Archive Page 2
January 13th, 2014 by BPV
Writing in The New York Times, a professor of economics at Boston University claims to have built a sophisticated computer model that shows if we were to abolish the corporate income tax we’d significantly raise investment, output and real wages. He’d replace the lost tax revenue with higher personal income tax rates.
Abolish corporate income taxes and, yes, there would be more investment by and in those corporations.
However the secret to national prosperity is found more in entrepreneurs and the investors who back them – both of whom often pay taxes at the higher personal income tax rates. Raise their taxes and there will be less investment by and in those sources of growth and prosperity.
Academic explanations that depend on hypothetical models are fine as far as they go, but a simpler micro-economic proof is available: investors put up money (only) in expectation of an after-tax return, and it is simply a fact that more projects – startups or expansions of existing businesses, large or small - are viable when taxes are 0% than when they are 40%. There are a lot more projects that can expect to earn 10% pre-tax than the 17% you need if you are going to pay 40% in taxes.
We’re not privy to all the factors accounted for in the model, but we’d be reluctant to raise taxes in any way that punishes saving and investing.
The professor is not the first op-ed writer at the NYT to overlook this point. From November 28th, 2012, Warren Buffett and after-tax returns:
In an op-ed this week in The New York Times, Warren Buffett writes that investors ought to assess investment ideas without regard to their personal tax rates. He opens by suggesting no reasonable person declines a good investment opportunity based on the after tax return. Quoting a hypothetical investor response, Mr. Buffett writes:
“Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.
He later closes the op-ed in similar fashion, with a tongue-in-cheek challenge:
In the meantime, maybe you’ll run into someone with a terrific investment idea, who won’t go forward with it because of the tax he would owe when it succeeds. Send him my way. Let me unburden him.
To be clear, we are big fans of Mr. Buffett’s investment style and more than impressed with his long term returns. He is one of the greatest investors of modern times. But many of us who invest in early-stage, high-growth companies – the companies responsible for all net job growth in the economy – disagree with the idea that individual tax rates don’t matter when it comes to investment decisions. Investors will always seek the best risk-adjusted return on their money, whatever the external constraints. If taxes and other risks go up, they will expect higher returns to compensate for the greater risk; when those returns aren’t available or attractive they will sit on their money.
Reasonable people will disagree on what tax rates should be. But can we at least agree that there are some forms of investment activity which promote economic growth, and that those forms ought to be encouraged, perhaps with favorable tax treatment? Our investors’ capital is tied up for years, resulting in reward only if our portfolio companies grow (and hire). That is not the same activity as trading securities or Treasury bonds, which Mr. Buffett has done with amazing success, and for which he practices his own tax-avoidance strategies. Mr. Buffett’s minimum tax on “millionaires” is essentially a tax on capital gains, which is a tax on economic growth and job creation.
We’d like to take issue with something else Mr. Buffet seems to suggest. In his op-ed he seems to treat investments as being either “worth doing” or “not worth doing.” However one of his well-known nostrums is that obviously “terrific” investment opportunities are rare, and that value is more likely to be found or created via attention to the more mundane operating or competitive considerations at the margins. And at the margins, changing the tax rate clearly affects the viability of additional projects. As a friend of mine recently said, this is true for established companies as well as start-ups: for Costco (one example) to build a new store, a 40% tax rate on the income will require much higher sales expectations for the store than if taxes were 30%, or 20%, or 0%. It’s the same analysis regardless of who is making the investment decision: rich angel investor, venture capitalist, Fortune 500 CFO. When taxes are higher, fewer stores get built and fewer companies get started.
There’s a heroic assumption embedded in the op-ed’s analysis: that there will always be a nicely growing economy, with plenty of opportunity, and no shortage of entrepreneurs. We believe it is not safe to assume that entrepreneurs will continue to risk their wealth and careers, expend the energy, and make the enormous sacrifices required to build a business no matter how big a bite the taxman takes out of their eventual reward. It’s fine to say investors will look for the best opportunity regardless, but if there are fewer entrepreneurs there will be fewer opportunities, and the economic pie will start to shrink.
