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Tue, 21 Dec 2010 17:03:02 -0500

The Entrepreneur's 12 Days of Fund Raising

Tue, 21 Dec 2010 16:53:28 -0500

On the 1st day of Fund Raising my VC gave to me- an expiring term sheet at $4mm Pre.

On the 2nd day of Fund Raising my VC gave to me- a due diligence list from Ato Z.

On the 3rd day of Fund Raising my VC gave to me- a junior associate with ADD.

On the 4th day of Fund Raising my VC gave to me- a meeting with a blackberry-addicted GP.

On the 5th day of Fund Raising my VC gave to me- a CEO candidate with a high opinion and a gotee.

On the 6th day of Fund Raising my VC gave to me- a Lawyer and uncapped legal fee.

On the 7th day of Fund Raising my VC gave to me- a co-investor with an embellished CV.

On the 8th day of Fund Raising my VC gave to me- a lavish dinner paid for by me.

On the 9th day of Fund Raising my VC gave to me- a technical consultant with Turrets and a double E.

On the 10th day of Fund Raising my VC gave to me- a 40 minute wait and cold cup of tea.

On the 11th day of Fund Raising my VC gave to me- a ride in his beloved S63 AMG.

On the 12th day of Fund Raising my VC gave to me- a revised term sheet with a new T and a revised C.

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Fri, 17 Dec 2010 12:00:13 -0500

D Bag of the Year

Fri, 17 Dec 2010 11:59:00 -0500

It’s that time of year again. The time when the Yearly honors are bestowed. One of the best known is Time Magazine’s Person of the Year. The annual magazine cover used be ”Man of the Year” but the PC police replaced “Man” with “Person.” I suspect at some point it will be “Organism of the Year.” We don’t want to leave out animals and plants- that’s not PC. So I thought I would add my honor to the list to balance Time Magazine and others. I call my Yearly honor “D Bag of the Year. ” To be fair, the Time Magazine “Person of the Year’ isn’t necessarily a “good” person. They are just the “Person of the Year” according to the brain trust at Time. There have been several questionable characters on that list i.e. W, the Ayatollah, etc.

My motivation for D Bag of the Year is to highlight great examples of bad examples. These are people that do more harm than good. Many of these people would be more useful as food than members of society. Please don’t label me a Hater. I am a Lover with a dark side that emerges when I see a foul committed. Everyone has the right to throw a yellow flag (and a red challenge flag twice a game). This is me throwing my flag. So here are the finalists that didn’t win but deserve credit for discrediting themselves:

Finalists

o Jesse James. What a nitwit. Did he really think he could fool all the people all the time. He wins the Tiger Woods Award but not the D Bad of the Year.

o Bernie Madoff. Bernie is a finalist again this Year because his actions led to the suicide of his Son. I wonder how the fellas in the cell block will celebrate this Holiday Season with Bernie.

o Philip Markoff. The Craig’s List Killer. A promising medical Student with a pretty Fiancée and the world by the balls. Apparently it wasn’t enough or he just had a screw loose. He robbed the family of the woman he murdered by offing himself this year before he could be prosecuted putting him the running for D Bag of the Year.

o LeBron James. The way he dissed the good people of Cleveland on the way out was classless, egotistical and selfish. It’s bad enough to be struggling to make ends meet in a rusting Industrial City without a kick in the balls.

o Major Nidal Malik Hasan. This D Bag killed innocent people and fellow soldiers on his Ft. Hood rampage. It’s bad enough our boys have to fight the enemy overseas. He is a Coward and a D Bag.

o Brett Farve. Sending pictures of your junk to a young woman is a good way to land yourself on the D Bag of the Year list. Thinking that you are so fabulous that the mere texting of an pic of your unit will cause women to rush to your bed in a horny fit is an even better way to get on the list.

o Tony Hayward. He wanted his life back even as birds were dying, fisherman were starving and the Gulf Coast line was awash in Petroleum from his well. I’d say he got his life back and a slot on the list.

o The Entire Cast of Jersey Shore. Are you F-in’ kiddin’ me. Apparently Americans are fascinated by human train wrecks. This is proof positive that being a major D Bag can make you famous. These guys are potentially perennial winners.

