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Showing posts with label capitalism. Show all posts
Showing posts with label capitalism. Show all posts
Wednesday, June 28, 2023
Wednesday, August 13, 2014
Sunday, October 27, 2013
Checking Out VEDC Access to Capital San Francisco 2013
The VEDC Access to Capital Business Expo in San Francisco has become one of my perennial favorite conferences. I had to attend and check out innovations in raising capital for small businesses. The Hyatt Regency San Francisco never disappoints with hospitality. VEDC renamed the conference this year as "Here's the Money!" instead of just asking where the money hides in years past.
Check out the awesome signage above. You just can't go wrong with signs like that showing you the way to money. I would posts signs like that around my home office but they would just get in the way of my daily moneymaking. VEDC comes all the way up to San Francisco every year to show us the money, which is a long trek away from their usual SoCal partnerships with organizations like Golden State Certified Development Corporation. They've been reaching out for partnerships with Mission Economic Development Agency here in town and the Nevada Microenterprise Initiative. Where's the money? It's here, there, and everywhere. I noticed that the conference also coincided with an unaffiliated event, EO Alchemy 2013, at the same venue. The entrepreneurs doing their alchemy may have had no idea that Access to Capital was just around the corner.
The introduction from VEDC announced their new venture, Aquaria Funds, specifically to operate outside Los Angeles. I think it's great that VEDC created a vehicle that entrepreneurs can use to obtain capital in addition to other local microfinance partners. They also offer more conventional SBA loans.
I started my morning checking out the session on startup financing. Interstate Business Capital mentioned cash advances on purchase orders and other merchant advances but I'm pretty sure those are only options for revenue-stage companies. No one can offer advances for purchases that haven't been made if the business is still trying to launch itself. There just aren't accounts receivable to accelerate or accounts payable to defer at most early-stage startups. Kiva Zip is enlisting its microlenders as evangelists for the non-profit projects they launch. That's great for Bay Area do-gooders. The Green2Gold guy, Bruce Blechman, mentioned CCVF's Clean Business Investment Summit and their founder's radio show on new venture money. Bruce is a genius and his rapid-fire rundown of non-bank lending, licensing, collaborative co-ops, advance order funding, and sweat equity is like a five-minute MBA education.
I slipped in to the concurrent seminar on financing for existing businesses but it was mostly a panel of larger banks discussing their established loan programs. Banks look at an industry's default rate in addition to a business' specifics, which will disappoint a lot of the aspiring restauranteurs and beauty parlor owners attending this conference. It's good to know that SBA-backed financing covers a ten-year cycle for equipment instead of banks' normal five-year cycle considerations. That was all I needed to know before going back to the last part of the early-stage financing panel. I was pleasantly surprised to hear that Chinese entrepreneurs were successfully pushing their government to crack down on IP infringement. I'd like to see more confirming evidence of stronger Chinese IP protection before I revise my low opinion of the rule of law in China. In the meantime, there is such a thing as insurance against IP infringement. It works just like other policies with premiums and deductibles. Yeah, just don't tell the ACA exchange folks about it, or they'll force us all to buy it with another mandate. Startups who want to protect their IP as early as possible should file a provisional patent application with the USPTO.
Strolling the expo floor meant listening to bank loan sales pitches. My eyes doth glaze over when I hear big banks say they have a community bank culture. Sorry, but I'm not a believer. Only two things determine a large corporation's culture. Number one is the CEO's personality and expressed strategic goals, because other executives will model that behavior and push their business units to meet those goals so they can get promoted to the C-suite. Number two is the HR department's policies on hiring, firing, promotions, and performance bonuses. Those are the hard incentives that motivate human behavior. Any big bank that aspires to live a community bank culture would have to devolve so much autonomy to its local branches as to make its corporate structure nonviable.
I sat in the next session introducing local resource partners. The usual cast of characters from the SBA, SCORE, SBDC, Operation HOPE, and others were on hand. The Renaissance Entrepreneurship Center, San Francisco Community Business Resources, Pacific Community Ventures, and OBDC's Bay Area Small Business Finance were also in attendance at the expo. I would have preferred to see the San Francisco Center for Economic Development (SFCED) in attendance but alas, it was not to be this year. Entrepreneurs from underrepresented demographics need to check out California's Veterans Business Outreach Center. I'll give you this panel's best quote, free of charge: "The one time a banker won't give you an umbrella is when it's raining." That means banks won't give you a loan if your business is losing money or the microeconomic climate for your sector has a poor outlook.
The most valuable insights I got out of that local partners panel was from the SCORE guy who previously worked with Harvard Angels and Sand Hill Angels on early stage investing. He said records of the term sheets and signed subscription agreements that support a startup's capitalization table are a must. Banks and angel investors will want to review those documents during their due diligence phase. Corporate structure is the key to determining capitalization structure because it must allow for selling equity shares. The choice of an S-corp or C-corp IMHO depends on how rapidly the business expects to scale up.
One participant at "Here's the Money!" mentioned Wells Fargo's financial support of microfinance platforms, which I presume to be Grameen America. I've blogged before about how SIFI institutions will eventually purchase microfinance and crowdfunding platforms to broaden their product offerings. The consolidation won't start until the SEC finalizes the regulatory structure enabling the JOBS Act. You heard it here first.
