Posts Tagged ‘startup’

4 Reasons Why the “4 Reasons Today’s Tech Scene Differs from the ’90s Bubble” Aren’t Really Reasons

03/29/2011

I hope that the title of the article didn’t scare you. Yet I felt compelled to share with you the same confusion many in the social media world are currently going through with regard to company valuations.

I got to the article “4 Reasons Today’s Tech Scene Differs from the ’90s Bubble” through the article “Buffett Declares Social Media Valuations Overpriced“, in which Buffett, in eerily similar fashion to the Tech Bubble 1.0, claims “it’s extremely difficult to value social networking site companies” and that “some will be huge winners, which will make up for the rest.”

As a student of investor sentiment I love to point out when investors’ hearts jump far ahead of their minds. One of my favorite books of all-time is “Extraordinary Popular Delusions and The Madness of Crowds” in which Charles McKay journeys through the greatest examples of herd-mentality people’s money has been subject to.

I’ve become quite keen of bubbles. Both finding them and pointing out false ones. Tops are more fun than bottoms, simply because bubbles are so much more entertaining.

It’s a funny thing money, because it’s something we work our whole lives for and yet it can drive us completely insane. We gamble when we have everything to lose and we shy away from the greatest of opportunities.

Back to the article.

If you insist that Facebook is worth $85 Billion today you deserve to be made fun of. Let’s begin.

Alexander Hotz is a freelance multimedia journalist and public radio junkie based in New York City. Currently he teaches digital media at Columbia University’s Graduate School of Journalism.

So now we have a case of Buffett vs Hotz. Who do YOU think is going to win? That’s right. The 80 year old investor or some young “public radio junkie”. Sorry, Alex but my money’s on Buffett.

We currently have the following valuations:

Quora $1 Billion

Twitter $10 Billion

Facebook $85 Billion

Alex mentions 4 reasons why “this time is different”.

1. Startup Costs

“[In the 1990s], when you started a company, more money was pumped into office space, servers and equipment,” said Mimeo.com Founder Jeff Stewart. “Today, when you build a company, you don’t own a server — you might even have mobile office.” With so much infrastructure now in the cloud, entrepreneurs can focus more on the product than they could in the past. For their part, investors don’t need to invest as much, so at least in comparison to the 1990s, oftentimes the risk is less. Bottom line — it costs less to start a company today.

There are 3 immediate issues I have with that paragraph.

a. It’s not true. Yes infrastructure costs have lowered significantly yet other costs and other distractions have taken its place. Today, marketing, lead generation, code writing and technical expertise have taken the front seat – aspects just as time consuming as taking out the trash or actually selling product.

b. This doesn’t help us. If startup costs have dropped that means that the incentive for other competitors to compete has risen. What stops some potential college drop-out from spending his night writing better code than your oh-so-genius team?

c. This isn’t a reason. So let us assume that you do have a patent-pending for your state-of-the-art tech-savvy game-changing app. How do you make money? If there’s no money, there’s no valuation. Period. I’ll write that again because it will recur throughout this article. If there’s no money, there’s no valuation.

2. Public vs Private

In the 1990s, tech companies raced to secure a lucrative IPO. When the bubble burst in March 2000, those who got burned weren’t just angel investors and VCs, they were less experienced investors who had jumped on the tech bandwagon.

Today, younger companies aren’t in a rush to go public. Think Facebook’s “special purpose vehicle” with Goldman Sachs. What’s more, today’s public tech companies are market stalwarts. “You can’t call Amazon or Google or Apple overvalued,” said OrganizedWisdom CEO Steve Krein. “[In the 1990s] you could have called DoubleClick, Amazon and Yahoo overvalued.”

Krein agrees with Fred Wilson that the startup world has some “frothiness” or excess capital, but comparisons to the 1990s don’t take into account where the investors are coming from.

Firstly, investors are investors. And history has proven the astute “experienced” investors to be the ones who are often the most foolish ones. You may insist that small investors won’t get burned this time and, I agree, that’s a good thing. But that doesn’t in any way validate the stupidity of the affluent who we know spend millions of dollars on other stupid stuff like art, CDOs and credit default swaps.

I have no doubt that if the small guy could get in on this mayhem, he’d buy Facebook faster than he bought Enron and Pets.com 12 years ago.

Then he mentions Google, Apple and Co., which makes my head spin. Of course Google wasn’t overvalued in 1999. It didn’t exist! So while investors were piling into Yahoo and Juno their ultimate rival wasn’t even a prototype!

