£2.95
hnwmagazine.co.uk
HNW
High Net World Magazine
NOVEMBER 2013
THE HNW INTERVIEW … Angels Den Founder Bill Morrow
The Bull is Back Staring Down the Bears as the Markets Move Up
LINKING ENTREPRENEURS WITH INVESTORS & ADVISERS UK-WIDE hnwmagazine.co.uk
Q Court, 3 Quality Street, Edinburgh, EH4 5BP For further information, please contact Stephen Paterson on: Telephone: 0131 625 5151 spaterson@hwca.com
DISTRIBUTION “A hard day’s write” Since its inception, High Net World HNW Magazine has been extremely fortunate in its assocations with leading business angel, entrepreneurial, investment and networking organisations. This includes the Angel Investment Network (AIN), founded in 2004, which has grown into the largest angel investment community in the world. AIN has over 500,000 members across 30 networks in over 80 countries. The Angels Den, the world’s first integrated angel and crowdfunding platform which for over six years has been successfully matching entrepreneurs and angel investors. Since launching in 2007, Angels Den has raised £16 million of investment, through 10 globally based offices from over 6,000 angel members. Par Equity, one of Scotland’s most active business angel syndicates, is an investment firm with a difference bringing a hands-on investment approach and extensive experience to opportunities that have the potential for significant returns. KILTR, The leading edge professional social network for everyone with a Scottish connection, was founded with the local-to-international Scottish diaspora at its centre. The social network has over 40,000 members. LINC Scotland is the national association for business angels in Scotland with a membership including individual investors and most of the main angel groups or syndicates. Since 1993, LINC has played a significant and active part in changing the business culture in Scotland. Thrive for Business is a membership-based networking organisation for business-to-business SME’s across Scotland bringing together likeminded individuals willing to share knowledge, ideas and contacts.
P.3
Steel’s View P.8
CONTENTS HNW HEAT
P7
WEALTH
P10
INTERVIEW
P17
WHAT ANGELS WANT
P20
INTERNATIONAL
P23
HNW MAGAZINE LTD, OLDWOOD PLACE, WEST LOTHIAN EH54 6UJ
EDITORIAL Ed Emerson, Editor Alan Steel Mike Williams John Kennedy Hetty Green The Brunette Joshua Brown
FEATURE The Bull Is Back
STARTUP DISEASES
P24
INVESTOR
P29
THE WALL
P30
“While the world is looking back toward 2008, the markets are looking forward and breaking
HEAT: HIGH GROWTH COMPANY LEADERS MAIN SPONSOR
ENTREPRENEURS
P32
YOUR ECONOMY
P34
PRACTICAL BUSINESS
P39
DIATRIBE
P45 Mike Williams
P.4
P13
HEAT SPEAKERS Stephen Paterson / Haines Watts Raymond McLennan / Angels Den Benny Placido / BlueMungus Alan Steel / ASAM Rob Begg / Shirlaws
FIRST WORD
By Ed Emerson
“There’s a curious lack of revenue on the other side of the balance sheet. And when I say curious, I mean zero. Zip. Nada.”
Vanity Fair author William Makepeace Thackeray once asked: “Which of us is happy in this world? Which of us has his desire? or, having it, is satisfied?” Snapchat founder Evan Spiegel may, in his quieter moments, now be pondering that same question having today passed up on Facebook’s $billion acquisition offer, an all-cash deal according the Wall Street Journal.
daily ‘snaps’ (by the by, that number has been reported as anywhere between 50 million and 300 million per day depending on who you read/believe) will entice Facebook to up its largest ever acquisition offer to…well….. Mr Thackeray, have you any thoughts for us….? “All is vanity. Nothing is fair”
All cash you say?! (Boys, let’s get the New York Football Giants in here to load these pallets of money onto the truck!)
It’s difficult to fathom the value here. Certainly Spiegel and his Stanford frat brother and cofounder Bobby Murphy have attracted a hugely valuable demographic in their droves and in a very short space of time.
In June, HNW Magazine reported the selfdestructing mobile messaging channel had closed a Series B funding round of $60 million from IVP, General Catalyst, Benchmark Capital and others to ‘continue scaling’ the company.
But what remains, as with Facebook, Twitter and the rest of social media, is the wee problem of monetizing that vast audience.
The company valuation then? About $800 million. Ahem….ehh….though there remained a curious lack of revenue on the other side of the balance sheet. In other words, zero. Zip. Nada. Spiegel however now apparently believes the app, launched in 2011, and its estimated 200 million
Or maybe that happens once the founders and funders have begun to cash out and Snapchat becomes the next NYSE plc as $SNPCHT at $45 per share. A valuation that’s likely to disappear faster than one of their millions of exploding messages. Emperor? Clothes? Bueller? Anyone…..?
P.5
AL
AN
S
T EEL
AS
S ET
M
AN AGEMEN T
Alan Steel Asset Management Limited is authorised and regulated by the Financial Conduct Authority.
Are you fed up with earning little or no interest on your savings account?
If you’re looking for an income to safeguard your long term financial future then simply having all your eggs in a bank or building society deposit account basket won’t work.
Email us today for your FREE copy of our new guide at: income@alansteel.com Or call us on 01506 842 365 and ask for Carol McNicol In the guide we explain and compare the risks and rewards in both a “saving for income” and an “investing for income” strategy. One of these alternative income strategies may now be right for you. It must also be remembered that the capital value of investments and the income return you receive from them can vary and may fall as well as rise. You may get back less money than you started with.
HNW HEAT
HEAT COMPANY LEADERS nooQ-ING IT!
“Cool startups from Web Summit Dublin”
By Graeme Bodys
Hats off to HNW Magazine HEAT Company Leader Graeme Bodys of nooQ Software and his 25 Cool Startups from the Web Summit extolling the Dublin gathering of UK and Ireland-based high growth newbies.
There were quite a few companies working on similar theories but with different approaches or targeting different markets (social for business, gathering ideas, communication for teams, projects & tasks, visualising social streams, message overload, working visually instead of linearly, social analytics).
We’ve included a portion of Graeme’s piece, which includes HNW HEAT programme company leaders like miiCard’s James Varga and Mallzee’s Cally Russell, with links to the full editorial at nooQ: Cool Startups from Web Summit Graeme Bodys Aside from what we thought of The Summit event, we saw, met and chatted with a lot of great companies in Dublin last week. Here’s a list of 25 cool companies we liked. First of all some very cool companies working in similar concepts or areas to nooQ.
Unified Inbox Tackling the message overload problem. Reminds me of IQTell a little. Very ambitious project, which we love. A huge task which we are very familiar with at nooQ. A different approach, them going for integrating your existing streams in one inbox and a traditional linear style but all in one place.We have gone for the non-linear visual style. I have registered for beta so will see how it works. They seem to have a great team and some investor backing too.
P.7
Par Equity invests in innovative young companies with high growth potential. Our approach is hands-on, investing where we can add value through our Par Advisers, deploying intellectual Par Equity invests in innovative young companies with high growth potential. Our approach as well as financial capital. We offer qualifying investors access to both EIS and conventional is hands-on, investing where we can add value through our Par Advisers, deploying intellectual venture capital collective vehicles.investors access to both EIS and conventional as well as financial capital.investment We offer qualifying venture capital collective investment vehicles.