Mr. Buffett is no doubt correct that “terrific” ideas will still find willing investors, but what about all the not-obviously-terrific-but-still-really-good ideas? For every Facebook there are hundreds of other early-stage companies who receive financial backing and grow nicely and thousands of new stores opened by established companies; those investments are approved only if the after-tax returns are sufficient. The economy is not built on a series of towering home runs that clear the fence no matter how strong the wind is blowing into the park. Winning takes singles, doubles, walks, anything that advances runners and scores runs. Raising taxes on investment is like building a pitcher-friendly park and keeping the infield grass long: you better plan on low-scoring games.
January 8th, 2014 by BPV
A prominent Silicon Valley venture capitalist, frustrated by his state’s broken institutions, has launched a ballot initiative to split California into 6 states. (Named Jefferson, North California, Silicon Valley, Central California, West California, and South California. Fwiw.)
These pages have often extolled the virtues of doing business in the Southeast and Texas, the best climate for entrepreneurs and where we have focused our investment efforts for over twenty years. Along the way we may have poked gentle fun at our friends in California whenever the state’s business environment fared poorly in surveys or did something like retroactively tax entrepreneurs.
So we can try to imagine the frustration engendered when a large and diverse geographic area strains under distant and schlerotic governing institutions – and we love the idea of having a state named after our 3rd president. Hard to see how this becomes a political reality though.
But Cali ballot initiatives can get gnarly so perhaps it bears watching…
From the 12/23/13 San Jose Mercury News:
Lots of folks believe California is ungovernable. Venture capitalist Tim Draper has a solution: Six Californias, including one called Silicon Valley…
Veteran political observers were quick and unanimous in assessing the plan’s odds of success at zero. At the same time, they said Draper’s modest proposal could spark discussion about how to fix the state’s manifold problems, such as bursting prisons and jockeying over water rights.
“The sheer size of California raises questions about representation and accountability. A single state Senate district has more people than all of South Dakota,” said John J. Pitney, a political science professor at Claremont McKenna College, east of Los Angeles…
(Draper) argued that the status quo in Sacramento, which regularly features budget gridlock and statehouse gamesmanship, “is not cutting it for our schools, our businesses, our infrastructure or our people.”
Asked by this newspaper how much of his own fortune he plans to sink into his latest political crusade, Draper deadpanned: “As little as possible.” Then he added, “I’ll make sure it gets on the ballot, so that Californians have a chance to make the decision.”
December 31st, 2013 by BPV
Thank you to all our readers for joining the conversation here in 2013. We wish you all a happy and prosperous 2014, and look forward to seeing many of you at the Florida Venture Capital Conference, January 28&29 at Hyatt Regency Orlando.
Offered for your reading pleasure, in case you missed any: a compendium of our twitter highlights from 2013.
- As Exit Runways Grow, So Does Growth Equity. Growth equity is a class of venture capital not be confused with private equity or leveraged buyouts.
- CA taxes entrepreneurs & investors 5 yrs retroactively, and maybe even after they flee… to Texas & the Southeast.
- Vintage Future, V – special ’80s edition. Our 5th (Vth?) look at how today’s trend can be tomorrow’s punchline.
- Transparency, objectivity, truth-telling, opening doors. Making the Most of Your Board.
- Don Burton honored for his pioneering work as a founding father of the Florida venture capital industry.
- FL to pass NY in population. Pro-business/low-tax environment, plus actual climate environment cited as reasons.
- Interesting piece on the history of patent reform. Did 1979 law create tidal wave of software litigation?
- 7 Things Investors Love To See (with bonus “7 Signs You’re Not Entrepreneur Material” in Read More section).
- What every entrepreneur needs to learn from food trucks: make it easier for customers to engage & transact.
- 6 Things Successful Entrepreneurs Always Do. Even if there were a genetic component to “entrepreneurial engagement,” entrepreneurs succeed because of their good habits which they repeat day in and day out.
- Florida’s entrepreneurial activity rate exceeds national average. (From the 2012 GEM U.S. Report from Babson College.)