The second mistake is a bit more complex. You can’t use the survivor to prove the challenge. You can’t take the 1997 Bulls and claim that the Michael Jordan draft pick was a home run. Apple has come a long way since 1999. Jobs had just joined the company again after 10 years of struggling profits and a stagnant share-price.

3. Hubris

A less tangible difference between the 1990s and today’s startups is the dynamic between the up-and-comers and the established titans. “[In the 1990s] there was a sense of confidence that the new companies would knock off the old companies,” said MeetMoi.com CEO Andrew Weinreich. “Imagine Time Warner, the most venerable of media companies, literally giving away half of itself to an Internet startup AOL. If you were in a startup, you really thought that you would knock off existing players.” Today, the big players are the survivors of the dot com era.

I have to give it to him. He had the substance of a real argument until the last line. Which survivors are we referring to? When people talk about Google being taken over by Facebook, what does that say about hubris?

Finally, since when does hubris a necessity for a valuation bubble. All we’re saying is that investor aren’t discounting anything for the future. Webster’s  defines a “Bubble” as “a state of booming economic activity (as in a stock market) that often ends in a sudden collapse”.

When VCs are throwing (literally) money at these new tech startups there is a definite chance of a sudden collapse in economics activity, at least in Silicon Valley.

4. The Bubble Isn’t a Profitable Joke

In 2000, entrepreneur Philip Kaplan created the satirical website FuckedCompany.com (a take on Fast Company), lampooning the absurdities of the startup world. “When you have a profitable business built around making fun of the bubble, that’s an indicator,” said Stewart. The site made some serious money off the woes of the floundering dot com world. Today, while satirical blogs and social accounts are plentiful, none of them come close to the profitability of lampooning the last bubble.

Do we really need jokes to prove investor insanity? Mind you, every child knows that (bubblegum) bubbles take time to grow, but only an instant to pop. Investors should bear in mind the same. That one day there will be a joke, the next it won’t be so funny.

So is there a bubble?

No.

Guess you weren’t expecting that answer. The fact is that if investors are going this crazy now, it’s due to continue for some time. True, there are no jokes, there are no naysayers (and thus stark advocates) and it’s not the hottest topic on CNBC. Most of all, there aren’t enough people claiming it’s a bubble (yes, a bubble needs a conscience). Not yet at least. But once the IPOs start rolling out and the small investors do get wind of what’s going on, it will end, and badly.

Wait I say.

Wait for the “Facebook taking over Apple” articles.

Wait for the momentum, when volatility increases.

Wait for the young and inexperienced investors to sit on the set of CNBC and tout the reasons for their madness.

Wait until earnings become paramount, while balance sheet quality, cash flow from operations are ignored.

Wait until these “low cost” startups begin to run low on the mountains of cash they acquired.

Wait for when the accounting seems compromised, when large amounts of earnings stem from accruals rather than cash flow from operations.

Wait for the article that say “This time is different”, “P/E ratio’s don’t matter” and “If you don’t invest now you’ll die a broke old man”.

When Buffett said that he “didn’t get tech,” he didn’t mean that he didn’t understand technology; he just couldn’t understand how technology companies would earn returns on equity justifying the capital employed on a sustainable basis.

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The Ultimate Investment – Yourself!

04/20/2010

How would you like to invest in yourself? How would you like to learn EVERYTHING about starting and succeeding in your own business? How would you like to skip the tenuous and length college MBA and focus instead on a 2 DAY intensive designed to teach you everything you NEED to know about entrepreneurship?

I will be attending this Dreaming Room, with E-Myth founder and author Michael E. Gerber and I’m inviting only 15 Dreamers to join me in this most amazing experience!

And best of all Michael is offering this unique and rare event on the East Coast (something he rarely does) and for only a fraction of its original price! This opportunity cannot be missed!

So What’s a Dreaming Room? The Dreaming Room is a 2-day “Entrepreneurial Incubator” with Michael E. Gerber himself, jam packed with the knowledge necessary for anyone who wishes to build the business they’ve always dreamed of or wish to dream of.

You will truly experience everything you’ve ever read about E-Myth and Entrepreneurship, and you will come to understand, in vivid, extreme and creative detail how to start the business you’ve always dreamed of.

You’ll get to know the 4 components of the Entrepreneur: 1) The Dreamer, who has a dream 2) The Thinker, who has a vision 3) The Storyteller, who has a purpose and 4) The Leader, who has a mission.

What Will You Learn In The Dreaming Room?

Such a predictable question.

I receive it every time someone is wrestling with the decision about whether or not to enroll in The Dreaming Room…whether they ask it or not!

