Growthink Blog

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


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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?


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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


Learn how John Noel is Revolutionizing the Insurance Business - Again


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In 1985, Mr. John Noel founded Travel Guard in his basement with a 0% market share. Over the next 21 years, John and his team grew the business from pure startup to a 60% U.S. market share and 1,000 global employees.

In 2006, TravelGuard was sold to American International Group for an undisclosed sum.

In 1998, Multi National Underwriters was founded by two entrepreneurs and in 2002 was purchased by the Noel Group in partnership with the original owners. The vision of the company was to provide affordable short term health insurance with a relentless focus on customer service.

The Peace Corps, national universities, as well as U.S. foreign service groups came to rely on MNUI for their health insurance needs, and within five short years the original founders and the Noel Group were able to sell MNUI for 10x its purchase price.

Two great entrepreneurial success stories.

And The Noel Group is About to Do It Again


The insurance industry, long sleepy, is undergoing a disruptive technological transformation driven by the Software - as - a Service (SaaS) revolution, by hyper-informed and demanding customers, and by extreme margin challenges caused by poor investment asset performance.

For better or for worse, the days of the mom-and-pop insurance agency, like the mom-and-pop travel agency, are fast coming to an end.

And for those that manage the consolidation wave about to sweep the industry, the rewards can be immense.

Best regards, and look forward to your attendance and feedback.

Jay Turo
CEO
Growthink, Inc


Meet Mr. Greg Rorke – CEO of America’s Next Great Technology Company


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Some people talk about building disruptive technology companies – companies that are “cloud” – based, high revenue growth, and profitable.

Many more complain about how BAD their company’s customer relationship systems (CRM) are – bulky, unintuitive, not in line with how work actually gets done in a modern company. 

But there is one man who is actually doing something about it.

And in the process, he is building America’s next great technology company.

Meet Navagate CEO Mr. Greg Rorke

Greg Rorke’s resume speaks for itself. Former CEO of Kaplan Education Centers.  President of Danskin.   Harvard MBA. 
 
Instrumental in the development of ACT! – the #1 suite of contact and customer management software in the world, with over 2.8 million users. 

And now CEO of Navagate – a next generation cloud computing company customer that is disrupting “business as usual” in the CRM space.

Greg has graciously agreed to share with us his experiences and perspectives on, among other topics: 

  • Why CRM as done by the Salesforces and the Siebels of the world simply does not work and what to do about it.
  • How a small, fast-growing technology company in an industry dominated by giants overcomes the famed “Innovator’s Dilemma” and makes money doing so.
  • How to finance a tech. business via an “Early Exit” strategy, including how to creatively access the public markets via a merger into a public shell
  • And much, much more!


Jay Turo
CEO
Growthink, Inc

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Note to Gordon Gekko: 1985 is Gone For Good


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Gordon Gekko may have a new movie coming out, but the days of the jolly old stock market he once knew are gone forever.

I guess I shouldn’t be surprised as to how little known the horrific U.S. public stock market performance over the past 11 years has been.

But I was shocked by the number of people who expressed incredulity regarding the note in my column last week that all major U.S. market indices (Dow, S and P, NASDAQ) are trading lower today than they were in September 1999.

And many of them asked – does it portend a “Japan” situation for the U.S. - where we could be facing ANOTHER 11 years of similar return performance?

And if so, what to do about it?

First of all, the long-term woes of the stock market have been under-reported because there really isn’t anyone that has a vested interest in pointing it out.

Certainly not the financial services establishment. The whole mutual fund / brokerage firm/ insurance company ecosystem would much prefer the public see 20th and not 21st century stock market return statistics.

Certainly not the financial media, which has figured out that it is just a lot more fun to focus on the daily ups and downs of the market and personalities, than the more stuffy and far more ratings-unfriendly focus on return metrics.

And then there is the government. With 90 million Americans with money in the stock market, there is zero political hay in noting that 99.9% of these investors (i.e. voters) haven’t made a cent in the markets in a long, long time.

So that begs our next question – will we all be sitting here in 2021 with the Dow in the 10-11,000 range and the NASDAQ in the 2,000 – 2,500 range. Remember, the Japanese stock market is trading much lower today than it was in 1988 – 22 years ago.

The answer, of course, is that nobody really knows. Or more to the point, everyone certainly hopes this won’t be the case.

There is a factor, however, that is almost certain to continue in the next 11 years. And that is that the stock market will continue to be increasingly dominated by traders versus “buy and hold” investors.

Traders. Computer algorithm – based investor, where the short term is measured not in months but in hours and seconds.

