Growthink Blog

Jason Fried is on Cloud Nine


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If you aren't familiar with who Jason Fried is, you should be. Jason is the Founder of 37 Signals, makers of Basecamp, with over 3 million users and 2.8 million live projects, arguably the world's most popular project management software.

Jason is also the author of Rework, a New York Times bestseller on entrepreneurship, technology, and design.

Basecamp is the project management and collaboration tool of choice for the serious entrepreneur. In addition to being a fantastic piece of software (more on that in a bit), it is also a prototype of where all of the smart money in technology investing is these days.

Namely, on the cloud.

How ubiquitous is cloud, or software-as-a-service (SaaS) computing? Statistics that show the market for it growing to $160 billion next year only tell half of the story.

Just take any week of venture financings these last few years and you will find that almost all of the companies funded to be cloud-delivered software businesses.

Doubt me? Let’s look at the venture financings from A – F from last week to make the point:

8D World (Woburn, MA), Developer of a virtual world for learners of English as a foreign or second language - $5.25 million. Cloud.
 
Abcast (Camas, WA), Operator of digital radio platform - $500 thousand. Not Cloud.
 
Apperian (Boston, MA), Maker of mobile applications - $500 thousand. Cloud.

Communication Intelligence Corp (Redwood City, CA), Supplier of electronic signature solutions for businesses - $2.2 million. Cloud.

DigitalTown (Burnsville, MN), Developer of a national network of online communities for high school students, alumni and boosters. $10 million. Cloud.

DiJiPop (Providence, RI), Provider of on-demand shopper marketing platform - $1 million. Cloud.

DocuSign (Seattle, WA), Provider of electronic signature technology - $27 million. Cloud.

Echo360 (Dulles, VA), Provider of Internet audio and video technologies - $1 million. Cloud.

Factual (Los Angeles, CA), Provider of collaborative data platform and web services -$25 million. Cloud.

FleetMatics (London, United Kingdom), Developer of GPS tracking applications for commercial fleets - $68 million. Cloud.

Fluent Mobile (Boston, MA), Developer of mobile marketing software - $5.5 million. Cloud.

Flurry (San Francisco, CA), - Provider of mobile analytics services - $15 million. Cloud.

For those counting at home, that’s 10 out of 11.

And oh yes, then there are little companies like Google, Yahoo, Facebook, and Twitter. All, at heart, cloud computing.

So what is it about Basecamp? In a sea of mediocrity, it stands out with its speed, its ease, and its elegance.

Basecamp Runs Fast. What is more frustrating for the modern consumer than waiting to log-on, for a server response?

More to the point is relative waiting. 15 years ago, on dial-up modems we had a certain expectation of speed.  Today we simply rate one piece of cloud software against another.

Google to Yahoo. Facebook to LinkedIn. Expedia to Travelocity.

Basecamp runs Google fast and its speed alone makes it a joy to use.

Basecamp Runs Easy
. Given the potential complexity of Basecamp's core application - namely to manage projects of all types and sizes, Basecamp runs easy. Its basics can be understood at signup, and its more advanced features in a few weeks of use.

Basecamp is Elegant. Fast and easy get you a seat at the table, elegance gets you customers for life.

Elegant is a word seldom-used when describing software because it is rarely built to please in a way that products in the traditional domain of elegance - luxury consumer goods - are.

One of the great wonders of modern living is that we can experience elegance viscerally at the movies or on TV, or via physical products like cars, shoes, and the like.

Now with software like Basecamp we can experience elegance in a manner that approaches the “singularity,” where one’s mind and spirit meshes with the machine.

Not in a dark science fiction sense, but with software like Basecamp in a manner that appeals to our best, most creative, collaborative, just plain old getting things done selves.

Basecamp has this kind of elegance.
 
And its existence is a testament to the entrepreneurial and design spirit that is Jason Fried.

He and his cloud creation Basecamp - fast, elegant, and easy-to-use - are modern treasures.

Find the Jason Fried's of the world before they are rich and famous. And back them and grow with them.

And you and the world will be better for it.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Jessica Simpson, Renée Zellweger, and Bold Predictions for a Breakout 2011


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America is getting its mojo back. Once one quiets the mind to the drumbeat of negativity that passes as business and economic news, one can hear the sound of the nation’s entrepreneurial and risk-taking wheels turning.