Winner of D Bad of the Year

John Edwards. This former trial lawyer and North Carolina Governor edges out some of our other Finalists. He might have escaped the dishonor of being crowned the winner had it not been for the unfortunate passing of his wife. This dude is as slippery and slimy as the Grinch without the redemption. His most D Bagalicious quality is his gift for prevarication. He has a black belt in lying. Congratulations John. You are the winner of the 2010 D Bag of the Year.

Dishonorable Mention

o Charles Rangel. Yes, you did it and no you can’t hide behind your elected desk and claim immunity.

o Julian Assuage. Yes he is. I actually love watching the Politicos squirm but this guy didn’t do it for the good of mankind. He did it for attention.

o Pfc. Bradley Manning. He stole confidential information and gave it to Assuage to publish knowing that it could compromise the safety of some. While his motivation may have been understandable, his approach was not.

o Nancy Pelosi. Sorry. Had to do it. She just irks me. So does Barney Frank. They fiddled while Rome burned and then screamed “fire.”

o Mahmud Ahmadinejad. The President of Iran is more of a rabble-rouser than the true head of State but his threatening rhetoric is sufficient to win him a spot on the list.

o Kim Jong. This big-haired dictator is rattling his little saber in Asia. He is in the same basic class at Ahmadinejad.

o Mark Sanford. The South Carolina Governor squeaks onto the list because he is such a weasel. He doesn’t make it up to the finalist section because he fesses up when pinned down.

Editor’s Note: You may have noticed that the list this year is full of Politicians. Sad but true. The very people that we elect and entrust with our well being seem to have a propensity to act like D Bags. I think one reason is because dishonesty, hubris and abuse of power are sure-fire ways to land on the list. Another reason is that the public light shines brightest on celebrities; and, elected officials tend to have a deep-seated desire for attention. Unfortunately for them, attention is a double-edged sword.

Who didn’t make the list? Adam Wheeler, the 24 year old student that lied his way into Harvard and received $50k in scholarships and grants pretending to be a transfer student from MIT and Phillips Academy with a stellar record of achievement. In reality, he was a B student from Bowdoin. The lying and robbing another student of a chance to go to Harvard is a D Bag move but he does get points for his Chutzpah. I wonder how many others have gotten away with that. Methinks a bunch. That’s it for this Year’s list. Tune in next Year to see who’s been naughty and a major league D Bag.

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Thu, 27 May 2010 14:02:30 -0400

iTV anyone?

Thu, 27 May 2010 14:02:06 -0400

Apple has desktop computers, portable media players, mobile phones, tablet computers, a media gateway (AppleTV) and a vast library of content. AppleTV is a weak sister to Apple’s other products because it doesn’t share the same level of design, user experience and simplicity as Apple’s other, more successful products. If I were Apple, I would consider making a TV that combines a media gateway, navigation system and DVR capability that is easy to use and integrates what is needed to connect web video to a TV i.e. a seamless and plug and play broadband connection to the TV. After all, a TV is just a monitor. Apple already have most of the components for their TV. All it needs to do is design a bigger screen that incorporates elements of AppleTV and the iTouch/iPad and some enhanced navigation. iTunes is already there with a large library.

Of course Apple needs to figure out a few things like how to get the studios and networks to allow them to distribute their content including live sports, news and their catalogs of films and TV shows. They are already half way there and the Industry is moving there a break-neck speed. of course Apple will have to ease up on its control-oriented approach and open up to allow the consumer to access all legal content and not just what Steve wants you to see.

What would the Apple TV (let’s call it iTV) look like- it would be between 42’ and 55’; it would be white (black maybe later); it would have an OLED screen; it would come complete with a media gateway and a direct connection to a broadband modem (including a high speed wireless connection like WiFi). The iTV remote could be an iPad or a iTouch. The iTV would come with iTunes, and some elements of Apple TV. The 42’ unit will cost 50% more than the high-end LCD/LED TVs on the market. Apple won’t have much trouble getting the premium price from its legions of devotees.

