Written by Jay Turo on Monday, October 12, 2009
Tired of reading about the same over-shopped, over-hyped, over-followed technology companies? Intel. Cisco. Dell. Microsoft. Even Google, Amazon, and Apple.
All great companies for sure but the under-reported truth is that the real money has already been made on them. They are already big and famous and have lots and lots of smart people following and trading them. As investment opportunities, they are yesterday's news.
Hot Technologies of the Next 10 Years
Now, if you want to make real returns, you need to identify the growth stories of the next 10 years. Companies that are early in their lifecycle. Ones that have protected positions in fast growing market niches.
And you need to invest in them BEFORE everyone and their Uncle knows about them.
How To Do It
It is really as simple as 1 - 2 - 3.
First, find a dynamic growth industry. Second, identify a company within it that is well-positioned to grow as the industry does - the proverbial "boat lifted by the rising tide." And finally, investigate the company's guts - its technology, its historical and projected financials, and most importantly, the quality and determination of its management.
Solid State Drives - A Classic Next Generation Technology Play
Let's take a look at the solid state drive (SSDs) business. Solid state drives, based on computer memory rather than a rotating disk, are replacing traditional hard disk drives at an increasingly rapid clip.
This is a technology transition not unlike when we moved from cassette tapes and LP records to compact discs, or from compact discs to MP3 players. The basic idea is accomplish the same functionality - in this case electronic data storage - and to do so faster, more reliably, and with lower power consumption.
Well this transition is happening in the SSD industry big time. The industry as a whole is growing at a rate of over 80%/year (IDC).
IDC further estimates that the market for SSD devices will grow from $932 million in 2009 to $5.6 billion in 2012. Other industry analysts take a similar view, with some foreseeing over 100% annual market growth for a number of years as the technology transition heats up.
Ok This Makes Sense - Now What Do We Do?
Now let's find a company uniquely well-positioned within this industry. It would be even better if this company was one that not a lot of people know about, yet already has GREAT products that consumers love.
And even better - suppose this company was not a dreamy-eyed startup but one with a 7-year history of going from startup in 2002 to over $150 million in revenues last year?
Finally, dig a little below the surface and get a sense of their plan for growth. Are they thoughtful in all their business aspects - technological, marketing, operations? Is management both intense and mature? Can they protect their place in their market niche from the big boys? And most importantly, can they grow as the industry around them grows?
If you can find a company that has this kind of 1 - 2 - 3 logic, and if you can get in on it at the right price, you have something special.
How To Find a Company Like This?
Well guess what, we are right now connected with a company like this. One on the verge of having its shares publicly traded, and one that is looking to connect with a select group of investors to fuel its growth.
Best regards, and look forward to your attendance.
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Written by Jay Turo on Friday, October 9, 2009
Los Angeles, CA. October 9th, 2009. For Immediate Release. Jay Turo, CEO and co-Founder of Growthink, today announced that it honor of Columbus Day on Monday, that Growthink offices will be open for business.
"Being of proud Italian heritage, I have always admired the spirit of entrepreneurship, initiative, and good old-fashioned going for it that Christoforo showed on his great trip," Turo said. "And those of in the capital-raising business (especially as Columbus Day falls right in the middle of capital-raising season) can all learn a LOT from the strategic, angel investing round he raised from Queen Isabella to finance the trip. And he put his presentation together, I understand, without the latest versions of Powerpoint and Excel."
"In honor of his achievements and his spirit, Growthink, unlike the yesterday's news post office and the bailed out banks, is excited to be working and serving the world's entrepreneurs this Monday."
Written by Jay Turo on Thursday, October 8, 2009
Very, very sad news today that Luis Villalobos, Founder of the Tech Coast Angels and angel investor in 57 early-stage ventures, died suddenly yesterday at the age of 70.
I had the extremely good fortune to have Luis be one of the first clients of Growthink back in 1999. Luis hired us to do a lot of the "blocking and tackling" work in assembling a business plan for a fund/incubation concept - Gazelle Labs - that he and a number of the other principals of TCA had established. Truth be told, we should have paid Luis to work on the project.
First of all, because even at that time, he had forgotten more about entrepreneurship and early-stage investing strategy than most of us will ever know. And because of his attention to detail and intellectual rigor, he set a standard and an expectation of work product that we have tried to carry through with here at Growthink in the last 10 years. Wisdom worth many, many, many times the fees we earned on the engagement.
I have fondly reflected on my experience of working with Luis over the years. He embodied the best qualities of the American entrepreneur and angel investor - hard-headed and brutally realistic, challenging AND extremely giving of his time and energy in support of aspiring entrepreneurs.
