BNN The Pitch Gives Thumbs Up to 500px and Pinpoint Social

Smart entrepreneurs with high tech products on BNN The Pitch today. I was on with the warm Rick Nathan from Kensington and the more I spend time with Rick, the more I see why his company is Canada's leading private equity firm.
View BNN The Pitch.
Here were a few of my notes I scribbled about the two exciting presenters and maybe you can decide what you think. The panel was quite split in their views:
500px Inc.

The overall look and feel of the site is nicely set up, the interface is user-friendly and the professional quality of product (photos) is what sets it apart from the current competition.  They’re playing off the online community concept (similar to all the social networks out there). Technically, the platform in not very advanced at this time, and there’s significant growth opportunity in the site’s capability to purchase, sell and share photos via established social networks.

What is the growth plan for getting more exposure and populate the site with paying customers?

There’s also opportunity to earn additional revenue through membership sales and advertising to complementary trades, such as make-up artists, modeling agencies, production companies, interior design professionals.

Another important growth market (not yet being explored by 500px) is the mobile  market.

It has potential to become THE destination for professional photographers to market their products and services, but it’s currently lacking scope, and the founders need to dedicate to a well-structured marketing program to build a brand – the product (photos) will follow.

Pinpoint Social

It essentially offers the ability to create and track marketing campaigns on Facebook. The space is about to become 1000x more competitive due to the newly introduced (May 2011) regulation that requires companies to use a 3^rd party application to conduct promotions.  So you better have superior technical capability or lower pricing to attract market share.
Pinpoint  - nice idea - and who doesn't want to invest in a company that uses FB as its platform?? A couple of questions:
1. Need to get the platform into the hands of agencies - how?
2. What's the $250K used for? Is this for software innovation - keeping
ahead of their competitors? How much to marketing and sales force salaries.
If they get traction with their platform I can see them as an attractive acquisition target - where their software is embedded within a larger software suite (by Adobe, for example).

Yet, a major downside may be that Pinpoint’s capability is limited to Facebook, and many professional organizations remain anti-Facebook (crazy as it sounds!) If campaigns created on Pinpoint could be integrated with complementary print/social network/other campaigns, that would significantly increase their utility.

To succeed, Pinpoint has to be a highly scalable model, i.e. 100% self-serve, otherwise you’re paying expensive developers to manage campaign requests. Currently, creating campaigns requires a lot of customer support and they want the money to launch the self-serve, so thinking in the right direction.

The Pitch – Wednesday, May 18, 2011

Entrepreneurs:

Daniel Patricio, founder, Pinpoint Social

Ian Sobolev, founder, 500px.com-SK

Panelists:

Larry Wasser, Genuity Fund Management

Rick Nathan, Managing Director, Kensington Capital Partners

Jacoline Loewen, Director, Loewen Partnershttp://www.bnn.ca/Shows/The-Pitch.aspx

Why dating and raising capital are similar

Like a first date, business owners meeting with private equity meetings can be over quickly, Stuart MacDonald, founder of Expedia and venture capitalist, says.

“I use the three-finger rule:

1. Is it easily profitable,
2. Easily sustainable and
3. Does it matter to customers?

It’s a simple thing, but you’d be surprised at how many do not have a valid viewpoint.

Like dating, Stuart is not going to tell the owner of the business, but will quietly end the coffe meeting.

Mr. MacDonald is just one of hundreds of Canadian financiers who, upon meeting entrepreneurs and asking all the obvious questions, have been stunned at some of the answers.

It pains Stuart MacDonald to hear an entrepreneur utter something like, “We have no competition,” or “The product sells itself,” or “Within five years, Google will buy us.” Hearing those, he quickly pulls the plug.

The Toronto-based angel investor, who started Expedia.ca, has endured endless pitches for financing and has the capital heft to show for it. These days, he spends his time running Tripharbour.ca, the cruise ship search engine, and meeting with entrepreneurs who need financing.

An Idea, Not a Plan.

Here are 3 mistakes you’ll want to avoid when seeking money.

An idea, not a plan

Never say, “I have this really good idea,” or “This has always been a dream of mine.” Nobody wants to hear about an idea. You must have an actual business and not a dream, or your banker will take a pass, says Mike Bonner, Bank of Montreal.

Any good business starts with a solid plan, and entrepreneurs seeking financing must have one in tow.

“We need to understand the customer, the business and the industry – in that order,” says Mr. Bonner. “In the early stages it’s really about the business plan, the planning and preparation.”

It doesn’t have to be complex, he says. Details can be added and strategies adapted, but the core plan must be in place.

The long-term view

Don’t offer up business projections that look 10 years out – no one can predict the future, and it is not in your best interest to try.

“We’d never ask them for that,” says Mr. Bonner. “We really don’t want to see any more than one year.”

Bury mistakes

Never attempt to hide a poor credit history. A credit check is the first step in any due diligence process.

“We have to take a good look at management and how they handle finances,” says Mr. Bonner. “It’s a good proxy for future viability of the success rate of the business.”

 “They should come prepared to tell us why they may have had credit problems,” says Mr. Bonner.

“There could be very good reasons and we could help them deal with it.”