The tricky part of the iTV introduction will be navigating the traditional video distribution ecosystem including Studios, Networks, Broadcast Cable and Satellite Services, and deals with the HBOs, Blockbusters and Walmarts of the World. While we have made huge progress towards freeing content from the grips of tight fisted studios, we still have miles to go. Google with GoogleTV is testing the waters with Sony and the Android OS. Unlike Google, Apple loves making money on hardware and a TV is one big honkin’ piece of hardware.

Apple won’t care about stepping on some toes or creating some disruption but they will have to establish some deals with content owners and distributors to gain the full effect of entering the TV market.

So, stay tuned for Apple’s TV announcement. Of course they may have already decided not to enter the TV market in which case the space will be open for a new TV that does what Apple would do if it designed a TV.

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Fri, 14 May 2010 10:36:30 -0400

Help Wanted

Fri, 14 May 2010 10:29:06 -0400

A blight looms on the horizon. An engineering talent blight to be exact. The bumper crop of consumer internet seeds and start-ups cropping up around the country (with concentrations in SF/SV and NYC) and binge hiring of engineering talent by companies such as Google and Facebook are creating a shortage of talent. A blight ensues when there are hundreds of companies looking for the same people. I would guess that there are at least twice as many engineering jobs in start-ups as there are people to fill them. Just look at the job boards and hiring pages on the company’s web sites.

The availability of seed and Angel money, the preponderance of infrastructure as a service and open source code, and the capital efficiency of consumer internet businesses are combining to create a shortage of talent to perform critical functions. Add to this the “suck up all the good engineering talent” approaches of some powerful web companies and you have a shortage of people in key areas such as User Interface, Engineering Management, System Architecture, System Administration and good old fashioned coding.

For some requirements, outsourcing is fine. There are shops that excel at contract coding and consulting. India Inc. is ready and waiting to develop your code. Running your system on Amazon servers, hosting at RackSpace, using Akamai for content delivery and farming out discrete code development can be effective ways to reduce internal manpower and capital requirements. However, some functions are risky to farm out. I’ve seen companies burned outsourcing UI, system engineering, and even iPhone app development.

For a consumer internet company, the UI is a critical element of the business. The UI requires specialized skills combining technical and artistic talent. Since the web is a living thing and consumers are fickle, the UI often requires constant care and feeding. This is a role that is hazardous to farm out for many companies. The same is true for Engineering Management and Senior System Architecture roles. Unless the technology is trivial or the scale of the system isn’t significant, these roles can make or break the company. Scaling issues, security vulnerability, and other technical issues can have a devastating impact on a young company. Even a Sys Admin role can be critical to a company that operates a meaningful code base.

If you are a consumer web company or an enterprise web company and you don’t think you’re competing with technology, don’t worry, you’re already dead.

So, if you are a talented UI, Engineering Director, System Architect or Sys Admin congratulations, you are the belles of the ball. The scores of little start-ups being seeded need you. The big, “Monopoly-money” web companies want you. The key for you is to pick the right ones. It’s an opportunity cost issue. One byproduct of the engineering talent shortage is the problem of a revolving door where people jump from one company to the other building a portfolio of vested stock. This happened in spades back in the Internet Bubble era. This is not necessarily a bad thing if people go to the companies that deserve them. Luckily, all companies in the Spark Portfolio deserve the best people ;). Feel free to check out the jobs boards on their web sites.

So what is a company to do? Make sure you’re surrounded by people that are first rate at recruiting talent. There is always talent but remember that A’s attract A’s and B’s attract C’s. Look off the beaten trail for people that don’t want to live in the Valley or the City (or Taxachusetts for that matter). There are talent centers in the Beltway, Research Triangle, Austin and Great North West. There are also pools of talent north of the border in Ottowa, Montreal and Vancouver.