The keynote speaker after lunch was Kevin Harrington, a TV pitch innovator who brought you Ginsu Knives on shopping channels and infomercials before he joined the Shark Tank show. I'll share his tips on "Creating Brand Success" pretty much verbatim because they apply to lots of different business types.
Kevin liked the "Three Steps and a Stumble" approach to raising capital and growing a business. Step One is "curiosity overload." Deep market research reveals product trends, so collect industry publications and attend trade shows. You know what . . . that's exactly what I do. Step Two is "hijack your habits." Think outside the box. Make things happen. Don't do something the same way forever because business changes quickly. Hey, I do that too. Step Three is "build a brand for both the company and yourself." Man, this guy must be reading my blog because surely he recognizes the pure unrivaled genius that is both Alfidi Capital and Yours Truly, Anthony Alfidi.
Kevin also laid out five skills for entrepreneurs. Here they come.
- Skill One: Create the perfect pitch. Show healthy profits, exponential growth, acquisition opportunity, strong market, bootstrap capital from founders, uniqueness, powerful presentation using his "tease / please / seize" structure, the industry gap you fill (which I interpret as the pain points you solve), and your exit strategy.
- Skill Two: Publish. The business plan must have an executive summary, industry overview, competitive analysis, marketing plan, strong financials, and an exit strategy.
- Skill Three: Productize. Show your product's mass market, problem solving ability, uniqueness, magical transformation, celebrity endorsement, multi-functionality, credible testimonials, documentation and clinical studies, publicity, and value proposition compared to cost of goods.
- Skill Four: Profile. New media accelerates publicity. Smartphones now have multimedia production capabilities equivalent to a full broadcast studio. Shooting smartphone videos for YouTube will go a long way.
- Skill Five: Partnerships. Find parties with resources you need, and offer them resources they need.
Now for the "stumble" Kevin mentioned. If you must fail, do it fast and cheap. Make it up on the next venture. Kevin shared videos of a lot of his very successful infomercial products and few that were disappointments. No one remembers your disappointments if you recover and follow up with new successes.
These VEDC events are highly condensed equivalents of college seminars in finance and marketing. So where's the money? Well, here's the money, in my wallet. It's yours too once you line up investors and creditors who have confidence in your business prospects. Don't ask me for money. Go out and find it with the local partners VEDC lined up for you.
Check out the awesome signage above. You just can't go wrong with signs like that showing you the way to money. I would posts signs like that around my home office but they would just get in the way of my daily moneymaking. VEDC comes all the way up to San Francisco every year to show us the money, which is a long trek away from their usual SoCal partnerships with organizations like Golden State Certified Development Corporation. They've been reaching out for partnerships with Mission Economic Development Agency here in town and the Nevada Microenterprise Initiative. Where's the money? It's here, there, and everywhere. I noticed that the conference also coincided with an unaffiliated event, EO Alchemy 2013, at the same venue. The entrepreneurs doing their alchemy may have had no idea that Access to Capital was just around the corner.
The introduction from VEDC announced their new venture, Aquaria Funds, specifically to operate outside Los Angeles. I think it's great that VEDC created a vehicle that entrepreneurs can use to obtain capital in addition to other local microfinance partners. They also offer more conventional SBA loans.
I started my morning checking out the session on startup financing. Interstate Business Capital mentioned cash advances on purchase orders and other merchant advances but I'm pretty sure those are only options for revenue-stage companies. No one can offer advances for purchases that haven't been made if the business is still trying to launch itself. There just aren't accounts receivable to accelerate or accounts payable to defer at most early-stage startups. Kiva Zip is enlisting its microlenders as evangelists for the non-profit projects they launch. That's great for Bay Area do-gooders. The Green2Gold guy, Bruce Blechman, mentioned CCVF's Clean Business Investment Summit and their founder's radio show on new venture money. Bruce is a genius and his rapid-fire rundown of non-bank lending, licensing, collaborative co-ops, advance order funding, and sweat equity is like a five-minute MBA education.
I slipped in to the concurrent seminar on financing for existing businesses but it was mostly a panel of larger banks discussing their established loan programs. Banks look at an industry's default rate in addition to a business' specifics, which will disappoint a lot of the aspiring restauranteurs and beauty parlor owners attending this conference. It's good to know that SBA-backed financing covers a ten-year cycle for equipment instead of banks' normal five-year cycle considerations. That was all I needed to know before going back to the last part of the early-stage financing panel. I was pleasantly surprised to hear that Chinese entrepreneurs were successfully pushing their government to crack down on IP infringement. I'd like to see more confirming evidence of stronger Chinese IP protection before I revise my low opinion of the rule of law in China. In the meantime, there is such a thing as insurance against IP infringement. It works just like other policies with premiums and deductibles. Yeah, just don't tell the ACA exchange folks about it, or they'll force us all to buy it with another mandate. Startups who want to protect their IP as early as possible should file a provisional patent application with the USPTO.
Strolling the expo floor meant listening to bank loan sales pitches. My eyes doth glaze over when I hear big banks say they have a community bank culture. Sorry, but I'm not a believer. Only two things determine a large corporation's culture. Number one is the CEO's personality and expressed strategic goals, because other executives will model that behavior and push their business units to meet those goals so they can get promoted to the C-suite. Number two is the HR department's policies on hiring, firing, promotions, and performance bonuses. Those are the hard incentives that motivate human behavior. Any big bank that aspires to live a community bank culture would have to devolve so much autonomy to its local branches as to make its corporate structure nonviable.