Obviously, the smaller, individual investor can’t win this game.

And for what it is worth, given that most of them follow the “20th Century” Warren Buffet / John Templeton / Peter Lynch buy and hold approach via mutual fund holdings, very few of them even play it.

So what is the individual investor to do? Three ideas:

1.    If You Can’t Beat Them, Join Them. Give up the buy and hold mutual fund ghost, especially if it involves paying management fees, and if you insist on investing in public equity, then attempt to do so via more trading – driven investment strategies. Obviously, very, very difficult, but not less difficult than seeing your retirement nest egg not grow for another 11 years.

2.    Invest Internationally. Global stock market performance has significantly out-paced the U.S. markets over the past 11 years, and the long-term GNP growth trends are very favorable for the China’s and the India’s of the world. These growth trends should continue to drive their stock markets higher.

3.    Invest in U.S. Startups. U.S. startup companies are still by far the greatest source of innovation in the world today. And from all that innovation, a lot of money is made.

And even better, the same technological trends that have made public market investing so difficult in the last 10 years have made startup (i.e. angel) investing easier. The angel market is characterized today by a far greater liquidity, transparency and portfolio approach alternatives than ever.

And it is a relatively small and fragmented market – less than $50 billion in total angel and VC investment spread over thousands of companies as compared to Apple’s market capitalization of $200 billion+, angel investing.

This small size and fragmentation make it mostly inaccessible to the global hedge fund, Wall Street speculator-types that have made it so hard for individuals to make money in the stock markets.

Whatever you do, don’t just bury your head in the sand.

And don’t be like Gordon Gekko and think it will ever be 1985 again.

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


Residential Real Estate - Time to Move On


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For opportunities that Growthink is following now, click here.

Believe it or not, the great residential real estate crash of the last few years will turn out, in the long run, to be VERY good for the U.S. and the global economy.

Here's why:

The Fixation on Housing Prices Has Been and Is Unhealthy: The word that comes to mind when reflecting upon the government subsidies (see mortgage interest deduction, first-time home buying credits, etc.) and media attention given to housing prices is distorted.

Sure, the price of homes is important, but is it more important than educating our children? Than the health of our startups and small businesses? Than our global competitiveness?

Maybe it's me, but the America I love isn't one whose economic and social health is judged by how climate-controlled the big-screen TV room is, or how comfortable the couch.

Now I am not saying that a lot of people haven't been badly hurt by this recent (though not unprecedented) popping of the real estate bubble nor that our love of homes has turned us completely into a nation of unadmirable shut-ins and couch potatoes.

But if we must choose (and we must), I'll cast my lot with the young, highly educated, preferably immigrant software entrepreneur, working out of  their cramped garage, over the slow-to-innovate home-builder or mildly educated real estate agent.

Innovation, Not Bigger Bathrooms, Drives Wealth-Creation. As noted in my review of Matt Ridley's fantastic book, "The Rational Optimist," the source of all wealth-creation is innovation (i.e. technology).  While there have been of course many meaningful innovations in housing over the years, it is illustrative that the basic living schematic - bed, bathroom, kitchen - hasn't really changed much since Roman times.

Following up on this point and to my blog post last week let's remember that it is services not "stuff" that power the U.S. economy. And while the real estate industry creates a lot of service jobs for sure, you have to look elsewhere to find the really high value-add, high-paying ones (see software, financial services, energy, healthcare).

So what to do about it? Here are three quick ideas:

1. Eliminate the Mortgage Interest Deduction and Replace it With a Startup Business and Investment Credit.  As opposed to the government granting a $100 billion annual tax break to homeowners with the mortgage interest deduction, give it instead to the entrepreneurs - who, on average create 4 net new jobs every time they start a new business - and those that invest in them.

How transformative would this be? Remember that total venture capital and angel investing in a typical year doesn't add up to more than $50 billion, or about one-half of the mortgage interest tax break.

A tax break re-allocation of this nature would at least double the number of new businesses and investments in them every year. In addition to the millions of jobs created, the innovation gains that would result would be awe - inspiring.

2. Let Prices Fall.  It is time for all homeowners to just take their medicine (or, more accurately, even more medicine) and let prices fall to where the housing demand meets supply.

In addition to being the right thing to do in a market economy, significantly lower prices would be a huge boon to new homeowners. 

And as these new homeowners tend to be younger people, the time and money savings of lower housing costs could go to more societally beneficial pursuits than remodeled bathrooms - like perhaps going to back to school or starting or investing in a business?

