Growthink Blog

Startup Investing - The Impact of the Stock Market


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The general misery that the public markets have subjected us all to over the past 12 years - with the Dow Jones, the S & P, and the NASDAQ all trading lower today than they were in 1999, begs the question - how does stock market performance affect startup investing returns?

The answer seems obvious. A falling tide sinks all boats. So goes the public markets, so go the private equity markets, of which startup investing is a subset.

This is best illustrated by the depressing statistic that in the last 12 years there has been more money invested into the venture capital industry than has come out of it. 
A lot of effort for naught.

But in spite of this, and maybe even because of it, startup investing returns over the past decade have been surprisingly, even shockingly good. 

According to data compiled by Thomson Financial and corroborated by eight large studies in the US and the UK over the past three years, average returns for startup investing were in excess of 20% annually this past decade, and over a longer 20-year period, have averaged more than 25% annually.

Why Is This and Will It Continue?

If you step back and think about it for a moment, these high returns make perfect sense. Startup investing is high returning because:

1. As Compensation for Illiquidity.  As the vast majority of startups are privately-held firms, higher returns must be offered as compensation for illiquidity. You can't day-trade startups as you can public stocks. This, of course, is both a good and a bad thing.

2. As Compensation for High Variance.  Startup investing is characterized by a few winners and lots and lots of losers. To incent investors to play this high volatility game, alluring terms and returns must be offered.

3. Small Businesses are Fundamentally More Efficient Allocators of Capital.  The plain but powerful truth is that a startup firm is by FAR the most efficient form of human organization ever devised to allocate time and capital.

And with more efficient allocation of time and capital, higher returns naturally follow.

Pablo Picasso

As Picasso so famously said, "Work is the Ultimate Seduction."

And the most seductive form of work for the best and brightest these days is to start and grow a company.

Best illustration of this - in spite of throwing millions at them, Google has a hard time hanging onto their best engineering talent.

The wonder kids just prefer their own gigs. Always have, always will. And anyone who has spent just a little time with a dynamic entrepreneur knows, they're in it to win it.

And when they do, like Picasso's Les Demoiselles d'Avignon, the results just take your breath away.
 

Are you in it to win it too? 

Jay Turo
CEO
Growthink, Inc

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Here's Your Chance to Pitch Silicon Valley This May


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A couple weeks ago, Growthink hosted the "Startup Success Secrets" expert teleseminar series. 

We assembled an impressive group of entrepreneurship experts, including Ken Yancey (CEO of SCORE), Ryan Allis (CEO of iContact), and Bambi Francisco of Vator.tv, among others.

If you don't recall, Vator.tv is an online community that allows entrepreneurs to showcase their ventures and communicate with customers, partners, and investors.  I fully recommend that you register at Vator.tv.  

But that’s actually NOT why I’m writing today...

Today, I'm writing to you about Vator's upcoming "Splash" showcase, where you'll have an opportunity to pitch Silicon Valley.

We're excited to say that we secured a 25% discount for you to attend the "Splash" Showcase, which will showcase 10 promising startups, and the hottest companies in commerce and social networking, as well as blue-chip venture capitalists.

On the evening of May 13, Thursday, in San Francisco, 10 seed- to early-stage companies selected by their peers will have the opportunity to pitch an audience of nearly 400 people including the Silicon Valley elite. These 10 companies will also have a high quality video of their presentation produced. 

In addition, Tony Hsieh, CEO of Zappos, will talk about how he built and sold his company to Amazon for $1.2 billion, and Gurbaksh Chahal, CEO of gWallet, will talk about being a serial entrepreneur since the age of 16, and selling two companies for a combined $340 million. Additionally, venture capitalists from Founders Fund, August Capital, Mayfield and LightSpeed Ventures will be present.  

You can reserve a 25% discounted ticket or pitch table below when you use the discount code "Vatorgrowthink" here: http://vatorsplashmay.eventbrite.com/


And here's where you can submit an early-stage company to pitch: http://vator.tv/competition/vator-splash

 


"Naked" Replay


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Because of the overwhelming response to our webinar last week on modern brand lessons from Mr. Tom Hicks of Naked Juice and Dr. Sears Family Essentials fame, Tom has graciously agreed to sit for a live replay of the webinar.