I sat in the next session introducing local resource partners. The usual cast of characters from the SBA, SCORE, SBDC, Operation HOPE, and others were on hand. The Renaissance Entrepreneurship Center, San Francisco Community Business Resources, Pacific Community Ventures, and OBDC's Bay Area Small Business Finance were also in attendance at the expo. I would have preferred to see the San Francisco Center for Economic Development (SFCED) in attendance but alas, it was not to be this year. Entrepreneurs from underrepresented demographics need to check out California's Veterans Business Outreach Center. I'll give you this panel's best quote, free of charge: "The one time a banker won't give you an umbrella is when it's raining." That means banks won't give you a loan if your business is losing money or the microeconomic climate for your sector has a poor outlook.
The most valuable insights I got out of that local partners panel was from the SCORE guy who previously worked with Harvard Angels and Sand Hill Angels on early stage investing. He said records of the term sheets and signed subscription agreements that support a startup's capitalization table are a must. Banks and angel investors will want to review those documents during their due diligence phase. Corporate structure is the key to determining capitalization structure because it must allow for selling equity shares. The choice of an S-corp or C-corp IMHO depends on how rapidly the business expects to scale up.
One participant at "Here's the Money!" mentioned Wells Fargo's financial support of microfinance platforms, which I presume to be Grameen America. I've blogged before about how SIFI institutions will eventually purchase microfinance and crowdfunding platforms to broaden their product offerings. The consolidation won't start until the SEC finalizes the regulatory structure enabling the JOBS Act. You heard it here first.
The keynote speaker after lunch was Kevin Harrington, a TV pitch innovator who brought you Ginsu Knives on shopping channels and infomercials before he joined the Shark Tank show. I'll share his tips on "Creating Brand Success" pretty much verbatim because they apply to lots of different business types.
Kevin liked the "Three Steps and a Stumble" approach to raising capital and growing a business. Step One is "curiosity overload." Deep market research reveals product trends, so collect industry publications and attend trade shows. You know what . . . that's exactly what I do. Step Two is "hijack your habits." Think outside the box. Make things happen. Don't do something the same way forever because business changes quickly. Hey, I do that too. Step Three is "build a brand for both the company and yourself." Man, this guy must be reading my blog because surely he recognizes the pure unrivaled genius that is both Alfidi Capital and Yours Truly, Anthony Alfidi.
Kevin also laid out five skills for entrepreneurs. Here they come.
- Skill One: Create the perfect pitch. Show healthy profits, exponential growth, acquisition opportunity, strong market, bootstrap capital from founders, uniqueness, powerful presentation using his "tease / please / seize" structure, the industry gap you fill (which I interpret as the pain points you solve), and your exit strategy.
- Skill Two: Publish. The business plan must have an executive summary, industry overview, competitive analysis, marketing plan, strong financials, and an exit strategy.
- Skill Three: Productize. Show your product's mass market, problem solving ability, uniqueness, magical transformation, celebrity endorsement, multi-functionality, credible testimonials, documentation and clinical studies, publicity, and value proposition compared to cost of goods.
- Skill Four: Profile. New media accelerates publicity. Smartphones now have multimedia production capabilities equivalent to a full broadcast studio. Shooting smartphone videos for YouTube will go a long way.
- Skill Five: Partnerships. Find parties with resources you need, and offer them resources they need.
Now for the "stumble" Kevin mentioned. If you must fail, do it fast and cheap. Make it up on the next venture. Kevin shared videos of a lot of his very successful infomercial products and few that were disappointments. No one remembers your disappointments if you recover and follow up with new successes.
These VEDC events are highly condensed equivalents of college seminars in finance and marketing. So where's the money? Well, here's the money, in my wallet. It's yours too once you line up investors and creditors who have confidence in your business prospects. Don't ask me for money. Go out and find it with the local partners VEDC lined up for you.
Monday, August 19, 2013
Natural Capitalism Puts A Price Tag On The Planet
Who says you can't put a price tag on Mother Nature? Not me, folks. Everything has a price, except my own personal integrity.
The World Business Council for Sustainable Development (WBCSD) put out its Vision 2050 report on how to make the world sustainable by, you guessed it, 2050. I find their draft architecture for integrated reporting in the financial sector to be fascinating. The WBCSD's work matches up with similar work the World Resources Institute is doing on markets. Businesses that adhere to these frameworks and the Sustainability Accounting Standards Board protocols will have a leg up in attracting capital.
These initiatives aren't some pipe dream from radical agitators. They are the product of capitalists who believe in true prosperity. Read Nature's Fortune by the former investment banker who now heads the Nature Conservancy. These folks don't walk around chewing granola while they sabotage bulldozers in some rain forest. They make investments in nature that pay off. I want to make a buck too so I'm jumping on this bandwagon. Stanford University's Millennium Alliance for Humanity and the Biosphere has a consensus statement from super-smart pointy-hat scientific types who've studied the heck out of the biosphere's living systems.
This is the kind of stuff I read late at night when I'm not thinking about attractive women. Mother Earth is certainly attractive and she's worth every penny we can spend on her, just like a real woman.
