Curb Your Greed

Indulge in your inner child - or channel Gordon Gehko from the movie Wall Street - and let out the greed. Diane Francis has a new book topping the best sellers' lists and it is about who has got the cash in Canada and who are the new ruling families. 60% are newcomers to Canadian shores but that will not come as a surprise to those in finance who get to see the passing parade of entrepreneurs.


Perhaps, to reflect on national identity, John Loewen says, "the Canadian identity is not wrapped up in business success but more around what do you contribute to the community and that old fashion ideal of leading a decent life." The more American approach to business and drive to succeed is to be found amongst immigrant parents who limit TV time and curtail friends with the emphasise on homework and developing skills for the CV. If you play ping pong, you will do it with a coach and drill away at serves - not just for the fun of it.

Or perhaps the big families have removed their wealth from tax collectors' grasp to the Gurnsey Isles or Bermuda.

We will be giving Diane Francis's new book to the presenters at the Canadian Innovators Forum which will be discussing raising capital with private equity. The CEOs attending will be able to read the pages of those who have managed to make their fortunes here in Canada without a membership to that inner club. By the way, where is that inner club? I have asked Diane Francis to write the foreword to Money Magnet and will let you know how that goes.

Raising Capital Event

With billions of dollars in uncommitted capital, many private equity experts are saying: “Now is the time to invest…”

Join the CEO Roundtable
Thursday, May 15th, 2008:
10:30 am – 3:00 pm
at The National Club, Toronto.

Private Equity Investors are Ready to Spend
“The question is will market volatility quell the interest of private equity investors?”
says Peter Plows of Cobalt Capital. “Absolutely not! Private equity firms are now looking for quality deals more actively than ever.”

Cobalt Capital is a private equity firm made up of former business owners and operators seeking to help private companies grow and innovate by investing their own capital and contributing operating expertise. Cobalt Capital partners have significant business and entrepreneurial experience in a wide range of disciplines, sectors and geographies and work closely with their portfolio companies to help them achieve their growth objectives.

My Journey to Private EquityPatrick Bermingham, Bermingham Construction Ltd.
Patrick Bermingham, owner of a Hamilton based construction enterprise, discusses what his private equity partners have done for his company. As a fourth generation business owner, Patrick had a difficult decision to make; and the journey was not without its challenges. Learn about the key issues that needed to be resolved and the lessons learned. Find out what made the partnership with private equity triumph.

Iain Scott, Executive Coach & Roundtable Facilitator.
“CEO Roundtable events are organized to give business owners the opportunity to exchange ideas and gain insight into key issues that growing firms face.” This highly interactive session is designed to explore topics that are important to company growth strategy.
Please note that space is limited to maximize the value to attending CEOs by ensuring a highly interactive environment.


Map Location & Parking
Cost
CIF Members: $90.00 + GST

Non-members: $148.00 + GST
To Register (Please note, business owners and CEOs only):
Please email:
events@strategyinternational.com or call 416 961 0740 and ask for Anastassia

Private Equity Gets Respect

"Private equity is trying to improve its image in the public eye," says John Loewen, but they may not have to worry. According to a recent poll, politicians are the least respected and private equity did not even get a mention.
Why do teachers get paid less than lawyers for example, or politicians, or even TTC ticket collectors? If people were paid according to how much they were respected, then politicians may have a problem. Here's the quote:

"In the online survey of a representative national sample, a large majority of Canadians say they have a great deal or a fair amount of respect for doctors (94%), police officers (83%) and teachers (83%). At the bottom end are politicians (25%), lawyers (44%) and journalists (49%).
The results of the current survey are especially noteworthy when compared to those of an identical poll carried out by the Angus Reid Group in 1994. Interestingly, over the past 14 years, respect for every single profession—with the exception of doctors—has diminished across the country.
The professionals who endured the most noticeable slump are journalists. In 2008, less than half of all respondents say they have a great deal or a fair amount of respect for journalists (49%), compared to 73 per cent in 1994."

So you want to stay in your pond?

There’s an old Scottish tale of a frog living in a damp well. One day, another frog from a large pond hopped past the well. Interested in all things, this adventurous frog looked down into the dark depths and leapt inside.

Intimidated by the interloper, the first frog asked, “Who are you and where did you come from?”

The pond frog said, with a nod at the top of the well, “A large pond filled with water many times the size of this well.”

“How big is this water?” The well frog pointed to a boulder at the edge of the well. “Oh, many times the size of that boulder.”

“As big as that?” the well frog gestured at the shadow of a weeping willow tree.

“Much bigger.”

The well frog was momentarily struck, “How much bigger, then?"

“It’s many times the size of your well and it’s quite close. We could travel together to see it.”

“Why would I do that?” He regarded the pond frog suspiciously.

“You would have more water.”

The frog in the well gave a sideways look as if to say, “Oh, a wise guy, eh?” and swelling up with enough irritation to pop, said decisively, “Get out! Get out! I want nothing to do with frogs like you.”