Having development centers in Tel Aviv, Shanghi and Oxford, England can work if you have the right people managing the projects (Spark companies have centers in these cities.) The H1B Work Visa effort is also an important source of technical talent. The flow has diminished as xenophobia went on the rise. Alas, the US is falling behind in producing the quality and quantity of engineering talent required to keep the armies web companies humming. The Government should do no harm. If they want to do good then they should create incentives for kids to undertake and excel in technical educations and careers.

Establishing a relationship with an outsourcer that goes beyond just work for hire can work i.e. performance-based compensation and a participation in the success of the project. In some cases it makes sense to acquire your third party developer. Groupon just did this with their CA-based iPhone developer. This is happening a lot lately.

Finding good talent will be a key differentiator for start-ups. Of course not all these companies will survive. Perhaps the growing shortage of talent is a good thing: a form of Darwinism to trim the herd when money is loose and barriers to entry are low. If so, the rich will get richer, so to speak. A lack of people to go around will drive up prices (salaries that is) and drive down the hiring barriers (companies will settle for what they can get). To boot, outsourcers and contractors will see a boon in their businesses as companies try to rent vs. buy talent.

If there were a stock market for engineering talent I’d be buying. I might also be buying futures on UI developers and derivatives on System Architects and Sys Admins. I wonder if Goldman is already doing it. They seem to know how to make money during a blight. Maybe I’ll start a stock exchange for technical talent and call it the C++SE or the NERDAQ.

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Fri, 02 Apr 2010 09:50:56 -0400

iBox Fund

Fri, 02 Apr 2010 09:50:29 -0400

In anticipation of Apple’s new iBox product due out in 2011, we announcing a new, $100m Fund dedicated to investments in companies building Apps for the iBox. Below is a description of the product. We intend to begin evaluating companies immediately. If you are developing an iBox App, please forward a summary to Apps@iWantmyiBox.com. We were treated to a sneak peak of the iBox and were duly impressed (see enclosed photo). iBox Description: The iBox promises to revolutionize the Consumer Electronics Industry by offering, for the first time, a sleek, well designed container to carry all your Apple products. The iBox will transport and store your iPods, iPhones, MacBooks, iMacs, iPads, and Lisa products that you have accumulated. The iBox will not support non-Apple products such as MP3 players, Windows devices and Smart Phones. Initially, the iBox will not support WiFi or Cellular service. However, a subsequent version is planned with built in camera, WiFi and 4G so you can access the iBox and its contents remotely. The iBox is expected to sell for $199 for the Standard White version and $299 for the Black U2 version. Apple Stores, Best Buy and the Container Store are expected to carry the product line when available.

The Planting of the Seeds

Wed, 24 Mar 2010 14:54:00 -0400

As a participant in the start-up world I am always trying to gauge the supply and demand function. How many companies are being funded, by whom, in what segments and with how much capital? The trending topic in the start-up market is Seeds. Lots of Seeds. Angels are back with a vengeance after lying low following the Dot Com bust. The Financial Meltdown in October, 2008 didn’t dampen the Seed investment environment, but rather, energized it. The Seed investment became the bridge between a pure start-up and a Series A round with VCs. While VCs were licking their wounds, focusing on the Portfolios and looking for later stage deals with less “risk”, the Angels and Seed investors stepped in and filled the gap. Alumni from successful companies such as Google, EBay, Paypal, and others have the money and experience to help companies gets started.

Seed investing is becoming a more organized and structured form of investment. Angels like Ron Conway, Peter Thiel, Chris Dixon, Chris Sacca Jeff Bezos and Serge Brin have been active investors for some time. Ron Conway has morphed in SV Angel and perennial Angels Peter Thiel, Sean Parner and Dave McClure have Formed Founders Fund. The newest entry is Mike Maples taking a Partner and renaming his Angel fund Floodgate (I think Floodgate is apropos of the Seed funding environment in general). Programs such as Techstars and Y Combinator, among others, have emerged to add a boost to the Seed scene. These programs hatch batches of enterprising and hungry little chicks.