- A statistical ranking reveals which states have the most thriving startup communities, and which states have work to do. FL&TX ranked 1&2 in “The United States of Innovation.”
- SEC making it harder for start-ups to raise $: A Red-Tape Turnoff for Startups.
- Might be for earlier stage companies, but still good advice: 5 Things VCs Want You to Know Before You Pitch.
- Lessons in Entrepreneurship - MIT prof re-examines how e-ship is taught. Interesting, especially for early stage companies.
- Rise of the high-tech south, cont. – Austin to get non-stop London service from British Airways.
- SEC set to cripple angel investing. Government regulations rarely get the details right even when intent is good.
- HB 705 creates Florida Capital Technology Seed Fund. Companies who receive $ from the Fund must provide 1:1 private $ match.
- Kleiner’s Laws – great entrepreneurial wisdom from legendary VC Eugene Kleiner.
- Tampa #2 in Forbes “10 Best Cities For Young Entrepreneurs.” Southeast &Texas grab 5 out of 10 slots.
- “Existing companies execute a business model, start-ups look for one.” ‘Lean’ practices for (very) early stage companies.
- 5 Habits of Great Startup CEOs. If a candidate fits this profile, move quickly to hire them. But do your diligence.
- Keys to innovation from The Economist: Government get out of the way of entrepreneurs, reform public sectors. and invest wisely.
- “Seeing Steve Jobs Everywhere” – Watermark Medical and its founder Sean Heyniger mentioned in BusinessWeek.
December 26th, 2013 by BPV
Florida Trend has an interesting piece about the entrepreneurial ecosystem in our state that highlights the Florida Angel Nexus and the incubator at UCF.
The Florida Angel Nexus has teamed up with UCF’s Business Incubator Program and other groups such as the Tamiami Angel Fund, the Florida Institute for Commercialization of Public Research, and the Florida Next Foundation in order to connect qualified companies with the mentorship and capital needed to create a viable company and product…
The Florida Angel Nexus’ partnership with UCF is already seeing success; it has closed three deals, and is on track to meeting its goal of investing $1 million by years end. With this team, the Nexus plans to make Florida the next major innovative ecosystem in the U.S.
The Florida Trend article floats a distinction between angels and VCs – the former provide experience and guidance while the latter provide only capital – that doesn’t really match our M.O. or the early-stage investors with whom we work.
As a matter of fact, the management teams at our portfolio companies typically value our experience, guidance, and extensive network (which includes many angels who invest in BPV and work with our portfolio companies) even more than our capital.
Early stage investors don’t always fit neatly into angel or venture capital categories, and can take varied approaches to working with entrepreneurs.
In Finding the right angel we covered Scale Finance’s six categories of angels and “The Chaperone Rule”: the odds of a startup company succeeding are significantly enhanced when the company has a chaperone from the get-go, an experienced guide on the trip from the embryo to the IPO. Here’s an excerpt:
Good angel investors provide much more than capital. Their networks and reputations can assist early stage companies with introductions to additional sources of financing, expertise, customers, and strategic partners. It’s a long and difficult journey from idea to successful business, and entrepreneurs need partners who intuitively understand the right kind of support to offer over the long term during the inevitable challenges of building a business.
Angels have varied experiences, interests, strategies, reputations, and (in the case of angel groups) cultures. Choosing the one who best fits requires as much rigor and thoughtfulness as any decision an entrepreneur makes.
Serial angels – perhaps the most productive type, often adds significant value to the companies in which they invest because they’ve done it before.
Tire kickers – the opposite of serial agents. They lack a genuine commitment to angel investing – at least at present – but they’re using the process as a means of educating themselves.
Trailblazer angels – experienced investors, typically partners in investment banks and venture capital firms who incubate deals too small for their firms while maintaining a link to their company for larger/later rounds.
Retired angels - business executives with enough personal capital to enable them to quit their jobs and “retire,” but who remain perfectly capable (and eager) to keep up in the so-called rat race.
Socially responsible angels – investors who are interested in double-bottom-line investing – that is, doing well by doing good.