He will be missed. May America produce more of his kind.
Written by Dave Lavinsky on Tuesday, October 6, 2009
Imagine a business opportunity that had a 95% chance of success.
In the interview, Ed revealed tons of great tips and information regarding buying a business, including:
Listen to the full interview here: http://www.growthinkuniversity.com/members/357.cfm
Non-members can listen to a brief clip of the interview by clicking on the blue triangle in the player below:
Written by Jay Turo on Monday, October 5, 2009
To be filed firmly in the categories of the rich get richer and it does usually make sense to be both lucky and good, this week’s New Yorker notes that Jeff Bezos was one of the early investors in Google.
Yes, that Jeff Bezos. Founder of Amazon.com. #33 on last year’s Forbes’ 400 with a net worth of over $8.7 billion.
The story is this - in 1998 when Larry Page’s and Sergey Brin’s Google offices were a Menlo Park, California garage - Bezos invested $250,000 of personal funds into the fledgling search engine in a $1 million follow-on investment round.
When Google went public in 2004, that $250,000 investment translated into 3.3 million shares of Google stock. At Google’s IPO that represented a stock share position worth over $280 million!
While Bezos does not disclose how many of those shares he still holds, at the current price of Google stock they would represent an investment position of over $1.5 billion.
Why did Bezos invest in Google? In his words, “…There was no business plan…They had a vision. It was a customer-focused point of view.” And more tellingly he adds, “I just fell in love with Larry and Sergey.”
In addition to being a tale to which the normal reaction is to just say “wow,” Bezos’ Google investment offers a number of great lessons for aspiring, private company investors:
1. He Thought Long Term. Even though Google has been the fastest rocket ship growth company in the history of capitalism, it was still SIX YEARS from Bezo’s investment in the company to liquidity. Private equity overnight successes simply do not exist.
2. He Got In Early. Sure, it would have been great to get into Google at its IPO price of $85/share, especially as the shares are up over 535% since then. But Bezos got in, after adjusting for stock splits, at EIGHT CENTS PER SHARE!
Talk about leverage. That translates to a 112,000 percent increase from investment to IPO, and then if he held onto the shares to another 535% on top of that.
3. He Invested in People. At the time of Bezo’s investment, there were a large number of very well-funded and far more successful search engines already on the market. Remember this was 1998 not 1994. Yahoo. Alta Vista. Lycos. Excite. Looksmart. Webcrawler. Infoseek. Inktomi and GoTo to name just a few.
But Bezos was attracted to Page and Brin as people, as technologists, as leaders. And obviously their customer-centric focus really tracked the way that Bezos looks at the world and is embodied in the Amazon customer service experience.
So while a business opportunity, in its abstract is great, evaluating the people leading a business is a FAR MORE RELEVANT investing best practice.
4. He Took a Shot. For every Jeff Bezos who invested in Google, there are stories of literally dozens of investors that were presented with the opportunity and did not.
This of course does not mean that the probability of any early stage private company investor having a Google-like success in their portfolio is anything but very low, but it does mean that it is far greater than the ZERO percent likelihood of success of those who did not invest.
As they say, you can’t win if you don’t play.
5. He Got Lucky. As hard as it is for many to accept, luck is a key, and sometimes the key, variable in successful investing.
As opposed to fighting or getting philosophical re this reality, a far better question to ask is “How can I improve my likelihood of, for lack of a better turn of phrase, getting lucky?
Best regards, and look forward to connecting.
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Written by Dave Lavinsky on Wednesday, September 30, 2009
I just finished a great book called The Inspired Leader.
And while I was reading it, I tried to see how I stack up against the great business leaders discussed in the book.
And unfortunately, I didn't rate myself so well.
Maybe I'm being a bit harsh on myself, but there's clearly a lot of room for improvement. And importantly, I will be making a personal effort to improve. And I hope you will too. Because, a key attribute of a successful entrepreneur is that he or she be an effective leader.
As you know, few successful companies have just one founder and no employees. As you grow your business, you will most likely grow your employee base. And, as you do this, your ability to effectively lead your workforce becomes more and more important.
In fact, according to management expert Peter Drucker, most businesses would double their profits if they increased employee productivity by just 10%.
Let me repeat this critical point - most businesses would double their profits if they increased employee productivity by just 10%.
That fact alone should inspire you as an entrepreneur to improve your leadership skills. It certainly did for me.
Now, the key premise of the book is that there is one leadership skill that trumps all others. That skill, as the book's title so aptly points out, is the leader's ability to inspire employees. (The proof? The book's authors, through rigorous market research and analysis, repeatedly found a high correlation between success and a leader's ability to inspire the employees around them.)