The World Business Council for Sustainable Development (WBCSD) put out its Vision 2050 report on how to make the world sustainable by, you guessed it, 2050. I find their draft architecture for integrated reporting in the financial sector to be fascinating. The WBCSD's work matches up with similar work the World Resources Institute is doing on markets. Businesses that adhere to these frameworks and the Sustainability Accounting Standards Board protocols will have a leg up in attracting capital.
These initiatives aren't some pipe dream from radical agitators. They are the product of capitalists who believe in true prosperity. Read Nature's Fortune by the former investment banker who now heads the Nature Conservancy. These folks don't walk around chewing granola while they sabotage bulldozers in some rain forest. They make investments in nature that pay off. I want to make a buck too so I'm jumping on this bandwagon. Stanford University's Millennium Alliance for Humanity and the Biosphere has a consensus statement from super-smart pointy-hat scientific types who've studied the heck out of the biosphere's living systems.
This is the kind of stuff I read late at night when I'm not thinking about attractive women. Mother Earth is certainly attractive and she's worth every penny we can spend on her, just like a real woman.
Thursday, May 09, 2013
"Extractivism" Becomes Radical Left's New Anti-Capitalist Canard
I recently learned a new word: "extractivism." The dictionary definition is specific to forestry but left-wing polemicists apply it to any mining, pumping, or harvesting activity. I have no problem with governments assessing land use fees for resource extraction on publicly-owned common land. The US federal government does this all the time in granting exploration rights to drillers when they prospect on federal land. I do have a problem with radical political philosophies that demand exorbitant state control of all private resource production.
Hefty resource fees may sound nice in populist rhetoric. In reality they lead to rentier states as private investors become priced out of an economy. Resource nationalism turned Venezuela from a productive economy into a nightmare of repression. Progressives who praise Hugo Chavez for snatching resources from "extractivist" multinational corporations are really to blame for that country's mounting problems. The Heritage Foundation rates Venezuela as an exceedingly horrible place to engage in productive enterprise but leftists don't mind as long as extractivism is punished. Socialists learned nothing from the fall of the Soviet Union. Centrally planned economies do not deliver prosperity for people, and anti-extractivist resource policies destroy the private capital formation modern economies need.
It's time to reclaim this word for the thinking world. I'm proud to be an extractivist. It's great that large corporations go through the trouble of turning the planet's natural resources into goods that enhance our civilization. I admire wildcatters and prospectors who brave wilderness to locate new sources of material wealth. Extractivists of the world, unite. We have nothing to lose but our Luddites.
Hefty resource fees may sound nice in populist rhetoric. In reality they lead to rentier states as private investors become priced out of an economy. Resource nationalism turned Venezuela from a productive economy into a nightmare of repression. Progressives who praise Hugo Chavez for snatching resources from "extractivist" multinational corporations are really to blame for that country's mounting problems. The Heritage Foundation rates Venezuela as an exceedingly horrible place to engage in productive enterprise but leftists don't mind as long as extractivism is punished. Socialists learned nothing from the fall of the Soviet Union. Centrally planned economies do not deliver prosperity for people, and anti-extractivist resource policies destroy the private capital formation modern economies need.
It's time to reclaim this word for the thinking world. I'm proud to be an extractivist. It's great that large corporations go through the trouble of turning the planet's natural resources into goods that enhance our civilization. I admire wildcatters and prospectors who brave wilderness to locate new sources of material wealth. Extractivists of the world, unite. We have nothing to lose but our Luddites.
Sunday, February 17, 2013
Clothing Carbon Footprints and the Future of Capitalism
I recently got to hear firsthand from clothing manufacturers about how they have reduced the carbon footprints of their signature products. They didn't reveal the secret sauce behind their methods, but I didn't expect them to reveal any trade secrets and I certainly wouldn't reveal such things myself. The common approaches to reducing the carbon footprint of clothing involve more natural dyes, less artificial fibers, simpler patterns, and fewer choices. One of the clothing honchos did ask a very interesting rhetorical question: "What does capitalism look like without growth?" I think I know the answer.
Capitalism requires three basic inputs: labor, natural resources, and capital goods. Those capital goods are a fairly broad term and can include intellectual capital, i.e. the know-how to make a process work. Intellectual capital is potentially unlimited because it springs from human imagination. Labor and natural resources are ultimately limited by the carrying capacity of this planet's biosphere and its existing stock of energy and minerals.
A perpetual growth model runs out of steam when populations cease to grow and the quality of natural resources hits a peak. The Club of Rome's most dire predictions haven't come true yet because technological advances in the use of materials continue to extend the peak of this planet's various production curves. The mining sector is well aware that ore grades of new discoveries continue to decline. Some kind of downward adjustment to lifestyles is probably inevitable but the timing is unknowable.
The Western world already has experience with an economic model that could produce a steady-state economy: feudalism. This model was sustainable partly because it was coupled to environmental conditions that suppressed population growth: high infant mortality and short adult life expectancies. Its natural resource base was less clear (to me, anyway, as I'm not a medieval historian) but the relevance for our time is that a wide array of environmentally invasive activity wasn't needed to meet a population's basic material needs.
I'm not endorsing a switch from capitalism to feudalism as a solution to the impossibility of perpetual growth on a finite planet. I do advocate a deeper look at what drives the satisfaction of material demand. Imposing carbon constraints on manufacturing is one way to gradually habituate a population into accepting the impossibility of unlimited growth. Another method is to incentivize hot-looking women to wear skimpier clothing in warmer weather. I'm all in favor of that transition.