I’ll wager you’re wrestling with that decision right now.

But, here’s the thing.

If you were buying a computer seminar, that question would be relevant.

If you were buying a cell phone seminar, that question could be answered, and should be.

If you were buying a sales training seminar, of course you would want to know that the course will provide you with the information you need to become more effective at sales.

All such events, what we’ll call training events, are designed to teach you operating skills.

Operating skills are work skills.

Work skills are those you use inside of your business to produce work results.

And therein lies the difference between The Dreaming Room and all training events.

Training Events are Right-Brained Events.  The Dreaming Room is a Left- Brained Event.

Right-Brained events teach you Work Skills.

Left-Brained events teach you Life Skills.

Right-Brained events teach you how to DO something.

Left-Brained events teach you how to SEE something.

DOING is a Right-Brained activity.

SEEING is a Left-Brained activity.

SEEING is what happens in The Dreaming Room.

It is an activity of your intuition.

It is Soul activity, not Brain activity.

It is about heightening your state of attention. Of presence.  Of imagination.  Of congruence.

SEEING is what Entrepreneurs do.

It is a completely different kind of DOING.

It is not about the DOING that technicians do.

It’s about the DOING that inventors do.

It happens inside of you, not outside of you.

Inside of you is where all the life-sourcing occurs.

It’s where all the magic lives.

It’s where all the energy resides.

It’s where the ideas come from.

The great ideas.  The powerful ideas.

The ideas that make life happen outside you.

The ideas that give birth to great companies.

*  *  * *

Toward that end, The Dreaming Room is designed to awaken the entrepreneur within you.  Not to make you more effective at working IN your business, but to make you more effective at working ON your business.

The entrepreneur is the one who creates the opportunities that are waiting for you in the world around you.

To fill them with your vitality.  With your spirit. With your passion.  With your imagination. With your Soul.

But in order to create opportunities, the entrepreneur within you must first recognize what an opportunity is, and what purpose it serves.

That’s what happens in The Dreaming Room.

What happens in the Dreaming Room is that each and every participant is taken on a unique, one-of-a-kind journey.  Unique, because it is their journey and their journey only.

The journey one goes on in the Dreaming Room is therefore completely unpredictable because no two participants are the same.  No two journeys are the same.

In the Dreaming Room you are not the same as the fellow or women seated to your right or to your left.

Your creative surge is yours alone.

Your path to freedom is only yours, and no one else’s.

Your personality, your history, your obstacles toward inventing a new life through the creation of a new venture, are only applicable, and therefore important, to you.  To you alone.

That’s why we say that The Dreaming Room process is no more or less than an original experience.

A deeply personal, evolutionary experience that is impossible to describe.

Since only you can know it when it happens.

And only you can do it when you are so awakened.

A blank piece of paper and beginner’s mind.

That’s all you need to know when you come to The Dreaming Room.

Along with the desire to explore your own imagination.

Are you up to that?

Are you up to experiencing a miracle inside?

Well, that’s what I do in The Dreaming Room.

Don’t ask me how I do it.

I just do.

Ask anyone who’s been there.

They’ll tell you the very same thing.

It was miraculous.

That’s why I love to do it.

That’s why I know I will love doing it with you.

Come dream with me.

Stop thinking about it.

Come dream with me.