“Why, because I can show you a bigger view, more flies to catch?” The pond frog realized that this frog was afraid to go beyond the bricked walls he had known for so long.

“Nonsense. You are trying to trick me out of my well.”

With that, the pond frog shook his head and hopped back into the sunshine.

In the book, Money Magnet, the author, Jacoline Loewen, explores this theme of not wanting to explore past your every day groove is opened up for discussion. What are you missing by not even learning more about private equity and venture capital?

What is Venture Capital?

Your business is attracting customers but now to fill those orders but your bank is being difficult. It is time to look at the very exciting alternative which will change the way you do business for the better.

Venture Capital (VC), is risk capital invested in privately held companies by VC firms, through the underwriting of newly issued stock and/or convertible bonds.

If you plan to launch a new business venture or expand a young business which has not reached profitability, venture capital is almost always the only source of capital. For banks, it is too high a risk and why should they put their own customers' money at risk on your venture? Banks get given a knock for being cautious but they are being paid to look after their depositors' cash.

Do look for an expert in private equity to match you to the right fund and get your business "investor ready".

Venture capital funding is provided by Venture Capital funds. If you are interested in finding out more, you can read about it in Money Magnet: Attracting Investors to Your Business.

Raising Capital Rule #1: Swim in the right pond

It was a sunny spring day when I had lunch with a Profit Top 100 Fastest Growing business leaders and most of the conversation revolved around his search for capital.

You would think that his many listings as Ernst & Young Entrepreneur of the Year or Profit’s Top 50 Entrepreneurs or Rising Hot Stars to Watch would make it easy. He thought it would be but forgot the first rule of finding capital: Swim in the Right Pond.

What the heck does fishing have to do with raising money? People with cash have what is fondly referred to as their preferred “bite size” which is the amount of money they will invest in a company. This bite size could range from $200,000 right up to $50M and private equity investors cluster according to this investment size. My friend, the cover story of Profit magazine, could not understand why funds were passing on his company but when I asked who he was seeing, it became very clear. He was swimming in the pond for much larger bite size than required for his stage of business. He was wearing out the leather in his shoes walking around Bay Street and visiting what he termed the “best” investors. One of the people he saw was Brent Belzberg of Torquest who is one of Canada’s leading private equity investors. Torquest raised capital for their private equity fund from a range of high calibre sources such as CIBC and these sources will be expecting a high level of return. Torquest is under pressure to achieve their client expectations and have delivered so far due to their focus on size of investment or deal they will do. They are familiar with investing $20M and know how to work with this size. Anything lower would require a different type of involvement with the management team and a different financial structure. Quite rightly, Torquest politely declined and explained the company was not their "bite size".

My CEO friend could not understand how the size of money put into a business could be so different until I asked him if he fished: he glowed as he described catching bass up at Georgian Bay. I asked him if he gone salmon fishing in BC or deep sea fishing for marlin – yes, to the former, no to the latter - but what about catching a whale? It became instantly clear how each of these fish sizes would require different bait, hook, equipment and boat. Above all, the attitude of the investor becomes evident. Is this a weekend jaunt with beer in the cooler or is it for a living where if the fisherman does not bring home the big tuna, it means not being able to make a living? Torquest fishes where there are the big tuna and takes their risks out in the big sea. My Profit Hot Shot CEO needed to fish with the private equity funds who put in their own money, with a far smaller bite size.

But here’s the real hair raiser: the CEO went to a Whale sized private equity shop where one of the financiers advised against private equity but then said, “I’ll invest as I have just made a bonus and have $2M sitting on top of my dresser.” The irony is that $2M investment is private equity! This rich individual was putting in money - which is labeled as Angel investing - but he did not have passion for the business, it was just opportunistic. It is private equity at its worst!
By now though, the CEO was exhausted from swimming in all the wrong places which is the worst time to make a financial decision. He thought the big name of the rich investor would be good for his business and he went ahead and accepted the valuation thumb suck without even checking with a third party agent. This CEO believed the investor knew what he was doing. Absolutely correct – this private equity investor knew he was dealing with a great upcoming company with a vulnerable CEO/owner and jumped to put in his own money. He knew if the company grew, he would get a great payout and if it did not, well, he had the cash to burn. The situation was the equivalent of a Whaler captain deciding to fish with you but with a cooler of beer and no big deal if you don't catch much. Would you want that type of investor in your boat with you?
If this CEO had taken the time to even skim the book Money Magnet: Attract Investors to Your Business he would have known how to swim in the right pond.

Blogs in Plain Canadian English

Are you the owner of a business? Was your company founded a few generations ago by your grandfather? If you are a family business, you may be in danger of living in the past glories and history of the company rather than moving into the future. To get yourself up to date, I suggest you blog. Too intimidating? You don’t type? You can’t write? No worries – seriously. Here is a visual cartoon – no hard bits- on how to blog. Commoncraft found out that people like to watch other people draw. It does break through to the busy brain. They have drawn a quick story board of how blogs work. This website is also useful for giving you ideas on how to get across your company products and services in an unforgetable way. Seth Godin also has an uplifting blog which has taught me a great deal about how to get a higher ranking on Google. His blog appears near the top when you just Google Blog so I guess he knows his stuff.