Some VCs have jumped into the Seed space by forming their own seed programs. Spark has Start@Spark which has resulted in 3 new investments in the last 12 months. Our average seed has turned out to be larger than we expected at around $500k because that’s what was needed to get to the point where a larger round could be raised. Other VCs have introduced various programs for seeding companies ranging from free room and board to $250k loans. Seeds are becoming more competitive and growing in size. Seeds of $1mm are not uncommon.

Most of the seeds are for either Consumer Internet start-ups or suppliers of software or services to enable established companies to address the Consumer Internet. There are also seeds going to start-ups tapping into emerging ecosystems such as those of Apple’s iPhone, Facebook and Twitter. These companies don’t require a lot capital to bring a product or service to market so Seed funding is an effective way to get started. It seems the Seed is the new Series A and the Series A is the new Series B. Ideally, the Seed round is “friendly” in that it is either a convertible loan or minimally dilutive without bells and whistle terms.

So what does the boom in Seed funding mean? First, it means smallish amounts of cash available to Entrepreneurs with good ideas. Second, it means Investors with small amounts of money and large amounts of experience are available to fund and mentor new companies. Third, it means more competition for VCs at the seed stage. Fourth, it means a bumper crop of start-ups with funding from $250k to $1mm entering the market. Lastly, there will be a long line at the VC counter as Seed investments line up for follow-on funding.

I, for one, have been impressed with both the quantity and quality of companies receiving Seed funding. Most of the activity is occurring in the Valley. New York, due to its Media prowess; and, Boston with its Academic and High Tech pedigree, are also making the scene. VCs should be welcoming the presence of the expanding Seed investment community. What’s not to like about having the chance to invest in a start-up that has a working product and some early momentum. In other words, it’s nice to see the “Dogs eating the Dog food” before you invest. VCs can work with Angles and Seed Funds as feeders and Farm teams. VCs can also team with Seed investors in hybrid deals that include Angel terms and VC follow-on investment potential. I think the service performed by the Seed investors is valuable and helps fill a gap in the market between self-funding and Series A.

The less pleasant byproduct of the boom in Seed investing will be a fairly high mortality rate among Seeded companies. Looking on the bright side- it’s far better to fail quickly than to fail slowly. Seed funding will run out sooner than a Series A if the company is on the wrong track. As the bar for funding is lowered and more companies are started, the quest for follow-on funding will be intense. By their nature, Seed funds and Start-up programs are not designed to provide substantial funding beyond the start-up phase. That means VCs will be called on to take the baton from the Seed investor and fund the companies to the Promised Land. Some companies will be acquired before a VC round is needed. While the total purchase price might not be huge, the Entrepreneur’s result could be sweet. For those Entrepreneurs wanting to go big, the VC route is likely to follow the Seed funding.

The result of the current boom in Seed funding will be a bumper crop of start-ups. Many won’t make it but some will go on to become valuable companies. For Investors and Entrepreneurs alike, it is important they keep the bar high, the friction low, raise enough capital to hit a major milestone, treat the Seed round as a bridge to a larger VC round relative to terms and timing, and compromise on spending but not on the size of the opportunity. In the end, the quality of the team, market opportunity and product differentiation are what matters- no matter how you get started.

Deal or No Deal

Fri, 22 Jan 2010 10:56:41 -0500

The Private Sale space is taking on a life of its own. The combination of E-commerce, social networking, supply imbalances, and People’s desire for discounts all enable the space. The space can be divided in to 2 main segments: 1) private sales groups like Gilt, Rue LA LA, and HauteLook; and, 1) Group buying sites like Groupon, Living Social, Scoop Street and a host of knock-offs. The Private Sale group is all about building a list of subscribers and offering Brand Name Products art deep discounts at a specific time and for limited quantities. The Group Buying sites are based around offering Metro Area-based services and products (rather than National Brands) to a list of subscribers with a “tipping point” for the coupon or deal to be valid. The main distinctions are National offers to Individuals vs Local Offers to Groups of Subscribers. Both models feature “push” emails and social connections via Twitter and Facebook. Both offer between 40% and 75% discounts and both categories have a time and quality element. The Group Buying sites take no inventory while the Private Sale sites take inventory and handle returns.