Capitalism requires three basic inputs: labor, natural resources, and capital goods. Those capital goods are a fairly broad term and can include intellectual capital, i.e. the know-how to make a process work. Intellectual capital is potentially unlimited because it springs from human imagination. Labor and natural resources are ultimately limited by the carrying capacity of this planet's biosphere and its existing stock of energy and minerals.
A perpetual growth model runs out of steam when populations cease to grow and the quality of natural resources hits a peak. The Club of Rome's most dire predictions haven't come true yet because technological advances in the use of materials continue to extend the peak of this planet's various production curves. The mining sector is well aware that ore grades of new discoveries continue to decline. Some kind of downward adjustment to lifestyles is probably inevitable but the timing is unknowable.
The Western world already has experience with an economic model that could produce a steady-state economy: feudalism. This model was sustainable partly because it was coupled to environmental conditions that suppressed population growth: high infant mortality and short adult life expectancies. Its natural resource base was less clear (to me, anyway, as I'm not a medieval historian) but the relevance for our time is that a wide array of environmentally invasive activity wasn't needed to meet a population's basic material needs.
I'm not endorsing a switch from capitalism to feudalism as a solution to the impossibility of perpetual growth on a finite planet. I do advocate a deeper look at what drives the satisfaction of material demand. Imposing carbon constraints on manufacturing is one way to gradually habituate a population into accepting the impossibility of unlimited growth. Another method is to incentivize hot-looking women to wear skimpier clothing in warmer weather. I'm all in favor of that transition.
Thursday, November 22, 2012
The Haiku of Finance for 11/22/12
Thankful time of year
Glad for cash, women, and fun
In a free country
Glad for cash, women, and fun
In a free country
A Very Alfidi Capital Thanksgiving in 2012
I grew up watching those corny TV holiday specials like everyone else in Generation X. There was always some special message about giving, sharing, kindness, or some such that those cute little animated characters wanted to share with us. I've got some cute little messages of my own that are just filled with holiday cheer.
I'm thankful for whoever the heck clicks on my pages. You people must be geniuses or else you wouldn't be attracted to my compelling content.
I'm thankful for the sponsors of business conferences who allow me to attend and even have me in a speaking role once in a while. Those folks know talent when they see it and I obviously have it.
I'm thankful to be a self-employed blogger, where I can say whatever I like in public and make stupid people angry. I'm thankful not to live in a police state where some pompous poobahs can have me arrested for goring their sacred cows.
I'm thankful to live in San Francisco, the greatest city in the world. My social calendar is always full of fun events, especially during the Christmas season. I'm also thankful that lots of attractive women show up at these events.
I'm thankful for today's buffet spread at the Palace Hotel. I marveled at the wide variety of menu items. I had ham, turkey, roast beef, salmon, shrimp, steak medallions, several different seafood and vegetable salads, paella, sushi, specialty cheeses, ravioli alfredo, caviar, pate, and champagne. I overdid the dessert servings; someday I'll learn not to have more than a couple of confections. I'm also thankful for the hot chicks in form-fitting dresses who attended. Why were they dressed like they were at a cocktail event looking to score? Beats me. I was too busy eating to get their phone numbers so maybe I had my priorities all wrong.
Most importantly, I'm thankful to be financially secure enough to afford the things I mentioned above and to have the good health needed to enjoy them. The bounty on display at the Palace Hotel is the product of a capitalistic society, where people are free to pursue their dreams. The bottom line is that I'm thankful to be an American. I don't expect Americans to be thankful for my existence but that's okay.
I'm thankful for whoever the heck clicks on my pages. You people must be geniuses or else you wouldn't be attracted to my compelling content.
I'm thankful for the sponsors of business conferences who allow me to attend and even have me in a speaking role once in a while. Those folks know talent when they see it and I obviously have it.
I'm thankful to be a self-employed blogger, where I can say whatever I like in public and make stupid people angry. I'm thankful not to live in a police state where some pompous poobahs can have me arrested for goring their sacred cows.
I'm thankful to live in San Francisco, the greatest city in the world. My social calendar is always full of fun events, especially during the Christmas season. I'm also thankful that lots of attractive women show up at these events.
I'm thankful for today's buffet spread at the Palace Hotel. I marveled at the wide variety of menu items. I had ham, turkey, roast beef, salmon, shrimp, steak medallions, several different seafood and vegetable salads, paella, sushi, specialty cheeses, ravioli alfredo, caviar, pate, and champagne. I overdid the dessert servings; someday I'll learn not to have more than a couple of confections. I'm also thankful for the hot chicks in form-fitting dresses who attended. Why were they dressed like they were at a cocktail event looking to score? Beats me. I was too busy eating to get their phone numbers so maybe I had my priorities all wrong.
Most importantly, I'm thankful to be financially secure enough to afford the things I mentioned above and to have the good health needed to enjoy them. The bounty on display at the Palace Hotel is the product of a capitalistic society, where people are free to pursue their dreams. The bottom line is that I'm thankful to be an American. I don't expect Americans to be thankful for my existence but that's okay.