Joseph and the amazing technicalities

The Economist has an interesting article where it has done a complete about face on the need for bank regulation after Bear Sterns was unable to cover its losses through high risk banking. The suggestion is to step up regulation and to get the Anglo Saxon world away from trading and back to simple business. They sum it up well:

Despite this, countercyclical regulations would not be popular with the bankers.
Over a full cycle, such rules would probably require banks to have more capital
than under the existing system (and given the rescue of Bear Stearns, the rules
would need to apply to investment as well as commercial banks). Because money
tied up in capital earns lower returns, that would mean lower profits.

Many people feel that the bankers get fat and then want a bale out - what about the middle class folk? Banks are going to have do a great deal of public relations about this paradox which makes them seem greedy. But it is hard to feel much sympathy for bankers who rake in fortunes during the boom and require taxpayers to help them out in the bust (or make central banks jump through hoops for them, as the Bank of England has done this week—see article). An efficient financial sector is vital for a modern economy but trading securities has arguably achieved too much importance in the Anglo-Saxon world. Winston Churchill once said that he would rather see finance less proud and industry more content. That is not a bad motto for those devising a new set of banking regulations. Agreed about getting these mononolithic sized banks to have to cover themselves more and certainly they could afford it. There is one issue though. We are now in a global economy and Dubai is open for business to attract the financial trading away from London, NY, HK, stock exchanges, etc. Do keep that in mind when adding regulations. If the focus of a country and its people should be more on the meat and potatoes of running a good business that can compete in the global world, then capitalism, mercantilism, entrepreneuralism and the creation of small business should be given a better position in the education system and the publically owned media such as the BBC or CBC which, at times, appears to group all business under the same evil, greedy capitalist category. More venture capital TV shows like Dragons Den!

Deals That You Have Blown

If you are trying to raise capital but getting turned down, read this list of passed deals by the USA's oldest venture capital company. They passed on Cisco, eBay and even visited the house where the Google guys were using the garage to start up their search engine. A friend who owned the house had been telling them about these smart students and all the VC s could say was, "how can we get out of this house without passing the garage?" Read more in MacLean's magazine.

Bessemer Venture Partners is perhaps the nation's oldest venture capital firm, carrying on an unbroken practice of venture capital investing that stretches back to 1911. One thing for sure - they have a good sense of humour as they list their passes on companies which are now the top ten pics of any investor. These VCs say, "if only we had invested in any of these companies. We would not be working today." I don't know - sounds as if they would because it is evident that they love helping growing companies get capital and move forward with their dreams - much like Loewen & Partners.

Your First Advisory Board Meeting - Food Matters

You know what you hope to gain from having an Advisory Board and now the first meeting looms. What contributions will your Advisory Board members make? How will they inspire you to take your business in new directions, earning more revenue? That depends on how you set the tone at your first meeting. You want to encourage your Advisory Board members to relax and contribute.
One Hot Topic: Your first meeting, therefore, like all your Advisory Board meetings, needs to be planned around a question or problem. You might find it easiest to state the problem as a goal. For instance, "We want to increase our sales by 25% this next quarter. How might we do this?" Or you might state the topic for discussion more generally: "Should we try to break into the export market?" or "Theft has been increasing. What can we do to cut down on theft at our stores?"
Professional Package: Once you've got the topic, put together a package with information that your Advisory Board members will need. You could include a business plan and any other documents such as charts, graphs and fact sheets illustrating the background of the discussion topic. If possible, you should send a copy of these documents to all Advisory Board members two weeks in advance, along with a copy of the agenda.
Time Limit: Notice that each agenda item should be timed; building a time schedule into your meeting and sticking to it ensures that your meeting doesn't get bogged down and stimulates on-topic discussion.
Take Minutes: You will also want to make some arrangements for recording the minutes of the meeting. Don't try to do this yourself; you need to be able to participate fully, and listening and contributing well is a full-time job. If you don't have someone who can attend and serve as a secretary, ask permission of your Advisory Board members to tape the meeting.
It's All About the Food: Here's the most important part - the food! Do organize tasty snacks as people bond over food - an odd comment but one you know to be true. Don't do order in pizza or soggy sandwiches. Head over to Pusitarri's or even Loblaw's where you can purchase pre-made snack food which is delicious and fresh. Plenty of web sites like the passionate gourmet can give you ideas of unique and interesting platters of finger foods.
Keep it Simple: Above all, don't fret about your presentation. You are there to share your vision and hopes for your company and seek advice, not to impress anyone with multimedia presentation effects. Your long-range goal is to establish a working relationship of trust with your Advisory Board members, so focus instead on ensuring that your Advisory Board members walk away feeling that they've been heard and that they've contributed to the management of your company - and looking forward to the next meeting of the Board.
My upcoming book, Money Magnet, has a chapter on how to get going once you get capital from Venture Capital or private equity but you will be having many more board meetings and now is the time to get started.