So let's talk about nine ways that you and I can be more inspiring to our employees:
1. Increase our energy and enthusiasm. When inspiring leaders enter a room the energy level and excitement should go up. Employees should want to be around you.
2. Provide clarity on your goals. Inspiring leaders are very clear about the company's goals and how each employee can contribute to the company's success.
3. Set challenging goals and objectives. Setting "stretch" goals (goals that are challenging but obtainable) releases employees' conserved energy and increases their productivity as they try to achieve those goals.
4. Have a formal plan for personal development. No leader has all the skills they need. Every leader can become more knowledgeable in multiple areas and needs to continually educate themselves and keep abreast of best practices.
If you go to Growthink University (http://www.growthinkuniversity.com), you
will note that we recently added three "Departments" - 1) Building Your Team, 2) Growing Your Revenues, and 3) Protecting Your Business. Over the coming months, I will be developing (myself and with the help of various experts), expert content in these and several other areas to ensure that the entrepreneurs who enroll in Growthink University have all the skills they need to succeed, and are constantly learning best-of-breed success practices.
5. Provide coaching and mentoring. Inspiring leaders help employees develop new skills and abilities.
6. Share information. To be a great leader, you need to share important information with other team members. In the information age, where the sheer quantity of information is so great, this becomes more challenging as leaders want to provide enough information, but not too much information such that it bogs down employees.
7. Do as you say and say as you do.
8. Encourage feedback and ideas from employees. Great leaders don't come up with all the great ideas themselves. They get constant feedback from their teams. And they don't criticize feedback. Or else, the feedback quickly stops coming.
9. Provide helpful feedback on performance. Great leaders periodically review their employees' performance and give feedback regarding what is good, what needs to be improved and how.
If you're curious to see why I gave myself a C+, I feel that I can do a much better job of 1) setting stretch goals, and 2) periodically reviewing and helping to improve the performance of each of my team members.
Finally, to ensure that I do a better job on ALL NINE of these ways to inspire my employees, I have created a monthly worksheet for myself that I will complete on the first of each month. I uploaded a copy of the worksheet here: http://www.growthink.com/InspiringLeader.pdf, so you can use it too.
Just fill in the blanks and post it on your wall. If you see it every day, you are more likely to execute on it.
Written by Dave Lavinsky on Wednesday, September 30, 2009
The conversation I had the other day started like many others I have with entrepreneurs.
"How can I help you?" I asked.
"I need money to grow my business," he said.
"So how far along is your business right now?" I replied.
Now, here is where things got a little strange.
In most cases, the entrepreneur says that they are just starting out. Or that they have been around for a year or two and have some customers and a nice revenue base.
But this entrepreneur responded, "Well, we're 7 years old and projected to do $120 million in revenue this year."
??? No, this was not the response I was expecting.
So, why does a company that's doing over $100 million in revenue need capital? To buy a competitor? To build market share since it's selling products at a loss?
While these are two valid reasons why more established companies constantly need capital, this company was actually very profitable and not looking for acquisitions.
So, why then did this company require capital?
Because it was growing too quickly and hadn't financially planned for that. You see, the company was manufacturing and selling products at a nice profit, but it needed to pay its manufacturing costs 90 to 120 days prior to when it received payment from its customers.
The result is a cash crunch.
The company has lots of outstanding orders. But it can't fulfill them since it can't lay out the cash to manufacture the goods. This is extremely frustrating for the entrepreneur, and potentially lethal (if customers decide to switch to a competitor).
Now, there are two key ways around this problem.
One, as discussed in Growthink's Definitive Guide to Creative & Alternative Financing Sources, is customer financing, whereby the customer pays for the product upfront or more quickly in return for some benefit (equity or price discounts).
The other is getting outside capital to solve the cash crunch.
The underlying issue here that you must understand is that "cash flow" is very different than "profitability."
Profitability compares your revenues to your costs.
On the other hand, cash flow determines when, where and at what times cash is coming into and cash is leaving your company. And without proper cash flow projections, a fast growing company can find itself in big trouble.
That's why it's critical that all companies, as part of their business planning process, prepare a Cash Flow Statement or forecast. And in fact, companies should prepare cash flow forecasts every month if not every quarter.
This is particularly important for companies who expect significant growth or those with seasonal sales fluctuations.
Your cash flow statement is roughly calculated as follows: Cash Flow From Operations minus Cash Invested in Equipment plus Cash Received from Outside Financing.
It gets a little more complicated than this, since Cash Flow From Operations includes things such as whether your accounts receivable (how much money you are owed from customers) is going up or down, etc.
