Written by Jay Turo on Wednesday, April 22, 2015
My Post last week on the fast funding and growth success of Domo (over $450 million in capital raised at a $2 billion valuation), generated a lot of great responses - some whimsical, some skeptical, but with the most interesting being variants of:
"How can the lessons of Domo (and those of the other Tech Unicorn's profiled), be best applied to my business and investment plans?
This is such an important and in so many ways misunderstood topic that I decided to share, via live Webinar, key insights from the business models and investment strategies of Unicorns like Domo, Uber, Airbnb, Dropbox, and Slack and why some of the smartest business and investment minds in the world today consider what these companies do so important and valuable.
What Will Be Covered
On the webinar, I will reveal:
Who Should Attend
I have designed the webinar with two main audiences in mind:
1. Entrepreneurs and Business Owners seeking transformational ideas to quickly increase the growth and value of their companies.
2. Investors interested in aggregating positions in Disruptive Technology Companies at their most opportune moments: after the highly unpredictable Startup stage, but before they become widely known and priced to market.
To preserve the intimacy of the presentation, we are limiting attendees to the first 35 registrants, so Reserve Your Seat today!
Sign up here:
Written by Jay Turo on Wednesday, April 8, 2015
I regularly engage with entrepreneurs and executives to help them determine the right long-term strategic plans and goals to pursue, toward the end of maximizing their businesses’ valuations and their likelihoods of selling their companies down the road.
This, as I have discussed before, is the highest ROI work that a business manager can do, yet most of us invest way too little time in it, and even more vexingly the results we get from the time we do spend are middling at best.
Now, in addition to just not knowing how to strategic plan (and for those interested in a quick primer, I recommend Dave Lavinsky’s excellent book Start at the End), an under-rated reason why otherwise talented businesspeople are poor strategists is because of what I would describe as Business Dissonance - the sad feeling that even if we do manage to arrive at the right plan, it won't make any difference.
Why not? Well, at least partly because for too many of us and the organizations we lead feel incapable of implementing and maintaining the big changes that are almost always required to attain the long-term plan.
Yes, to paraphrase a famous scene from The Godfather, it can often feel like every time we think we have freed ourselves from Business as Usual, we are pulled back in and nothing changes.
As a result, we sabotage our grand plans by frittering away our precious time and energy on the mundane, the petty, and on the "urgent" but not really important stuff that can so easily consume our day.
Like round and piles and endless streams of email.
Meetings with weak agendas and even weaker follow-up.
The daily "just getting through” client and customer “crises” (versus finding and fixing their root causes).
On chatter, and on frenetic activity that feels like hard work, but doesn’t progress us toward important goals.
Paradoxically, this state of affairs does point us to the strategic breakthrough: by gaining control of our day to day schedules and to dos, we will free up time and space to focus on the important projects as dictated by our strategic plan.
And how can we empower ourselves in such a glorious way?
Well, for those that can describe themselves as Knowledge Workers (almost all of us these days), here’s an extremely simple daily “hack”: For the first hour of our day, shut off the technology.
No email. No text. No tweets. No posts.
And if an hour feels too much, then start with 15 minutes.
Sound simple? Well, it is, but not easy. (Try it, and if you can keep it up for just a month write me back, and I'll send you a card for a free cup of coffee on me).
When we clear our minds and spirits like this to start our day, almost magically will our capacity grow to make steady progress toward our most important (and almost always extremely proactive) projects and goals.
And the deep peace of mind of knowing that today’s work is in sync feels really, really good, too.
Written by Jay Turo on Wednesday, April 1, 2015
This is clearly one of the great boom times in the history of Venture Capital, with more than $29 billion in fresh capital being raised by more than 250 funds over the past year. This represents a 70% jump from the comparable, previous year’s period, and more than a 225% jump from the “nadir” numbers of 2009-2010 (all stats here from the NVCA).
And VCs have seen a lot of successful exits, too (hooray!), with in 2014 more than 115 venture backed companies going public and more than 455 exits via M&A.
Probably most importantly, long term (3, 5, 10, and 20 year) VC returns continue to significantly out-perform the major public equity indices (DJIA, NASDAQ, S&P 500).
All very, very good and exciting stuff, but for the individual investor, is investing in a VC fund a good idea?