Michael E. Gerber
Chief Dreamer
In the Dreaming Room
Carlsbad, California

~~~

For more information about this exclusive event please email me at personalfulfillment@gmail.com

You can also find more information at the Michael E Gerber website

The Best Business Advice

10/12/2009

Just finished a phenomenal article “101 Small Business Mistakes and what you can learn from them“. It’s got to be one of the best article I’ve read in months. The following are some of my notes and personal insights.

Startup Tips:

  1. Become a leader as soon as possible.
  2. Focus entirely on the business, no 2nd jobs.
  3. Just do it and don’t look back.
  4. Spend nothing, let people know you’re only making “investments”.
  5. Bootstrapping goes beyond just startup. Ensure that all expenses are conscious.
  6. Entrepreneurs are unemployed until there are profits.
  7. Talk more about what you’re doing, not what you will be doing.
  8. Nothing will ever be perfect! Work around that.
  9. Always apply the 80/20 Rule and set short deadlines.
  10. Don’t have a master plan, have a vision.
  11. Prepare an exit strategy.
  12. Keep development short and generate a prototype quickly.
  13. Focus on Web development and e-mail marketing sooner rather than later.
  14. Hire talent not family. It’s hard to fire family.
  15. Don’t raise too much money. You’ll start looking for ways to spend
  16. Better to own a small piece of a large pie than a big piece of nothing.
  17. Never give up ultimate authority of your business.
  18. Debt is not cash.
  19. Pick the right type of incorporation. Speak to an Attorney.
  20. Know industry regulations and legal codes.
  21. Figure the most opportune time to launch, then accept capital only on the best terms.
  22. Investors will throw money at any great idea, allocate it right.

Product Tips:

  1. Research your market!
  2. Build your infrastructure before major client pulls.
  3. Keep your personality and be playful. Make your workplace fun.
  4. Never lose sight of how you differentiate from the competition.
  5. Don’t base prices on how much you think you’re worth but how much it would be worth to the customers you service.
  6. Price higher than the industry norm and do just enough ads to get noticed by the competition.
  7. Never undersell, even to lock someone in.
  8. No one ever said “We priced too high”. There are always unknown expenses and you can always make a sale.
  9. Negotiate everything. Don’t just pay based on what you value.
  10. When client applications and customer service are on the line, outsourcing isn’t an option.
  11. The costs of building a data center are quickly recouped through more efficient customer service and recurring revenue.
  12. Don’t trying to be all things to all people.
  13. Have a list of competitors that offer what you don’t. This builds your rapport.
  14. Always require an upfront percentage fee for services.
  15. Always sign a contract/terms for major deals/purchases.
  16. Don’t let referrals lead you way from your target market.

Sales and Marketing Tips:

  1. You must sell! Build your own skills, or find someone else.
  2. Your marketing ‘hook’ is critical, to grab the client’s attention long enough for the sales process to begin.
  3. Have multiple hooks for different psycho-graphics.
  4. Market locally. It’s easier and cheaper.
  5. Never underestimate the power of promotion. Plan for best/worst case scenarios.
  6. Use share-shift marketing, converting a client-base from your competition.
  7. You can’t buy instant recognition, but you can find key influences.
  8. Cross reference your events with various calendars.
  9. Inform! (clients, employees, partners).
  10. Always get testimonials when they say how happy they are. Even better, get them to recommend you.
  11. Have 4-5 on-going contracts, plus breathing room, so that the loss of one deal doesn’t set you back too far.
  12. Develop relationships with the most influential people possible in a company. (Founders preferably).
  13. Just because a contract is signed doesn’t mean the deal’s going to go through.

Operations and Big Picture Tips:

  1. If you do one thing right, hire the right people!
  2. Hire assistance ASAP for all work that doesn’t have to be done by you.
  3. Explain to people the job of leader – to build consensus and organization.
  4. Define functions and results, not personalities and process.
  5. Hire talented people who fit your culture!
  6. Recognize bad decisions and deal with them quickly.
  7. Sometimes it’s the little errors in judgment, compounded every day, that kill you.
  8. Learn when to say NO! and when to say YES!
  9. Inspect what you expect people to respect.
  10. You can’t manage what you don’t measure.
  11. Pay as you go. Partners should earn trust and their equity.
  12. Lead with authority and passion. Consensus leads to mediocrity.
  13. Listen to opinions and be open-minded but then make a decision.
  14. Employees have an expectation and a desire for leadership. Without it, everything falls apart.
  15. If there’s a will there’s a way. Go and find it!
  16. No one who provides capital lets your keep full control. So keep the cash!
  17. Always consult a cultural expert about small details before traveling to other countries.
  18. Get used to saying the words “Look. I saw things differently, but I could be wrong and I often am. I’d like for things to be right. Let’s examine the facts.”

Seth Godin’s on his biggest mistakes: “Not believing, not risking, not deciding. Holding back feels safe. When someone asks you your big mistakes, it’s tempting to talk about the stuff you did that didn’t work out. But what about the stuff you DIDN’T do? Those are the really big mistakes. Not starting Yahoo! or Google, those were big mistakes.”

Now get out there and make things happen!

20 Business Ideas for Recession

09/28/2009

There are plenty of opportunities for starting a new business in a recession or sluggish economy. Call them: Built for “Recessionary Success”.

While many businesses in the retail sector are posting record losses, other businesses are turning a profit, especially service-oriented businesses offering non-discretionary goods. During economic recessions, people are reluctant to part with their hard earned money, so businesses that help people keep money in their pockets are winners in tough economic times.

