Growthink Blog

The Greatest Stock Market Rally in History


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Did you know that the current stock market rally, which has seen the S&P 500 rise over 54% from its low of 676 on March 9th, is the greatest in history

Lazlo Birinyi, founder of Birinyi Associates, notes that since March the S & P has risen 0.31%/day on average.

This is three times faster than the previous fastest recovery in 1982, which averaged an increase of 0.12% per day.

He calls it the "Usain Bolt of markets. We just blew through the records."

Tracking the uptick in the market has been rising consumer and economic confidence.

The Conference Board Consumer Confidence Index was up in August to its highest level since December 2007.

And the Discover Business Watch Small Business Confidence measure jumped last month to its highest level since February 2008.  

 

How to Take Advantage?

The problem is, of course, first determining if you've missed the rally, and then how to translate this improving business sentiment into opportunity for you.

For those of us that aren't Washington politicians or C-level executives of Fortune 500 companies, the best pathway to do so is via entrepreneurship and via involvement in private companies

But, and it is a very key but, you have to know what you're doing.  As the famous saying goes, "A little knowledge is a dangerous thing." 

Quite simply, when it comes to investing in private companies you must "do it right or don't do it at all." 

 

Best regards, and look forward to connecting.
--
Jay Turo
CEO
Growthink, Inc

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  P.S. There are 50% and more rallies every year in various private equity sectors. You just need to know where to look.

And before you start looking, you need to know what to look for.


 


Creative Business Financing: CNN Money Identifies Creative Financing Loophole


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As a reader of my blog, I'm sure you're aware of my "Definitive Guide to Creative & Alternative Financing Sources."  The Guide presents 28 unique ways to raise money to start or grow your business.

I knew the Guide was really good (since it took me so long to create and since buyers have continually praised it), but I didn't know just how impactful it would be.

Well, a month ago, CNN found out about the Guide, and a CNN Money Reporter contacted me.

What resulted was a full story on ONE of my creative and alternative financing sources: customer financing.

You can read the article here: http://money.cnn.com/2009/09/08/smallbusiness/barnraising_a_business.fsb/

What I liked most about the article is that Helaine (the reporter) gave numerous examples of customer financings. This will hopefully give you more ideas on how customer financing might be right for your business.

If customer financing is not right for you, or if you want to tap 27 more unique and proven alternative and creative financing sources, download Growthink's "Definitive Guide to Creative & Alternative Financing Sources."


Who Will be the Next Billion Dollar Medical Device Company?


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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. 

Who Will be Next?

The great thing about this sector is that while the overall venture business is way down, medical device funding is BOOMING.

Firms poured $1.5 billion in 160 deals in the second quarter, up 47% over the prior quarter.  In fact, investments in life sciences companies made up 41% of all private venture funding last quarter.

 

Why Should You Care?

Is there money being made in the sector now - even in this tough economy? You bet your life there is. 

America's spending on healthcare will top $2.5 trillion this year alone, accounting for more than 17% of the nation's spending, and may double in the next decade. 

Medical devices account for more than $100 billion of this. 

Think of companies like device maker Vnus Medical, which Covidien just bought for $470 million - 4 times 2008 sales. 

And Danaher, the industrial conglomerate, made big moves in the sector by buying MDS's analytical-technologies business for $650 million.

Best regards, and look forward to connecting.

--
Jay Turo
CEO
Growthink, Inc

Follow me on Twitter
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  P.S. Medical devices is a bright and hot sector in the midst of a mostly dismal technology investment climate.

Stop crying in your soup about how tough it is out there and do something about it.  


Raising Capital Through Lobbying: An Interview with Jack Burkman


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I recently had the opportunity to interview Jack Burkman, the founder and president of Burkman Associates LLC.

You may have heard of Burkman since he appears frequently on ABC, CNBC, MSNBC, ESPN, and many other networks. He was also a former FOX News political analyst.

Jack Burkman has been raising capital for companies using an extremely rare technique - government lobbying.

According to Burkman, money for many types of companies can be raised from congress and government agencies (e.g., Department of Energy, Department of Homeland Security, etc.).