Angel syndicates – groups who episodically invest together, joining their capital for more influence in more material deals.
N.B. In 2013 the Business Incubation Program at the University of Central Florida (UCF) was named Business Incubator Network of the Year by the National Association of Business Incubators and also was selected as one of four Best Under the Radar Business Incubators by Entrepreneur magazine.
December 20th, 2013 by BPV
Wright Flyer next to Apollo 11 capsule at the Smithsonian
Earlier this week, on the 110th anniversary of the Wright Brother’s first flight, we learned that Neil Armstrong carried part of the Wright Flyer with him to the moon – a piece of muslin fabric from the left wing and a piece of wood from the left propeller. (From History.com’s 10 Things You May Not Know About the Wright Brothers.)
That he would choose such a deeply symbolic gesture, done without fanfare, is consistent with what we know and admire about Neil Armstrong – who was in many respects the opposite of the swaggering-right-stuff-machismo portrayal of astronauts in film. In 2012 we compared his description of the successful culture of the Apollo 11 mission to that of the esprit de corps we find in good private growth companies.
Mr. Armstrong described the required reliability of each component used in an Apollo mission – statistically speaking 0.99996, a mere 4 failures per 100,000 operations – and pointed out that such reliability would still yield roughly 1000 separate identifiable failures per flight. In reality, though, they experienced only 150 per flight. What explained the dramatic difference?
I can only attribute that to the fact that every guy in the project, every guy at the bench building something, every assembler, every inspector, every guy that’s setting up the tests, cranking the torque wrench, and so on, is saying, man or woman, “If anything goes wrong here, it’s not going to be my fault, because my part is going to be better than I have to make it.” And when you have hundreds of thousands of people all doing their job a little better than they have to, you get an improvement in performance… this was a project in which everybody involved was, one, interested, two, dedicated, and, three, fascinated by the job they were doing.
We can see the same entrepreneurial motivation at work in the origin story of that same space-faring muslin and wood: the race to achieve powered flight between the Wright Brothers and Samuel Langley. The former were interested, dedicated, fascinated, and trying to change the world with the loyalty and support of people who shared their dream. The latter was using other people’s money to fuel his pride with the support of Harvard, The Smithsonian, The New York Times, and Teddy Roosevelt. Langley’s spectacular failure in the nation’s capital was much more well attended than the little-noted (at the time) success in Kitty Hawk, but Langley’s support – as well as his own motivation – evaporated once his efforts became a well-publicized object of scorn and derision.
(See The Only Thing He Ever Made Fly Was Government Money to learn not only how Langley lost, but how he attempted to re-write history.)
December 13th, 2013 by BPV
When we’ve written on the subject of board performance, we’ve emphasized that private company boards often have greater chemistry and transparency because the incentives of the entrepreneur and investors are more easily and perfectly aligned than in public companies.
Here’s how we put it in 2010 in Communicating good news and bad:
In our experience, the relationship between entrepreneur and venture partner in private companies is more cooperative, longer-term, and (mercifully) not subject to the quarterly reporting pressures of public companies. Moreover, venture investors have real “skin in the game” and have the same incentive as the entrepreneur to understand the nuances of the business and focus on long term value creation. As a result, the communication of good news and bad tends to be more forthright and in real-time, enabling partners (assuming they are good partners!) to understand intuitively the right kind of counsel and support to offer during both the good times and during the inevitable challenges of building a business.
Not too long ago we came across a great piece at HBR Blog Network on the importance of aligned incentives. In There Is Such a Thing as Too Much Incentive for Entrepreneurs, N. Taylor Thompson makes the case that there are instances in which an entrepreneur ought to “take some money off the table”: when lack of diversification in his wealth creates a difference in economic incentive between himself and his investors. If all his money is tied up in the startup, it could (quite reasonably) cause him to “prioritize exit probability above expected value because of diminishing marginal utility and loss-aversion.”
In other words, if all his money is in the company he founded, but it’s just one of several investments for the venture firm, the pressures and logic of decision-making within the partnership can be different.