3. Just Stop Talking About It.  My favorite because it is easiest and will have the quickest effect - let's just stop talking about residential real estate. Too much ink and mindshare have been wasted on it these last few years. 

This would not be all that bad if the coverage was somewhat balanced, but as it is almost universally presented in an "the end is near" tone and focus, falling home prices have been unfortunately equated with the health of our economy and our society.

Let's use better, more 21st century measures of well being - like our kids' science and math scores  or the speed of innovation in those high value-add service fields like healthcare, energy, and software.

More attention here will mean more human progress, more wealth for all of us.

And maybe this time, with all that new wealth, instead of building bigger bathrooms, we do something with it that's just a tad more...inspirational?

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 Coming Technology M+A Boom


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In my last post, I referenced Basil Peters' great book - Early Exits  - and how the technology investment of choice is "small ball":  Putting small amounts of money to work in companies with game plans of quick sales to strategic acquirers within 3 - 5 years.

Well, in response, I have been inundated with variations of one of the two queries:

1.    How does the current, sluggish deal environment affect this strategy?
2.    Where can I find companies that meet this criteria?

Let's take these one by one. 

First of all, the current deal environment - if you have an ounce of contrarian in you - should be best described as a dam ready-to burst. 

Try these numbers on for size: Mergers and acquisitions activity in the past 24 months has more than halved - with only 7,300 deals closed in 2009, representing approximately $803 billion in deal value.

Compare this to the more than 13,000 deals representing $1.38 trillion in value that got done in 2007 - the last "normal" year.

The YTD date deal numbers for 2010 are even worse. While the number of deals will, in all likelihood, show an up tick, deal values are actually significantly behind the abysmally poor 2009 numbers.

And while this has happened, an enormous stash of cash has built up in the coffers of companies and private equity funds worldwide, more than $3.4 trillion sitting on the sidelines in low to no-interest bearing cash instruments.

Now to this backdrop reflect on the following:

1.  Speed of innovation remains, as it always has, the #1 driver of competitive advantage in modern business.

2.  Large and mid-sized companies are more scared than ever of their ability to keep up.

3.  Concurrently, it is only the startup and small technology company form of business that has proven to be able to consistently innovate at positive ROIs.
 
The result: a desire and game plan of companies of any significant size to BUY technology, and not build it.

Put it all together and a LOT of technology M+A activity in 2011 and beyond is the almost certain future.

So how can you get in on the action? 

Well, two choices and two choices only - be a technology entrepreneur or back one.

As for which sectors to seek out, look for those with high quotients of intellectual property - think Internet, software, biotechnology, digital media, and energy. And ones characterized by high cash flowing "lumbering giants" - think consumer products, oil and gas, and financial services.

As for business plans, look for those that are built for speed and for hitting "hard singles and doubles" versus swinging for the fences.

And when hit in quantity, those singles and doubles REALLY add-up.

Webinar: Secrets of the Black Swan and The Early Exit


I encourage you to register for my webinar this Thursday - "Secrets of the Black Swan and the Early Exit" - where I will show you which early exit opportunities we are following now, and how you too can participate in the coming technology M+A boom.

To register, click here.

To your success,

Jay Turo
Chief Executive Officer
Growthink, Inc


The Talented Mr. Ridley – Part II


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Last week I commented on Matt Ridley’s incredible book, “The Rational Optimist,” and how it represents an entirely new paradigm re the probabilities for economic growth and prosperity worldwide in the coming years.

A particularly revelatory component of Ridley’s analysis revolves around what the real process of innovation is and what it is NOT. 

Ridley first points to what innovation is NOT. 

It is NOT Government Research.  One of the most cited examples of the importance of government research to commercial technology is America’s successful efforts to land a man on the moon in the 1960’s. It is often said that non-stick frying pans would simply not exist were it not for the Apollo program. 

Well, given that close to $200 billion in today’s dollars was spent on the moon effort, it is just a bit underwhelming, isn’t it?  Heck, even the Wikipedia entry re the program’s scientific and engineering legacy is a scant 3 sentences.


It is NOT University Research. Buzzwords from academia like “technology transfer” and “commercialization” are, in Ridley’s analysis, just that - buzzwords.
 
For the tens of billions of dollars in hard costs and the monumental diversion of top-grade intellectual talent from commercial activity that academia represents, no demonstrable commercial return-on-investment has ever been proven. 

A “Renaissance lifestyle” value for young people, sure.  Civic pride and relationship values of affiliation with top-notch colleges and universities - of course.
 
