Growthink Blog

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


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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

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Hispanic America - Go Where the Growth Is


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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. 


The One Thing You Can't Live Without


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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. 


The Obama Stimulus - $17 Billion to ONE Tech Sector


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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.


CleanTech Nation: Why Investments Have Risen 477%


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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.

Portfolio Theory and Angel Investing


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One of the most exciting trends in angel investing and private equity over the last 6 months has been the application of traditional

Some of the most interesting investment research over the last 6 months has been the application of traditional portfolio theory and hedging  techniques to angel and private equity investing. Research compiled by the National Venture Capital Association, by the Kaufman Foundation for Entrepreneurial Activity, and by the Entrepreneurship in the United States Assessment, highlight a number of both subtle and startling insights.

When compared to other asset classes, there is relatively little correlation between various private equity investing sectors. In other words, while the share  prices of publicly traded aerospace and software companies, for example, will move up and down more or less together, the success probabilities of that hot drug development company and that wind energy startup are reasonably uncorrelated.

Why is this important? Because it creates a far greater hedging opportunity than is available in public stocks, whereby the investment combination of the wind  startup and the drug development company has disproportionately less risk for the expected return.

The research also shows that the smaller the size of an equity financing deal, the less correlated is the success probability of that deal with the equity markets as a whole. A subtle, but critical point that had made a HUGE difference in investment returns over the past 10 years. Try on these two facts:

1) The venture capital industry as a whole - with average financing sizes over the past 10 years of greater than $8 million/deal - has returned ZERO percent to investors during that time frame.

2) In contrast, the average return on private equity classified as "early, or angel stage" had an average annual return during that same period of a whopping 32.9%! (Thomson/Reuters).

I talk about more about the application of portfolio theory to private equity and angel investing in the video below:



For our Friday live deals call, click here: www.growthink.com/livedeals

 


Angel Investing Returns - The Impact of the Stock Market


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The general misery that the public markets have subjected us all to over the past year (and really the past 10 years, with the Dow Jones, the S & P, and the NASDAQ all trading lower today than they were in 1999), begs the question - how does stock market performance affect angel investing returns?

The answer, on the one hand, is very obvious.  A falling tide sinks all boats.  So as goes the public markets, so go the private equity markets, of which both venture capital and angel investments are subsets.

This is best illustrated by the amazing (and depressing) statistic that in the last 10 years there has been more money invested into the venture capital industry than has come out of it.  A lot of effort for naught.

But in spite of this, and maybe even because of it, average angel investing returns this decade have been surprisingly, even shockingly good.  According to data compiled by Thomson Financial, average angel investing returns have been in excess of 20% annually since 1999.

Why is this and will it continue?  Well, it has to do with the difference between the "macro" and the "micro."

To hear more on this, please click the below.
 
 
 
 

 


What Separates the Best from The Rest?


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Accelerant. C8 Medisensors. Dakim. DCIP. Free Conference. Fresh Games. Green Medical. Helix Wind. InfoSpace. Integreon. L3D3. Mobeze. MyPublicInfo. Nolatek. Ometric. Pocketsonics. Precision Time. Raise Capital. Recoup IT. Research Scientists. Sandel Medical. Spring Medical. Telverse. Thrombovision. XCOM Wireless. Xorbent.

These companies all share a few things in common:

1. They are either past or current Growthink clients and/or investments (though this is by no means a complete list).

2. They all either achieved - or are on the path to achieve - successful exits through a public offering or a company sale.

3. They are all led by CEO's and senior executives that are a cut above. Men and women that are entrepreneurs and business-builders in the best and highest sense - the kind of managers and visionaries that are the bedrock of America's vibrant, free enterprise system and way of life.

I have been privileged to work and get to know inspirational, entrepreneurial leaders like Dan Michel at Dakim, Liam Brown at Integreon, Walter Alessandrini at Ometric, Brian Ashton at Precision Time, Rick Singer at Raise Capital, Peter Sobotta from RecoupIT. Jack Smyth at Spring Medical Systems, Ed Teitel at Thrombovision, and Dan Hyman at XCOM Wireless.

Here are 5 qualities they all share:

1. Their Work Ethic is Off The Charts. This may sound really obvious, but the great entrepreneurs are extremely disciplined and organized and make the sacrifices to commit themselves fully to their business. Work - life balance is a nice theory, but in entrepreneurs to back, the more zealous the better.