Here are seven bold predictions for 2011:

#7. Convergence will Again be the New Buzzword. The prototype of a breakout technology company will continue to evolve from “geeks in a garage tinkering with transistors” to loosely - coupled gangs of media - savvy trendsetters that get the game of viral and cross - platform brand and buzz-building.

Doubt me? See Groupon, Zynga, and my favorite - Jessica Simpson’s fashion empire – which now includes shoes, clothing, and fragrances, and is on track to gross more than $750 million this year. 

#6. Venture Capital will Rise Again. Venture capitalists invested $4.8 billion in 780 deals in the third quarter of 2010.  Before the “great deal crisis” of 2008 – 2010, venture capital quarterly funding averages were in the $7.5 billion and 1,000 deal range, or 60% greater than today.

Look for 2010 funding activity to get back to these numbers and beyond in the New Year. 

Far more interesting as a mega-trend: the traditional U.S. technology startup has a FAR bigger addressable market than ever before in history.

With an additional ONE BILLION people (i.e. consumers) worldwide having entered the middle class since the turn of the century, and millions more entering it every month, the world has truly become the breakout startup’s oyster. To illustrate, see Twitter, Facebook, and LinkedIn, all of which have many more overseas than domestic members.

More than anything else, venture capitalists seek BIG scores, and the world has never offered more opportunities for innovative startups to breakout fast than it does right now.

#5 American Small Businesses will Finally take the Global Plunge. The Fortune 500 have understood for years that the real growth action is to be had overseas, and today make more than 50% of their profits outside the United States. Small businesses have been late to the party, but look for that to change in 2011.

The combination of vastly increasing purchasing power worldwide, an almost evermore depreciating dollar, and the increasing ease of cross-border transactions, will drive increasing U.S. small business exports.
This can take as simple a form as more overseas visitors and purchasers to U.S. small business websites, eBay stores and the like, to foreigners increasingly investing and providing the desperately needed growth capital to entrepreneurial America.

#4. The Extension of the Bush Tax Cuts, Combined with the Payroll Tax Break, will pass and be Highly Stimulative. Putting aside the long-term impact of the deficit, passing the proposed tax cuts before the New Year will set up 2011 to be a good economic year by all the big measures – GNP growth, employment, stock market performance, and business and consumer confidence.

A key added benefit – having Republicans and Democrats working together on a big economic issue will encourage the nation’s businesses – who have cited political uncertainty again and again as a main holdback of investment and capex.

#3. Inflation will Creep up In 2011, and on Balance that’s a Good Thing. On balance, a little inflation now would be a welcome relief to the nation’s debtors, especially its homeowners. They would feel at least a nominal sense of equity and wealth in what is for most Americans their major asset.

And inflation should be good for stock prices too, as companies are usually able to raise prices faster than wages, leading to higher profits.

#2 The American Wage-Earner will Remain Under Siege.
Rising inflation will only tighten the squeeze on the American wage-earner, who will see their real take home pay and sense of economic security continue to dwindle.

This is a very bad thing, and whether folks want to hear it or not, there is really very little government can do about it. Massive structural deficits at all levels of government simply make resources too strained.

As importantly, the realities of global competition aren’t just growing more intense by the day.

One powerful mega-trend to follow: Look for more and more Americans to join the 200,000 that start new businesses every month. Why? Increasingly for the simple motivation of making ends meet.

#1. 2011 Will Be the Year of the Young (and the Young at Heart). The best qualities of youth – enthusiasm, flexibility of mind and spirit, and the over-riding desire to be inspired will continue to shape the brave new economic world order.

From youth by the millions leaving the countryside (smart phones in hand) to find their dreams in Shanghai, in Mumbai, in Sao Paulo, in Nairobi, to the young technocratic of Palo Alto, of Manhattan, of Santa Monica, of Moscow, the youth like Renée Zellweger’s unforgettable character in the movie Jerry Maguire, are not so much looking for jobs as they are looking to be inspired.

And that inspiration, and it is a credit to their more open-minded than ever parents, is found in BOTH making a difference AND making a buck (and/or a rupee or a ruble).