From the HBR piece:
Behavioral economist Dan Ariely has conducted a set of experiments to gauge the relationships between economic incentives and performance. In one experiment, he offered participants payments for pressing alternating keys on a keyboard; in another, he offered payment for math problems – and, in both he varied the incentive so that participants could earn either up to $30 or up to $300. For key-pressing, stronger incentives led to better performance. For math problems, incentives decreased performance.
Ariely’s interpretation is that simple tasks requiring no cognitive engagement respond as expected to increased incentives, while cognitively complex tasks peak and then show decreasing performance, as increasing incentive distracts from cognitive performance…
Taking a small amount of money off the table aligns incentives much better to focus on making a big, world-changing impact. And diversifying also can remove the performance-destroying stress that comes with overly strong incentives.
To be clear, aligning incentives remains critical to startup success; my argument is simply that a modicum of diversification helps both entrepreneurs and investors. Taking money off the table isn’t about getting rich, it’s about freeing entrepreneurs to focus on doing something great – not just good enough.
While we (also quite reasonably) prefer to have our capital directed toward growing the business, we understand there are times it makes sense to achieve partial liquidity for founders who want to continue building the business but would also like to realize a portion of the value they have created to date.
On a related note: buying out a minority or absentee partner’s interest can also often better align incentives and remove a barrier to rapid growth.
December 12th, 2013 by BPV
If you are an entrepreneur or part of the “hodge-podge of scientists, institutions, and funding” that make up our state’s entrepreneurial ecosystem, please join us at the 2014 Florida Venture Capital Conference.
On January 28 & 29, hundreds of venture capitalists and private equity investors from across the U.S. and the world will be at the Hyatt Regency Orlando to listen to some of the most dynamic high-growth companies in Florida. (You can click here to register.)
The conference will feature expert panel discussions, exclusive networking opportunities, featured speakers and many of Florida’s top companies presenting to a national audience of venture capitalists, investment bankers and private equity investors.
The Florida Venture Capital Conference highlights both mid and later stage investment opportunities throughout the State of Florida. Past Presenters have attracted more than $2.8 billion in investments.
December 5th, 2013 by BPV
Conqueror or consumed? Likely both.
Jessica Bruder writes in Inc. magazine that entrepreneurs are “vulnerable to the dark side of obsession.” She echoes something we wrote last January about a famous football innovator: Hall of Fame coach Bill Walsh and his obsession to conquer the game of football itself. Here’s Bruder:
But it may be more than a stressful job that pushes some founders over the edge. According to researchers, many entrepreneurs share innate character traits that make them more vulnerable to mood swings. “People who are on the energetic, motivated, and creative side are both more likely to be entrepreneurial and more likely to have strong emotional states,” says Freeman. Those states may include depression, despair, hopelessness, worthlessness, loss of motivation, and suicidal thinking.
Call it the downside of being up. The same passionate dispositions that drive founders heedlessly toward success can sometimes consume them. Business owners are “vulnerable to the dark side of obsession,” suggest researchers from the Swinburne University of Technology in Melbourne, Australia. They conducted interviews with founders for a study about entrepreneurial passion. The researchers found that many subjects displayed signs of clinical obsession, including strong feelings of distress and anxiety, which have “the potential to lead to impaired functioning,” they wrote in a paper published in the Entrepreneurship Research Journal in April.