2. They Have Great Numbers Fluency. As Guy Kawaski so eloquently puts it, we live in the age of excel, not of PowerPoint. Great 21st century leaders are "Super Crunchers," - they undertand the power of statistics, of "evidence-based" decision-making, of testing, and of managing by the numbers. They are not enslaved by the numbers nor do they lose sight of their human and qualitative aspects, but they are highly informed by them. They are hungry for unbiased, third-party information about their markets, their customers, their competitors.

3. They Have Done it Before. Following up on #2, the entrepreneurs most likely, statistically, to be successful are those that track records of success. It doesn't mean that just because they have succeeded in a past company mean that they will necessarily succeed in the next one. Nor do this mean that those who have failed in the past will fail in the future. Only that the probabilities are that this be the case. All of the managers above had track records before their existing business of successes - entrepreneurial successes, corporate successes, educational successes. Success follows them, not the other way around.

4. They Know When To Manage and When To Lead. Successful business exits require first and foremost, organization-building. Teams of people need to be assembled and directed to accomplish a common objective that can be quantified on the scorecards of business - revenues, profits, and cash flow. Balancing these left and right brain objectives require a sense of knowing when to manage and when to lead. Management is left-brained - it is analytical, numbers-driven, and dispassionate. It see business as a black box, with the sole objective of turning cash into more cash as fast as possible. Leadership is right-brained - it is conceptual, more long-term focused, and sees the business more as an organism as opposed to a collection of individual parts. Leaders sometimes will sacrifice short-term results for long-term gain, but do so carefully, deliberately, and warily. They are soft-hearted but hard-headed.

5. They are Proud and Humble. Great entrepreneurs are proud of their accomplishments and greatly desire more of them. They are confident in their vision and their abilities, and do not let adversity, criticism, objections or rejections deter them from their chosen path. They are not, however, headstrong nor arrogant. They respect facts, statistics, and informed opinions. And when these are in conflict with even their most dearly-held beliefs and strategies, they change. Not with the wind, but nor only at the point of a gun.

If you find these 5 attributes in an entrepreneur, savor them, appreciate them, learn from them, and back them. Till the cows come home. And then some more.


Angel Investors - Do You Want Venture Capitalists in Your Deals?


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The typical wisdom regarding the appropriate financing course for startup goes as follows:

  1. Founders start the company in classic "bootstrap" fashion - with a combination of sweat equity and their own financial resources. This usually consists of their personal savings, credit cards, and small loans from relatives (Mom, Dad, Uncle Bob, etc.).

  2. Through connections, or through a chance meeting at a networking or social event, an angel investor hears the entrepreneur's story, likes him or her and the technology, and on the spot, writes a check to provide the company with its first outside financing. The angel then introduces the entrepreneur to his or her wealthy friends and business connections who, based on the good reputation and respect that the angel has with them, also invest.

  3. With this capital, usually totaling between $100,000 and $1 million, the company accomplishes a number of key technical milestones, gets a key beta customer or two, and then goes on a "road show" to venture capitalists around the country. The first institutional financing round - usually between $3 and $10 million - is the first of a number of rounds of outside investment over a period of 3 - 5 years.  With this capital, the company propels itself to $50 million+ in revenues  and to either a sale to a strategic acquirer or to an initial public offering.

  4. With the exit, the entrepreneur and the original angel investor become fantastically rich (or in the case of the angel, even more so), and are lauded far and wide for their deep and keen predictive insight.

  5. The cycle is then repeated - the original angel investor utilizing the windfall from their successful exit to fund more companies.  And they are now joined in their investing by the once impoverished but now wealthy entrepreneur.

  6. All live happily ever after.

It all sounds wonderful and it is. The only problem is that it mostly a fairy tale. Here is what really happens:

  1. The entrepreneur pours their lives, their fortunes, and their sacred honor into their company- at great personal sacrifice to them, their families, and everyone connected to the enterprise.

  2. A "black swan" investor appears mostly out of the blue to fund the deal - less concerned re the efficacy of the technology than by the talent, desire, and grit of the entrepreneur. Technical progress and market traction are much slower and cost a lot more than anticipated. There are a lot of dark, hard days.

  3. There is considerable internal debate around whether or not to solicit and/or accept outside venture capital. For most companies, it is simply a non-starter. Management has the wrong pedigree, is geographically undesirable, competes in the wrong industry, and/or has a business model that lacks "scalability credibility" with the venture community.

  4. Usually unbeknownst to all, the conversation and decisions around pursuing or accepting a venture capital round above will be the factor most highly correlated with their expected return on investment.  But here is the key – contrary to popular wisdom it is negatively correlated.

New, groundbreaking research from the Ewing Merion Kauffman Foundation on Entrepreneurship shows that the #1 key for the angel investor returns in emerging technology deals is that there is never any venture capital invested in the company!