To find out more please contact either Paul Atkinson at paul.atkinson@parequity.com or Paul Munn paul.munn@parequity.com call +44at(0)131 556 0044. To find out at more please contact either Paulor Atkinson paul.atkinson@parequity.com or Paul Munn at paul.munn@parequity.com or call +44 (0)131 556 0044.
www.parequity.com www.parequity.com
Par Fund Management Limited is authorised and regulated by the Financial Services Authority. Funds managed by Par Fund Management Limited are available only to elective professional customers, who are able to invest in unregulated collective investment schemes. Retail investors will not be eligible to receive information about, or to invest in, such funds.
HNW HEAT
DaPulse Better user interface than Yammer. Social collaboration for teams. They like us have opted to group conversations together by topic and don’t have a newsfeed, although our visual, non-linear approach allows us to have several conversation threads on one screen, all sized visually to your preferences, so no need to jump between different conversation boards.
Swarmly – location based app showing real people in real time. Like Waze but for people. Love the real time bubbles showing where is popular. Or finding somewhere quiet can be just as useful.
Timebox.io To-do lists re-invented visually. I like the visual way they use box size to indicate importance and relevance. Sounds familiar @nooqsoftware.
Box.com – Was nice for us to be approached from the big guys at Box asking if we were interested in integrating nooQ. We much prefer Box over Dropbox at nooQ, definitely the best file sharing platform on the market.
CloudDock – they bring together all your docs from multiple cloud storage systems.
TaskMessenger very nice UI for team based tasks. Irish based startup. Very interesting to find out.
WikiDocs extremely cool real time editing – almost like google wave. 37Signals very interested in this and I can see why. Watch this company.
Mallzee – personal shopping & recommendations. Like how they take your style preferences and recommend others brands and items. Cally Russell, Callum Stuart and Jamie Sutherland all pitching like mad.
miiCard – Prove and Protect your online identity. Pushing now into USA market. CEO James Varga, Cassie Anderson and team.
PrintAR – their PrintAR app turns 2d images into 3D ads. A lot of tech behind this but they make it look easy.
FloatApp – cashflow forecasting now integrated with Xero. Recently received large investment too. Accounting is not so cool, but cashflow definitely is king. Colin Hewitt captain of that boat.
StorkUp – social shopping for Mums. Great design, potential and team. Check out the site and follow them on Twitter. Craig has some great startup content.
P.9
STEEL’S VIEW WEALTH One of several cruel lessons learned during a 2-and-a-bit year MBA incarceration that began in 1999, occurred while struggling through Statistics & Business Markets. The usual professor, an actuary and mathematician, had invited a renowned fund manager to lead the class in an exercise designed to predict the market’s next big winners.
GLOBAL WARMING RETURNS BY ALAN STEEL
Judas Goat: Predicting A Gold Slam Dunk?
Sadly, my remaining 300 or so brain cells (another generous assumption) were busily slipping on the blood of those fallen before them – like 300 desperate Spartans at Thermopylae without the vainglorious ending. The slaughter lasted all of thirty minutes before a sudden ink blot made for a convenient white flag, and laid my pen to rest on the desk.
By Ed Emerson A full twenty minutes of guilt-boredom ensued as I watched I’m somehow unconvinced that Warren the equations run wild across the lecture hall’s chalkboard, Buffett will hoist his morning copies of the guided by this mathematical madman as our usual broadsheets-r-us, alongside his first slug professor looked on and nodded sagely from a corner seat near the front. of Coca Cola, read Goldman Sachs calling out Gold to drop to $1050 by the end of Until the big reveal, that is, when the fund manager finally next year, and like Bill Nunn’s character stopped his scribble and said: “But that’s all really just guesswork. If you want to beat the Index for your clients, ‘Bradley’ nursing a debilitated Harrison buy Vodafone.” Ford in the movie Regarding Henry think: “I gotta get me some of that….next Our recollections of history often have a wonderful proclivity toward the Hollywood-style ending, like the Christmas.” Someone even referred to the Spartans at the narrow coastal pass of Thermopylae. expected precious metal plunge as a ‘Slam Dunk’. Folks tend to forget the circa 700 Thespians, 400 Thebans and a few “Gold at $1800 an ounce hundred other no-namers with swords was a ‘no-brainer’ to hit Well, the NBA’s Slam Dunk Contest and shields in that pass who hung $3000…’ Now it’s $1200” has sucked for years, with about 36 around to be slaughtered as well. misses and only 15 certain-to-succeed slams in 2013. That’s like shooting 30% from the field. And that would be a generous measure of the media’s market prediction success rate. When crystal ball commentary becomes the mainstream maelstrom it’s usually a good sign that, sooner or later, a reversal is en route. And many will follow that Judas Goat, the one trained to go out into the fields, round up the flock and walk them merrily back to the safety of the slaughterhouse.
P.10
Maybe 300 just sounded better. Oh, and wasn’t the popular view on Gold just 18 months ago when it was $1800 an ounce that it was a ‘no-brainer to hit $3000…’. Slam Dunk, you say? I’ve already had me some of that.
WEALTH
“Wall Street will call it a Dow Jones 16000 mega bubble, but the Bears are on the run…”
A Record-Breaking Dow
By The Brunette
Someone out there, somewhere, will today try and convince you that the Dow Jones Industrial Average breaking through the 16,000 barrier for the first time in history is somehow, and for some mind-f–k justification reason, (probably to convince you to ‘be safe and keep buying up those bonds, suckers’) a signal that we’ve just gone ‘2008’ all over again. Wait for it. The Wall Street machine will call it a bubble, an over-priced equities market, a searing glimpse into the next recession just on the horizon.
Oops! And this kind of thing’s nothing new. When George Bush Senior lost out to Bill Clinton in the1993 US elections it was due to his alleged mismanagement of the US Economy, thanks to “Official” GDP estimates at the time showing the economy to be tanking. After a good few years of checking and re-checking however the Nerds decreed they’d miscalculated. US GDP had been positive instead. Beating around the Bush anybody? (Alan Steel, Gross Distortion Predictions)
They’ll pepper you with Greek austerity, fiscal cliffs, Government shutdowns, SARS, tapering, quantitative easing and an impending sell-off of social media and cloud-related stocks.
It’s all looking very Glengarry Glen Ross out there. We’re drowning in circumstance, like actor Ed Harris’s seductive character Dave Moss enticing us into a sedan, tired and desperate on a rainy evening, and we suddenly find ourselves complicit in a crime we’ve yet to commit:
They’ll blame inflated company earnings, low borrowing costs, Warren Buffett, Tesla, frackin’ in the Bakken, Kyoto, spontaneous human combustion, Area 51 and China owning $1.3 Trillion of US debt.
Moss: In or out. You tell me, you’re out you take the consequences. Aaronow: I do?
And you’ll follow that Judas Goat who has been trained to go out into the fields, round up the flock and walk them merrily back to the safety of the slaughterhouse.
Moss: Yes. (Pause.) Aaronow: And why is that?
Why? Because drama sells, bleeding gums mean ‘rinse with Corsodyl or become a gum-diseased pariah’, and the doom-and-gloom predictions of the Office of National Statistics (ONS) can be hidden away after the fact in the digital ether once the retractions reveal their UK GDP “findings” were actually wrong for the previous 15 years thanks to some error or other in their theoretical calculations.
Moss: Because you listened. Dow at 16,000? Hey, isn’t there still a recession on? And so it begins. Oh, to hell with it. Settle for second place. There’s a set of steak knives waiting for you at the door.