Special Bonus Commentary

The webinar will also feature bonus commentary from Mr. Michael Galef, Former Vice President of Marketing and Sales of Emergen-C, and current Executive Vice President of Marketing and Sales for Dr. Sears.

An Entrepreneurial Team We Love

Dr. Sears Family Essentials - a children's natural foods company inspired and branded by the author of one of the best-selling child-rearing books of all time (The Baby Book) - is a classic "doing good while doing well" business model and opportunity.

On the webinar, Tom and Michael will share their secrets of successful, modern brand-building, including:

- The "Pyramid to Brand Growth" - the interplay between brand-building, community-building, retail partnerships, and innovation

- When and When NOT to place your product in the "Big Boxes" - Wal-Mart, Costco, Target
 
- How to utilize the power of the Internet to quickly and cheaply conduct high-quality consumer research
 
- How to and how NOT to utilize social networking strategies to build brand and product awareness

- And much, much more!

Who is Tom Hicks?

Tom Hicks is uniquely credentialed to lead this brand-building discussion for the best reason of them all - he has done it before.

Before Dr. Sears, Tom was President of Naked Juice and led their growth from $80 million to $200 million in revenues and a sale to PepsiCo in 2007 for 30 times earnings.
 
And he was Co-Founder and President of Fantasia Fresh Juice - leading them from startup to $15 million in sales in 3 years.  And he is a former sales and marketing executive at both Frito-Lay and Proctor & Gamble.
 
Quite simply, Tom gets what works and what doesn't work when it comes to launching and growing consumer products brands.

Best regards, and look forward to your attendance and feedback.

Jay Turo
CEO
Growthink, Inc

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In Spite of Avatar, The Movie Business is Dead


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Nothing is more important to U.S. consumers than their entertainment choices, but are movies and broadcast TV even relevant  in the new world of entertainment?

Or will the convergence of content, internet, mobile applications, games and social media be the onrushing asteroids that will soon destroy the movie dinosaurs?

Is it a 3-year fad, or will new technologies like 3-D keep going to the movies from being relegated to the dustbin of history like Vaudeville, the afternoon newspaper, the evening news, the variety show, and the compact-disc?

Has the U.S. movie box office - traditionally the holy grail of movie industry metrics -- become increasingly irrelevant?

What is the future of Pay-Per-View/Video-on-Demand (PPV and VOD)?

Video-on-demand alone is estimated to grow from a $1.1 billion dollar business this year to $5 billion by 2012, taking market share away from DVD retailers and intensifying the carriers' ambition to bid for the best (and first run) titles.

How about Internet Video?

Annual U.S. revenues from internet video services spanning user-generated content to television shows and movies will exceed $7 billion this year.

And this business is becoming LESS advertising driven -- transitioning from today's model of more than 85% of revenue being ad-based to less than 60% and trending down with the balance being generated by content payments, either for one-time viewings or via subscriptions.  

What do these new realities mean for the content creators of new media and for traditional studios, filmmakers, producers, and distributors?

What is the future for good-old fashioned DVD rentals and sales?

Get The Answers

I am very excited to share with you the opportunity to meet the Managing Director of Growthink's new media and entertainment practice, Mr. Lee Muhl.

Lee, quite simply, has forgotten WAY more about the entertainment business than most of will ever know (see his biography below).  
 
And he has graciously agreed to give us the answers to the above questions, which winning business models to run with, which losers to run from, and much, much more!

Best regards, and look forward to your attendance and feedback.

Jay Turo
CEO
Growthink, Inc
Follow me on Twitter
Join my network on LinkedIn


Biography of Mr. Lee Muhl, Managing Director, Growthink's New Media and Entertainment Practice

Lee Muhl heads Growthink's entertainment-media vertical, encompassing the making and distribution of films, television programming, games, new media content and numerous related distribution platforms, technologies and methodologies including theatrical exhibition, DVD, PPV-VOD, mobile applications, internet/IPTV, and a variety of new content modalities (digital theater conversion, advertainment, infotainment, advergaming), and related investment, banking and funding issues.

To date, Lee has overseen the successful conclusion of more than 100 Growthink engagements for funding plans and sophisticated media financial models, including film projects ranging from the production of numerous independent films and major studio productions to scores of angel and seed development fundings - overall, production funds generated are well in excess of $100MM.

