Getting the Public Equity Markets Right

Here is the brilliant Nassim Nicholas Taleb in a recent Charlie Rose interview:
http://www.charlierose.com/view/interview/9713
Taleb talks about Capitalism 2 where instead of relying on public markets to make money, people will now revert back to private money.
This is exactly what I said in Money Magnet, where I predicted the end of the public markets as the main model for creating value. Private equity is money which goes into companies directly from one human to another human who look eachother in the eye at least once every few months and who work together to build value in the business.
Beats the ATM machine style of investing in the public markets.

The Wisdom of the Markets

Rudyard Kipling wrote his poem 'God of the Copybook Headings' and still stands a metaphor for our current woes:

In the Carboniferous Epoch we were promised abundance for all,

By robbing selected Peter to pay for collective Paul;

But, though we had plenty of money, there was nothing our money could buy,

And the Gods of the Copybook Headings said: "If you don't work you die."

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew

And the hearts of the meanest were humbled and began to believe it was true

That All is not Gold that Glitters, and Two and Two make Four

And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man

There are only four things certain since Social Progress began.

That the Dog returns to his Vomit and the Sow returns to her Mire,

And the burnt Fool's bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins

When all men are paid for existing and no man must pay for his sins,

As surely as Water will wet us, as surely as Fire will burn,

The Gods of the Copybook Headings with terror and slaughter return.

The poem was written in 1919, is apt and shows that nothing really changes.

Copybooks were an exercise book used to practise handwriting in. The pages were blank except for a printed specimen of perfect handwriting at the top. You were supposed to copy this specimen all down the page.The specimens were proverbs or quotations, or little sayings – the ones in the poem illustrate the kind of thing.
About Kipling: He had lost his dearly loved son in World War One, and a precious daughter some years earlier. He was a drained man in 1919, and England, which he identified with so intensely, was a drained nation. With all this as background, the general opinion is that The Gods of the Copybook Headings is a clinging to old-fashioned common sense by a man deeply in need of something to cling to....
As many do again just on 90 years later.

What is The VC Screening Process?

VCs have to screen deals that come through their doors. They see thousands of proposals and you have to break through to get their attention. Your business plan can help you stand out from the crowd, or not. If you do not have a decent plan, forget it.
Where Does Your Deal Fit?
Ask your venture capitalist where your company investment would be placed in their fund horizon. If your company is first in, then you have more time (five years) to make money before being required to pay back the full amount. If you are last in, the time for the VC to get out will be closer.
It also depends when you meet with the VCs and at which stage they are with their fund. If they have already filled up most of their fund, they will be very choosy about the last two companies. If they have just obtained the cash, then they will be feeling more generous. After the investment, find out who will handle your file. Will it be the same person who did the due diligence and who spent time getting to know your business? That person will have an emotional attachment. If a new guy is handling your file, there will be far less commitment.
The VC is a high-risk, high-return animal. Three out of ten companies in their fund will drive their fund’s return. If you are in that portfolio and your business is struggling, expect some pressure from the VCs. They want winners as these are their bread and butter. VCs make money for people who make them money. There are usually ten years in their life cycle: the first five years are used to seed your business and the remaining five are used to harvest the investment. The VCs must get out. They are not there to fund you into retirement.

How Much Should I Prepare to Meet an Investor?

Expect to spend at least a few weeks preparing to visit a sophisticated investor. Otherwise, you are dead before you even begin. Without the work, you might just as well climb into a coffin, hand a stake to the investor and said, “Drive it in, please.”
Your business plan is much like a resume and it’s the ticket that will get you to the next stage: a face-to-face meeting. Attracting money to your business will be easier if you show your vision of the business and how you plan to execute it. You can make yourself far more attractive to investors if you have a merger possibility on the radar that you can name.
“It's the people, not the product, that investors are most interested in,” says Ilske Treurnicht, MArs. “And first impressions are important. Be active and interested without being arrogant. A banking or VC relationship typically lasts four to eight years, so investors tend to look for people they like and believe they'll get along with. Also, they do want people who are prepared.”
"How people present themselves to investors says very loudly how that business owner presents their product to their customers.

I Need Money - Where Do I get It?

One of the bloggers on CBC's hit TV reality show, Dragons' Den, posed the often posed question, "I'm under thirty years old, where do I get money to start my business?"

I recommend the Canadian Youth Business Forum.

This is program run by entrepreneurs for young, new entrepreneurs who are too high risk for banks. Don't slag off the banks either as they must look after the money given to them by depositors. If the US banks had remembered that priority, the world economy would not be in this current mess.

But back to the CYBF.

It lends money to young people but then assigns them a mentor and makes them part of a group. This helps these youthful business people get through the failures of business. 80% of small businesses do fail but CYBF's program, pushes that statistic way down.

One of these CYBF success stories is in the National Post, read the story here.

QuickSnap is being mentored by Brett Wilson, a Dragon from the Dragons' Den. Already, QuickSnap has gone to Afghanistan and, hopefully, the military will set up a contract soon.

Here is the story on CYBF, Brett Wilson and Quicksnap with more...