P.11
WEALTH
The Bull is Back Staring Down the Bears as the Markets Move Up By Mike Williams The media seems to be taking a break from hyping Obamacare disasters and the upcoming (just after the Holidays) all out battle over the budget and debt ceiling issues again. Instead, they are focusing the crowd on the terribly ugly idea that markets have actually done well this year. In a continuing backward slant, they seem to feel this is all bad - and has led to the new problem: Too many bulls. Hmmm, let's see if that is in the cards. Bullish sentiment in the latest AAII data dropped to the lowest levels seen since late August. Huh? How could that be?
Didn't the headlines tell us that we simply cannot go up anymore with all these bulls? Wasn't the cover of last weekend's BARRON's all about bubbles? Do we recall what cover contrary history there is? I much prefer to see fears about bubbles on major covers vs. seeing "Hey, Man....the sky is no longer the limit in stocks....go all in quickly...." Yes indeed, after declining 4.8 points to 34.4% in the latest reading, bullish sentiment in the AAII Investor Sentiment Survey is the lowest since just before everybody "knew the Fed was going to taper in September." The long-term bullish average is 39%. At 29.5%, the latest bearish sentiment is about inline with the long-
P.13
STEEL’S VIEW WEALTH
Cloudy wit h a chance of....storms Guess what...in the business of reading tea leaves or crystal balls about the future...it is ALWAYS cloudy with a chance of storms.
GLOBAL WARMING RETURNS
It gets cloudy right after your next breath. It gets cloudy stepping off the curb. No one knows what is next. We can only try to understand that the largest part of the crowd mentality (when it comes to greed and fear) is more often than not … eventually...wrong. Mind you, that does not at all relieve of us of the fact that the masses can be right in the short-term. Markets are in effect, self-fulfilling prophecies.
“Imagine what a week or two of red ink would do to this jittery crowd.”
term average of 30.5%. Neutrals at 36.1% compares to the 30.5% long-term average. So, net-net, over 65% of the crowd is either bearish or neutral in their stance. Too bullish? I'd bend towards not....even though I would love to see some red ink. However, "Houston, we do have a problem"
The issue we are more likely dealing with is the same issue felt in late 1982 when one was forced to buy stocks at levels not seen....well, ever....in history. Ouch! After the last 12 years of watching stocks hit the upper regions of the trade range twice and crash, what buffoon would buy stocks here? Right? I can recall just the other day, "Mike, wait a minute, after the last 12 years of garbage and 2 horrible bear markets, along with a total collapse in 2008, you want me to buy the highest price ever?" Oh wait, that was late 1982...not just the other day. Or was it? Get my point?
P.14
The issue at hand today is that after 12 years of sh#*, the crowds will not readily understand we are in the midst of breaking into new highs. That does not mean it will be smooth and a bed of roses. Actually, we are praying for a few thorns indeed. It is perfectly normal for this sloppy internal gyration as markets try to break away from a twelve year trade range. Yep...that's what I said: a 12-year trade range. "Are you crazy Mike?" Well, heck, let's admit it...yes. But that has little to do with what we are covering. Trade Range It Is...call it "digestion" of the previous secular bull (from 1982 to 2000). Keep in mind that it is not abnormal to see breakouts tested eventually but as we know from the last few weeks, waiting on corrections is often when they do not come. After having been in a 5-month range since May, the SPY broke out recently - and so far, even a little red ink scares the pants off the crowd. I cannot imagine what a week or two of red ink and several hundred points back would do to them. Mind you, I am using the term several hundred points on a 15,900 point average. Itchy sell fingers are everywhere--hence the AAII reading above.
WEALTH
Staring Down the Bears as the Markets Move Up The latecomers will have little patience in seeing setbacks unfold. By the way....that's good. So use corrective action wisely. My Concern....? We won't get corrections. Yes indeed, there it is....I am a broken record. The point is this: The more we see the markets meander up, the more unlikely it is we will see the significant corrections we became accustom to over the last 12 years. Why? Altitude sickness. New highs have a way of spooking the human mind. Recency bias "tells us" what happens at new highs...they crash. Period. This is nearly exactly how it felt in 1982.....all cloudy, a world full of problems....and a DOW at 1,040. Melt-UP Instead? For so long, the world has been awash in worries over when the next meltdown will hit us all. There have been hundreds of funds, ETF's and various trade programs created to "protect you from the next meltdown". Heck, they don't even call it a meltdown anymore. It has its own moniker, 'another 2008'. All the while, as the various hedge and protection techniques mount on one side of the trade log, the markets have simply ignored all those things and have gone from one 'Apocalypse Now' to the next, rallying after each end-of-the-world scenario is overcome and we live on to fight another day.
It was not too long ago (earlier this year, in fact) that we had lunch with our good friend, Dr. Ed Yardeni. He had invited us to join him in a Chicago presentation he was making to clients over the lunch hour. At the end, we sat and listened to an introduction cycle around the table. Each person there described their concerns and what they had positioned the portfolios for. As one might expect, there were a myriad of concerns and worries, sure to be something that should be protected against after these last 12 years and the socalled 'lost decade'. We went last and I pointed out one simple, yet very difficult psyche to overcome; no one at the table had described the scenario by which the market simply goes up. No one had even suspected that we could very well be witnessing the dawn of a new secular bull market. None of the participants (other than Dr. Ed) had considered that we may be witnessing a market which has repaired itself enough to work toward old highs, reak out from this 12 year trade range and move on to new bull-market driven frontiers. We suspect we will look back on the last 3 to 5 weeks as the market timidly reached into new highs and realize that is exactly what we have witnessed. Remember that it was many years before the damage of the 70's was erased and the masses began to embrace the new opportunity in the early 80's. We suspect this time it will be no different, even though we do see a few things to fret over which should keep many on their heels.
P.15
23
INTERVIEW
He turns the angel funding process inside out, starting with a well-researched ‘Top 3′ reasons why angels invest; 3) make money, 2) to be needed, and the leading reason 1) fun!
Bill Morrow… ….The Angels Den Savant By Ed Emerson
Angels Den founder Bill Morrow doesn’t do ‘gluten-free’. There’s no watered-down or vegetarian option on offer during his angel investment talks, no prediscussion health and safety warnings or hints at the impending rush of business reality breaks (the ones about to overtake you like an amateur swimmer caught in a riptide), and certainly no hint of audience baby-kissing. This is classic Morrow; stood before a gathering of established and wannabe entrepreneurs, a few high-networth individuals, a gaggle of bankers perched in solidarity near the back, some age-wizened angels and, like myself, a scribbler or three, notepads in hand near the front of the Glasgow SECC main speaker space. His guise is disarming, the blue suede shoes, waistcoat over flannel shirt, dress jeans, left wrist noosed with a rainbow-like collection of rubber, leather and woven concert bands (his in-law is Fatboy Slim); the effect is somewhere between transatlantic retro chic and Santa Claus on his day off.
And when he launches into it, the expletives arrive suddenly and without reservation, like little explosions next to the more ordered and soldierly investment nomenclature of ‘crowdfunding’, ‘investor-readybusiness’, and ‘angel’ and ‘venture capitalists’. It’s impactful, a swift kick to the sensibilities; a diatribe of honesty like few can (or would) offer up to an audience of relative strangers.