Anti - business do-gooders they are surely not, but nor are they faceless and dreamless company men. Rather, their spirit is raised by big ideas.

By clean energy for all. By friendship and professional networks not limited by nationality, race, and creed.

By eliminating hunger in the world not via charity but via a combination of venture philanthropy, technology, and always - on global communication and awareness.

By healthcare breakthroughs of all types - diagnostic, prescriptive, and in cost and efficiency so that everyone gets great care when and where they need it.

And it will be the young and the young at heart that will move all of the above and more from dream to reality.

Not all of it in 2011 and not without setbacks and heartaches along the way.

But a lot of it.

This will be the REAL story of 2011 - listen closely and you too will hear the thumping, pulsing heart of a new economy.

Beat along with it, and 2011 will be the best year of all of our lives!

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


The Best Economy In History


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You would never believe it given the drumbeat of negativity that passes as business news these days, but last month U.S. GNP regained all that was lost in the recession of 2008-2009 and now America stands once again as the largest economy in the history of the world.

Let’s first take a moment and be proud and of that.

Now of course not all is rosy. Above all else, persistently high unemployment, back up to 9.8% and 15 million jobless Americans as of Friday, continues to drag down the nation’s morale.

How important are jobs? Well, quite simply jobs are EVERYTHING.

To put it in perspective, let's look at two places in the world that create very few jobs – sub-Saharan Africa and the Middle East.

Even a cursory look at the deep and tragic social problems of these regions results in two conclusions - 1) that the lack of jobs there wastes the gigantic human potential of literally hundreds of millions of people and 2) poor economic opportunity is THE main wellspring of extremist ideologies.

Now, of course the problems in the U.S. economy are nowhere even near the magnitude of those in these fortune-starved places.

And more to the point we don't just want ANY jobs here in America. We want GOOD JOBS. I define a good job as follows:

1. A job that allows for a reasonably “worry-free” meeting of the base, human needs - food, water, shelter, and clothing.

2. A job that provides security from threats to health (yes, health insurance) and violence (making enough money to live in a safe neighborhood).

3. A job that is part and parcel of one’s overall life mission, whereby the successful performance of it appeals to the best in all of us - self-respect, a sense of belonging and community, the inherent satisfaction of the work itself, and the satisfaction of contribution to a cause larger than our own needs.

So Where Do These Good Jobs Come From?

Well surprise surprise, they don't come from the government but more surprisingly they don’t come from corporate America.

Rather, nearly all net job creation in the U.S. economy comes from firms less than 5 years old, or brand new (startups) and young (one to five year old) companies.

For perspective on this, 2007 was the last fully healthy “jobs” with 12 million new U.S. jobs created.  And of these, startups and young companies created 8 million of them.

A few further points to illustrate:

•    Since 1977, without startup companies, net job creation for the American economy would be negative (i.e. more jobs would have been lost than created) in all but a handful of years.
•    Young firms - companies between 1 and 5 years old - over the past 30 years have accounted for the lion's share (more than 2/3) of all net job creation.
•    And my favorite, companies between one and five years old create on average 4 jobs per year each!

But it is often missed that the companies that are creating jobs are the usually ones that earn investors the highest returns.

Why? Simply, job-creating companies are almost always companies that are growing!

So let’s make it easier for our startups and young companies to create jobs.

From a regulation standpoint, let’s get the U.S. back up the board where it is lagging in the World Bank ease of doing business rankings - #17 in starting a business (behind countries including Belarus, Rwanda, and Saudi Arabia!), #62 in paying taxes, and #20 in international trade.

Culturally, let’s really put the entrepreneur where he or she belongs – on a pedestal as a modern day, real-life action hero.

And let’s invest in them.

Because while we like to see the good guys win, it is even sweeter when we win with them.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Facebook’s Fantastic Four: Parker, Saverin, and the Winkelvoss Twins


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At a current U.S. box office of close to $90 million “The Social Network,” – the movie about Mark Zuckerberg and the founding of Facebook - continues to offer a wealth of wisdom re how to get rich in the 21st Century. To wit:

Among other entrepreneurial treats, the movie weaves the tale of one Sean Parker., erstwhile founder of Napster, playboy, and benevolent Svengali of a young Zuckerberg. 