Saturday, November 10, 2012
Winning at VEDC Access to Capital 2012 in San Francisco
The Valley Economic Development Center (VEDC) cares enough about small business owners to link them to sources of investment. I liked their San Francisco event so much last year that I had to come back for a second helping. I thoroughly enjoyed attending the VEDC Access to Capital Business Expo 2012 in San Francisco and was lucky enough to be selected as a panelist for one of their "Where's the Money?" expert workshops. I was the only blogger on a panel full of institutional financiers and did my best to show off my genius . . . er, I mean, enlighten the audience about post-modern innovations in raising capital.
The other panelists were pretty cool. They were from banks and other institutions that offered products running the gamut of SBA-backed loans and accounts receivable factoring. My turn to explain myself came after everyone else had pitched their value propositions. I explained crowdfunding in the context of its immediate predecessors, microfinance and P2P lending, and predicted that any crowdfunding portal that could offer a combination of debt, equity, and exotic project finance options would be a very attractive acquisition target for a major broker/dealer someday. I threw in a couple of details about the JOBS Act's definition of an emerging growth company and how startups that want to benefit from its registration exemptions need to use only the handful of portals that have registered with the SEC. I finished off by proposing four best practices that can help a startup maximize its chances for successful fundraising and reduce its chances of incurring lawsuits or criminal penalties. Here they are, and perhaps they'll start some kind of movement toward standardization. The first three practices describe documents a startup should post on its crowdfunding portal, and the fourth is something to execute daily.
1. Business plan. Post your two-page executive summary, mega-slideshow of your business model's execution, and two years worth of projected monthly cash flows on the crowdfunding portal.
2. Prospectus. A good business attorney can help draft an offering memorandum that will comply with the JOBS Act and the rules the SEC should publish sometime early in 2013.
3. Term sheet. Use the free term sheet generators that major law firms have built for free on their websites as part of their offerings to entrepreneurs.
4. Social media campaign. Entrepreneurs need to get savvy about using social media to drive investor traffic to their crowdfunding portals.
I admitted to the audience that the crowdfunding environment is kind of like the Wild West where anything goes right now until the SEC publishes its final rules. The sector reminds me of where e-commerce was in the 1990s when eBay and PayPal were just gaining traction. I still remember rival companies pushing "digital cash" solutions back then that ultimately went nowhere once secure portals figured out how to accommodate traditional cash. That kind of shakeout is coming to crowdfunding, so it pays for both investors and entrepreneurs to be reputable from the start. I got a few laughs when I mentioned that I blogged about crowdfunding last night, so they had a healthy sense of irony about my blatant self-promotion.
The audience members were pretty sharp and had some good questions. One guy asked me if U.S.-based crowdfunding portals were open to investors and companies from outside the U.S.; I admitted I had no idea. That is really the kind of thing the SEC should seriously consider through public comment on its rulemaking process. Internationalizing a U.S. crowdfunding platform would make this country a leader in financial market innovation (and no, hedge fund algorithms don't count as innovation in my reckoning). Another audience member asked about the best time to bring angel investments into a startup. I said words to the effect that investing should be a natural outward progression from one's own capital (savings and couch pillow spare change), to friends and family money, then crowdfunding, then angel investors, and finally VCs. I truly believe crowdfunding can bridge the financing gap between personal sources and the larger world of professional investors.
I also stuck around for the next "Where's the Money?" panel on fundraising. I liked what Youth Business America does with microfinance and what Midland American Capital does with invoice factoring. My recollection of the panel's responses follows. Banks have many credit channels: practice finance, SBA, and equipment finance to name a few. Relationships matter in lending because banks consider their clients' exit strategies. Non-bank lenders often bring technical assistance with business planning, plus outside partners from SBA, SCORE, SBDC, and others. Non-bank financiers can also help a startup become eligible for more stringent bank lending by putting cash on its balance sheet. One audience member at this second panel asked about crowdfunding, and a panelist said it's useful for projects with ROIs that are hard to define (like a music album or art project). He was correct and I didn't speak up to interrupt because it wasn't my panel anymore. I know when someone else deserves to shine.
Lunch at the Hyatt Regency San Francisco was as terrific as I remember from last year, with salad greens, chicken in cream sauce with rice pilaf, and some kind of carrot cake dessert thing. I hung around afterwards to snag some extra biscuits and rolls that others foolishly left behind. Yeah, I'm frugal like that if it spares me the expense of dinner. I'm ultra-cheap and proud of it, woo-hoo!
There were only a small number of hot chicks at this entire forum. I got into a conversation with a really hot gal from Europe who wanted to digitally self-publish research on politics and diplomacy, and I kept thinking about how cool it would be to make out with her right there at the conference. Well, unfortunately business comes first.
The lunch speakers were pretty good. The Wells Fargo lady talked up her bank's support of the nation's "recovery" but I remember hearing the same kind of talk last year and evidence for said recovery is still spotty if you track data from Shadow Government Statistics. She did have some good insights about using critical thinking to challenge our assumptions and get beyond simple choices between positive and negative extreme outcomes. I'll do that the next time I have to choose between a blonde, brunette, or redhead and ask them if they'd all like to date me simultaneously. Yes, I'm serious, I really do think that way.
The next lunch speaker was the regional SBA guy. He had some good advice, like getting whatever business licenses you need early in your startup process or you'll pay twice as much for them later (presumably through opportunity costs of lost business). His charge to the crowd was to max out the use of free resources like SBA and VEDC. I hope the audience appreciates these free goodies, because the federal government's fiscal pressures will put all taxpayer-funded business programs in jeopardy very soon.
