Quelle dommage- what a calamity! After making more than half a billion dollars or so with his sale of PlentyofFish.com, to Match Group, Markus Frind put $100 million into his own personal venture fund. He’s invested about $29 million of it already. That’s not the calamity of course. The calamity is that Mr. Frind can’t find good places to invest the rest of that money. While I do have empathy and feel more than a dash of jade green envy when considering Mr. Frind’s problem, the fact is that there is more to this story than his personal woes.
The lack of venture investment grade companies in the tech sector could be indicative of a general early market failure of the sort that puts the lie to Mr. Trudeau’s claim that Canada is- or can- redevelop itself as a technology oriented economy. Generally speaking, if Mr. Frind can’t find places to invest his money based on some reasonable criteria, then others in his position can’t either. On that note, Mr. Frind doesn’t seem to be asking for a unicorn that can jump the moon and poop diamonds- he’s only looking for a company with growth potential and about $5 million in revenues in a business that matches his core competencies. Seems reasonable to me. Investors like Mr. Frind are diligent and inundated with requests and pitches, so the conclusion I draw is that quality investments of this type are in very short supply. It takes time to grow them too. Unfortunately for Canadians in our globalized world, that growth takes time. On the other hand, capital is extremely portable and if it’s sitting around uninvested it’s likely to have a negative net return due to our low interest rates and the real rate of inflation. How much should a given investor sacrifice in terms of ROI in order to invest in their own country? The best answer may be that there is no ‘should’ about it at all- it depends on the investor and they’re free to invest where they like. Eventually the desire to invest locally is going to be outweighed by the cost of waiting around. I for one hope that the Trudeau government puts it’s resources where its’ mouth is and does something meaningful soon to help build tech businesses. The whole sea will be healthier if people like Mr. Frind can catch a fish.
January 28, 2016
We touched on New Year’s resolutions in a previous post, so it seemed like a good idea to share some. Telus kindly posted a breadbasket of seven resolutions for us to have a look at. Each one is primarily relevant to the entrepreneur and entrepreneurial situation at hand and has a secondary general interest value. One of my favourites was aimed at changing the processes happening between an entrepreneur’s ears, namely: Substituting the word ‘have’ with the word ‘get’ in one’s own thought processes. The idea is to stop pushing ourselves around by replacing a command mentality with an opportunity mentality. Here’s an example: “I have to read this information” gets replaced with “I get to read this information.”
Whether the authors of the Telus post know it or not, this is one of the cornerstones of Cognitive Behavioural Therapy, and is prominently featured in David Burns’ book ‘Feeling Good’, among others. It’s a key principle in maintaining good mental health. In essence, we can change our lives by simply changing our minds. This is as true for entrepreneurs as it is for anyone else in the world today. It seemed like an especially good idea to mention it in today’s post given that it’s Bell Let’s Talk day.
The rest of the resolutions are here:
January 27, 2016
Today’s article is Fortune’s cautionary wisdom about unicorns. These aren’t the unicorns in neon colours revered by the tween set. These unicorns are more than just a modern day fairy tale: “The combined value ascribed to the 173 unicorns by their investors is a stunning $585 billion—an especially astonishing figure given that so many of them aren’t even close to profitable.” While the article does provide a relatively clear eyed view of the structural mechanics of unicorn IPO pricing, and their very name signals their relative reality, I suspect there’s more to it than that.
I suspect that the average reader of Fortune magazine is more likely to think, “Oh, here’s something I can capitalize on”; or “I’d never fall for that.” In other words, to delude themselves into thinking they won’t be the sucker. Either that, or they’re already mad because they were the sucker. Either way, the core process of managing IPO’s for these highly valued, oversubscribed and overmarketed equities looks like boilermaking to me. More to the point, it’s a manufacturing process designed to optimize the near term economic exploitation of human desire in a near pure form.
I once had a book called “Extraordinary Popular Delusions and the Madness of Crowds” that tracked mass delusions over five centuries. The unicorn IPO process is certainly worthy of a chapter in the reprint. If you want to ride one, go right ahead. By the way, I have a rainbow winged kitten to sell you that can shoot fireballs from its eyeballs.
Silicon Valley’s $585 Billion Problem
January 26, 2016
We’ve been hearing about the Dark side and all the good reasons to stay away from it ever since the first Star Wars Movie in 1977. Yes, it was that long ago! Never mind that though- the focus today is on Vader’s spawn, the multitude of unscrupulous entrepreneurs who live and feed on the dark side. Today’s article is about con artists and scamming people. It’s essentially a book review, and it has some fantastic advice for everyone.
Here are some examples: “The true masters of deception… are ourselves.” “We want to deceive ourselves. That’s the problem.” People are more vulnerable not because of who they are, but because of “where we happen to find ourselves in our lives.”
Ok, what has this got to do with entrepreneurship and finance? Well, for starters, Vader’s parasitic spawn are out there, and they work at all levels and in all kinds of business. A wise businessperson will actively identify them and filter them out. Another key reason is that any investor, analyst, or entrepreneur can deceive themselves without even necessarily realizing it. With the best of intentions, they can also draw in innocent people and ruin their lives. To quote yet another schmaltzy mass market movie franchise, “With great power comes great responsibility.” Any decent entrepreneur should do a very thorough job of ensuring their business rests on firmer, more ethical and sincere foundations. The force is with you, young Jedi.
January 25, 2016
Yesterday I presented an entrepreneurial sales and marketing strategy at a Net Impact business case competition sponsored by the Rotman school of business at U of T, my old alma mater. It was a very interesting session. The Rotman school certainly did perform up to the standard I’ve come to expect of my venerable alma mater while still managing to keep a little bit of a home court advantage.
A Ryerson team came in second place with a very well thought out and presented strategy. In lieu of an article, a copy of the presentation our team made is available on request. In a way, it’s a teensy tiny business plan. Well done everyone!
January 24, 2016
The Globe had an article called “Why the pack-rat mentality is dangerous for entrepreneurs” today. It’s nice to know there’s lots of ink getting spilled about entrepreneurship in general, and specifically about the pitfalls of being one. There are lots of those.
This specific article was about 1-800-Got-Junk, the Canadian made rags to riches story. In it, the CEO Brian Scudamore talks about getting rid of corporate junk- the emotional carryover from failures, people who don’t share the vision, and underperforming or nonessential things so we can stay focussed on what he calls the treasure- the things worth bothering with. Opportunity cost considerations would help with that. New Year’s resolution, anyone?
January 22, 2016