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Growthink Blog

The Story of Jeff Bezos’ $250,000 Investment into Google in 1998

Written by Jay Turo on Monday, October 5, 2009
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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.

--
Jay Turo
CEO
Growthink, Inc

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Private Equity and Your IRA: The Pathway to Tax-Advantaged Returns

Written by Jay Turo on Tuesday, September 22, 2009
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Individual Retirement Accounts, or IRAs, in all their forms - traditional, Roth, 401k, Defined Contribution, Simple, SEP, 403(b) and 457, have become increasingly popular vehicles for private equity investing.
For the individual investor, Investing in private equity via a "Self-directed" IRA has a number of key advantages:
First and foremost are tax savings - both at the time of investment and as the investment appreciates.  In some circumstances - for pre-tax contributions via a SEP-IRA for example - up to $49,000 can be invested on a pre-tax (i.e. tax deductible) basis.
Secondly, the power of tax - free compounding of interest, dividends, and capital gains - via both traditional pre-tax IRAs as well as the increasingly popular (and increasingly tax-advantaged) post-tax Roth IRAs is enormous.
In high-return and payout scenarios, where there are larger cash dividends and/or capital gains paid on an annual basis, the value of tax free compounding can lead up to a doubling of total investment return when compared to taxed compounding.
And thirdly, investing in private equity via an IRA addresses "de facto" arguably the key negative of private equity investing - its illiquidity.  This is because, to encourage a long-term, retirement-focused time horizon, under the IRA umbrella there are significant, structured penalties for early withdrawl.
In short, IRAs are ideally designed to house long-term investment assets with high capital appreciation potential.  This is, of course, the core objective of almost all private equity investing.

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

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The Greatest Stock Market Rally in History

Written by Jay Turo on Sunday, September 13, 2009
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Did you know that the current stock market rally, which has seen the S&P 500 rise over 54% from its low of 676 on March 9th, is the greatest in history? 

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

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

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

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

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

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

 

How to Take Advantage?

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

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

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

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

 

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

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

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


 


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Who Will be the Next Billion Dollar Medical Device Company?

Written by Jay Turo on Monday, September 7, 2009
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Medtronic. Cardinal Health. Guidant. Becton, Dickinson. St. Jude Medical. Hospira. Fresenius. Varian Medical.

All of these medical device manufacturers had greater than ONE BILLION DOLLARS in sales last year. 

Who Will be Next?

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

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

 

Why Should You Care?

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

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

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

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

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

Best regards, and look forward to connecting.

--
Jay Turo
CEO
Growthink, Inc

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

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


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

Written by Jay Turo on Sunday, August 30, 2009
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Did you know that in the last 10 years, every major stock market index has LOST investors money?

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

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

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

Why is This?

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

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

The Times They Are A Changin'

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

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

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

3. The ability to better price deals utilizing regression analysis

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

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

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

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


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Growthink Again Makes Inc. Magazine's Top 50 and Top 100 Lists

Written by Jay Turo on Wednesday, August 26, 2009
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I am very happy to report that Growthink was named to the Inc. 5000 list for the 2nd year in a row.

We were ranked as one of the country's 50 fastest-growing financial services companies (#45) and one of the 100 fastest-growing businesses headquartered in Southern California (#71).  Our comprehensive survey ranking was 1,042 out of the 5,000 fastest growing companies in the country.

Our standing is a testament to the work ethic and passion of our people as we navigate these historic markets. And our continued success highlights the power and importance of small business and entrepreneurship to the American economy.

I am also happy to report that in spite of my fears of a slow  business summer, August has proven to be an incredibly busy month here at Growthink. Our 3rd quarter revenue numbers are on pace to come in at over a 30% uptick from Q2, and as importantly, the quality of our new client portfolio deals is incredibly high.

For a snapshot overview of some of the rockstar companies that we have brought on recently, click here.

How Can YOU Get Involved?

If you believe in emerging technology and in American entrepreneurship, if you're tired of the losing stock market game, and are open to the new and the different, then we should talk.  


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

Follow me on Twitter
Join my network on LinkedIn


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Hispanic America - Go Where the Growth Is

Written by Jay Turo on Sunday, August 23, 2009
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It is no secret that Hispanic America is exploding.  As the fastest-growing sector of the U.S. population, the U.S. Hispanic population is projected to triple from its current 45.5 million, to over 150 million by 2050.

And this exploding demographic group spends money - over $1 trillion in 2008 alone.

Why Should You Care?

Well, if you are looking for a dynamic, long-term macro-growth sector and one filled with special situation opportunities - then you should care.

Try Beverages.

Of the $210 billion U.S. consumers spend on beverages each year, Hispanics spent $24.8 billion of that.  And with rising affluence, the "ready-to-drink" Hispanic-focused category is one pulsating with deals.

Who Says So?

Well, only some of the biggest beverage and consumer products companies in the world - like Coca-Cola, Pepsi, Kerin (of Japan), Pernod Ricard, China Water, and Inbev - which shocked the world with its $52 billion acquisition of Budweiser last year.  

Putting It all Together

The macro trends here areas simple as 1-2-3.  1) Exploding Hispanic Population. 2) Rising affluence - leading to exploding demand for consumer products and 3) Robust sector acquisition activity.  

