Written by Jay Turo on Sunday, March 21, 2010
This Saturday, I took my 2 and 3 year old sons to Toys"R"Us to buy them baseball gloves. A great American tradition to be sure, and with opening day just 2 weeks away, both spring and the national pastime were in the air.
I looked for the American baseball glove names of my youth - Rawlings, Wilson, Easton, Spalding, Cooper.
My boys happily tried on gloves (most much too large for their little hands) to find the perfect fit.
For whatever reason my eye was caught by the fine-print label on one glove and its none too surprising "Made in China" imprint.
My curiousity piqued and my young sons' attention of course being diverted by all of the amazing toys in the store, we started wandering about.
Tonka. Backloaders, dump trucks, bulldozers, and more. Made in China.
Chutes and Ladders. Gnip Gnop. Battleship. Twister. Yahtzee. Risk. Connect Four. Made in China.
The erector sets have evolved impressively from the clunky sets I remembered. Made in China.
Hundreds of Hot Wheel model race cars - beautifully modeled Camaros, Jeeps, Corvettes, and more. Made in China.
On to the figurines and action figures. Dale Earnhardt Jr., Tom Brady, Lebron James, Albert Pujols. Staring out lifelike from their boxes and Made in China.
Blond-haired blue-eyed Barbie and Ken. Made in China. GI Joe. Defending our freedoms and Made in China.
Notes To Self
Call me old-fashioned, call me protectionist but it just didn't feel right to buy my sons Chinese - manufactured baseball gloves.
Then thinking practically as a striving parent does, first order of business was to go home and get my boys immediately enrolled in intensive Chinese language instruction because by golly if this is how the world is now then where is it going?
And on this thought I caught myself. I realized I had fallen for the classic mercantilist trap and confused "Made In" with "Value Added."
What's the difference? Well, for you parents reading out there put it this way - none of you I would surmise want their sons and daughters to grow up and work in a factory (though, of course, it is like all work noble and deserving of praise).
But a LOT of you would be VERY happy if your son or daughter went to work as a product designer for Lego.
In marketing or public relations for Mattel.
In corporate finance at Rawlings.
At the NFL league office.
In post-production on the movie Avatar.
As eco-friendly packaging and shipping designers for Toys"R"Us itself.
These Are the Good Old Days
While it is hard for many to accept, it is beyond clear that America is MUCH wealthier today than it was in the so-called good old days when the U.S.A. was the manufacturing capital of the world.
What's The Point?
Very simply, wealth and power in the modern world is NOT about making things. It is about reconceptualizing them.
Apple. Google. Microsoft. In Apple's famous (and grammatically incorrect) advertising campaign, none of these great American companies actually make anything in the strict sense of the term. But they invest lots and lots of time and money in thinking different about them.
To put it another way, modern wealth and power are NOT in the things themselves. They are in their recipes - the instructions of HOW to make them.
And in making new and better recipes, American entrepreneurs lead the way by miles and miles.
And assuming government stays out of their way, they will continue to do so.
To when my little boys enter the workforce and beyond.
Written by Brittany Lawson on Saturday, March 20, 2010
As providers such as Android gain traction in the market place, and iPhone alters the requirements for applications carried in its AppStore, a slew of entrepreneurs have been working tirelessly to create engaging applications for smart phone owners.
Growthink has worked on a number of projects with these emerging companies and offers the following insight to individuals who are looking to break into the lucrative mobile application market.
The success of Apple, which, as of January 2010, had 3 billion downloads from its application store has fueled much of the development in the application sector. Some 100,000 applications have been developed, many of which see their income not from the per application download fee, but in engaging the consumer past the point of purchase.
At the Digital Media Conference West, Norwest Venture Partners’ Tim Chang stated “that in order [for an app] to do $10 million in revenues in the App store it must appear in the top 5 for 3 months.” This is an important point for entrepreneurs out there – find a way to monetize your customer based on their activity; a sustainable business model will include revenue past the point of sale.
One space that has found a way to do this is mobile gaming. Mobile game technologies have been wildly successful, even amidst the economic downturn through the sales of virtual goods which are then paid for using micropayment technology. Micropayments have been enormous money makers for companies like Zynga, Playfish and Japan’s Mobile Game Town. Even traditional game development companies have gotten involved in mobile gaming; Electronic Arts produces Monopoly and Rock Band for the iPhone, to name a few and recently acquired Playfish for $400 million in cash and stock.
As would be expected, venture capital has followed the mobile gaming space. Zynga, the creators of Farmville, claim to have 20 million users and have raised $219 million in venture capital to date. Their latest round occurred in December 2009, and was $180 million dollars at a $1 billion valuation. PopCap Games raised $22.5 million in Series A capital in October 2009 – their claim to fame? Bejeweled, the 7th highest grossing game in the App Store.
The mobile application space, and more specifically the mobile gaming space, are two exciting sectors in which there have been a number of emerging companies taking storm over the past six months. The best performing companies have learned early on that the key to success is an application that engages the user beyond the point of purchase and provides for daily active user engagement. Companies that are prepared to create engaging games with well thought business models have the highest chance of success. This is based on the market conditions as well as the eagerness in the venture capital community to become involved with new developers in the marketplace.
Written by Dave Lavinsky on Wednesday, March 17, 2010
There’s one role in an organization that most entrepreneurs and business owners’ don’t really understand.