“Some forty or so people gathered together expecting a prototypical starter lesson in business funding and angel investment, and instead witness a jarring personal and professional reverie served up like a bottle of special reserve Richebourg 76′ and a 12oz sirloin……..blood rare and steeped in horseradish.” For some that approach would be about as welcome as Franz Kafka in a Burger King. But on Morrow it simply works. Of course, as is his way, he turns the angel funding process inside out, starting with a well-researched ‘Top 3′ reasons why angels invest; 3) make money, 2) to be needed, and the leading reason 1) fun!
P.17
“As entrepreneurs we understand that our biggest risk will always be the performance of our business.�
Helping contractors and consultants to keep what they earn
Martin Cook Accounting Services Ltd 19 Monktonhall Place Musselburgh East Lothian EH21 6RR Tel: 0131 665 7238 Mob: 07866 465 223 E-mail: martin@mcaccounting.co.uk Martin Cook B.Acc.C.A Director
www.mcaccounting.co.uk
INTERVIEW Bill Morrow (cont.)
This all arrives from the angel savant who lectures at universities throughout the world, and then quite merrily drops in that the average age of death of his 6,000 plus Angels Den investor tribe is fifty-two….makes you wonder how taxing the organisation’s renowned speedfunding events really are. The stories abound. He dovetails into the now infamous Levi Roots, the Briton Reggae Reggae culinary sauce king, whose pitch Morrow describes as nigh to diabolical but ‘everyone loved him’, then meanders through former The Apprentice runner-up Luisa Zissman and her instantaneous funding success with Angels Den…at about half the equity ask that would have applied had Lord Sugar given her the £250k. Shuffling up and down the centre aisle he cycles through the lessons, seeming to ignore the eerily simple PowerPoint even as he flicks forward to each supporting slide:
There’s no reticence to self-deprecation as he flirts with his own personal investment foibles, returning sharply by reminding a would-be audience upstart that 36% of entrepreneurs fail right out of the gate at the “tell me about your business” question. And then he asks the man, the would-be heckler, point blank to do just that. ”Tell me about your business.” There’s a stuttering pause, and a slaver of sense mixed with a lot of ‘…you know…’ and ‘….maybe…’ and ‘…I’m thinking about…’ speech ticks and pleading hiccups, eventually slowing to an excruciating pause. Morrow then holds that silence, like the microphone beneath his chin. He knows the lesson in the example, “Know your business”, and now so does the audience.
● If you can’t write your own business plan, you’re dead ● Women take 3x longer to write a plan than men ● The average Angels Den angel looks at a business plan on site for 2 mins, 12 seconds ● If you think all you need is money, you’ll never have it (Henry Ford) ● If you fail to understand your own business….refer back to bullet point one (above) ● Does anyone really want to have a F-ing genetically engineered giraffe as a pet in their bedroom….meaning, does the market want or need your incredibly clever product ● Business plans are a fantasy, but they allow potential investors to see how stupid or otherwise you really are ● Consider your own social skills; your halitosis, sweaty palms, bad dress sense, and factor that into whether or you would make for a good partner in 35-month-or-so investor relationship housed in that close-quarters shop of yours in Linlithgow He finishes by dipping into the mirthful undercurrent of his own experiences, revealing what he has found to be the most ridiculously shitty products suggested for funding. But I won’t give those ones away. You’ll just have to check him out yourself. Angels Den @angelsden
P.19
STEEL’S VIEW WHAT ANGELS WANT
INNOVATION IS NO ACCIDENT
Passion to persevere and smart enough to collaborate and then implement
The Brunette
The vast majority of inventions take years to design and develop, and thereafter introduce into and gain market share.
● Spencer Silver’s adhesive applied to Arthur Fry’s Post-it Note
It’s a process; the initial idea, the business plan, the proof of concept, market testing, finance, personnel, marketing and sales, competitor analysis, positioning, and so on. Some make it all the way, but most wither and die on the vine, or struggle through a hundred hurdles, a cornucopia of considerations, and miles of open highways before simply running out of time, support or interest.
● George Crum’s handling of a customer complaint becomes the potato chip…
“There will always be catalysts out there. Sometimes they’re digital, sometimes chemical, and sometimes human, like Steven Marx who invented the hashtag when he inadvertently sent a Tweet with the line #NBCFail mocking the station’s coverage of the London Olympics.” But some seem so entirely serendipitous and destined to become reality, that we mistake the daunting journey through history’s retelling as a straight line from a-to-b. Albert Szent-Györgyi said: ‘A discovery is said to be an accident meeting a prepared mind’. And the list of examples to support it is lengthy: ● The brothers Kellogg and their Adventistscentric wholesome corn flakes ● Neil McElroy’s pursuit of increased Camay sales for P&G pioneers the concept of brand management ● Percy Spencer’s magnetron vacuum leads to the first microwave oven ● James Wright’s failed effort to create a synthetic rubber becomes Peter Hodgson’s marketing gambit, Silly Putty
P.20
● Fahlberg’s laboratory spill becomes sweetener Saccharin
But this only tells half the story. The ‘instantaneous heroes’ we’re citing, the creators of microwave ovens, Nutrasweet and vulcanized rubber, understood through their own failures that good ideas are a dime a dozen. And while the tales are intoxicating, the reality is that the project-based approach was the catalyst for the divine innovation accidents that followed.
Successful innovation requires three things: 1. Your passion 2. Your ability to persevere 3. Your ability to collaborate and implement Remember, it was the entrepreneur’s open mind that turned the above ‘accidents’ into the innovation endgame. And as Mark Twain wrote: ”It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
WHAT ANGELS WANT
And We’ll Never Be Royals…. By Hetty Green
“….But everybody’s like crystal, Maybach, diamonds on your time piece. Jet planes, islands, tigers on a gold leash. We don’t care, we aren’t caught up in your love affair…..”
No such luck though. They even took the name of the other Lord (Noam Wasserman) in vain, manipulating his renowned Rich vs King mandatory pre-incorporation stage mental massage conducted with mentors and advisers, into the equivalent of a backroom rub down with a girl named ‘Trixie-Bell’.
For me, the missing link in the logic chain at a recent Manchester gathering of startup-stage entrepreneurs was Kiwi songstress Lorde and her electro-urban hit Royals.
What happens if this army of newly trained pitchmonsters reels in the funding from Government and other partially blind organisations?
Her heady mantra of immediate gratification avoidance should have been spun through Nigel Tufnel’s ‘special’ amplifier from Spinal Tap….set to ‘eleven’. In a nutshell it was: Pitch to win. Money is the mantra. And the rest of the business dynamics can be scribbled on the remainder of the fag packet. Let’s do overnight success, create the online audience, worry about perfecting the tech later, pull in the VC’s with zero revenue streams, shoot for the $billion IPO valuation… And all of this money-only malarkey was sung out to a sizeable patch of Google-eyed entrepre-wannabes eager for confirmation that their invitation to the World Economic Forum in Davos is just round the corner….with a star on their dressing room door. Yup, a little dose of the prescient pop princess would have been just the tonic.
There’s much discussion just now about economic bubbles, a return to the 1999 global tech-zeitgeist, people dancing The Charleston in a rejuvenated get-richquick-before-it-bursts world. Maybe, maybe not. But the bubbles of real concern are those empty shells being soaked in pitching steroids without a clue as to what comes next.