It can be, as the return examples above attest, but because of regulatory and technology changes, there are now far better ways to deploy capital into high potential, privately held companies (i.e. the VC investment sweet spot). Here’s why and how:
Market Efficiency. With now over twelve hundred active U.S. venture funds - and in general with them pursuing mostly the same deal sourcing strategies and approaches - it has become extremely difficult for VCs to consistently find and secure high potential, well priced deals.
The result has been a “regression to the mean” - with alpha performance by fund managers being driven as much by randomness and luck (as it has been with public market mutual funds for decades) as by coherent design.
Fees. The world of low and no load management fees that so transformed mutual fund investing for in the 80's and 90's is far from being on the VC radar.
In fact, as opposed going down, venture fund fees have been going in the other direction, with a number of higher profile funds upping their annual fees to 3% (along with asking for a greater share of the returns) versus the standard 2-2.5%.
These high fees obviously eat away at return, and more profoundly are in contrast to the “disintermediation spirit” so at the heart of modern investing.
Friction. Little discussed in most venture fund models are the high costs of deal sourcing, diligence, and oversight.
It is not unusual for a venture fund to sort through thousands of possible investments, deeply diligence a few hundred, prepare and submit term sheets on a few dozen, and then do zero deals.
This all costs money.
And all this doesn’t even begin to measure the management and oversight costs on the deals that are done – which at their barest minimum range from quarterly board meeting attendance to monthly, weekly, and sometimes daily calls and meetings with portfolio companies.
All this work is necessary to do VC investing right, but is also expense and friction filled.
Now, funds do work to charge some of these costs back to their portfolio companies, but usually these offsets flow to the fund’s General and not its Limited Partners.
So what to do?
Well, for those that want access to the unique returns of the asset class, but are reluctant to either a) put all of their eggs in one basket via investing in one particular startup directly and / or b) get the problems with the current VC model per the above, here are two ideas:
1. Explore peer-to-peer lending sites like Prosper.com and LendingClub, all of which offer various forms of fractionalized and securitized investing into the asset class.
And, with the SEC greenlighting equity-based crowdfunding last week, keep a careful eye on crowdfunding sites like Crowdfunder.com that will now be able to directly process smaller-denomination private company investments over the Net.
2. Do Like Warren Does. The Berkshire Hathaway Model of an “operating company owning other operating companies” can be a great gateway to the asset class, combining both diversification along with the the “pop” and fast liquidity potential that a single company investments allows. Well-run companies like this that focus on the startup space are hard to find, but when one does they are definitely worth a closer look.
In short, when it comes to this asset class, the advice here is to avoid the VCs and explore investment models – some new and some old – that provide access to it in a lower cost, higher expected return, and all-around more modern way.
Written by Jay Turo on Wednesday, March 18, 2015
Last week, I shared the depressing statistic on how less than 1 out of 5 companies marketed for sale are able to find a buyer and to consummate a successful sale transaction.
And how even this depressing statistic vastly under-estimates how few companies are able to attain a successful exit, as the great majority of the over 6 million U.S. business owners because of how they are structured and run can’t even contemplate commencing a “business-for-sale” process.
What did they do / do they have that your company does not?
Well, from my more than 15 years of helping companies of all types and sizes breakthrough to new plateaus of growth and value, I have discovered three universal truths:
1. Most entrepreneurs and executives make the same strategic and tactical errors over and over again.
Webinar Invitation: The Five Steps to Maximize Your Valuation
I would like to cordially invite you to join me on Friday, March 20th at 1 pm ET / 10 am PT for a brand new webinar - The 5 Steps to Maximize Your Valuation - where I'll reveal the 5 steps you can take to dramatically increase the sale price of your business, and dramatically decrease the time needed to achieve it, including:
• The 3 Mistakes that most Entrepreneurs and executives make that effectively render their businesses unsellable
I assembled this webinar presentation in conjunction with both the Growthink Research team, which over the past year has performed industry, market, and competitive analyses for hundreds of high growth companies…
…and with the predictive analytics team at Guiding Metrics, who have are currently working with dozens of companies in automating and optimizing their key marketing, sales, operational and financial metrics.