Now for the micro:  Find a company that 1) Has the right product with the right distribution. 2) Is targeting a niche sector that is unoccupied by the big boys and 3) Isn't so big and well-known that the "business as  opportunity" has passed.  

Best regards, and look forward to connecting.

--
Jay Turo
CEO
Growthink, Inc
 

P.S. Are you as sick and tired of the whiners and doomsdayers as I am?  This aint your granddaddy's world.  It is filled with ONE THOUSAND TIMES more opportunity than the good old days ever were.   You just need to know where to look. 


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The One Thing You Can't Live Without

Written by Jay Turo on Monday, August 10, 2009
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If you're like me, there's one thing you probably take for granted. Interestingly, this one thing is something you can't live without. At least not for long.

But fortunately, there are some cutting-edge entrepreneurs working wonders on solving the challenges of this one thing.

What is it?

Water.

All around the world water shortages long ago crossed the crisis threshold.  In California.  Arizona.  New Mexico. Georgia and Florida.  The Middle East.  China.

Too many years of antiquated public policy, population and economic growth, climate change, and unsustainable agriculture have strained water resources in all of these places to and beyond the breaking point.

The American Entrepreneur to the Rescue

The greater the adversity, the greater the opportunity. And in the dynamic technology landscape of "new water," American entrepreneurs are leading the way. 

A select cadre of under-the-radar water startups are developing game-changing technologies to develop, purify, store, convey, and conserve water.

Meet the Industry Leader

I would like to invite you to an exclusive opportunity to meet, via web conference, the CEO of one of the fastest-growing and innovative water companies in the world.

He will talk about the state of the next generation technologies out there - distributed desalination, nano-particle membranes, energy-efficient reverse osmosis, and demand management.

And he will tell us where the smart money has been going lately, and who stands to profit from the $15 billion the Obama stimulus package targets for water technology and infrastructure investments.

Best regards, and look forward to connecting.

--
Jay Turo
CEO
Growthink, Inc

P.S. To make money in the new business world order, it is imperative to focus on deals and ideas that have a strong, blended public and private sector focus.  You can search the whole world round and not find a technology and a marketplace that fits this description better than water. 


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The Obama Stimulus - $17 Billion to ONE Tech Sector

Written by Jay Turo on Friday, July 31, 2009
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Aren't you sick and tired of watching Washington spend all of YOUR money and YOU not seeing any of it?

Wonder where all of the stimulus money has gone?

Well, try this on:  The Obama stimulus commits $17 billion in federal funds to reimburse medical practices for implementation of electronic health records systems and their use.

This involved doctors getting paid up to $44,000 each to transition their practices to the new technology.

And even before the government began throwing money at the sector, it was a $4 billion business growing at 23%/year. 

Why Should You Care?

Well, if you're interested in capitalizing on one of the fastest growing and most dynamic technology sectors out there, and one about to see turbocharged growth driven by federal dollars, you should care.

Meet an Industry Pioneer

I would like to invite you to an exclusive opportunity to meet, via web conference, the CEO (and Stanford MBA) of one of the fastest-growing and innovative companies in the industry.

He will talk about which companies and technologies are best positioned to profit from the stimulus money, how "cloud computing" applications are beginning to see real adoption rates, and what has been driving the record revenue months his company has had this quarter in this tough economy.

Best regards, and look forward to connecting.

--
Jay Turo
CEO
Growthink, Inc


P.S. I know too many otherwise intelligent business men and women who have been listening to all of the negative drivel that passes as business news out there, and sitting on the sidelines and missing opportunities.

Don't be like them.


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CleanTech Nation: Why Investments Have Risen 477%

Written by Jay Turo on Monday, July 27, 2009
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You've likely heard all of the hype regarding Cleantech.

How the Obama stimulus plan fuels $83 billion into the sector.

How cleantech investment today is more than 477% greater than what it was in 2005.

How Vinod Khosla, arguably the world's most famous and well- respected venture capitalist, last week raised another $1 billion - including $150 million of his own money, to invest in it.

Wind. Solar. Geothermal. Water treatment. Smart grid. Fuel cells. Carbon capture. If you have turned the TV on at all over the past year, you've probably heard about all of these.

And here is one you probably haven't heard - Bio-friendly pesticides. 

Who cares?

Well, if you're interested in capitalizing on one of the great arbitrage opportunities of our time, you should care.

Because bio-pesticides, an environmentally friendly option to synthetic chemicals, is the perfect storm about to happen.

We're talking about a $70 billion+ industry, where new, effective and safe pesticide products are gaining traction.

One where governments worldwide are mandating -  through strict, new regulation - a fast transition from the old, synthetic-based products that have been damaging our health and the environment for far too long.

An industry that includes dozens of completely under-the-radar, private companies.  And cash - rich big boys, like DowAgro and Monsanto - on acquisition sprees.

Meet the Industry Leader

I would like to invite you to an exclusive opportunity to meet, via web conference, the CEO of one of the fastest-growing and most dynamic companies in the industry.

He will talk about the super-fast growth his company is currently experiencing, and how they relate to his public offering and acquistion plans.

If you're interested in learning how money is really made in emerging technology, then this is a presentation you don't want to miss.

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