With the dynamics of business delivery on the line, they’ll find themselves suddenly thrust off the cliff of post-startup support into a Grand Canyon-sized abyss of anonymity, and once the Angels and VCs have had a look (if they even got to those tables), no prospect of Second Round or Series B. They’d be better off at the crap tables in Las Vegas. Meanwhile, flocks of these doe-eyed sheep are being rounded up (at £199 per shear), perpetuating the cycle and then led to the slaughter by the teeth-whitened podium lotharios HNW calls the Judas Goats.
P.21
STEEL’S VIEW
HEAT 2014
INNOVATION IS ● 4 Regions NO ACCIDENT HEAT Scotland ● 16 Events HEAT North West ● 600-800 high-growth company leaders HEAT Ireland ● One unique HEAT London programme The Brunette
The HighGrowth Company Leaders Programme from HNW Magazine…
For further information contact editorial@hnwscotland.co.uk
INTERNATIONAL
Oil’s Well…That Ends Well From North Dakota to Norway to Scotland’s North Sea
I’m reading through a book called 1339 i Facts and noticed a surprising factoid - just opposite "The bite of the Brazilian Wandering spider causes an erection that lasts for several hours." (must get that on the Christmas list!) - that says: “If North Dakota seceded from the US and became an independent country it would be the world’s third strongest nuclear power.” Wow! Frack me. The once sleepy North Dakota backwater, home to such iconic audience draws as the Theodore Roosevelt National Park and the world’s largest Buffalo statue, is now the new Wild West of oil production, where ‘fracking’ cities like Williston have become booming mining towns, dripping with nouveau millionaires and boasting less than zero unemployment figures. Why? Because the mining techniques of hydraulic fracturing and horizontal drilling have allowed access steady on all ye Greenpeacers - to that natural shale oil resource that until recently technology and legislation would not allow. But the earth has opened. And despite the fearmongering of environmentalists whose picket line options are declining after the more recent global warming findings went cold, the only thing being ‘swallowed up’ is 40 plus years of US oil dependency on OPEC, and the Middle East’s ability to set petrol prices as they see fit. America’s holy grail of oil independence seems now well within reach. Skip with me across the Atlantic to Norway to their globally impressive $800 billion sovereign wealth fund, into which the ‘Wegians’ channel most of their income from oil and gas. What’s their biggest problem? How best to deal with the fund’s growth as the new administration of Prime Minister Erna Solberg reviews its investment mandate.
ByBy The Brunette Alan Steel
Norway started the oil fund in 1996. They made the investment in an attempt to avoid overheating their $500 billion economy. But the move backfired…in a good way. Norway is now Scandinavia’s richest economy.
“And despite the fearmongering of environmentalists whose picket line options are declining after the more recent global warming findings went cold, the only thing being ‘swallowed up’ is 40 plus years of US oil depedency on OPEC, and the Middle East’s ability to set petrol prices as they see fit. America’s holy grail of oil independence seems now well within reach.” And when we look at Scotland, at the impending referendum, at North Sea Oil, you have to wonder if those examples are not signposts to the future. Setting aside the political allegiances, the North-South biases, the yes or no consensus on whether independence is to be or not to be…. It’s really about the wealth, isn’t it?
P.23
STEEL’S VIEW FEATURE: STARTUP DISEASES
LOBAL
The Brunette
● How to distinguish between a business dimple and a strategic pothole ● The most common business startup ailments ● Cures that don’t kill How do you distinguish between ‘business dimples’, those cherubic birth defects that make our new companies appealingly naive and needy to angels, and strategic potholes that, like acne scars, would require a more surgical procedure to correct? The problems that arise in startup world are numerous and potentially fatal. Distinguishing the venomous from non-venomous issues can be challenging, but like snakespotting in the wild, where you steer clear of rattling sounds and diamond-shaped heads, there are telltale identifiers to use as your guide. The signposts rarely change. Daniel Tenner wrote some years ago The 9 Deadly Startup Diseases and How to Cure Them, and it remains a crucial document, one I keep with me to help from getting bitten in the business jungle. And I recommend you do the same. P.24
The 9 Deadly Startup Diseases and How to Cure Them - Daniel Tenner Startup Disease 1: The Imaginary User Syndrome A product that’s not geared towards a specific user is unlikely to benefit anyone in particular; hence, there’s no such thing as a generic user. No matter how great your initial vision might seem, if you don’t have a target audience in mind, your startup will lack direction and flounder. In addition, it’s difficult to market to everyone, so not only will your product suffer, it’ll be hard to sell too.
FEATURE: STARTUP DISEASES Symptoms: Your product is targeted at all or most small businesses online. You don’t know any of your likely users personally, but you’re sure they’ll find your product very useful. Your product seems so versatile that it will be useful to practically anyone. Cure: Stop developing until you’ve established a small, defined set of users who could benefit from your product. Then contact these users and convince them to test-drive your site. Tailor the product so that it benefits them, and chances are it will appeal to other like-minded users.
Startup Disease 2: The Frenetic Distraction Pox A startup’s primary resource is the time and intelligence of its founders. That resource can easily be squandered on non-essential tasks that don’t bring the business closer to break-even (and then to profit). Until you have paying users, every activity in your startup should be aimed squarely at achieving that objective. Symptoms: You’ve had a productive day, but didn’t actually do any product development. You’ve just spent a week preparing stationery and business cards for your startup. You haven’t released a new version of your product to your users in the last month. Cure: Refocus. For a startup, there are only two activities that matter: building the product and attracting users. Although there is a constellation of other nuisances such as business administration and accounting, these should be avoided, or at least delegated to those who have the appropriate expertise.
Startup Disease 3: The Wrong Hire Infection The caliber of the people who work on a startup is directly related to the quality of the product that they deliver. The raw material of startups is people. Bring on board the wrong person, and it could cost you your startup. Bringing in friends and family who lack the required skills is a common cause of a startup’s early demise. Symptoms: You find yourself micromanaging one of your cofounders or employees. You have to establish a policy of how many hours people will work each day. Someone isn’t pulling their weight. Cure: Startups have no room for people who need to be micromanaged. The time you waste and unnecessary
distraction could kill your startup. The smart, brave solution in those cases is amputation. Let them go gently if you want, but let them go.
“A startup’s primary resource is the time and intelligence of its founders. That resource can easily be squandered on non-essential tasks that don’t bring the business closer to breakeven (and then to profit).” Startup Disease 4: The Implicit Promise Fever Assumptions are dangerous, particularly if they occur between cofounders who are close friends. Sometimes close friends assume that they know what the other’s thinking. Unless your friend has telepathic power, that’s not the case. Symptoms: There are a number of issues that bother you, but, although they haven’t been discussed, you’re sure they won’t be a problem later. You’ve not discussed share percentages, or voting rights, or what to do if there is a major disagreement. Everything is always done faceto-face (or on Skype); nothing is written down. Cure: To cure this disease, make the implicit explicit. Have those discussions. Write the results down. You will find much more disagreement than you expected, but that’s good. Work it through, come up with compromises, and agree on a way forward. You’ve come this far already. Together, with a distinct understanding, you can solve whatever problems you dig up. In your discussions, don’t avoid the question: “What if it all goes wrong?”