Here’s an excerpt from our January piece on Walsh, The Imperfect Perfectionist:
Over the next few years, as Walsh turned Ken Anderson into one of the league’s most accurate passers, the system worked so well that Walsh began to think he could do something no coach had done: conquer the game itself. His offense became so precise that it couldn’t be stopped when executed perfectly, so Walsh became obsessed with always executing perfectly. “It would grind on him,” says longtime friend Dick Vermeil. “He was so perceptive and detailed and emotional, and he put so much of himself into a game plan, that he took it personally if it didn’t work… After the 49ers hired him in 1979, Walsh won a total of eight games in his first two seasons. Ridiculed in the media, he grew so despondent that he considered resigning, convinced he didn’t have the answers. Even after Walsh turned an inconsistent Notre Dame quarterback named Joe Montana from a third-round pick into a future Hall of Famer, winning Super Bowls in 1981 and 1984, he felt more angst than validation. “Bill had to prove himself to himself all the time,” Vermeil says. “His past success could never overcome a recent failure, and nothing was enough to fill that little hole in his personality.” … By the late ’80s, as Walsh’s definition of success became so narrow as to be unattainable, the Walsh Way started to cripple the coach. He would sit dazed in his hot tub even after wins, despondent that he had miscalculated a play or two. “I was a tortured person,” Walsh later told biographer Harris. “I felt the failure so personally … eventually I couldn’t get out from under it all. You can’t live that way long. You can only attack that part of your nervous system so many times.”
Back to Bruder… she also cites a psychologist from John Hopkins whose theory about entrepreneurs adds another wrinkle to our recently completed 4-part series on Entrepreneurship and global wealth since 1850.
Reinforcing that message is John Gartner, a practicing psychologist who teaches at Johns Hopkins University Medical School. In his book The Hypomanic Edge: The Link Between (a Little) Craziness and (a Lot of) Success in America, Gartner argues that an often-overlooked temperament–hypomania–may be responsible for some entrepreneurs’ strengths as well as their flaws.
A milder version of mania, hypomania often occurs in the relatives of manic-depressives and affects an estimated 5 percent to 10 percent of Americans. “If you’re manic, you think you’re Jesus,” says Gartner. “If you’re hypomanic, you think you’re God’s gift to technology investing. We’re talking about different levels of grandiosity but the same symptoms.”
Gartner theorizes that there are so many hypomanics–and so many entrepreneurs–in the U.S. because our country’s national character rose on waves of immigration. “We’re a self-selected population,” he says. “Immigrants have unusual ambition, energy, drive, and risk tolerance, which lets them take a chance on moving for a better opportunity. These are biologically based temperament traits. If you seed an entire continent with them, you’re going to get a nation of entrepreneurs.”
Though driven and innovative, hypomanics are at much higher risk for depression than the general population, notes Gartner. Failure can spark these depressive episodes, of course, but so can anything that slows a hypomanic’s momentum. “They’re like border collies–they have to run,” says Gartner. “If you keep them inside, they chew up the furniture. They go crazy; they just pace around. That’s what hypomanics do. They need to be busy, active, overworking.”
November 26th, 2013 by BPV
Every child in America learns of the hardships endured by the Pilgrims as they established Plymouth Colony. Some lucky ones even learn how the Pilgrims found salvation via private property, division of labor, and capitalism. The luckiest ones of all learn about capital preservation when a venture capital investment fails.
Mayflower with shallop – William Halsall, 1882
When a group of Puritans known as “Separatists” fled England they first settled in the Netherlands, where they took menial jobs and over time grew to miss their native culture. They lacked the resources for a passage to North America, so they sent two entrepreneurs from their congregation to London to seek financial backing – a successful merchant named John Carver and Robert Cushman, a “wool comber of some means.” While those two were in London, an ironmonger (a dealer in metal utensils, hardware, locks, etc.) from that city named Thomas Weston was visiting one of Carver’s in-laws in the Netherlands and learned of the Pilgrims’ need for funds.
Whether we call that serendipity or opportunistic networking, it resulted in Weston putting together an investor group to back the voyage. Weston and his London Merchant Adventurers put up 7000 pounds and also recruited experts to assist with the enterprise: roughly 50 additional settlers with the vocational skills to help build a colony in the new world. These “non-Separatists” crammed aboard the Mayflower with the Separatists and together became known as the Pilgrims.
What happened to that £7000 investment, you ask? Here is the story as told at encyclopedia.com
Weston and his fellow investors were dismayed when the Mayflower returned to England in April 1621 without cargo. The malnourished Pilgrims had been subjected to “the Great Sickness” after the arrival at Plymouth, and the survivors had had little time for anything other than burying their dead and ensuring their own survival. Weston sold his London Merchant Adventurer shares in December, although he did send a ship, the Sparrow, in 1622 as his own private business venture.