But actual hard dollars and cents wealth-creating returns, well it just isn’t there. Probably the best that can be said about the commercial value of the university R+D is that it is normally so stilted and misaligned that it drives away the best entrepreneurial and technical talent very quickly (see Gates, Ellison et al.)

So What Does Drive Real Innovation?  Building on the seminal work of Clayton Christensen in the Innovator’s Dilemma, Ridley describes the innovation process and its economic value-add in very prosaic terms.
 
He points to innovations like Amazon’s ongoing transformation of the ecommerce experience – none of which would be considered breakthrough technology, but which in their aggregate have brought unprecedented consumer productivity gains.

And to eBay, whose core innovation was NOT the idea of online auctions as much as it was that a robust exchange of buyers and sellers could be attracted via pay-per-click advertising (see Google above).

Ridley’s point is that the innovation that creates wealth - versus innovation that looks good on an academic’s or a politician’s whiteboard - is simply the abiding power of Adam Smith’s invisible hand made real. 

Namely individuals and small teams tweaking the way things are done only so slightly for one purpose and one purpose only – to make a buck. Or a yuan. Or a rupee. Or a few pesos. Period. End of story. 

And you know what else?  For the first time in human history, there are now billions of people thinking and working and collaborating in real time toward this basic human desire.

And that is why - and only why - as a species we just keep getting richer every day.

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 and how to grow and profit with them, please click here.


The Early Exit


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The next big technology investment idea is the “Early Exit.” The best articulation of it comes from Basil Peters, a serial technology entrepreneur, co-Founder of Nexus Engineering, former Canada Entrepreneur of the Year, and Managing Partner at 3 venture capital funds – Fundamental Technologies I and II and the BC Advantage Funds. His blog is one of the best resources on technology investing out there.

Aptly to the point, Basil is the author of a great book – “Early Exits: Exit Strategies for Entrepreneurs and Angel Investors.” His core thesis is that successful private equity investing is now driven by quickly getting to the smaller investment exit. 

Or, as he says it, "Today, the optimum financial strategy for most technology entrepreneurs is to raise money from angels and plan for an early exit to a large company in just a few years for under $30 million."

This is a realistically attainable for the individual investor. Here's why:

You, Mr. or Ms. Main Street Investor, are NOT getting a piece of the next big IPO: The 2 best known venture capital funds –Sequoia Capital and Kleiner Perkins - because of their reputations and massive bankrolls – will continue to get the lion’s share of the deals with rockstar IPO potential. Try these names on for size – Electronic Arts, Apple, Google, NVIDIA, Rackspace, Yahoo!, Paypal, Amazon.com, America Online, Intuit, Macromedia, Netscape, Sun Microsystems.

They were all Sequoia and/or Kleiner investments that became mega-successful IPOs. To give a feel for the power of their investment model, estimates are that Kleiner’s investment in Amazon scored returns of 55,000%!

YOUR big problem – your friendly neighborhood stockbroker (if they exist anymore) isn’t getting you in on any of these deals anytime soon.  And if you don’t have a $100 million bankroll and the very right connections to become a Kleiner or Sequoia LP, you’re not joining their club.

Hit’em Where They Ain't:
The size of most modern venture capital funds has increased, with the average sized fund now having more than $160 million under management. As a result, the vast majority of professional investors simply can’t and won’t invest in smaller deals. The new VC model has, for better or for worse, become “Go big or go home.” As such, competition for smaller deals is much less and the deal pricing on them far more favorable.

Small Deals Rock:
You don’t need a lot of money anymore to build a technology startup – not with outsourcing, viral marketing, and the Software as a Service (SaaS) revolution. And if your business isn’t cash flow positive REAL FAST, you probably don’t have a very good business.

So the new technology investment model is to place small amounts (under $1 million) into companies that a) develop intellectual property and compete in markets with lots of active strategic acquirers (think Internet, software, biotechnology, digital media, and energy) and b) have management with the mindset and track records to ramp-up and exit FAST and at very attractive but not pie-in-the sky multiples. 

Not a game that big private equity or venture capitalists are interested in playing because it is just too hard to put large amounts of money to work in such a fragmented marketplace.
But if done right, an EXTREMELY lucrative one for thoughtful entrepreneurs and the investors that back them.

To Your Success,

Jay Turo
Chief Executive Officer
Growthink, Inc

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"Old-School Leadership
is DEAD"

"Barking orders" and other forms of intimidating followers to get things done just doesn't work any more. So how do you lead your company to success in the 21st century?

CLICK HERE
to watch the video.

Blog Authors

Jay Turo

Dave Lavinsky