So, the key takeaway is this - do NOT risk bankrupting or slowing the growth of your business because you don't forecast your cash flow statement every quarter or month.
If you need help, the financial model portion of Growthink's Ultimate Business Plan Template has a full, plug & play, financial model which includes your Income Statement, Balance Sheet and Cash Flow Statement, so you can accurately project what your monthly cash flow will be.
Importantly, this will ensure that you can get financing, as needed, well BEFORE the months when you need it (and not risk your company's future).
Here's the link to Growthink's Ultimate Business Plan Template - http://www.growthink.com/products/business-plan-template.
Written by Christiana Moffa on Tuesday, September 29, 2009
Why Every Entrepreneur Should Wear a Top Hat
Last week, I had the great honor of attending the annual Inc. 500/5000 Conference, which celebrates the fastest-growing companies in the United States. Surrounded by the country's most inspired and innovative entrepreneurs, I was constantly amazed at what people can accomplish when they set their minds to it. Truthfully, I took a look back at my life and career and thought, "Should I be doing more? Am I inspiring others?"
Written by Dave Lavinsky on Tuesday, September 22, 2009
I just read this really interesting story about Dr. Doreen Orion in Psychology Today and wanted to share it with you.
Dr. Doreen Orion is a psychologist, as is her husband, Tim.
That's why she truly thought her husband was insane when he proposed that they give up everything and travel the country in a converted bus for a year.
But after two years of being nudged to do it, Dr. Orion finally gave in.
So, off they went around the country in their bus. And, during that time, they experienced it all... from a fire, a flood, an armed robbery and finding themselves in a nudist RV park.
Was it worth it?
According to Dr. Orion the answer is a whopping YES. In fact, enough so that she and her husband have decided to sell their home and live on their bus full-time.
So, what did she find? What did she learn?
Dr. Orion learned that "being comfortable" is not all that great. She said, "I hadn't understood how important it is to keep stretching myself, to keep trying new things. A certain spark I hadn't even known was missing suddenly came back into our lives."
The key for me is this -- it is the process of making yourself uncomfortable and stretching yourself when real personal growth and progress is made. As an entrepreneur, you MUST do things that make you uncomfortable. You can not let fear get the best of you.
Consider Johnny Carson who is well known for his severe stage fright. Fortunately that didn't stop him.
And consider the millions of great entrepreneurs who had the courage to develop their business plans and launch their business to the world.
Now, if you haven't truly launched your business, that is, if you haven't developed your business plan and raised capital (if needed for your business), then now is the time to do it.
And, to "make you an offer you can't refuse" (to borrow the line from the great mafia movies), until this Thursday at 5PM EST, I have a really special offer for you.
The offer is this:
For just $1, you can instantly download Growthink's Ultimate Business Plan Template and get a 14-day trial to GrowthinkUniversity.com
To learn more, and take us up on this $1 special offer, click the link below to watch a video that explains it all:
Written by Dave Lavinsky on Thursday, September 17, 2009
The other day I was given a badly-needed, private webinar by John Moccia, Technology & Venture Capital Practice Leader at Rollins Insurance, which is a member of TechAssure.
John has been working with venture capital firms and emerging ventures for many years to make sure they are properly protected. And he was gracious enough to give me a private presentation (which we recorded as a video) regarding the insurance needs at the four key stages of an emerging company's lifecycle:
Stage 1 - Formation/R&D
Stage 2 - Growth Phase
Stage 3 - Mature Company/IPO
Stage 4 - Public/Fully Developed Company
I think all of you will find tons of value in this presentation, particularly as it relates to Stage 1 and Stage 2, where most of you currently are.
John went through each of the key types of insurance that entrepreneurs need during these phases. He discussed numerous types of insurance that you must be aware of, including:
• General Liability
• Property Coverage
• Business Interruption Coverage
• Workers Compensation & Disability
• Errors & Omissions
• Directors and Officers Liability
• Crime Coverage
• Global Companion Policy
• Employee Benefits including medical, dental, 401k, life and disability coverages
• Key Man Life Insurance
Importantly, John not only talked about what each of these insurance policies are, but he explained when you need them and when you don't, and gave great tips regarding finding the right insurance policies for your company (and what to look out for).
Now, I'll be the first to admit that buying insurance for your company is not the most important part of being an entrepreneur. But getting the right insurance is part of being a sophisticated entrepreneur.
And in fact, several types of insurance are required when reaching key milestones such as getting your first office, raising capital, and expanding geographically. So, it's important to understand the key insurance issues and plan accordingly.
You can watch the video below:
If you need to contact John or Rollins, his contact information is on the last slide of the video.
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