Startup Disease 5: The Stealth Product Delusion In my experience, most product developers have a natural inclination to wait as long as possible before showing off their creation to others. After all, until you receive external feedback, you can continue to nurture the illusion that your product will soon be flawless, and you can work hard to make sure it will be, right? Right? Symptoms: You want your product to be just perfect before you let real users near it. You’ve been working on your startup for several months now, but no one outside the found-
P.25
STEEL’S VIEW FEATURE: STARTUP DISEASES “All of your friends (or at least those who own a computer) should know LOBAL about, and have provided feedback on, your startup. Even more importantly, find some real users and ask them to have a look. Yes, they’ll tell you that it’s far from perfect. With any luck, they’ll give you enough feedback so that you can fix the problems and have a shot at building a good product.”
ing team has seen it. You haven’t shown your application to your significant other or your best friend, because “it’s not ready yet.” Cure: All of your friends (or at least those who own a computer) should know about, and have provided feedback on, your startup. Even more importantly, find some real users and ask them to have a look. Yes, they’ll tell you that it’s far from perfect. With any luck, they’ll give you enough feedback so that you can fix the problems and have a shot at building a good product.
Cure: No one likes to discover that they’ve been wrong all along. However, if you’re trying to go south and you find yourself walking north, it’s always best to turn around. “We’ve walked this far already” isn’t a good enough reason to continue heading in that direction. Chances are, you’re much, much further from the completion of your product than you think. If you’re convinced that you need to change platform, do so now – don’t wait until you’ve invested even more resources in the wrong direction.
Startup Disease 6: The Wrong Platform Fracture
Startup Disease 7: The Other Interest Disorder
Picking the right platform (language, framework, technology) for a startup is complicated. The platform needs to be robust but flexible, allow for rapid development, and, of course, it must be a platform you are able to work with; at the very least you or one of your cofounders should be familiar enough with it to be able to create your product.
The creation of a startup is an all-consuming fire. Few people can successfully pull off that extraordinary feat while simultaneously spending their energy on another proposal (though they do exist). Entrepreneurs, by definition, like to start projects. For them, the distractions are many. After all, there are so many interesting, worthwhile things that one can do in the world.
It’s worth doing your research to make sure you’ve chosen wisely from the beginning. And you really should switch to the right platform as soon as possible if you discover that you’ve made the wrong choice; choosing an unsuitable platform can be a surefire way to snatch defeat from the jaws of victory. You definitely want to avoid a scenario where, upon launching, you suddenly realize you have to rewrite the application from scratch. It happens more often than you might suspect!
No one likes to discover that they’ve been wrong all along
Symptoms: Symptoms:
P.26
No matter how hard you work, it takes forever to build new features because of your platform’s limitations. You know that you’d be better off using framework X, but you think you’re too far down the line to change.
When you explain what else you’re doing, you feel the need to finish the sentence with “but I’m still working on my startup.”
Your gut is telling you your choice of technology is wrong, or the way you’ve applied it is flawed, but you’re almost done so you figure that you may as well press on.
You haven’t found the time to work on your startup in the last week, but you’re definitely going to return to it soon. You’re working on several startups simultaneously.
FEATURE: STARTUP DISEASES Cure:
Startup Disease 9: The Marketing Blind Spot
This disease is deadly if left untreated. After all, sometimes there is an enterprise that’s more interesting and rewarding.
“Build a better mousetrap, and the world will beat a path to your door.” If only!
A new undertaking often looks more exciting than a project you’ve already spent many months on. However, if you’d rather be working on a different venture, and you’re not bothered by wasting all the effort you’ve put into your startup, then perhaps you should jump ship. If you decide to abandon your startup, you should do so openly. If other people are involved, you also need to ask yourself whether it’s worth letting them down. And if it is, you should pull out cleanly, rather than pretend to still be working on the startup.
Startup Disease 8: The Perfection Hallucination All good product designers are perfectionists. The right kind of graphic designer feels physically sick when the font is misaligned by one pixel. The right kind of programmer will refactor the code even when it’s working fine, because it’s just not right. However, if you want to deliver a product of which you’re completely satisfied, then perfection must be balanced with a good dose of pragmatism. Otherwise you risk never launching your product at all. This disease often hits later in the product development cycle, when you’ve already built a startup that people have liked. The expectations have been set, so you feel that every subsequent update must be perfect.
Users are more forgiving of progress in the wrong direction than of a lack of progress Symptoms: You plan to spend two months on a new feature before showing it to users. Even though the basic functionality is there, you’re afraid that the new feature is going to fail if you release it now. You’ve built a lot of new stuff recently, but none of it has been released to users because it’s not quite ready yet. Cure: Users are more forgiving of progress in the wrong direction than of a lack of progress. What you’ve built will never be perfect, but if it’s close enough your users will tell you how to improve it. However, they can only do that once they see the new changes and features. Release early, release often. The only way to learn from your mistakes is to accept that you will make them.
Some startups (in particular, a certain well-known search engine) have succeeded using little or no marketing, relying largely upon word-of-mouth referrals. While this may work for some, it is far from a safe, repeatable marketing philosophy! Simply assuming that users will sign up to your web site just because you’ve built a great product could cost you your business, even if it is a great product. Symptoms: You’re counting on word-of-mouth marketing alone to spread the news of your product.
“Build a better mousetrap, and the world will beat a path to your door.” If only! You have no idea how you might reach your target users via traditional marketing. You think marketing and sales are second-rate activities, and you’d much rather spend all your time developing the product. Cure: Spending your time on development is never a mistake, but no magic fairy will deliver your users to you. Balance the two activities. Find out how to reach your target users, and make the effort to do so. Once your startup is worth marketing (for example, when it is capable of turning a profit), market the heck out of it! Marketing doesn’t have to cost much, but if you don’t do enough of it, you’re setting yourself up for failure.
Final Advice from the Doctor There are many more ways for startups to fall ill, wither, and die. The bad news is that some of them may well afflict your startup. The good news is that almost everything that can go wrong can be fixed – if you figure it out quickly enough. Still, prevention should always be your priority. By monitoring the wellbeing of your startup and watching out for these deadly diseases, you’ll ensure your business enjoys a healthy and prosperous life.
P.27
Are you embarrassed about your companys’ website? you are not alone... to be able to stand tall and feel good again contact
0131 240 3390 geckonewmedia Interactive solutions for proactive business
Web: www.geckonm.com Tel: 0131 240 3390 44 Melville Street, Edinburgh EH3 7HF
INVESTOR
Double By The Brunette
I love all the confusion out there right now, all the tech bubble chat being blown about by lofty market valuations, shorting bears and shorter memories of what 1999 was really like. We seem to have forgotten how the millennial lunacy drove an inexplicable belief that the Internet could somehow magic away the need for market fundamentals, or at least in the minds of investors. And now here, ensconced in dot.com 2.0, the sequel to the original of a baker’s dozen years ago, cometh the bubbles. It’s he says she says: Expert 1: “Sure there’s a bubble. Snapchat, Twitter, the revenue bupkis brigade.” And the economist in the room: “There’s actually another much bigger bubble wrapped around the smaller tech-sector bubble, like a double-bubble or sorts.”
Bubble
It gets better (or at least more creative). Then our friendly neighbourhood analyst chimes in: “Don’t worry, unlike dot.com the market bubbles now are far less co-dependent. We’ll likely have a collapse but nowhere near the scale of 200/01.” Did he just say co-dependent? Does this come with counselling?