For approximately a year’s worth of “work” which the movie fairly or unfairly portrays as mostly involving a lot of sex, drugs, and rock and roll, Parker now owns Facebook stock worth over $1 billion.

The movie also serves up Eduardo Saverin, portrayed sympathetically as both Zuckerberg’s college best friend and as Facebook’s bungling first “CFO.”  Via these early positions of primacy and via his wealthy Brazilian family’s money being Facebook’s first $20,000 of seed capital, Saverin today is worth more than $1.3 billion.

And oh yes, he is still only 28 years old.

And finally we are given the Winkelvoss twins - blue-blooded scions of old money privilege and wealth and members of Havard’s most exclusive social clubs. The Winkelvoss’ allegedly had the idea that Zuckerberg re-formed into Facebook.

A few years and million dollar lawsuits later, the twin’s net worth is now estimated at north of $100,000,000.

Now, after we indulge ourselves of the natural envy and the exasperation “Golly, why couldn’t that have been ME,” we are left asking – “Didn’t our Fantastic Four just get lucky beyond belief?”  And if so, then what?

Well, for the intrepid investors and entrepreneurs among us, here are three thoughts to run with:

1.    Go Big or Go Home. Sean Parker, portrayed memorably in the movie by Justin Timberlake, embodies the archetype “Black Swan” life approach. Grandly flamboyant in lifestyle and with an iconoclastic self-definition, he both thinks and dreams very, very big and immediately “gets” the scalability power of the Facebook model. Lesson – sanity is over-rated, the best investors and entrepreneurs are often more than a little crazy.

2.    Run with the Right Crowd. Now Saverin and the Winkelvoss twins TRULY had the luck of a lifetime. But they did go to Harvard and they were in tune enough to glob on to the programming genius that was Mark Zuckerberg. It is trite, but success is as much about who you know as what you know.

3.    What’s Wrong with a Little Luck?  Sure, Parker was prescient and Saverin and the Winkelvoss’ proved themselves smart and well-connected enough to get into Harvard.

But there are literally HUNDREDS of THOUSANDS prescient, smart and well-connected investors and entrepreneurs in this 21st Century of ours. And only a few thousand of them truly get rich, and only a handful still get rich at the level here.

So what to make of it?  Well, luck stands alone. 

Sometimes entrepreneurs and investors have it, sometimes they don’t.

The best one can do is to just keep spinning the wheel. And to make sure that every time we do that the odds are in our favor.

Now the great thing about our ridiculously prosperous 21st Century is that by taking just a little care, the odds on entrepreneurial “spins” are almost always GREATLY in our favor.

So take a little care.

And spin the wheel.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


REAL Lessons of The Social Network


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At a current U.S. box office of over $84 million “The Social Network,” – the movie about Mark Zuckerberg and the founding of Facebook – is just another example of the public’s fascination with social networking and young billionaires, not necessarily in that order.

Not mentioned in the movie is the unbelievable story of a Peter Thiel one of the founders of PayPal investing $500,000 in 2004 in exchange for approximately 5% of Facebook.

Given that the estimated market value of Facebook is now worth $20 billion, that represents a 2,000x return in 6 years, qualifying it as surely one of the greatest investments of all time.

Now let’s be real people.

Mr. Thiel, while obviously talented as evidenced by both his founding and then selling PayPal to eBay for $1.5 billion before age 35, had the luck of a lifetime with his Facebook investment.

Yes, luck is a key, and sometimes the key, variable in entrepreneurship and investing.

But 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?"

Here are three ideas:
 
I. Run With the Right Crowd. Thiel is part of the famous PayPal Mafia - former founders of PayPal and their friends that travel in the rarefied Silcon Valley air of next generation Internet ideas and technologies. Through this professional and personal network, Thiel sees lots of great startups. Most of them are duds, but a few are world-beaters. Like Facebook, LinkedIn, YouTube, Yelp, and Six Apart.

II. Swing For the Fences. No doubt Thiel's cat-bird seat as CEO of PayPal in the late 1990's allowed him to "get" instantly the scalability of the Facebook business model. But give credit where credit is due – meeting Mark Zuckerberg in a Palo Alto bar and writing him a check for $500,000 when Facebook was still in its college dorm mode, channeled the Romans and their famous ode to luck - "Fortes Fortuna Adiuvat," "Fortune Favors the Bold."