1. Debt Collection
It goes without saying that in tough economic times bills start to pile up and often go unpaid. While debt collection is not an especially pleasant business, it’s one that generally does well during economic downturns. As an added bonus, you have the option of working out of your home as an independent contractor or working for a debt collection agency.

2. Healthcare Products
An aging population whose health is declining is going to purchase healthcare products and services—recession or not. And, with more health related products and services available than ever before, this is a business that is sure to thrive.

3. Job Search Agency

When people lose their jobs, they often turn to employment agencies or job search firms. If you are a people person with a lot of industry contacts and a knack for matching out-of-work employees with potential employers, then this type of business might be a good choice for you.

4. Mediator
In tough economic times, many people turn to mediators rather than attorneys to settle disputes simply because they are less expensive. If you’re skilled at negotiating, this may be the business opportunity you are looking for.

5. Security Firm
Security firms are doing a booming business, but the security business is not just about security guards. It’s also about performing security and background checks for employers.

6. Computer Repair
Computers are a fact of life and so is computer repair. The good news is that a computer repair business doesn’t depend on whether the economy is good or bad. If you are the go-to person when a friend’s computer goes bust, then the computer repair business might be a good fit. It’s also possible to join a franchise operation like Geeks on Call.

7. Internet Marketer

Many people jump on the website bandwagon without really understanding internet marketing. After all, what good is a website if no one sees it? Internet marketing is becoming more and more important as people comparison shop and purchase items online. That’s just one of the reasons why it’s a good business when the economy goes south.

8. Web Entrepreneur
You don’t have to be a computer geek to become a web entrepreneur; all you need is a good idea or product. You can create a website yourself or hire a web designer to do it for you.

9. Pawn Broker
Ok, not everyone is cut out to be a pawnbroker, but pawnshops are typically businesses that do well during recessions. A pawnbroker takes merchandise as collateral on a loan, albeit a loan with exorbitant interest rates.

10. Cosmetics Sales
This may seem like an odd business to start in a sluggish economy, but the truth is that cosmetics are an inexpensive way to let us feel good when times are not so good. After all, who doesn’t want to look terrific?

11. Financial Advisor
This might seem like a strange choice given typical market activity during a recession. But when turmoil is afoot, people are looking for solid advice on how to manage their money. Americans, especially those close to retirement, are worried about their financial futures.

12. Business Coach

As businesses try to improve morale, increase bottom lines, and improve efficiency, more and more of them turn to business coaches. Business coaches offer advice on everything from reading financial statements to helping companies with time management and personnel problems.

13. Beer Distributor
Beer consumption doesn’t go down in a recession. In fact, it usually goes up as people switch from more expensive wine and cocktails. And with the wealth of microbrews available now, there’s a beer to suit even the most discriminating palate.

14. Reusable Water Bottle Sales
Another profitable business that’s taking off is selling reusable water bottles. With all the health scares about Bisphenol A (BPA) and other harmful chemicals leaching into water from traditional reusable plastic bottles, stainless steel and BPA-free water bottles are a must-have item even in the tough economy.

15. Green Café
The green café is a variation of the neighborhood café. The advantage of a neighborhood café is that it can start off small and expand as your income grows. The advantage of a green café is that it can have lower operating expenses because it focuses on recycling and reusing as much as possible, thus creating very little waste. And being green offers a unique marketing aspect.

16. Consignment Shop
Even socialites are doing it—shopping at thrift stores, that is. And if that isn’t an indication of a trend, then what is? That’s just one of the reasons running a consignment or resale shop during a recession is a sound business proposition. Consignment shops sell clothes, furniture, decorative items, and home furnishings; business owners can specialize in one of these resale niches or offer all of these items in their stores. One of the advantages of starting a consignment shop business is that it doesn’t require a lot of capital to get started.

17. Automotive and Appliance Repair
The automotive repair business is always brisk during economic downswings because people opt to repair their cars rather than buying new ones. The same can be said about large appliances like washers, dryers, and refrigerators. For many big-ticket items, repair is far more cost-effective than buying new.

18. Auto Salvage Yard
Think of it as architectural salvage for cars instead of houses. Sometimes called auto parts recycling centers, auto salvage yards often experience booms during recessions. More people repairing their cars leads to increased demand for recycled car parts.

19. Residential Real Estate Appraiser
Because recessions usually see waves of foreclosures in the housing market, residential real estate appraisal is a profession that’s going to remain in demand, despite an economic and real estate slump.

20. Home Healthcare Services

Home health aides, personal aides, and visiting nurses all fall under the umbrella of home healthcare service providers, one of the top growth industries today. Recession or not, Baby Boomers are going to need these services as they age. If you have experience in the healthcare industry, especially in management or nursing, then operating a home healthcare services business is definitely an option.

Whatever you do, remember the key to any great business: Keep The Customer Happy!