The founder of Chasing Lions Cafe told us how his home equity loan financed his first cafe; his home ended up underwater while his business stayed profitable. The keynoter from ZinZin talked about branding because that's what the firm he founded does for a living. I'll summarize his main points. He said succeeding in a down economy tells you that you did something right, while doing it in a good economy means you never know the true cause. Great branding doesn't just happen; it must be debated and advocated as a compelling narrative. He challenged us to ask ourselves the following questions about the core of our brand identity:
1. Who are you / What do you do / Why should anyone care?
2. What's the great promise of your brand?
3. How will your brand change the world?
The ZinZin dude said competing on price and features makes your business a commodity; I'll bet he's been reading Harvard Business Review. He also said a strong name, memorable story, and business actions that back up your story make a great brand. Be bold! Have a disruptive name and message that force people to slow down and pay attention. Make a big bang. End of story.
Okay, mister ZinZin, I'm taking you up on those challenges. Here's how I answer your big three questions for the Alfidi Capital brand.
1. I'm Anthony J. Alfidi, Supreme Super-Genius / I make people angry with my obnoxious blog articles / People who are easily offended should care about how I ridicule the stupid things they do with money.
2. My brand advocates unlimited freedom, radical honesty, and side-splitting humor about finance.
3. Alfidi Capital will change the world by humiliating dishonest financial "professionals."
I didn't hand out any business cards because exchanging contact information with other people isn't part of my self-publishing business model. I did make one serious mistake by writing my name on some contact sheet when a clueless woman asked for a way to reach me. I told her to Google my name but frankly I shouldn't have gone to that much trouble for her because I have no intention of getting in touch with her. Maybe I should have rudely told her to get lost (you know, the whole business actions in support of my brand story thing) but some people are just so clueless they tug at what's left of my heart strings. In the future I'll just spell my name once and people need to be quick enough to write it down for reference and move along. I told quite a few other inquisitive people to look up my name printed in the program and they figured it out, geniuses that they all are. Business professionals don't need my card anyway because I'm pretty visible around San Francisco. I'm branded as an independent blogger and I need to minimize direct human contact to succeed.
There you have it. I plan to attend Access to Capital San Francisco next year as a keynote speaker. I promise I'll make it unforgettable.
Nota bene: None of the companies or institutions mentioned have given me
any compensation or consideration for this blog article. My recollection of this
conference is provided as a public service.
Friday, November 09, 2012
The Haiku of Finance for 11/09/12
Where is the money?
Crowdfund capital online
New fundraising source
Crowdfund capital online
New fundraising source
Tuesday, June 05, 2012
Tuesday, May 15, 2012
China's Oil Thirst Drives Everything
The China growth story is still sputtering, but some pillars take longer to collapse then others. PetroChina has just surpassed Exxon in oil production. The Chinese government created PetroChina to serve its geopolitical goal of maximizing the material prosperity of its people. Pumping as much oil as possible is the priority, with capitalistic concepts like ROI as a secondary concern. Please note that PetroChina (PTR) has an ROE of over 13% and has added steadily to its retained earnings. The stock is a success story primarily due to geopolitical realities. They can sustain that growth if they can muscle into more acquisitions in Africa and the Middle East.
China's oil thirst is also driving rates for VRCC hulls. That's good news for non-captive oil tanker operators who have capacity to spare. Such capacity may get tight if the price of oil keeps dropping. Lower oil prices in the U.S. mean less domestic production here and more imports from somewhere else where production is cheaper. China's slowdown means more than just cheaper commodity inputs for the U.S. and Europe. It means the Chinese government's hidden subsidies to its state-sponsored resource explorers will be more costly and less effective at creating a veneer of prosperity. If China is concerned about reducing the cost of capital available to its economy, then opening its economy to more foreign investment is certainly one solution. Cost of capital is probably not the main concern of Chinese regulators; fighting fraud and making the yuan more globally fungible rank higher on the national priority list.
Full disclosure: No positions in PTR or XOM. Long FXI with covered calls.
China's oil thirst is also driving rates for VRCC hulls. That's good news for non-captive oil tanker operators who have capacity to spare. Such capacity may get tight if the price of oil keeps dropping. Lower oil prices in the U.S. mean less domestic production here and more imports from somewhere else where production is cheaper. China's slowdown means more than just cheaper commodity inputs for the U.S. and Europe. It means the Chinese government's hidden subsidies to its state-sponsored resource explorers will be more costly and less effective at creating a veneer of prosperity. If China is concerned about reducing the cost of capital available to its economy, then opening its economy to more foreign investment is certainly one solution. Cost of capital is probably not the main concern of Chinese regulators; fighting fraud and making the yuan more globally fungible rank higher on the national priority list.
Full disclosure: No positions in PTR or XOM. Long FXI with covered calls.
Sunday, March 25, 2012
JOBS Act Will Do More Help Than Harm To Enterprise Finance
I first took note of the Jumpstart Our Businesses Act, a.k.a. the JOBS Act, in one of John Robb's posts. It seemed like a cute idea but I was skeptical that such a liberalizing reinvention of the capital markets would make it into law. The U.S. financial system is so skewed towards large institutions that something so amenable to small capital raises would have to swim against the tide. I thought it was some lawmaker's hobby horse or a gesture to the venture capital sector. I fully expected that it would either die before reaching a floor vote or emerge unrecognizable as TBTF-friendly filler.