Originally trained in transactional entertainment law and the representation of above-line talent, Lee worked with a number of well-known writer-director-producers in both traditional studio/network deals and in arranging non-studio financing for independent film production including such classics as Bladerunner.  In 1999, Lee joined the Silicon Valley new media content contingent as an Internet-company CEO, and has since founded two innovative Los Angeles media companies. With Growthink, Lee has continued his deep involvement with film, digital media, content delivery protocols, gaming technologies and sports initiatives.

A former partner in two leading Los Angeles media law firms, Lee holds a J.D. from the UCLA School of Law where he also served as Chief Comment Editor of the UCLA Law Review, and earned his B.A. in History from UCLA. He is a current member of the California State Bar, and the Hollywood Writers Guild.

 


Why Money Can In Fact Grow on Trees


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Last night at dinner, as my kids were saying "I want this" and "I want that," I said something that you should never tell your kids.

What did I say?

I said, "you know, money doesn't grow on trees."

Why is this so bad?

Well the goal of my saying this was to try to show them the value of money. And that we have to work to make money to spend on the things we want.

The bad part of this saying is that it paints the wrong picture. It paints the picture that we can't always get what we want. Which is the polar opposite of the attitude I want my kids, and all of the entrepreneurs reading this today, to adapt.

What entrepreneurs MUST be thinking is YES, I CAN get whatever I want. Yes, it won't just come to me, but with hard work and ingenuity, I can and I will get what I want.

Fortunately, right after I said that to my kids, I caught myself.

This was partly due to the interview I recently conducted with Ken Lodi about The Bamboo Principle.

Here's the link to that interview in case you missed it the other day:
http://www.growthinkuniversity.com/members/419.cfm

In the interview, Ken explained that timber bamboo shoots grow very little for four years while their extensive root system is growing and taking hold. But once the roots are firmly in place, the bamboo can grow a shocking 80 feet in just six weeks.

So, I immediately realized that money does in fact grow on trees. The key is to work on the tree's roots. To build such a strong foundation that generating money becomes easy.

Every great company has a strong foundation. They create a brand name, sales systems, delivery systems, etc. And then, they can generate cash and profits each and every day.

So, focus on building an extremely strong foundation. Think through your business model. Learn the best practices for each of the key business disciplines - marketing, HR, finance, sales, etc.

And never let anyone tell you that "money doesn't grow on trees" or that you can't have everything you want. Because money does grow on firmly-rooted trees and you CAN achieve and get everything you want out of life if you resolve to do so.

As you might expect, explaining to my kids (ages 9 and 7) that money can in fact grow on trees wasn't so easy.

Maybe I should have just had them listen to The Bamboo Principle interview.


Improve Employee Productivity: An Interview with Ken Lodi on The Bamboo Principle


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This is pretty amazing.

After being planted, timber bamboo plants are hardly noticeable above the ground for nearly four years. But once their roots are fully formed around the four-year mark, they can grow a remarkable 80 feet in just six weeks.

The key to their amazing growth is their extremely solid foundation. To learn about how emerging companies can create a solid foundation for their businesses, the other day, I interviewed Ken Lodi, creator of The Bamboo Principle.

What Ken explained to me is that the solid foundation of a company is rooted around its employees. But, importantly, Ken explained that a company's greatest resource is NOT its employees.

Rather, the greatest resource is the TALENT of its employees.

The fact is this - most companies have some great employees that are underutilized. Conversely, great entrepreneurs and business owners are able to figure out what their employees like to do. Interestingly, what they like to do is oftentimes what employees are best at, and what they will achieve the best results at.

Ken equated this to sports. Players on your team, he explained, don't necessarily have to be great at everything. For example, on a football team, the quarterback doesn't need to be a great punter. And the punter doesn't need to be a great quarterback. The problem arises when your quarterback is spending his days punting. The business owner must figure this out and make the requisite changes.

The best way to figure this out is to mentor and coach your employees. You need to figure out what their values and goals are, and modify their roles as needed to leverage them. When meeting with employees ask open ended questions (not just "yes" and "no" questions). For example, ask "if you could spend the majority of your work day doing just one thing, what would it be?"

Employees too must figure out what they value and enjoy and make sure their job roles are in line with this. This is the key to improving employee productivity, satisfaction and performance. It's called "making a vacation out of your vocation."

Both employees and entrepreneurs/business owners should develop a fresh assessment of themselves. What do you/they like to do most in their jobs? What makes you/they say "cool?" And, ask yourself, "if money wasn't an issue and you could do one thing with your work life, what would it be?"