The Pilgrims attempted to make their first payment by loading the Fortune, which had brought 35 additional settlers in November 1621, with beaver and otter skins and timber estimated to be worth 500 pounds. The ship was captured by French privateers and stripped of its cargo, leaving investors empty-handed again.
A second attempt, in 1624 or 1625, to ship goods to England failed when the Little James got caught in a gale in the English Channel and was seized by Barbary Coast pirates. Again the London Adventurers received nothing for their investment. Relations, always tempestuous between the colonists and their backers, faltered.
Facing a huge debt, the Pilgrims dispatched Isaac Allerton to England in 1626 to negotiate a settlement. The Adventurers, deciding their investment might never pay off, sold their shares to the Pilgrims for 1,800 pounds. Captain Smith, of the failed Jamestown venture, felt the London Merchant Adventurers had settled favorably, pointing out that the Virginia Company had invested 200,000 pounds in Jamestown and never received a shilling for their investment.
By our back-of-the-envelope calculation, the investors got back 26% of their invested capital. If only they’d kept their long-term perspective…
On a more serious note, that outcome fits into the first category of entrepreneurial failure listed in Fail the Right Way and reflects well on those involved:
1. Liquidate all assets, investors lose most/all money: 30-40%
2. Not realizing the projected return: 70-80%
3. Falling short of initial projections: 90-95%
With “failure” this common, he urges executives to distinguish between business failure and personal failure. It’s vital to not let the former, which can be a valuable learning experience, pressure you into the latter, which can become a career-damning ethical lapse:
Although the original backers did not get the return for which they’d hoped, the endeavor ultimately succeeded thanks to the intrepid settlers who displayed many of the noble traits found in entrepreneurs: flexibility (they had to settle further north than intended), persistence (through brutal hardships), the value of good partners (Squanto and the Wampanoag tribe), and the courage and optimism necessary to accomplish the impossible and stupid.
“All great and honorable actions are accompanied with great difficulties, and both must be enterprised and overcome with answerable courage.”
- William Bradford, 2nd, 5th, 7th, 9th & 11th Governor of Plymouth Colony
Our business – like every business – has its ups and down, but we have much to be thankful for. Much. So we’d like to take this opportunity, here at NVSE, to give thanks for the trust and patience of our Limited Partners, the initiative and dedication of our entrepreneurs, the support provided to them by the many friends in our network, and the nation that offers the freedom to pursue happiness. We love our work, have been blessed with terrific successes and honorable failures, and get to do it all with great people in beautiful weather. God Bless you and your families – we hope you have a wonderful Thanksgiving.
November 18th, 2013 by BPV
On the first of this month we wrote about the planned “IPO” of shares in Arian Foster, running back for the Houston Texans. Fantex, Inc. is applying the concept of celebrity bonds to professional athletes and securitizing their potential future earnings.
At that time we expressed concerns about the business model and the ability to quantify risks or conduct due diligence: (a) it’d be analogous to a musician securitizing songs he planned to compose rather than his library of existing proven songs, (b) a professional athlete’s fortunes can turn on a dime, and (c) their “brand” is easily tarnished by revelations about past or current activities.
Last Tuesday brought unfortunate news for Mr. Foster. (Unfortunate but impeccably timed as follow-up to the original story…) He must have season-ending surgery and as a result, Fantex has postponed the IPO.
San Francisco-based Fantex last month filed with the U.S. Securities and Exchange Commission to raise $10.6 million in an initial public offering priced at $10 a share for Foster, who pledged 20 percent of his on- and off-field earnings to the company in exchange for most of the proceeds of the IPO. It was to be the first public offering for a professional athlete.
“After consideration, we have made the decision to postpone the offering for Fantex Arian Foster,” Fantex Chief Executive Buck French said yesterday in a statement. “We feel this is a prudent course of action under the current circumstances… We continue to support Arian and his brand, and we wish him well in his recovery. We will continue to work with him through his recovery and intend to continue with this offering at an appropriate time in the future based on an assessment of these events.”