III. Cultivate Serendipity. How shall we seek the wisdom as to what the next big thing will be? Well, as this example shows us, as much via serendipity as anything else. From conferences, parties, chance encounters, flash and intuitive insights.

From being open to ideas, people and things outside of the normal box.

In many ways, luck and serendipity are the new religions of our age. Books like Outliers, the Black Swan, Fooled by Randomness, and the Age of the Unthinkable profess on them. Successful technocrats like the PayPal mafia toast to them. Aspiring entrepreneurs who seek their name in lights pray to them.

Peter Thiel was both lucky and open to the power of serendipity.

The question, of course is, how about you?

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, please click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Entrepreneurship in the Fast Lane


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What do all of the most dynamic 21st Century entrepreneurial companies have in common?  They:

1.    Pursue Global Markets
2.    Place Corporate Culture Above All Else
3.    Embrace the Black Swan Both Within and Without

1.    Pursue Global Markets. If you don’t have a business that can scale globally, then either don’t bother or just content yourself with staying small.

Try these statistics on for size, from 1999 to today Asia’s share of the world’s Initial Public Offerings grew from 12% to 66%.

In that same time frame, United States IPO volume declined 75% in real terms and now accounts for less than 11% of the global total. 7 Companies in China have raised more than $1 billion in an IPO this year. In the U.S. so far, no company has raised more than $700 million and it is somewhat of a sad commentary that the biggest U.S. IPO by far this year will be the government ward General Motors.

And with their capital and confidence, China and India are stretching their wings. Since 2005, they have been the two leading investors in Africa, investing $31 billion and $16 billion on the continent, respectively.

Why? Well, McKinsey estimates that consumer spending in Africa will double, to $1.8 trillion, by 2020, equivalent to bringing a whole new market the size of Brazil online.

China. India. Brazil. Africa. This is where the growth action is, and while the first reaction of Americans is to feel as if we’re being left out of the game, the RIGHT reaction should be WOW. These are fantastic new markets for U.S. goods and services, especially services, and they are expanding in aggregate at a rate that even 10% U.S. domestic GNP growth couldn’t touch.

Action Point: Core to every strategic session for any company of ambition should include these simple questions:

•    What is your China strategy? Your India strategy?
•    How easy / possible is it for global customers to buy your product – to purchase your service?
•    How can they find you? How do you market to them?
•    How / must your business model evolve to leverage these new opportunities?

2.    Place Culture Above All Else. Modern business, shaped by technology, is increasingly diverging to two nodes – on the one hand to great size quickly (see Google, Facebook, eBay, Twitter, et al.) and on the other hand, to corporations of one, to the so-called Free Agent Nation.

The tools of collaboration and connectivity –mobile always-on Internet, cloud productivity applications like Google Apps, Basecamp, Salesforce and Skype – are so good that the natural devolution is to a BREAKUP of the corporate form and to everyone working for themselves, by themselves.

Now except for the very fortunate few (see Google et al. above), almost everyone else is left with the challenge of how to get to scale and once there how to maintain it.

This is HARD. In a world where ideas and technologies and business models and even intellectual property (sad but true) can be copied and undercut worldwide at the speed of a mouse click, what can any company really hold onto?

The answer is corporate culture. There is no one size fits all answer as to what the “right” corporate culture is. Successful cultures are as disparate as General Electric’s famously formulaic one, to Zappos’, Virgin’s, and Mind Valley’s irreverent, almost carefree approaches.

But a few constants remain. A strong results and metrics-focused approach. A vigilant commitment to ethics and integrity. And an environment that encourages and demands learning and constant improvement of people and processes.

The great thing is that via the Internet we CAN copy the principles of the best of them – Zappos’ and Mind Valley’s and scores of others are online for all to see. While the principles of course are NOT the culture itself (wouldn’t it be nice if it was that easy?) they ARE signposts as to what is possible.

3.    Embrace the Black Swan Both Within and Without. At the core of modern entrepreneurship is the sometimes seemingly mystical precepts of The Black Swan.

The concept of The Black Swan was popularized by the great Lebanese thinker and writer Nicholas Taleb in his bestseller of the same name. He describes it best:

"What we call here a Black Swan is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."