This just in from Mike Williams, the contrarian voice of reason from America’s windy city of Chicago. Mike’s not blowing any bubbles, and by the sounds of it neither should you. Sentiment moves markets. The chart below tells us that we’re right in the midst of a Bull market. And while the figures tell the tale, majority view continues to hate or deny it. Sounds like the beginning of every other bull market in history to me. And that’s no bad news.
P.29
STEEL’S VIEW THE WALL
GLOBAL WARMING RETURNS
By Ed Emerson
Kaiima Startup Seeds Super Crops After years of strenuous endeavour, an Asian entrepreneur has finally succeeded in developing a way to turn whisky into water….. Nope, no punchline required. Is the concept interesting?
P.30
Well, maybe in a laboratory….or to gatekeepers at an alcoholics anonymous “Newbie Night”. It’s like innovation without insight, putting Descartes before des horse, and so far removed from marketable reality that even a “Kibu.com” engrossed late-90’s techfunding frenzy would have gagged on the Water-fromWhisky idea. A business requires far more than good intentions and technology to succeed, a conclusion super crop startup business Kaiima exemplifies, having firmly placed the innovation plowhorse at the front of the business in the land of Galilee. Kaiima Bio-Agritech is sowing the
THE WALL seeds of a food revolution in an experimental rice field. Backed by Li Ka-shing, Asia’s richest man (he’s the one bolstering Hong Kong’s property market, because, well, he owns it), Kaiima CEO Dr Doron Gal has the ambitious goal of helping to feed the world while making money in the process. How so? Kaiima hich means ‘sustainability’ in Hebrew, appears to have developed the technology to boost crop yields by up to two-thirds.
Paterson Leads £2.5m Health Care Services Deal
The test site in Galilee’s Moshav Sharona is the launch pad for the use of a genome multiplication process to, in the words of Bloomberg’s Elliott Gotkine, ’increase yield potential, improve water use efficiency and fortify plants against harsh environments’. And it doesn’t stop at rice. Tests on corn and wheat farming are said to have yielded 15% to 50% increases in production. That’s a lot of upward traction in a global wheat, corn and rice market where demand has increased 90% in the last 30 years.
Kaiima’s holistic approach permeates every aspect of the business, from increasing yields and sustainability right down to the castorfueled tractor that harvests its own gas. And since castor doesn’t make for good eating, little is wasted. Is an edible tractor next? Doran Gal founded Kaiima in 2007, enticing not only Li Ka-shing but a number of other wealthy and powerful investors including World Bank Group’s International Finance Corp. The duo served up a $65 million financing round in September of this year to fund further research and
Stephen Paterson HW Corporate Finance is pleased to announce the combined £2.5m sale of Scottish domiciliary service providers Lowland Care and Alpha Home Care to Real Life Options based in Nottingham, England. HW Corporate Finance in Edinburgh, led by Corporate Finance Director Stephen Paterson, managed this transaction from inception to completion. Stephen Paterson says, “Lowland Care and Alpha Care are well run businesses with long established track records in domiciliary care services both to the private and public sectors. This sale demonstrates that there are solid business opportunities available to both management and investors.”
P.31
ENTREPRENEURS
Searching For Your Business USP’s…?
GLOBAL WARMING RETURNS
…Here’s Three Ways to Fork It! By Ed Emerson Thursday evening. Sat with a finance director, an accountant and a clowder of non-execs. And while I used to dread these financial journeys, now I find them better catalysts for ‘think time’ than a quiet 20 minutes in the loo with my Samsung.
HNW? Unique? USP? Let’s checklist that one. Your unique selling point is that compelling thing, that attribute, that distinguishes your company from the competition.
I’m dropping in every so often on the conversation. Blah, blah blah … outgoings…blah blah blah ….. deadline …. blah blah blah … “Hey, what do you suggest we do with that, Ed? Ed. Ed?”
And it’s that message that you cluster bomb your target audiences with, over and over again in ever more creative ways.
I’m miles away. No, not lost in that old ‘I happened to run into Sandra Bullock at a bar in Monte Carlo’ mind twerk. Nope, it was a stray chat grenade, pin pulled and rolled at me earlier today, that has me pensive.
The accountant has now given the ‘red ink’ question over to the FD who looks like he too might have fallen into a Bullockstyle reverie for a moment there. Think he’s more of a Jolie type though.
“HNW?” He asked. “Sure. Just remember Ed, you’re as unique as everyone else!”
“HNW?” He said. ”Remember Ed, you’re unique just like everyone else!” One line in a much larger conversation and he’s got my New York paranoia tingling. I never even noticed the pin prick he’d made until the hole started bleeding out thought bubbles in my head. The accountant is now sage-faced, tapping a silver pen at an uncomfortably large number on an excel in front of me…and it’s on the wrong side of the balance sheet.
P.32
You integrate it into all marketing efforts. It’s the reason you’re in business. Someone has opened the door interrupting the proceedings to offer more coffee. Everyone round the table appears ready for a breather. But what if you’re in one of those ‘generic business’ areas? I once heard that if you find yourself ‘generic’,
ENTREPRENEURS create an extra value proposition or EVP. But EVP plucks at my paranormal strings – electronic voice phenomenon – and pulls up visions of TAPS’ black Scooby Doo like ghost hunting Dodge van. So let’s just call it ‘forking’ instead. It’s more my speed.
Three Ways To Fork It How do you create an additional motivation to buy from you in the minds of your current or potential customers? 1) Cost This is usually the death knell for a sector desperately in need of innovation. There’s only going to be one ‘cheapest’, and the race to the bottom of that barrel usually leaves it empty. 2) Differentiation Are you doing it better, faster, safer, cooler or leaner than your competitors? It’s the alternative to the above option of price slashing, and it means routing through your offerings, your people and your business processes to unearth that critical mass that means something to the market. No differentiation? No secret sauce? No FCUK moniker? No Air France plastic cutlery that converts into an
“To get people talking, you need to do something extra. But most companies get it wrong. They try to create a big, expensive, splashy thing. Which, of course, is so obviously a marketing stunt that customers ignore it.” ‘airplane’ (I’ll tackle that one in a minute). No Meerkats, or mythical dancing Joe McKinney Guinness anticipation advert. No differentiation, no business. 3) Niche-ing Finding a market within a market. Credit to Aussie Adam Tregear @AdamTregear for that one! It starts when you focus on and then narrowly define a market. Then you nano-focus and either lead on cost or differentiate yourself in that narrower space.
The coffee arrives. There’s an ‘in very bad taste’ joke that has taken the gathering through bouts of recurring laughter. Then the sobriety kicks back in with the accountant’s austere sounding: “How are we going to resolve this?” Andy Sernovitz, on his Damn I Wish I’d Thought of That blog writes the following:
Are you doing it better, faster, safer, cooler or leaner than your competitors? It’s the alternative to the above option of price slashing, and it means routing through your offerings, your people and your business processes to unearth that critical mass that means something to the market. Delivering the expected doesn’t spark a word of mouth conversation. (But it does get customer satisfaction.) To get people talking, you need to do something extra. But most companies get it wrong. They try to create a big, expensive, splashy thing. Which, of course, is so obviously a marketing stunt that customers ignore it. Instead, you need one simple conversationworthy bit of awesomeness. It’s easier than you think. Like the Air France cutlery that becomes a toy plane (page opposite). It’s a goofy thought that I’m gonna fly Air France for the stackable plastic crockery or cutlery that becomes an airplane, but it’s cool for kids, and an ever-so-slightly unforgettable brand additive. It’s easily a social step removed from competitor Emirates’s service design complimentary Chauffeur-drive to get you to the airport offering, but still remarkably target audience focused and friendly. I’m consciously now back amongst the now sombre gathering. Thank god these aren’t my accounts. What a F-ing mess. The lesson: don’t kid yourself by thinking you’re in better shape than you are or that you’re naturally unique…and don’t bring me in as non-exec. I’m perennially distracted.