I took further note of the bill when I read a scathing criticism in the Huffington Post signed by William Black and Janet Tavakoli, two names among many whom I respect for their analysis of the financial crisis. They are alarmed at the possibility that the JOBS Act may engender further criminality and ensure continuing economic crises. As much as I respect their concern over financial market health and investor protection, I believe their objections to the JOBS Act are based on incorrect premises.
Bill Black correctly identified deregulation as a major contributor to the savings and loan crisis of the 1980s. His objection to the JOBS Act rests on a similar premise: Lack of regulatory supervision of small institutions will embolden them to make irresponsible decisions with other people's money, and the consequences of those decisions will then be borne by taxpayers. My response is that the 2008 financial crisis was engendered by several actions that had little to do with securities registration for undercapitalized small businesses. The repeal of the Glass-Steagall Act created an environment where financial supermarkets could make equity and derivative bets backstopped by taxpayer-guaranteed savings accounts. A policy bias toward homeownership spanning several administrations incentivized government-sponsored mortgage poolers (specifically Fannie Mae and Freddie Mac) to securitize things that should never have been securitized. The Federal Reserve's loose monetary policy under Alan Greenspan kept the cost of capital so low that mortgage creation seemed to be a no-risk road to profit. All of these things led to multiple asset bubbles that popped. None of these things had anything to do with the needs of small enterprises for capital.
The JOBS Act makes minor changes to regulation that will allow ordinary non-millionaire investors to take equity in privately-held companies. The critics' concern that this approach will engender fraud is misplaced. Existing securities rules require public companies to file regular financial statements with the SEC. The statements for thousands of penny stocks are available at the click of a button and yet too many investors buy the stocks anyway, thinking they're getting bargains. Check out the dozens of blog articles I've written in the past few months on useless stocks whose SEC statements routinely cast doubts on their legitimacy. People invest in them anyway. Enron, Worldcom, Tyco, AIG, Lehman Brothers, and now MF Global were all well-known companies that plenty of smart institutional investors thought were great investments. They failed anyway. Regulation and disclosure help people who spend time doing homework. They can't cure human stupidity.
The JOBS Act will not eviscerate an American financial regulatory regime whose main deficiency is lack of enforcement for existing rules. It will energize small businesses by granting them access to a capital pool beyond accredited investors. It may even remove the "hair on the deal" excuse some VCs use as a reason not to back a startup. If plenty of ordinary people can invest in plenty of startups, hairs on deals have a lot less stigma.
I spent this weekend at a startup hackathon in San Francisco where multiple teams of technology experts created business solutions. They are all long on talent and enthusiasm but short on capital. The JOBS Act will give them the extra juice they need to win. I support its enactment into law.
I took further note of the bill when I read a scathing criticism in the Huffington Post signed by William Black and Janet Tavakoli, two names among many whom I respect for their analysis of the financial crisis. They are alarmed at the possibility that the JOBS Act may engender further criminality and ensure continuing economic crises. As much as I respect their concern over financial market health and investor protection, I believe their objections to the JOBS Act are based on incorrect premises.
Bill Black correctly identified deregulation as a major contributor to the savings and loan crisis of the 1980s. His objection to the JOBS Act rests on a similar premise: Lack of regulatory supervision of small institutions will embolden them to make irresponsible decisions with other people's money, and the consequences of those decisions will then be borne by taxpayers. My response is that the 2008 financial crisis was engendered by several actions that had little to do with securities registration for undercapitalized small businesses. The repeal of the Glass-Steagall Act created an environment where financial supermarkets could make equity and derivative bets backstopped by taxpayer-guaranteed savings accounts. A policy bias toward homeownership spanning several administrations incentivized government-sponsored mortgage poolers (specifically Fannie Mae and Freddie Mac) to securitize things that should never have been securitized. The Federal Reserve's loose monetary policy under Alan Greenspan kept the cost of capital so low that mortgage creation seemed to be a no-risk road to profit. All of these things led to multiple asset bubbles that popped. None of these things had anything to do with the needs of small enterprises for capital.
The JOBS Act makes minor changes to regulation that will allow ordinary non-millionaire investors to take equity in privately-held companies. The critics' concern that this approach will engender fraud is misplaced. Existing securities rules require public companies to file regular financial statements with the SEC. The statements for thousands of penny stocks are available at the click of a button and yet too many investors buy the stocks anyway, thinking they're getting bargains. Check out the dozens of blog articles I've written in the past few months on useless stocks whose SEC statements routinely cast doubts on their legitimacy. People invest in them anyway. Enron, Worldcom, Tyco, AIG, Lehman Brothers, and now MF Global were all well-known companies that plenty of smart institutional investors thought were great investments. They failed anyway. Regulation and disclosure help people who spend time doing homework. They can't cure human stupidity.
The JOBS Act will not eviscerate an American financial regulatory regime whose main deficiency is lack of enforcement for existing rules. It will energize small businesses by granting them access to a capital pool beyond accredited investors. It may even remove the "hair on the deal" excuse some VCs use as a reason not to back a startup. If plenty of ordinary people can invest in plenty of startups, hairs on deals have a lot less stigma.
I spent this weekend at a startup hackathon in San Francisco where multiple teams of technology experts created business solutions. They are all long on talent and enthusiasm but short on capital. The JOBS Act will give them the extra juice they need to win. I support its enactment into law.
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