The early successes of Gilt and Groupon have spawned loads of copycats and fast followers. The Groupon approach in particular is being ripped-off shamelessly. The barriers to entry are relatively low and the economics are compelling. I have spotted 5 Groupon knock-offs in London alone, 3 in Germany and a dozen in the US. I would not be surprised to see coupon sites and companies in adjacent businesses pile in to space, particularly the Group Buying Space. The question is- how long will the economics remain compelling? My guess is not so long. The margins enjoyed by these companies are sure to shrink. Also, as the economy turns around the excess inventory is likely to shrink cutting into supply.

With competitors piling in it’s likely that margins will shrink. The copycats out there will have a difficult time differentiating their propositions to the merchants and brands. Particularly in the Group Buying space where the barriers to connecting local merchants with local buys are low. That said, there is an opportunity right now to establish leaders in the space and segments the market into several large niches. The keys to success will be the quality of the teams, approaches taken in the market, financing, and an unfair advantage.

Two trends will develop in the Private and Group sale market- 1) they will converge and 2 they will start to break up into niches. Companies such as Gilt have been branching into services and Groupon has experimented with National brands. We have already seen fragmentation as new sites pop up focused on Baby Products, Furniture, etc. The venture community has started to pile into the space with Accel leading a $30mm round in Groupon and Living Social raising an additional $5mm from VCs. Rue La La was having its leg humped by PE firms as it sold out to GSI for $350mm. Several other Sites are in the process of being funded.

The space will be fun to watch and consumers will benefit from the growing choice of discounts. Whether a new distribution channel is being created is unclear at this time. If I were a betting man, and I am, I would predict several winners in the space and lots of train wrecks. The copycats and doppelgangers of the space, you know who you are, will have a tough time. The innovators and companies capable of establishing an unfair advantage and carving out their own space will have a fighting chance at a good exit. What is an unfair advantage you ask? It’s what differentiates a leader from an “also ran”. Enough on that for now. Advice for Investors- Caveat Emptor.

The Entrepreneur's 12 Days of Fund Raising

Thu, 24 Dec 2009 11:08:51 -0500

On the 1st day of Fund Raising my VC gave to me-

an expiring term sheet at $4mm Pre.

On the 2nd day of Fund Raising my VC gave to me-

a due diligence list from a to z.

On the 3rd day of Fund Raising my VC gave to me-

a junior associate with ADD.

On the 4th day of Fund Raising my VC gave to me-

a meeting with a blackberry-addicted GP.

On the 5th day of Fund Raising my VC gave to me-

a CEO candidate with a gotee.

On the 6th day of Fund Raising my VC gave to me-

his Lawyer and uncapped legal fee.

On the 7th day of Fund Raising my VC gave to me-

a co-investor with an embellished CV.

On the 8th day of Fund Raising my VC gave to me-

a lavish dinner paid for by me.

On the 9th day of Fund Raising my VC gave to me-

a technical consultant with Turrets and a double E.

On the 10th day of Fund Raising my VC gave to me-

a 40 minute wait and cold cup of tea.

On the 11th day of Fund Raising my VC gave to me-

a ride in his beloved S63 AMG.

On the 12th day of Fund Raising my VC gave to me-

a revised term sheet with an old T and a new C.

Regulating the Little Guy Down.

Tue, 03 Nov 2009 15:52:18 -0500

The Government is regulating the “Little Guys” into a lower financial class. By Little Guys I mean individual investors with less than $1mm in assets. By lower financial class I mean these Little Guys can’t invest in a multitude of financial services products that are available to the Rich Guys.

The meltdown of the financial markets and ensuing finger pointing are exacerbating the problem. The Government wishes to add even more regulations to protect the People from the demons in the Financial Industry and from themselves. The limitations on how and where the Little Guys can invest have been put in place to protect these would-be drunken sailors from financial oblivion. The regulations prevent or prohibit the Little Guys from investing in Alternative investments and performance-based investment funds. Of course, they can go out and borrow 5X their potential take home income for the next 20 years to buy a house. The Government believes that that’s good for America, especially the Little Guys. But it’s bad for the Little Guys to lose money playing on the Rich Guys turf. Is that because they’re not smart enough? Or is it because they can’t afford to lose money? Or is it because it’s the easiest way to prevent those that are less intelligent, more naive or pathological? I think the issue is that the Regulators find it easier to use a broad brush of regulation to protect the People rather than apply narrower and more intelligent brushes. That means that while the top 1% of the population have access to myriad financial products and opportunities, the other 99% does not.