An Interview with Renaud Laplanche, Founder & CEO, Lending Club


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I recently had the opportunity to speak with expert entrepreneur and founder/CEO of Lending Club, Renaud Laplanche.

Renaud is an expert in raising capital, as he has successfully raised multiple rounds of venture and other capital -- totaling over $50 million for both Lending Club and Triple Hop Technologies, of which he was also the founder.

So I was excited to ask him questions about raising capital for one's business and how LendingClub can help individuals and entrepreneurs. In the interview we covered:

  • How LendingClub works
  • The importance of your FICO score in getting a peer to peer loan
  • How your track record of success factors into a successful capital raise
  • That factor matters the most in selecting a VC
  • Renaud's single most important tip for those looking to raise funding


Click below to hear excerpts from the interview:

 

 

To download the full interview and/or transcript click here.


Keys To Hiring & Retaining The Best Employees


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If you are managing an early stage or growing company, it typically means that you are cash restrained.

And, as a result, you are often unable to pay employees salaries commensurate with what they would earn at larger organizations.

So, how do you manage this and hire and retain the best staff?

In order to do this, you need to understand and manage the four core factors that effect an employee's satisfaction and thus willingness to join your company and/or stay with you.

The first key factor is financial compensation, which includes the employee's salary plus benefits such as healthcare, and any significant perks. For the most part, early stage companies can't compete with larger entities when it comes to these salaries.

However, with stock options and/or profit sharing, smaller companies can better motivate employees and give them the potential to earn even more money then their large organization counterparts should the company succeed.

The second key factor effecting employee satisfaction is lifestyle. Specifically, how does your organization accommodate the employee's lifestyle? Do you offer daycare? Flexible schedules? For some employees, the ability of the employer to accommodate their lifestyle is of critical importance.

The third key factor that employees consider when assessing whether to stay with a company is how much they enjoy their jobs and coming to work every day. Clearly there are millions of workers that hate their jobs. But, for the most part, these aren't the best workers. If they were, they would have lots of other job opportunities.

It is up to the small business owner to create an environment whereby employees enjoy their work. They must enjoy working with the other members of the company, the types of work they are doing, and their work conditions. They must feel that they are a part of the overall company culture. They must get along with their co-workers, and feel their boss appreciates them and treats all employees equally and fairly. And they must receive adequate communications as to company policies and decision-making.

The final factor with regards to satisfying your employees is to ensure that they are learning and developing skills that will further their careers, whether or not their futures lie with your organization or with another organization (preferably they see advancement opportunities within your organization).

Employees need to be continuously trained and have the ability to continually learn so that they become more valuable assets. This training can be formal, and/or it can include learning from trying new tasks and projects.

It is up to the business owner to ensure that employees are given training and projects that expand and improve their skills.

As an entrepreneur and/or business owner, it is your duty to hire and retain the best staff. Since, no one person has the ability to grow a massive empire with the help of others. In building your teams, consider and constantly revisit these four key factors and make sure you create and foster and environment that gives your firm a competitive advantage in each of these areas. In doing so, you will maximize your chances of building a truly superstar company.

How Seeking Out Failure Can Lead to Your Success


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I read a very interesting blog post the other day about "survivor bias," an important statistical principle that could greatly affect your future success.

In brief, survivor bias occurs when an analysis excludes information since that information no longer exists.

Let me give you an example...

The English forces, during World War II, sent planes each day to bomb the Germans. As you might expect, several of these planes were shot down. And, the ones that did come back typically returned with multiple bullet holes.

Now, the English obviously wanted to maximize the chances of its planes and soldiers returning home. So English engineers studied the planes that returned. In doing so, they found patterns among the bullet holes. Specifically they found lots of holes on the wings and tail of the plan, but few in the cockpit or fuel tanks.

As a result, the English added armored plating to the wings and tail.

As you might have already concluded, this was the wrong thing to do. The better decision would have been to add armored plating to the cockpit and fuel tanks. For, the planes that were shot in those places were the planes that were shot down and never returned.

