Adobe. Akamai. Amazon. Amgen. Apple. Baidu. Bed Bath & Beyond. Biogen. Broadcom. Check Point. Cintas. Cisco. Citrix Systems. Dell. eBay. Electronic Arts. First Solar. Flextronics. Garmin. Genzyme. Gilead Sciences. Google. Hansen Natural. Infosys Technologies. Intuit. Juniper Networks. Logitech. Maxim Integrated Products. Microsoft. NVIDIA. Oracle. Paychex. QUALCOMM. Research in Motion. Seagate Technology. Sigma-Aldrich. Starbucks. Symantec. Urban Outfitters. VeriSign. Xilinx. Yahoo!
What do these companies have in common? Their stocks are all components of the NASDAQ 100 – the “biggest and the best” of the mostly technology-focused companies that make up the overall NASDAQ Composite Index.
Quite simply, this is a list of some of the most dynamic, most innovative, most technological, most forward-thinking, highest “IQ” companies on the face of the earth.
And know what else? If you had been invested in any relevant basket of these stocks in the last ten years, your investment returns would have been HORRIFIC. Here are some sample returns:
In the period from January 1st, 1999 to December 31, 2008, the overall NASDAQ composite index went from 2,192.69 to 1,577.03, or a 10-year return of MINUS 28.1%. Microsoft, down -45%, Yahoo down 71%, Akamai down 86%. Even the winners haven’t down all that hot – Starbucks up only 18% for the decade. Electronic Arts – riding the global gaming wave – up a pretty mediocre 52% for the whole decade.
So the obvious question is - what is going on here? The companies on this list have certainly been innovating and growing these last 10 years. And the #’s here are not overly distorted by the bubble of 1999-2000 and the great crash of 2008. If you normalize for these two factors, the numbers are somewhat better, but still no way NEAR the mid-teens annualized returns that the mutual fund and insurance industries would like you to believe you will get via a standard basket of public stocks investment approach.
Like Mickey Rourke’s character in “The Wrestler,” the stock-picking industry can’t keep themselves from talking about their glory days of the 1980’s and 1990’s. These two decades saw consistent double-digit broad public stock market returns. In those days, making good, and sometimes great returns, was as simple and easy as buying virtually any index or broad-based market index fund. To illustrate this, let’s look at the NASDAQ return by decade:
What is interesting, however, was that the last 10 years – the “00’s” – were far, far from a lost decade for the professionals. In fact, while the Main Street investors were left holding the bag, the hedge fund and private equity businesses boomed. Little and sometimes well-known money managers like Bruce Kovner, Edward Lampert, Eric Mindich, George Soros, James Simons, Louis Bacon, Marc Lasry, Paul Tudor Jones, Ray Dalio, Stephen Feinberg, Stephen Schwarzman, Steve Cohen, Steve Mandel, T. Boone Pickens and William Browder earned personal compensation packages that regularly exceeded 10 figures – as in billions of dollars of earnings. And to make it even more of a kick, when the bottom fell out these last 6 months, they didn’t have to give back all of the money they had personally earned over those years. No, conveniently those losses were born by a combination of their investors and the American taxpayer. Nice gig if you can get it.
So what does this all ad up to? A few action points:
The sky is falling. The sky is falling. While that's the news the media is telling us everyday, it's not necessarily all true.
While the economy is clearly not doing so well, there is still tons of money available to organizations via loans, investments and grants.
In fact, with regards to grants, last year more than 75,000 U.S. foundations gave $45.6 billion to organizations and individuals, according to Foundation Growth and Giving Estimates: Current Outlook (2009 Edition). That's $45.6 BILLION!
Do you want a piece of that money? Well, if you do, there is one site that you MUST visit: FoundationCenter.org. Right on FoundationCenter.org's homepage you can start searching thousands of foundations that provide grants. You can even search by factors such as your zip code and market sector to zero in on the most appropriate grants for you.
But, before you rush to give FoundationCenter.org a try, you need to know the one key fact about private grants that no one seems to tell you. Foundation grants are only for non-profit organizations.
So, if you are a non-profit organization, you should definitely stop what you're doing and go to FoundationCenter.org to see what grants might be available to you.
I know what you may be thinking right now...How does this help me? I'm running or starting a for-profit business.
I gotcha. And fortunately, there are also billions of grant dollars available for you too. However, getting these dollars is a bit more tricky. Your business needs to be in certain sectors. You need to know where to look. You need to know how to apply and the secrets to making sure your application succeeds.