It’s not the Marketing Manager. That’s pretty easy. The Marketing Manager is in charge of marketing the company’s products. It’s not the Sales Manager. Or the Operations manager either. These roles are also quite evident.
But the CFO (Chief Financial Officer) role confuses most entrepreneurs.
In fact, most don’t really understand what a CFO does, or think that the CFO role doesn’t apply to their business until they’re much bigger.
Well, recently I had the opportunity to learn more about the CFO role when I interviewed Jonathan Weiss.
Unlike many of the interviews I’ve done, Jonathan is not a famous author, investor or renowned entrepreneur.
No, Jonathan was simply a classmate of mine when I went to business school at UCLA (The Anderson School). But when I started speaking with him at our 10-year class reunion a few months back, I realized he had some special expertise.
You see, Jonathan had recently been the CFO of a small company, LA Rose, which manufactures fashionable uniforms for healthcare workers.
The company had been around for a few years and was generating $3 million in annual revenues when he joined it.
But in short order, Jonathan helped grow revenues from $3 million to $10 million, and then he helped sell the company for a nice multiple.
I listened to Jonathan’s story in amazement, and the questions started flowing. What did he do as the CFO of that company? Do all businesses need a CFO? What should my clients be doing to replicate his success?
But rather than monopolize Jonathan’s time at the reunion, I requested a telephone interview to ask these questions, and he was kind enough to oblige.
Here's an excerpt of my interview with Jonathan:
Click here to listen to and/or download the full interview and/or transcript.
Now, before I brief you on some of the interview’s highlights, let me explain the core role of the CFO.
As the title implies, a CFO or Chief Financial Officer is responsible for helping the company achieve it’s financial objectives.
Specifically, the CFO:
Ensures that key financial metrics (e.g., last month’s sales, current inventory levels, etc.) are reported in a timely manner.
Ensures that the company has enough cash to fund its growth
Helps improve the profitability and efficiency of the company
Figures out where assets should be invested
So, for example, some specific things that Jonathan did at LA Rose were as follows:
1. He created a financial dashboard. This dashboard showed the business owners exactly how the company was fairing on key metrics such as month-over-month sales, inventory levels, etc. This helped the company set and accomplish goals. Importantly, he also put key financial figures in terms that the business owners could understand so that they were able to make better decisions.
2. He improved the profitability of the business by better focusing the owners’ time. For example, one owner was amazing at designing new uniforms. But, she was only spending 10% of her time doing that (and spent her other time managing customers, employees, etc.). When those other roles were delegated and she focused more of her time on design, sales and profits skyrocketed.
3. Product sourcing. Jonathan boosted profits by finding new suppliers to manufacture the same quality uniforms at a lower cost.
4. New financing. Jonathan identified that much of the company’s capital was tied up in receivables (e.g., money owed to it by customers). He used a unique combination of factoring and receivables insurance to get this money from third parties at a low cost. The money was then reinvested in the company, and sales went up dramatically.
5. Investments. Jonathan made investments in IT that helped streamline operations and cut costs, boosting long-term profitability.
Whether your company needs to hire a CFO right now is up to you. But clearly someone needs to be performing the CFO role if you hope to really grow your revenues and profits.
To hear Jonathan tell his story and reveal his best CFO tactics, click here to listen to and/or download the full interview and/or transcript.
Written by Dave Lavinsky on Monday, March 15, 2010
Recently I had the opportunity to interview Scott Jordan, founder of All Credit Lending Solutions.
All Credit Lending Solutions was formed in 2005 to help small business owners in obtaining commercial financing from banks and other alternative lenders and can be found online at yourbusinessloannow.com.
Scott gave some nice tips on raising debt capital in today's environment. Click here to listen to the full interview, or listen to a preview below.
To begin, Scott mentioned that building your credit score is key to getting debt financing for your business.
As you may know, Dun & Bradstreet's Paydex is the primary source for business credit scores. Paydex scores can range from 0 to 100, and Scott said that a score of 70 or above is necessary for a business to get unsecured lines of credit.
With regards to startups, who don't have a business credit score, you ideally want to have a personal credit score above 680.
In either case, Scott stressed the importance of spending the time to manage and improve your personal and business credit scores.
For those folks who don't have great credit, Scott revealed two other things that will help in receiving debt financing. The first is having orders in hand from reputable customers, and the second is having assets which you own free and clear that you can use as collateral.
Another key point which Scott revealed is that entrepreneurs and business owners need to "think like a banker." Bankers, according to Scott, think "safety first." You need to show the banker multiple ways in which you can repay the debt; e.g., via revenues, liquidating assets you own, etc.
Scott also mentioned that your chances of receiving a loan multiply when 1) you are very clear on the reason why you need the loan, 2) put together a quality business plan, and 3) get all your financial documents in order for the bank's review.
Click here to listen to the full interview, or listen to a preview below.
Written by Dave Lavinsky on Monday, March 15, 2010
Written by Jay Turo on Sunday, March 14, 2010
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.
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?
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Written by Dave Lavinsky on Thursday, March 11, 2010
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
Written by Jay Turo on Friday, March 5, 2010
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.
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Written by Jay Turo on Saturday, February 27, 2010
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.
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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.
Written by Dave Lavinsky on Thursday, February 25, 2010
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:
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.
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