Success requires a solid foundation. Six minute abs don't work. Nothing is fast and easy. You need to work hard to build a solid foundation from which you can build success. And this foundation is your employees. And making sure you are leveraging your employees to their best potential.

So make sure you quarterback is not playing defense. Talk to your employees. Find out what they value and enjoy doing. And create a workplace that supports their values, leverages their talents, and achieves massive and successful growth - just like the timber bamboo.

Growthink University members can listen to my interview with Ken Lodi here. Not a member? Then simply test drive Growthink University for 30 days here.


You, Me, and a "Naked" CEO


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As is well-reported, childhood obesity in America is an epidemic. According to multiple studies by the U.S. Centers for Disease Control and Prevention, by the American Diabetes Association, and by the American Academy of Child Psychiatry, close to 33% of American children are now classified as clinically obese.

In addition to the massive additional burden to the U.S. healthcare system this will cause, childhood obesity is a moral crisis. Quite simply, we are letting down the next generation of Americans. And we can and will do better.

And like almost all of the great problems and challenges of the 21st century, the solutions to it will be found not by government nor even by well-meaning non-profits, but by savvy and hard-working entrepreneurs.

An Entrepreneurial Team We Love

Dr. Sears Family Essentials - a children's natural foods company inspired and branded by the author of one of the best-selling child-rearing books of all time (The Baby Book) - is a classic "doing good while doing well" business model and opportunity.

They provide children a foundation of lifelong health via offering exceptional and exceptionally well-marketed functional food and beverages, and supplements.

And guess what? As the company helps more and more kids eat better, it will grow its revenues and profits very, very fast. 

This, folks, is the classic entrepreneurial win - win. 

Meet the CEO

I am very excited to share with you the opportunity to meet the CEO of Dr. Sears - Mr. Tom Hicks.  

Tom is uniquely credentialed to both lead Dr. Sears and to advise on the factors that separate the successful consumer products company from the unsuccessful.

Why?  Because he has done it before. 

Before Dr. Sears, Tom was President of Naked Juice and led their growth from $80 million to $200 million in revenues and a sale to PepsiCo in 2007 for 30 times earnings.
 
And he was Co-Founder and President of Fantasia Fresh Juice - leading them from startup to $15 million in sales in 3 years.  And he is a former sales and marketing executive at both Frito-Lay and Proctor & Gamble.
 
Quite simply, Tom gets what works and what doesn't work when it comes to launching and growing consumer products brands.

And we're VERY excited to have him share his wisdom with us regarding:

- When and When NOT to place your product in the "Big Boxes" - Wal-Mart, Costco, Target

- How to utilize the power of the Internet to quickly and cheaply conduct high-quality consumer research

- How to and how NOT to utilize social networking strategies to build brand and product awareness

- And perhaps most excitingly, Tom will share his "pyramid to brand growth" - the interplay between brand-building, community-building, retail partnerships, and innovation

Best regards, and look forward to your attendance and feedback.
--
Jay Turo
CEO
Growthink, Inc  
Follow me on Twitter
Join my network on LinkedIn

P.S. I know too many otherwise intelligent businessmen and women who have been listening to all of the negative drivel that passes as business news out there. 

Invest time out in your day to learn from someone who is doing something about a big problem facing our country and not just talking about it.  


Medical Device M&A Activity Up 154%


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Medtronic. Cardinal Health. Guidant. Becton, Dickinson. St. Jude Medical. Hospira. Fresenius. Varian Medical.

All of these medical device manufacturers had greater than ONE BILLION DOLLARS in sales last year.

Sector Funding Activity Remains Strong

While overall venture investment is down substantially, funding in the medical device sector remains strong.

For the fourth quarter of 2009, venture capital investments into medical device companies increased 13 percent in dollars and 18 percent in deals (quarter over quarter), with over $719 million in fresh capital invested into 87 deals.

Amazingly, investments in biotechnology and medical device companies accounted for 34 percent of all venture capital dollars invested in 2009.

Merger and Acquisition Activity Also Vibrant

Are there exits happening in the sector - even in this tough economy? You bet your life there is.

Sector merger and acquisition activity leaped by 154% in the third quarter of 2009 to $5.6 billion, and the trend-line for 2010 is strong. 