To answer these questions and make winning grants for your business a whole lot easier, my team and I just completed Growthink's "Step-by-Step Guide to Raising Capital for Your Business from Grants."
The guide is focused on teaching for-profit businesses how to raise capital via grants. Growthink University members have already been sent their copy of this special report. Others can learn more and download it today by clicking here.
Investing in startups and emerging companies is the process of identifying and backing the entrepreneurs and executives with the best ability to move efficiently and profitably from ideas to execution, and then from execution back to ideas and then back to re-focused execution. And finding those that do so on all aspects of their businesses -- marketing and sales, operations and finance.
The entrepreneurs to avoid are those overly focused only on ideas or only on execution. Those focused only on ideas often let the desire for the perfect negate the doable. They don’t quickly and rigorously subject their ideas to the rumble and tumble of the marketplace. Here we are referring to the great idea person that never gets around to actually executing upon an action plan.
On the other hand, those entrepreneurs focused on just execution, while at some levels far more effective than the ideas set, are often too slow to react to changing technological, marketplace or competitive conditions. They often define their value offerings so narrowly that they miss adjacent opportunities. Classic examples of this include IBM defining themselves as a computer hardware as opposed to a technology solutions company in the 1980s, thereby ceding the operating system software market opportunity to Microsoft. Or the traditional phone companies in the 1990’s not leveraging their huge patent portfolios to profit in the emerging mobile communications and Internet marketplaces.
Contrastingly, the best entrepreneurs and successful executives are constantly finding the balance between ideas and execution. They are masters at what we at Growthink like to call, “The Business of Ideas.” They are both creative and task-focused, but not too little or too much of either. They make plans and they work them, but they are not slaves to them. They understand that great businesses are inspired by ideas, but their success is counted in cash. They are, in essence, “idealistic capitalists,” believing that the best ideas, the best products, and the best services make the most money.
Entrepreneurs running businesses like these are few and far between for sure. But when it all comes together, legends are born and fortunes are made.Categories:
Stanford psychology professor Carol Dweck in her book "Mindset: The New Psychology of Success," addresses the fascinating issue of why some people and companies achieve their potential while others equally talented and positioned don't.
The key, interestingly, is not ability.
Rather it is whether ability is viewed as something inherent that needs to be demonstrated or as something that can be developed and increased over time, through persistence and experience. Incredibly important for entrepreneurs is the corollary idea to this -- namely that if you take on the belief that ability can and must be developed (as opposed to being something that you either are or are not born with) that great strides in performance are possible.
This "effort effect" is really a key success metric for emerging and middle market companies. In today's globally competitive, fast-changing marketplace, great companies are built not simply via aggregating talented teams, but via aggregating talented teams and creating a corporate culture that rewards thoughtful risk-taking and "learning on the fly" -- thoughtfully incorporating market and competitive feedback into managerial decision-making processes.
Another way to think of the Effort Effect is that business in the 21st century is not a place for resting on one's laurels, resume, or past successes. Rather, it is an increasingly global, level playing field where individuals and companies can rise from the humblest of circumstances, and via effort and imagination, rise to compete and win on the grandest of stages.
And make themselves and their investors a lot of money in the process.
The overriding body of statistical research conducted over the past 30 years shows that the vast majority of all venture, private equity, hedge, and mutual fund manager's investment return performance is worse than that of the market averages.
Stepping back for a moment, one should really be struck by how absolutely amazing this fact really is.
Think about it - here are some of the highest-paid and theoretically smartest people in the world, and yet if you take their advice you will most likely have a below-average performing investment portfolio. A famous feature in the Wall Street Journal for many years had a cross-section of well-regarded investment analysts pick stocks head-to-head against a monkey and a dartboard.
And this randomly-generated portfolio did, on average, appreciably better than the portfolio assembled by the top-shelf analysts.
Now, once-upon-a-time in a more innocent age, these results could be taken in an almost light-hearted manner. Overall stock market performance was generally good enough to overlook the reality that the huge infrastructure of Wall Street brokerages, analysts, and commentators essentially added no value. Over the past 25 years, there was so much money to be had by all as the investment management industry grew from a relatively quiet backwater to the behemoth that it is today, institutional and individual investors did "well enough" to not rock the boat on this issue.