Tips and Traps when joining an EMD - Vipool Desai, Ara Compliance

“A drowning man will grab, even the tip of a sword”,                                                                            Tsun Tsu

I have a guest blogger this week to talk about the Exempt Market Dealer registration. Vipool Desai, Ara Compliance, has simple and sensible advice on how to approach the EMD registration. Vipool explains it and his contact details are listed below too if you want to chat further.

National Instrument 31-103 and the recent CSA staff notice 31-323 regarding mortgage funds have mandated a dealer registration for a large number of existing businesses and salespersons that were previously free to operate without registration.This has understandably created an unhealthy amount of fear and confusion.  It has also encouraged certain businesses and salespersons to address the new registration requirement by joining third party Exempt Market Dealers (EMDs).  In this article, we will review what you need to consider before joining an existing dealer, and introduce the option of creating and operating your own independent registered EMD.

Moving in with your EMD

When confronted with new registration obligations, many new industry participants focus on the ticket price for entry to the securities industry (e.g. proficiency, capital, etc.) and, don’t fully appreciate that registration is the beginning of one’s regulatory obligation -  not the end of it.

Joining an EMD is like moving in with a new spouse or partner.  It can be a positive and fulfilling experience if you and your EMD are compatible.  However, it can also be a source of tension and conflict, and even a messy divorce, if you two are not in sync.

An EMD can provide a range of services in addition to a regulatory platform, including:

1.  Product Due Diligence
2. Training
3. General Marketing Support
4. Compliance Support
5. Administrative Support

As a first step, you should review your business needs against the type and quality of services the EMD can reasonably provide.

It is important to pick an EMD appropriate to your requirement.  If the purpose of joining is primarily to address compliance issues, then registering with a firm that has sparse compliance and registration experience in a multi-branch dealer may not be helpful.

Your compatibility with the EMD management’s style is also important.  Salespersons who are used to operating independently can find it frustrating to work under someone else’s direction and control.  This problem is magnified if EMD management has a different outlook, or has objectives that are not in alignment with the salesperson.  Conflicts can often arise over matters such as product due diligence and acceptance. 

Prior to joining any EMD, you should carefully review its internal policies.  Discuss your obligations and management’s involvement/oversight of your business.  For example, it is required that management execute agreements relevant to your business, pre-approve any products sold through the dealer, and handle any referral payments.  However, management may have other restrictions and controls that you need to be aware of, such as restrictions on the use of trade names, or restrictions on dealing with out-of-province clients.

Management’s reputation and prior regulatory difficulties are also important considerations.  However, it should be recognized that many prior regulatory problems are not a matter of public record and can remain hidden.  Management’s fundamental orientation toward regulatory and control matters is often a better indicator of potential future problems.

For example, if the firm’s compliance manual appears disorganized, misses key topics, discusses principles in lieu of specific procedures, and/or appears to be pieced together from other manuals - run away.  A poorly defined compliance manual is often a prime indicator that management may not appreciate the challenges or seriousness of operating a multi-branch securities registered firm.

Finally, you need to consider who else will be joining the EMD.  If regulators sanction a firm, or the financial press publishes a distasteful article against a dealer, it tarnishes the reputation of everyone operating under that firm.  

Salespersons don’t fully appreciate that when joining another EMD, they are also placing their reputation in the same boat as other registered persons who may operate under different branches or divisions of the EMD. Your business can be affected by actions of other salespersons over which you have little or no influence, or oversight. Hence, you should also interview management on their criteria and due diligence process when accepting new businesses and salespersons.

Build your own

Given the above considerations, it would be wise to also think about creating your own EMD.

An EMD is a relatively easy category of registration for which to qualify, on the basis of proficiency, capital, regulatory insurance, etc.   However, as noted above, obtaining registration is only the beginning of one’s obligations, not the end of it.

The real barrier may be uncertainty about whether you have adequate time, attention and/or knowledge to manage compliance issues for your own registered firm.

Please contact us at info@aracompliance.com  for more information.

EMDA Toronto Event: Private Equity: Opportunities in Canada and Beyond

The Canadian Private Equity industry is more vibrant than ever, and is increasingly seeing greater deal volumes and variety.  Speakers at this session will provide insights stemming from their active involvement with private equity deals that range from small to super-large, and related to investing across Canada and globally. 

Date:	Tuesday May 17, 2011
Time:	11:30 AM - 2:00 PM
Location:	The National Club Main Dining Room 303 Bay Street Toronto
CE Credits:	Eligible for 1.5 CE credits

David Austin, CFA (Northleaf Capital Partners), Jacoline Loewen (Loewen & Partners ), Kamal Pastakia (OMERS Private Equity), and Gerhard Pries (Sarona Asset Management ) will share their knowledge and experiences in the sector, highlight opportunities/constraints and discuss future prospects for Canadian private equity investment in Canada and internationally.

Who Should Attend

Professionals involved or interested in the private equity and alternative investment space.  Private equity practitioners, portfolio managers, analysts, private client investment professionals, wealth managers, investment advisers, consultants, family office professionals, and private bankers.

Registration Details

Register here or email eventregistration@torontocfa.ca to receive the CFA Society member rate of $65 ($85 registration fee for non-members)

Learn More (This is an embedded link to the CFA Society event page)