The term “alternative” has been soiled by the financial meltdown. The smart guys on Wall Street hoodwinked the not so smart guys that were supposed to watch them. These very same Regulators that were asleep at the financial switch are responsible for making sure the Little Guy doesn’t get conned by the financial hucksters on Wall Street. So no performance-based managers or hedge funds, no private placements, no access to endowment-like funds. If you are going to blow your life savings, do it on “Conventional” investments like buying stock in Fannie Mae, or AIG or GM. Yes, buy a house with a big mortgage and buy stock in GM and AIG.

If all of these Alternative investments were evil, why would rich people invest in them? Why wouldn’t the government prohibit rich people from losing their fortunes in these financial product? The answer is because it’s easier to regulate the 99% by prohibiting them from investment opportunities because the Government doesn’t want to take the risk that someone loses their house or goes bankrupt because they went “all-in” with an alternative investment. Of course, they can bet their house on conventional stocks or go to the local casino and lose their shirts with less than $1mm in assets.

Is it possible that regulations that protect the Little Guy actually keep the little guy down? Little Guys can’t do what the rich guys do. Not because they don’t have the intelligence or assets, but because the government won’t let them. They are being protected against themselves. Why can’t a high school professor or electrician or fireman with $75,000 in savings invest some portion in alternative investments? They could be quite sophisticated and savvy when it comes to investing their money. They could possess the restraint and discipline to not bet the farm a speculative investments. I know lots of people with assets under $1mm with good investment sense. They have the presence of mind to limit their investments, diversify, and even protect themselves against volatility and financial risk. Couldn’t they be trusted to only invest what they can afford to lose? Shouldn’t they be given a chance to invest in financial products that have made the Rich Guys loads of money? Yes, they have also lost the Rich Guys loads of money over the last year. Much of what was lost was tied to lunacy in the mortgage and debt markets. Institutional Investors lost their minds and overleveraged against bad assets. The result was pandemonium. Guess what, the Little Guy was hurt just as much on a percentage basis in terms of asset value because their 401Ks, and Mutual funds were heavy into Fannie Mae, GM, etc and their home equity is gone. Guys like Barney Frank encouraged the Little Guys to concentrate 75% of their net worth in their heavily morgaged houses.

Why is it safe for the Little Guy to taste the forbidden investmnent fruit now? Well for one thing, the shit has already hit the fan, and while it may still be flying around, it’s built in to the market now. That’s another way of saying that this might be a good time to get into the market. Including the Rich Guys’ market.

Why do I care? Because I don’t think it’s fair that people with less than $1mm in assets are prohibited from investing in financial products that can make them money and protect their assets. Of course I don’t want financial “bad guys” and con men to be able to take advantage of average citizens. If they do, and get caught, they go to the “big house”. We have regulations (laws) against people being defrauded, stolen from, and abused. What I do want to see is a democratizing of the investment space. I want to see new transparency and openness. I want to see people gain access to a broad array of investment opportunities that can help them to build their fortunes. I want to see Little Guys tap into the best performance-based managers. I want to see little guys have a chance to invest in private companies with the potential for huge, life-changing returns. In short, I want the other 99% to have access to the same investment opportunities that the 1% enjoy- even if they don’t always bring joy. How can alternative investments become accessible to everyone? There are three options: a) deregulation, b) re-regulation, c) more regulation and d) intelligent regulation. I prefer “d”. What I propose as intelligent regulation will be the subject of the next blog post.