As interestingly, the data shows that when you remove a follow-on venture capital round from angel invested deals that expected returns skyrocket.

The data is somewhat inclusive as to why this is.  I surmise three main reasons:

  1. The Best Metric for the Health of A Company is Cash Flow. By definition, companies that receive venture capital cannot fund their businesses from operations - and thus need to seek outside capital. This may lead to inherent negative selection to venture deals – whereby the sample of companies that need outside capital are by definition weaker companies.  

  2. Venture capitalists Have Very Different Objectives than Angel Investors. Venture capital funds are usually 7 - 10 year partnership structures whereby the general partners, the VC’s, manage the capital of the limited partners, usually institutions (endowments, pension funds, etc.).  And at the end of the period, all profits and proceeds are distributed to the various partners on a pre-determined split. These splits are normally such that the general partner professional money managers need to obtain a “highwater” return for their limited partners before they, as the general partners, see any return. beyond their management fees   In practice, this creates a huge incentive for the general partners to hold on for home runs, and to be reasonably indifferent regarding smaller (less than 3x returns).  As a result, the VC will often block a portfolio company from harvesting a very attractive, but not a home run, investment return. Or as counter-intuitively, press for a far more risky strategy than the entrepreneurs or the angel investors in the deal would prefer.

  3. Venture capitalists Cut Tough Deals. Venture capitalists for the most part are very nice guys and passionate about entrepreneurship, but they are not shrinking violets. And they hire very aggressive securities attorneys to represent their interests.  This combo all too often leads to various forms of deal unpleasantness -  ncluding cram-down rounds, liquidation preferences, and change of control provisions, among others. Which in turn often leads to a lot of very unhappy founders and angel investors even in somewhat successful exits.

My suggestions for the angel investor looking to make money?  First, look for "one and done" deals - companies that need just one round of outside capital to get them to positive cash flow.  Second, look for companies that have short and realistic liquidity (exit, IPO) timelines.  And third, don’t get star-struck by big VC interest in your deal.  It can often be a double-edged and very sharp sword.   


The Stock Market Rebound: What Does it Mean for Angel Investing?


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With the Dow Jones up more than 35% from its early March lows of 6,440, the investing mood has undergone a 180 degree turn for the better. How does this rebound affect the angel investing returns?
Here are the negatives and the positives:

The Negatives:

  • A Zero Sum Game. On some levels, assets classes compete in a zero-sum game for investor attention. So with money moving back into the real estate market, with long-term treasury yields creeping up, and with the increasing attractiveness of traditional stock mutual funds ticking up, the risk-reward profile of private equity (of which, of course angel investing is a class) are relatively less attractive.

  • The Bad Behaving VC Older Brother. Venture capital performance over the past 10 years has been shockingly bad, with some estimates being that the entire asset class has had ZERO return since 2000.  And so many assume that as venture capital returns goes, so go angel investing returns.  While the actual return statistics actually show the opposite (Data compiled by the Kaufman Foundation, by Ibbotson Associates, and by The Economist, show a 25%+ 10-year average angel investing return performance), perception is too often reality and is sometimes self-fulfilling.

The Positives:

  • Venture Capital Returns ARE Improving with Improving Public Markets. Having said the above, return expectations for venture capital are looking up.   Why? Because the IPO market is in an early boom period with the big recent market move.

  • America is Returning to its Natural State: Deal making. One of the worst aspects of the September–March market “darkness” was the unprecedented crisis of business and financial confidence it precipitated. The mood in America – the land of Vanderbilt and Rockefeller and Edison and Watson and Walton and Gates and Jobs and Brin and Page – felt like, I am very sorry to report, France. The end-of-the-worlders were in their full bloom, and for once, the facts on the ground seemed to agree with them.
But we are getting our groove back. Consumer and business confidence have skyrocketed since March. Bank lending is up. Business capital expenditures are increasing. The real estate market, in most parts of the country, has at least stabilized (and in many places, greatly rebounded). Jobless claims are down. Most importantly, corporate profit forecasts are up.

All of this drives deal-making. It drives big companies to buy small companies to gain access to their people and their technology. It drives venture capitalists to agree to bridge financings. It drives entrepreneurs to get back to pushing the envelope with their growth plans. And all of this positive, forward-looking acting and thinking drives angel investing returns. Entrepreneurs grow their businesses faster, they exit faster, and investors turn their money faster and at great multiples.
All these factors have turned 180 degrees since March. And for those that love America and its entrepreneurial spirit, not a moment too soon.

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