Some sample 2009 deals:

* Danahers acquiring Analytical Technologies for $650 million
* Thermo Fisher acquiring B.R.A.H.M.S. for $470 million
* Abbott Laboratories acquiring Evalve for $410 million
* Nipro Corp acquiring Home Diagnostics for $190 million
* Quidel Corp. acquiring Diagnostic HYBRIDS for $130 million

Who Will Be Next?


Selling Your Business: An Interview with Louis Crosier


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To begin, typically when I interview an expert, I only provide access to the recording and transcript to Growthink University members.

However, to thank you for your continued readership of this blog, and to ensure that you learn these key business-building lessons, I'm making this interview available to you.

Click here to listen to the interview and/or download the transcript.

The interview to which I am referring is the one I recently conducted with Louis Crosier. Among other impressive accomplishments, Louis is the author of "Selling Your Business: The Transition from Entrepreneur to Investor."

Specifically, Louis is an expert on helping entrepreneurs realize their financial dreams by selling their businesses and investing their proceeds wisely.

During the interview, Louis made numerous key points regarding things you need to be doing while you are starting, growing, and selling your business, and then what you need to do post-sale.

While you can listen to the interview yourself here, two of my favorite points were as follows:

-1- Your choice of corporate structure (e.g., LLC vs. C-Corp) can potentially save you millions of dollars later on when your company is sold. Fortunately, you can, for the most part, change your corporate structure down the road. But over time, your options become fewer and fewer.

-2- You need to find your weaknesses before it's too late. Specifically, Louis explained that when trying to maximize the price at which your business sells, you need to really think through where the vulnerabilities of your business are.

For example, is your business dependent on a small number of key customers? Are there key employees? What kind of barriers to entry and intellectual property are associated with your business? In other words, where is your business vulnerable to either competitors or major disruptions? You need to identify these vulnerabilities well in advance of a sale, and shore those things up.

Other key questions that Louis answered for me included:

- When deciding to sell your company, who should be on your professional advisory team and when should you start building that team?

- What are the main types of deal structures when selling your business, such as selling for all cash or for all stock? How common are each? Which are the most favorable to the entrepreneur?

- Once you sell your company, how should you re-invest your earnings and what should you be aware of?

- What do entrepreneurs need to know about now, when hoping to sell their businesses in the future?

Once again, you can click here to listen to the interview and/or download the transcript.


How much is this shortcut worth to you?


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Imagine you had been driving to and from work the same way every day for the past 4 years. And let's say that the drive each way typically took 30 minutes. And then one day, a friend told you about a shortcut that would save you 10 minutes each way. So, that's 20 minutes a day in time savings.

At 250 work days each year, that's 83 hours per year. Or 332 hours over 4 years.

I bet you wouldn't be too happy about having wasted 332 hours...

Or would you?

Because you would subsequently save 83 hours this year, and 83 hours next year, and so on and so on. That's pretty cool. The point is this - accomplishing more in less time IS possible. That is, if you know the shortcuts. Importantly, shortcuts shouldn't be quick ways to do things that result in poor quality. Rather, shortcuts allow you to do things more efficiently.

Let me give you an example.

Each of us has peak performance times. That is, times of the day when we have more energy and thus perform better. For many people, that time is early in the morning. Maybe we perform 15% better at those times than average.  Likewise, each of us has poor performance times. Like the hour after coming back from lunch. And at these times, we may perform 15% worse than average.

Now, you may recall from my recent blog post how important it is to create a To Do list each day, and to detail the specific time intervals during which you'll accomplish each key task (if not, you can read that here).

So now, imagine you have a really important one-hour project that requires your complete concentration. Well, doing that project during a normal performance time might take you 60 minutes. During a peak performance time it may only take you 50 minutes (and the quality will probably be higher). But during a poor performance time, it may take you 70 minutes.

So, in this example, performing the important task at a peak performance time would save you 20 minutes.

But what about the work you need to do during your poor performance time? Won't that take you 20 minutes longer and even things out? Not if you complete less important and less intensive work during that period.

So the action item I want you to take each day starting today is this:

1. Write down your daily To Do list

2. Schedule your entire day with the time intervals in which you'll complete each To Do item.

3. Adjust the order of the items to ensure that you complete the highest priority and most important tasks during the time periods when you feel you work at your peak.

I trust that this "shortcut" will start boosting your productivity right away.


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Jay Turo

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