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Wed, 22 Jul 2009 11:20:37 -0400

Covestor goes Live

Wed, 22 Jul 2009 11:19:37 -0400

About a year ago Spark invested in a start-up called Covestor that we hoped would give people an alternative means of managing their money. If you look at the data, the Institutional Money Managers haven’t done a great job beating the basic indexes. This means that people are paying fees for active management and not doing any better than if they passively invested in the market indexes themselves. There are Money managers that have beaten the market but they come and go and few justify their existence based on their returns. In the last year or so, the Investment Management Industry has been in turmoil to say the least. This would seem to be a perfect time to introduce a new way to manage your money. Enter Covestor. The company offers an alternative to the institutional money management machine. Covestor.com has been around as a social investment site until now. On Covestor, investment results are transparent. An individual investor can establish a track record and share investment results with the Community. The company’s recently released upgrade transforms the company from a Social Investment Community site to a web-based Investment Management firm. Covestor Investment Management (CVIM) is the platform that allows you to manage your money. As a subscriber, you can invest real money into a Multi Managed Account (MMA), the world’s first of its kind. You can then choose from a variety of investment models that equate to your investment goals and appetite. The models are in the form of individual investors with certain investment styles and characteristics. You can choose from a selection of Investment Strategies or Model that match your investment needs. To become a CVIM client, one must establish an account with Covestor/CVIM and put some money in the MMA. The money actually stays in the clients brokerage account but is directed by Covestor. When a client follow a Model, the money placed behind that Model automatically replicates the investments made by the Model. Clients can decide how much to put behind the Model and can increase or decrease the amount at any time. Clients can also follow multiple Models thereby creating a portfolio of Models. The Models available to follow are screened by Covestor and the choices depend on the risk profile and investment approach sought i.e. aggressive growth vs. value-oriented. CVIM ensures that its clients can only subscribe to models that fit their risk profile and permits fine-grained control, such as excluding trades in the stock of the company they work for. As Models trade, CVIM evaluates these trades and replicates the trades in the client’s account based on the rules established for the MMA account. As CVIM adds more managers to the platform, the choice of Investment Models increases and clients can change based on the actual performance of those Models. The result is a way for you to find and follow investment strategies outside the traditional institutional money management firms. I think of CVIM as an American Idol of investment managers. You can vote for the managers you like based on their performance. Due to regulations, I am not able to talk about the performance of Covestor’s Investment Models or CVIM program. However, you can see for yourself by going to Go to http://www.cv.im.

Down with Hate

Thu, 02 Jul 2009 13:29:56 -0400

Down with Hate

How to deal with Hate

Thu, 02 Jul 2009 13:27:00 -0400

Unfortunately, we regularly encounter hate in our lives. Hate is just depression turned inside-out. The best way to kill hate is to disarm it. To that end, here are some responses to people that elicit hateful behavior or utter hateful comments. I call these DBH (Don’t Be Hatin’) responses. These statements are designed to disarm the individual manifesting the hate.

Pease feel free to add DBHs of your own. I will create a “Top 10 List” after receiving your additions. I hope this exercise proves helpful to you as you encounter hateful situations. If not, then please don’t hate on me. I’m still mourning the recent loss of celebrities that I’ve never met and whom didn’t give a rusty rats tail about me. Here you go:

Suggested Responses to Haters and Hateful Behavior

you otta lay off dat hater-ade.
why you you drivin’ me down route hatie- hate?
step off with dat hate.com shizzle.
why you gotta enter the hatrix like dat?
must have been som’n you hate.
that’s so 2000 and hate
stop actin’ like you from hatie.
get out from b’hind da hate ball.
stop drivin’ dat hate-teen wheeler.
why you gotta be singin’ “Hate Days a Week” on me?
you gonna go blind if you kee master-hatin’ on me.
man you stuck in the haties.
dude don’t hate me ‘cause you ain’t me.
why you gotta play me like john and kate plus hate?

Stay loved my friends,

10 Things an Entrepreneur won’t say to a VC

Mon, 15 Jun 2009 14:08:06 -0400

10 Things an Entrepreneur won’t say to a VC

Look into the Inference Engine

Tue, 09 Jun 2009 15:06:08 -0400

Look into the Inference Engine