Taleb continues, "I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives."

Bringing it to October 2010, who would have thunk it that a) the fastest growing company in the world is built on the simple premise of 140-character messaging b) that a computer company left for dead 8 short years ago would now have the dominant position in music and telecommunications and c) that one of the greatest angel investments of the past 10 years would be for a prepaid debit card business?

The answer: Nobody. And more importantly, the phenomenons of Twitter, of Apple. and of Green Dot CANNOT be retroactively analyzed for guidance as to what the next new thing will be.

What to do with this? Two ideas:

a) Bet on the Unexpected. Check your ego firmly at the door when evaluating business models. Accept that you (and everyone) for that matter KNOWS NOTHING about what the future will hold other than the fact that we don't know what the future will hold.

That is philosophy - here is money-making: The big outlier events - the 10 to 1 shots and beyond - are UNDER-PRICED in the marketplace. Bet on them.

2) Allow Serendipity To Do Its Work. Startups intuitively get the idea of creating new business models as part of their mission. But this lightness disappears quickly.

The Black Swan teaches us that what we have done to date, what has worked to date, is probably NOT what we will be doing, what will be working in the future.

And where does The Black Swan point us to find the wisdom as to what to do? Well, as much from outside the formal strategic planning process as from within.

As Taleb says, from conferences, from parties. From chance encounters.  From being open to ideas, people and things outside of the normal box.

Incorporate these Black Swan elements into a dynamic corporate culture, cultivate and ACT upon the global view, and let the magic happen.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Election Postscript – That’s Pride Talking


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In 20 years we will look back at the first few elections of the global Internet age the way we remember the smoky backrooms of elections past.

As in I can’t believe we actually did things like that once.

Why? Because for the first time in human history, true competition – the kind of competition that brought us the $300 computer, the electric car that goes 95 miles-per-hour, the $800 HD big-screen TV, and free overnight shipping on purchases as small as a few dollars, THAT kind of competition is coming to a government near you.

Idealistic, you say? Impractical?  Not as much as you may think.

You see, there is another form of voting going on all the time. It is far less covered and far-less TV-friendly than the personality-driven “horse-race-type” coverage that dominates the airwaves, but it is THE kind of voting that shapes our world just as much.

It is the choices that capital makes. As in where to build that electric car plant, where to put that server farm, where to assemble that team of software engineers.

Sequoia Capital recently made headlines with the NASDAQ IPO of Mecox Lane, a Chinese Internet retailer and the seventh IPO by a Chinese company backed by Sequoia in the last 18 months.

By comparison, only two of the 12 companies backed by Sequoia to gain public listings have been U.S. – based. 

Now when any patriotic American reads this their heart sinks more than a little bit.

But you know what? Capital voting with its feet like this, in the long run, is the only way for real jobs and business-friendly reform to take place.

Why? Because even more so than money, it is PRIDE that talks.

Now, in the old days the battlefield of pride was literally the battlefield.

But, blessed are we all, the pride battlefield of our age is the marketplace.

And the rising powers of our age, the Brazils, the Indias, the Chinas, fight not with tanks and guns but with bits and bytes and rent-a-coder and hard work and hustle.

And how do the incumbent powers respond to all of this energy? This challenge? To dare I say it – to all of this entrepreneurship?

Well, as humans do when any disruption to a cozy order occurs, first they resist it. They whine about it. They play the blame game. They have a natural instinct to just shutter the windows and keep all of the change, the disruption, the competition OUT.

But then pride talks.

Well-educated, ambitious people say “Hey – they aren’t any smarter than us. Any harder-working. We CAN compete. And we can win.”

And unlike the bad old days, when governments would respond with muskets and bigotry to challenges from afar, today have NO CHOICE but to put ideology aside and just make things work.

To embrace the mantra of the Internet age and do more with less.

Kids learning more, faster, for less money.

Regulations simplified. Best practices codified. Productivity multiplied.

Why will this happen? Why will cushy government bureaucrats change like this?

Because in an always-on 21st century global Internet age, we’re all naked.

And when cities and states and countries fall behind, EVERYONE sees it.

And after the shame, pride kicks in. It may be hard to hear about the political noise and chatter. But if you listen carefully, it is there.