The combined statistical insights of all of this “on-the-ground” business fieldwork are the basis of the to-be presented webinar findings and insights.
Market and economic conditions will probably never be better than they are right now. I encourage all leaders of companies frustrated with their low growth rate and unclear pathways to exit to attend, listen intently, and then act on this awesome webinar content.
Written by Jay Turo on Wednesday, March 11, 2015
According to statistics from BizBuySell, less than 1 out of 5 of businesses marketed for sale are able to find a buyer and to consummate a successful transaction.
Even this depressing statistic vastly under-estimates how few companies are able to attain a successful exit, as the great majority of the over 6 million U.S. business owners are never able to even consider listing their companies for sale.
That’s a lot of blood, sweat, and tears expended on work and businesses that yield comparatively very little.
Even more viscerally, working hard and long on a business that doesn't get to an exit is, far more often than not, a profound form of losing.
And losing sucks.
Now, there are always reasons and excuses as to why better and faster progress is not made: Cheap, overseas competition, difficulty in attracting and retaining talent, taxes, regulations, and perhaps my favorite the lament that one's struggles are caused by customers that don't “get” how awesome our products and services really are.
These reasons and excuses are just that. For every one of them, there are infinitely more possibilities and opportunities that with just a little refocusing of effort and action can turn declining or flat-lining business vectors into solid and sustainable growth trajectories.
Here are three of them:
1. Always Ask This One Question. The great Charlie Munger, Warren Buffet's partner at Berkshire Hathaway for over 50 years and one of the most successful investors of all time, is famous for asking his managers this question when it comes to important operational decisions: "What is the Low Cost, High Quality choice?"
What I love about this question is that no matter the business process - marketing, sales, operational, financial - it forces us to not to make the classic (and lazy!) false choice between cost and quality: we can have and deliver both.
2. Start at the End. Growthink Co-founder Dave Lavinsky’s Small Business and Entrepreneurship best-seller Start at the End should be required reading for any and all executives truly interested in building their companies to a successful exit.
In it, Dave goes into great detail as to the effective practice of business goal-setting far out in the future, and then how to work backward to today’s most important projects, tasks and to-do's.
3. Trust Our Guts Less and the Numbers More. Pioneering work by Nobel Laureate Daniel Kahneman has demonstrated that in almost all business arenas - hiring, marketing initiatives, sales teams, customer satisfaction, financial performance – almost always it is the cold, hard numbers that are right and our warm and fuzzy guts that are wrong.
This has always been true, but now for the first time we can protect ourselves from our guts, utilizing Predictive Analytics (automatically making sense and order of our Big Data world) and Business Intelligence Dashboards (automatically giving us a "Quantified Self" snapshot of where we stand in real time against our goals and what to do about it).
It is simple: Be numbers-driven, define as precisely as possible our long-term objectives, and at every turn make the lower cost, higher-quality choice.
Written by Jay Turo on Wednesday, March 4, 2015
The confluence of Big Data and high quality, low cost software-as- service (SaaS) programs and applications for virtually every business purpose has made the path clearer than ever as to what entrepreneurs and executives must do to build real equity value in their companies.
It looks like this:
First, utilizing great tools like John Warrilow’s Sellability Score or Dave Lavinsky's Start at the End we define exactly what we seek for our key stakeholders: Customers, Employees, Partners, Vendors, and Shareholders.
For customers, it might be the efficacy / benefits of our products and services.
For Employees, it might be their opportunities for contribution, professional growth, enjoyment and income.
For Partners and Vendors, it might be what we wish our reputation to be, our brand to represent.
And for our Shareholders, it is the equity value we seek to attain, through our stock price, our sale price (to a strategic or financial acquirer), and / or the future value of our cash flows.
With these end points clearly defined, we then score ourselves - i.e. measure the size and nature of the “gaps” between where we are and where we want to be.
Now, for almost all businesses, completing this scorecard requires accessing various SaaS programs, both paid and free, to “get the data.”
We then turn to “the Micro SaaS” – the various “Cloud” programs and applications on which our business partially, mostly, or completely runs.
Programs and applications like Google Analytics, PIWIK, Clicky, and KISSmetrics for our web marketing performance, Salesforce, SugarCRM, Infusionsoft, and Marketo for lead conversion and sales teams, ECI, Sage, Intacct, and Basecamp for operations and project management, and QuickBooks, NetSuite, and Xero for accounting and finance.