As an aside, I think the main reason for the relative quiet has been that the investment industry has always been truly the ultimate old boy's club. Pension fund managers, the family office guys, the analysts at the big wirehouses and those that ran mutual and hedge and venture and private equity funds all traveled (and still do) in the same social circles. They all went to the same Ivy League colleges. Same golf clubs. Same charity banquets. It has been, for a long time, a nice, lucrative, relatively low stress, insider's game.
But the event of the last 6 months have taught us that those days are over. And from the perspective of believing that entrepreneurs and the operators of companies, and not financial intermediaries, should get the lion's share of a capitalistic economy’s financial rewards, it is about time.
We here at Growthink, as any regular reader of our contributor columns know, are not interested in being sideline commentators or market prognosticators. We'll leave that to the talking heads. Rather, we focus our effort in identifying, in investing in, and in helping startups and emerging companies grow and prosper. Why? First, because we believe that entrepreneurship is by far the greatest force for positive social and economic change in the world today. And second, because in modern, efficient markets, it is ONLY via investing in these companies that investors can consistently earn alpha returns.
Startup and emerging company investing, when done right, offers a unique combination of both value and trading-based fundamentals. Value-based because entrepreneurial companies, on average, offer a far higher probability of revenue, asset, brand, and cash flow growth than larger enterprises.
And trading-based because the equity in these companies can be bought in highly inefficient markets. These inefficiencies are two-fold. First, these companies trade in inherently lopsided markets - there are always a lot more sellers of startup and emerging company equity than there are buyers of it.
Second, because there are so MANY of them - more than 500,000 new companies in the U.S. coming on-line every month (startups) and more than 2.2 million firms with between 5-100 employees (emerging companies), the savvy, hard-working investor can consistently achieve significant information advantage in diligencing these deals.
So, to seek alpha, turn off CNBC. Put down the Wall Street Journal. Or, chuckle-chuckle, tune out Washington. Entrepreneurial America has, and will continue to be, your best bet. And in the process of making a lot of money, you just make help change the world for the better. Enough said.
I recently read a great blog post, from a company called The Name Inspector, about how to name your company or product. Whether your goal is to raise capital or gain the interest of partners or customers, the names of your company and products are critical.
In fact, when we first launched Growthink a decade ago, we started with the name BestBizPlan since we initially focused just on developing business plans. Realizing that we would expand beyond business planning, we changed the name to Growthink to reflect our desire and skill sets in helping entrepreneurs and business owners in growing their businesses via planning, capital raising, marketing, strategy and more.
The Growthink name has a better connotation and helps client, prospective clients, partners and employees better understand and relate to our mission. While I cannot attribute our company's success solely to our name, it certainly has helped us.
So, here are the ten ways for you to create great company (and/or product) names as suggested by The Name Inspector:
1. Use Real Words: These are names that are simply repurposed words. (e.g., Adobe, Amazon, Fox, Yelp)
This category also includes misspelled words (e.g., Digg (dig), flickr (flicker)) and foreign words (e.g., Vox (Latin 'voice').
2. Use Compounds: These names consist of two words put together (e.g., Firefox, Facebook).
3. Phrases: These names follow normal rules for combining words (but are not compounds) (e.g., MySpace, StumbleUpon).
4. Use Blends: Blended names have two parts, at least one of which can be recognized as a part of a real word (e.g., Netscape (net + landscape); Wikipedia (wiki + encyclopedia)).
5. Use Tweaked Words: Tweaked word names are derived from words that have been slightly changed in pronunciation and spelling - commonly derived from adding or replacing a letter (e.g., ebay, iTunes).
6. Use Affixed Words: These are unique names that result from taking a real word and adding a suffix or prefix (e.g., Friendster, Omnidrive).
7. Use Made Up or Obscure Origin Words: These names are generally short names that are either completely made up, or, since their origins are so obscure, they may as well have been made up (e.g., Bebo, Plaxo).
8. Use Puns: Puns are names that modify words/phrases to suggest a different meaning (e.g., Farecast (forecast, fore -> fare), Writely (rightly, right -> write))
9. Use People's Names: using a general name or the name from a personal connection (e.g., Ning (a Chinese name), Wendy's (founder Dave Thomas' daughter's nickname)).
10. Use Initials and Acronyms: names derived from the first letter of each word in the longer, more official name (e.g., AOL (America Online), FIM (Fox Interactive Media)).