And when pride talks in our modern, always-on global Internet age, governments DO change for the better.

And much, much faster than expected.

Pride has that kind of power.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink

 


Wall Street, Football, and The Great Deception


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Watching my beloved New England Patriots barely escape with a victory this Sunday, I was both amused and appalled by the constant T.D. Ameritrade advertisements touting their “great selection of ETFs (Exchange Traded Funds).”

Now while I have a very high regard for the intellectual capacity and market savvy of the typical football fan, these ads did beg the question – “Are football fans, between commercials on Sundays, really out there checking the opening of the Nikkei, gathering market intelligence, and placing their buys and sells before the game action returns?”

And of course its corollary, in the annals of bad ideas, where exactly would such a strategy rank? Alongside the Edsel? New Coke?  Sub-prime mortgage lending?

How about with Decca Recording in 1962 turning the Beatles with this famous line: “We don't like their sound, and guitar music is on the way out."

Let’s take a step back. Now there once was a very special time when everyone made money in the stock market. It was the great golden age of mutual funds, of variable annuities, of the brokerage firm.

It was also the golden age of heavy metal, of Larry Bird and Magic Johnson, and the VCR.

It was known as the 1980’s.

Starting in August 1982, the average annual returns on the Dow were as follows:

1982: 19.61%
1983: 20.27%
1984: -3.74%
1985: 27.66%
1986: 25.58%
1987: 2.26%(!)
1988: 11.85%
1989: 26.96%

Wall Street bankers made billions.

But even better, that Joe Six-Pack investor made money too.

He mostly followed the “buy and hold” principles of Warren Buffet, John Templeton, and Peter Lynch and his portfolio just went up and up.

And in the 90’s, the good times rolled, with the Dow skyrocketing from 777 in August 1982 to 11,028 in September 1999.

But as the century turned, the music stopped. And for the last eleven years it hasn’t played again.

BUT when the music stopped, some got to keep on dancing.

In football, that would be what we call a misdirection, a fake, or even a quarterback sneak.

Or to be more blunt, the reason why Ameritrade focuses their ads on buzzwords like ETF selection is because Wall Street CAN’T talk about any recent track record of investment return for the Main Street investor.

Because there isn’t one.

So they advertise ETF selection. As if that is going to work.

Now, there are MANY better ways:

1). NEVER listen to a brokerage firm advertisement ever again. Or if you love football and must watch, then treat them with the same wariness that we once gave used car salesmen before public and competitive pressure forced them to clean up their act.

2). Start Your Own Business. In the history of humanity, no form of investment has ever approached the return on time and money that investing in one’s own business has.

Easy? Heck no. But when compared to the stock market at least it is a fair fight.

3). Invest in a Portfolio of Startup Businesses. Prediction: portfolio startup investing, either in the form of super-angel funds like Right Side Capital, SoftTech, and Floodgate or incubators like Y Combinator and Tech Stars will be the KEY financial innovation of the next decade.

Like starting a business, not for everyone of course, but many of the best thinkers in academia and entrepreneurship have arrived at it independently and are hitching their wagons to it.

And unlike the public markets it remains human-sized enough to follow investment cause and effect.

And that, of course, is much better than following the herd.

Looking for Opportunities Now?


Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


363 CEOs All Can’t Be Wrong


Categories:

A fantastic October 2010 survey of 363 emerging technology company CEOs by the law firm Dorsey and Whitney is a fantastic snapshot of how the “old Silicon Valley boys club” world is gone forever.  Highlights:

The Super Angel Funds Are Coming. While individual angel investors still account for the largest percentage of funding for startup entrepreneurs, the new portfolio-based funding models – either in the form of incubators like Y Combinator and Techstars or in the form of Super Angel funds like Right Side Capital, SoftTech, and Floodgate are coming fast.

Close to 50% of the CEOs surveyed expected to get funding from portfolio angels in the next 12 month, up from less than 20% this year.

Sequoia, Kleiner, et al – Your Best Days are Behind You.
Quoting the report, “The perception of the investor’s brand no longer appears to carry the same prestige and value, with slightly more than 75% surveyed thinking that a tier-one “brand name” VC was only “somewhat important” to “not important.”