Now, here is where, in the last 18 months, the game has really changed.
For the first time ever, we can now automate both the measurement of where we stand against our goals and the Gap Analysis of what we need to do improve results.
This is because the long hoped for promise of business intelligence dashboards, tools and services has reached a tipping point, as best evidenced by the massive financing attained by companies like Cloudera and Domo, and by the incredible traction that smaller company-focused business intelligence dashboard tools like Geckoboard, Leftronic, and my company's product Guiding Metrics have gained.
Combining Exit Planning, SaaS, and Dashboards allows us to automate our strategy, defining what we want to achieve and understanding the industry, market, and competitive landscape we must prevail in…
…and our tactics, the day-to-day marketing, sales, operations, and financial nitty-gritty needing to be done to get there.
…sitting back and watching the dollars and the victories roll in while enjoying and not killing ourselves in the process!
Pretty cool, eh?
Written by Jay Turo on Wednesday, February 25, 2015
Yesterday, TechCrunch posted a neat slideshow on the nine largest venture capital and private equity financing rounds of the past 24 months.
It is an extremely cool piece - profiling seven (two companies on the list had multiple rounds) of the highest flying technology companies in the world.
Let's start with Uber, both because it tops the list, with over $4.6 billion in capital raised, and because most of us can easily understand and relate to the Simplicity, Power, and Promise of its business model.
First, the Simplicity. At its core, Uber utilizes pretty basic technology to better deliver a basic service - a hired ride from point A to point B - that has been in existence since the beginning of time.
It is simple in such an eye opening way that for many folks the first time they download the app, press “Request Uber X,” and magically then a few minutes later a ride appears they are taken with a giddy excitement.
This simplicity masks the Power unleashed by Uber's technology: the initiative of the now over 162,000 and growing Uber Drivers.
There are various reasons (many controversial) why these drivers see Uber as a good and worthwhile use of their time and work energy, and whether or not it is good for our economy and society as a whole.
However, what is clearly not in doubt, is how Uber is massively profiting by harnessing and channeling the entrepreneurial, Sharing Economy Power of these tens of thousands.
That Power in turn leads to the Promise of Uber: To transform our notion of what transportation is, including whether or not it even makes economic and quality of life sense to own an automobile anymore...
…and in an even grander vision how Uber could up-end the shipping industry (and even the mail, too!).
Simplicity, Power, Promise - better and more cinematically embodied in Uber than perhaps in the other six companies profiled, but as you dig into those you will find similar themes.
Didi Dache, which just raised $700 million, is the Uber of China. The core business of SpaceX, which just raised $1 billion from Google, is as Simple and Powerful as they get: shooting rockets into space.
Xiaomi, to bring the promise of high-end “Apple-like” smartphones, to China’s 1.2 billion mobile customers.
The vision of Cloudera, which has raised over $1 billion from investors (and is contemplating an IPO in the near future) is nothing less than to give “all businesses a…360-degree view of their customers, their products, and their business.”
The obvious suggestion is to work to bake these qualities into our business models and entrepreneurial endeavors.
Perhaps less obviously, in my experience these qualities do exist in most businesses, but to find them requires a boiling away of the Complex Excess to get to the essential core.
When you do, while you might not raise $4.6 billion at a $40 billion+ valuation like Uber, my gut is that you will find the path to meaningful growth and a High Value Exit more clearly and easily defined.
Written by Jay Turo on Wednesday, February 18, 2015
Last week, I wrote about the peaks to valleys to peaks flow of a typical strategic planning session, and how without this Breakdowns leading to Breakthroughs flow it is difficult to attain truly actionable projects and to-do's from the discussion.
Written by Jay Turo on Wednesday, February 11, 2015
In my work I often get to lead strategic and business planning sessions and retreats with some amazingly dynamic and thoughtful entrepreneurs and executives.
Written by Jay Turo on Wednesday, February 4, 2015
This weekend, I read The 80% Solution – a great e-book by famed business coach Dan Sullivan in which he makes the case that “perfectionism” is a misunderstood and under-reported “enemy” of successful entrepreneurship.
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