The English engineers' analysis missed this data because these were the planes that they were unable to examine. This is "survivor bias"-- their inability to include this critical data in their analysis since it was unavailable or didn't "survive."

So why does this matter to you?

It matters because as you start and/or grow your businesses, you will have to hire service providers and staff. And naturally, you will want to hire those with a track record of success.

But, when you hire staff who have only worked at successful companies, you may fall victim to survivor bias. That is, they have not learned many of the lessons that individuals and companies learn when they fail.

Likewise, when you hire a service provider that claims that every one of their clients has been successful, maybe they haven't learned from client failures.

They say that you learn more from failure than from success.

While that can be debated, from personal experience I can say that I've learned a ton from both failure and success. From successes, I have learned principles and formulas that worked. The ones I strive to replicate on a daily basis.

And from failures, I have learned things to avoid. I have learned flaws in my thinking. But importantly, many of my successes have come out of failure. From tinkering ideas and plans that weren't quite working. And making them work. And, these new ideas would never have come to me had I not failed first.

Now, clearly my advice is not to hire failures or those with a habit of failure. But, likewise, it's not to hire staff or service providers who claim to always succeed. Since a balance between success and failure often provides that winning combination of wisdom.

So, the next time you are interviewing a key hire or service provider, make sure to ask about their failures. Ask about tasks and jobs that they or their companies failed at. And find out what they learned from that failure.

Ideally they are the types of candidates that learned a lot from their failures and were able to overcome them. This is because the vast majority of growing companies fail at things over and over again. It is their ability to constantly modify and improve their businesses that enables them to excel. Surround yourself with people that have this ability.

Growthink Kiva Loan Recipient Repays Loan in Full


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As readers of the Growthink blog know, I LOVE Kiva (Please read my past blog post on it here).  For those not familiar with it, Kiva is a person-to-person micro-lending site –allowing individuals, primarily from developed countries, to lenddirectly to entrepreneurs in the developing world.  The borrowers arein places like Cambodia, Bolivia, Azerbaijan, Lebanon, Peru, andTanzania – and primarily borrow to allow their very small businesses toexpand and hire. 

Kiva was created in 2005 and originally funded 7 loans for a total of$3,500 which were all paid in full. 

Since then, it has grown incredibly. Try these stats on for size:

  • Total value of all loans made via Kiva: $89.7 million
  • Number of entrepreneurs that have received loans: 217,428 (!)
  • Current repayment rate: 98.35% (Phew - how would U.S. mortgage lenders love to be able to say that)
  • Number of countries represented by Kiva lenders: 181 (Who says the world isn't a more inter-connected and better place because of the Internet and technology?)
  • Percentage of Kiva loans which have been made to women entrepreneurs: 82.88% (A lot of academics and political scientists now cite the very high correlation between women's economic advancement and entrepreneurial opportunities and the relative stability of a country and a culture).

Growthink's first Kiva loan (first of many we hope), was made to Ms. Tamalii Iopu, owner of a fishing business in Luatuanuu, Somoa.  Ms. Iopu, a single mother of two, borrowed money last year to buy new fishing gear, and repaid it in full last month.

I would like to say that we had a particularly scientifically methodology for selecting Ms. Iopu from among the literally THOUSANDS of very deserving entrepreneurs on Kiva. The reality is, like most Kiva lenders, we simply connected to her story as presented on the site.  And the very pure repayment histories of all of the borrowers is beyond inspiring. 

Growthink hopes to do a LOT more with Kiva in the months and years to come. As I noted in my previous post, we love it because:

  • Loans, as opposed to charity, promote dignity, accountability and transparency.
  • The “middlemen” are cut out.  And, phew, is it about time.  Kiva is a great example of what the new world of finance will look like in the coming years.  As opposed to big, fat, amorphous Wall Street bankers standing between borrowers and lenders, buyers and sellers of money connect directly via a transparent Internet platform.  This greatly reduces the cost of capital and allocates it to where the marketplace, as opposed to your politician or your good old neighborhood’s old boys network, determines where it is best served.  It is a wake-up call for America.  98% repayment rate!  From the poorest of the poor? The titans of American finance (and the American consumer) could learn a thing or two from the Kiva borrowers.
  • It is more proof, if proof is needed, of the core advantages of small versus big and of owner-operators versus a managerial class


Check out Kiva at http://www.kiva.org. And prepare to be inspired.