Speed, in the Internet Age, is EVERYTHING. Fully 92% of the CEO respondents expressed frustration with the slowness of the funding process. In a word where one can buy a car, get a mortgage, and trade millions of dollars of securities with a few clicks of a button, why does it still take 6 months for a venture fund to make a decision?

As the “super-angel” fund model begins more and more to more to displace the traditional VC model, look for speed to funding to greatly accelerate. Hallelujah!

Small Funding Rounds Dominate. As always, the most interesting companies from a growth and return potential standpoint raise relatively small rounds, with less than 2% of all of the CEOs surveyed had raised more than $5 million.

The World Needs Leaders. My favorite CEO comment from the survey, “They were willing to take the lead, and not simply wait around for someone else to take the lead. I want an alpha investor.”

Aint that the truth. Both being an entrepreneur and backing one requires all of those human qualities we celebrate in art and in life: foresight, guts, rugged optimism, a can do spirit, and laughing charitably at the naysayers.

21st Century entrepreneurship is all that and more. Yes, it is risky, but the opposite is far, far worse. As Teddy Roosevelt put it, it is that grey twilight that knows neither victory nor defeat.

And as this great CEO survey shows, luckily our world is filled like never before with men and women truly in the arena.

And about to make lots of money for themselves, their families, and those that back them.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Foursquare? A Bakery?


Categories:

Picasso once famously said, “Work is the Ultimate Seduction.”

Well, when it comes to the debt we all owe the world’s entrepreneurs and innovators, we should all thank our lucky stars that he was right.

Why? Because never before in human history has there been as much opportunity to make as much money as fast as there is right now.

This fact may be hard for many to see – blinded as they are by the constant drumbeat of negativity that passes as economic news these days, but it is true.

Here’s why:

1. Today’s Startups grow faster and with less investment needed than ever before. Google’s growth velocity blew away that of Microsoft’s. Facebook that of Google. Twitter that of Facebook. And now Groupon and a host of others that of Twitter.

Sure, these new breed Internet companies far more often than not flame out than make it but, but ignore them at your peril as they will continue to be the big growth stories of our age.

2. Growing Globally Has Never Been Easier.
The teapot dictators in Iran and North Korea may get all the ink, but it is the Chinese, Indian, and Brazilian technocrats with their quiet defense of free markets and trade that make hay.

And it is they, by leading their once developing economies into huge import markets, that have made America’s service exports – scientific, engineering, financial – be in greater demand worldwide than at any time, ever.

U.S. Companies are generating, on average, close to $50 billion per month in service export revenues, and this number is trending up fast.

And unlike our huge “hard goods” trade deficit, the value of service exports is running on average 40% greater than that of service imports.

3. Who Needs the Stock Market? Someday soon we will talk about the New York Stock Exchange the same way we do about travel agencies, real estate agents, and going to the racetrack to place a wager. Maybe with nostalgia, but also saying how the heck did we ever get by doing things so inefficiently?

Traditional public markets, with their arcane pricing and regulatory mechanisms simply can’t keep up with the new speed of information.

Look at it this way – who does a better job of market-making – your Power Seller on eBay with their thousands of reliability comments and cutthroat pricing competition…

…Or your pot-bellied 70-year old NYSE specialist signing out at 1 pm in the West, vacationing in the Hamptons, and who thinks Foursquare is a bakery?

Yes, the future that is here now is investing the same way you buy over-stocked tube socks.  On fully efficient, 100% transparent, and vigilantly monitored buying and selling private exchanges like Second Market, Prosper.com, and Lending Club. 

And soon to be here, via even more liquid and efficient exchanges like eBay and Amazon Marketplace.

Scary, you say? Maybe, but anymore than the way things are done now?

I don’t know about you, but I’ll take my chances on eBay as opposed to the unholy alliance of hedge fund speculators, the plaintiff’s bar, and the fatigue inducing regulatory scheme that passes as vibrant public markets these days.

And oh yeah, nobody has made a dime in those public markets than the above parties in eleven long years.

Luckily for all of us, their time has past.

For this is the age of the global entrepreneur. Those whose hearts are fully seduced by their work.

They are the ones who really run things now. And they are both all around us, and all around the world.

Back the best of them wherever and however you find them.

And you and the world will be richer for it.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company investing opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


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