Five Mega Trends That Are Transforming Private Equity Investing As We Know It


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Did you know that in the last 10 years, every major stock market index has LOST investors money?

That's right, on an inflation adjusted basis, the Dow, S&P, and NASDAQ have each given investors NEGATIVE returns.

And with all of the meddling in the markets coming out of Washington, prospects for the next 10 years aren't any brighter.

Fortunately, there is a better way. In those same 10 years, while stock market investors made nothing or took a bath, early-stage private equity investors earned over 30% annually.

Why is This?

Efficient markets theory teaches us that private equity will always out-perform the public markets. Investors must be given higher rates of return to compensate for the traditional illiquidity and high variability of the asset class.

And up until recently, access to quality early-stage private equity return vehicles has been a) cost and time prohibitive for most institutional investors and b) simply inaccessible to the smaller, individual investor.

The Times They Are A Changin'

Luckily, this is no longer the case. Five mega-trends have coalesced to transform private equity investing as we know it:

1. The ability to source, research, and monitor deals via the Internet

2. The ability to take a data - versus a personality - driven approach to deal diligence

3. The ability to better price deals utilizing regression analysis

4. The ability to exit deals faster - both via alternative investment trading platforms like Second Market - and also simply because of the increasing velocity of business, especially technology business.

5. The ability and opportunity to properly apply "black swan," or "randomness" modeling to deal diligence

Best regards, and look forward to connecting.
--
Jay Turo
CEO
Growthink, Inc

Follow me on Twitter
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  P.S. Are you prepared to be saying in 2019 - "Darn - It has now been 20 years since I made any money with my investments?" The world has changed - time to change with it.


Be Like Mike...In Your Investor Meetings


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According to the book "How To Be Like Mike: Life Lessons About Basketball's Best," Jordan's practice habits and conditioning regimen amounted to an "almost alarming harshness."

In fact, many experts, such as Florida State University professor K. Anders Ericsson, argue that practice continually trumps talent. Prominent examples of success attributed to continuous practice besides Jordan include:

  • Bobby Fischer: yes, he became a chess grandmaster at the ripe age of 16. But, he had nine years of intensive study and practice before this.
  • Warren Buffet: who is known for his extreme discipline and the significant time he devotes to analyzing the financial statements of organizations he considers investing in.
  • Winston Churchill: who is widely considered one of the 20th century's best speakers; it is said that he compulsively practiced his speeches.
  • Tiger Woods: who developed rigorous practice routines from an extremely young age. He continues to devote hours upon hours each day to conditioning and practice in order to improve his performance.

These same practicing principles apply when you are selling your company and your products/services to investors, customers, partners and/or employees.

With regards to your elevator pitch, which is often your opening communications with all outside constituents, practice it over and over again until it flows from your mouth and causes prospects to nod in agreement and understanding each and every time.

With regards to your investor presentations, you should practice them over and over again. And when you practice them, you should think about the goals of your presentation and simulate the questions you might be asked.

For example, you should be thinking:

  • What is the outcome of the meeting that I am seeking?
  • What questions about my business will the investor have, and how will I most quickly and easily answer them?
  • What investment objections might the investor have and how will I overcome them?
  • What will be the signs that my presentation is going well, and how will I adapt if it is not?

By practicing your presentation over and over, you will get better and better at it. Just hearing yourself saying the words out loud will help. You will hear what sounds good and what doesn't.

Likewise, you should practice your presentation on real people -- your advisors, friends or family members. And after these mock presentations, ask them to recite back to you the key points you made. Importantly, make sure they recall the key points that you want to convey. If not, continue to improve your presentation content and your delivery until it reaches perfection.

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Jay Turo

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