P.33
YOUR ECONOMY
Remember, Remember‌.. GLOBAL WARMING RETURNS The Myths of November By Alan Steel
Quite a month November..... Early November two years ago, following two consecutive unpredicted severe winters that left Fran and I unable to drive up the steep hill to our home for weeks, I received through my research a Report from Climatologists predicting, thanks to Atlantic Ocean Temperatures and Cycles, one of the most severe Winters since 1947, the year I was born. Unwilling to face again the arduous trek to the house, we rushed out and bought a 4x4. A couple of days later, on a visit to Dougal Philip's Garden Centre for candles preparing for power loss resulting from the expected blizzards, I asked Dougal what he expected that winter. Dougal, I asked," with you an expert on Nature, the trees, plants and behaviour of animals and birds, what's winter going to be like? His response was he confidently expected a mild one. On what basis I asked? Well, he said, we've run out of Snow Shovels already, can't get Road Salt anywhere, and I hear the price of 4x4s are going through the roof!" (it was a mild winter by the way, as was the following one). It's a lesson worth learning --- When it's in the headlines it's time to be contrarian! Especially when it comes to Economics and Markets. Any idea what was to bring down the World Economy last November? Do you remember the hysteria about Debt Ceilings and Fiscal Cliffs? CNN Money summed it all up last November with the following headline --- "Debt Ceiling May Collide With Fiscal Cliff" and went on to remind us that in 2011 "US Congress eventually agreed to raise the Debt Ceiling but the brinkmanship earned the US its First Ever Downgrade, and rocked Stockmarkets." Oh no, and just
P.34
when we thought it was safe to leave the Dark Room. The fear generated by last November's gloomy wall to wall predictions sadly once again generated widespread fear among investors and pundits. Despite rising stockmarkets all that year, one problem after another, including headlines of the end of the Euro, the collapse of Greece, Italy, Spain or Portugal --- you choose --- in the US where most folks have no idea where these places are, nevertheless led to panic selling by investors with $125 Billion leaving the US market bound for "safer" places like Deposits. What happened next? Once again "problem" solved. Stockmarkets rose and economic blizzards failed to materialise while the worried shivered in "safe" havens, Deposits and Bonds, which delivered next to nothing. Statistics show the Footsie Total Return over the last 12 months up 19.3%. Those brave enough to sit out the noise and sticking to our premise that things are better than they've been for years did even better, with one example, an M&G Income fund managed by a favourite of ours, Stuart Rhodes, up over 26% even after charges the media insist are too high. Here's another question. When do you reckon this quote appeared in Business Week magazine?
"This was no mere Recession, it was a Contained Depression and we're still in it. Profits which are normally up about 60% at this stage of the Recovery are only up 25%. The reason is .... that the US has entered a New Era of sharply reduced Capital Spending with Investment dropping significantly. This Fall has been caused by Overcapacity and Excess Debt which take longer to right ....... these troubles have been brewing for decades ...."
YOUR ECONOMY What's your best guess? After the Dotcom bust of 2000/01? Or how about after the Great Financial Crisis in September 2008 when the world held its breath as Banks tottered on the brink and worldwide millions lost their jobs? ...... No ......actually it was from November 1993!
Unsurprisingly in the last 5 years the Footsie's up, net Dividends reinvested, by 93%, while sadly millions sit in Deposits or worse thinking safety's been the better option. Incidentally Stuart's Global Dividend fund, mentioned earlier, is up 131% on the same basis.
Yes, twenty years ago this month there was no hope for investors. The Footsie was a smidgeon above 3000. The total return from it since then is 332% would you believe, with well managed Global Growth funds higher, even after charges.
Ooops .... I have to remind you that's after charges, and you should also bear in mind the value of investments can go up as well as down. As to the weather this winter I hear "experts" predict a severe winter, but I did spot in a friend's car today a brand new Snow Shovel.
One more example underlines why investors should ignore popular headlines. Five years ago wasn't too clever either. September '08 saw one of the world's biggest banks, Lehman Brothers, collapse bringing with panic not seen since the Wall Street Crash 80 years earlier.
Regarding Stockmarkets, now we're told it's too late to join the party to which pessimists weren't invited. They've been wrong for 20 years, but unembarrassed by such failure now they've become West Ham supporters --- Bubbles everywhere!
By November, chemists were running out of sleeping pills and toilet paper supplies were running low. Only a fool would invest at such times. Fortunately one the world's best economic lighthouses, Warren Buffett, is one such "fool."
First there was no hope, but now the system's overheating causing bubbles. Economic numbers don't show that. Sentiment statistics agree there's no bubbles in sight, but hey, they've have to find something to worry us about. And if their Bubble
P.35
Business angels More than just money Millions of ÂŁs, Thousands of jobs, Hundreds of deals, One Network...
LINC Scotland is the national association and representative body for the business angel community in Scotland, and was a founder member of the European Business Angels Network (EBAN). Since our establishment in 1993 our members have made investments in hundreds of companies.
EUROPE & SCOTLAND European Regional Development Fund Investing in your Future
of millions of their own risk capital, on average levering three times more from other sources. Just as importantly they have invested their own skills and experience in the next generation of SMEs. The companies supported have created thousands of high quality jobs in the Scottish economy.
www.lincscot.co.uk
YOUR ECONOMY theory proves wide of the mark, an unlikely replacement sits in reserve ...... Pensions. You must have seen recent articles or the recent Channel 4 programme "Pension Rip Offs." Pensions are the new enemy. On what basis? Charges are too high. Greedy Insurance Salesmen are conning us for high commissions. Investment returns are poor. Nobody bothers to explain them. When you die, all the so called pathetic returns disappear.
Do remember there are very few if any millionaire Journalists. Mainly they exist to grab attention away from the rest. Sadly bad news sells.
If you live long enough and manage to fight off more salesmen trying to sell you even worse plans, the income you're paid by way of Annuity is so pathetic you won't afford rising energy bills. Trouble is, that's mostly rubbish. No wonder most of us don't save for retirement.
Charges should be no higher and in many cases lower than those attaching to Stockmarket ISAs. Profits made in the plan roll up tax free. The better the funds invested inside the higher the returns. If you die before taking benefits and before 75, your family receive all the money tax free, free of Death Taxation too. You don't have to buy Annuities ever.
Today a well designed well invested Pension plan has no equal in over-all effectiveness. Tax Relief up front gives you an uplift of between 25% and 81% depending on your tax rate.
Things have changed for the better. Headlines will probably continue to lead you the wrong way though. So, as Monty Python reminds us"Always Look On The Bright Side Of Life".
P.37
YOUR ECONOMY
JP Morgan’s $13 Billion
‘Selfie’ Those bonds backed by faulty residential mortgages helped sow the seeds of the meltdown.
Doing the Bloomberg Shuffle shuffle of late. Let’s see, JP Morgan is “acknowledging the statement of facts” but “not admitting to any violation of law” in order to resolve probes into its sale of mortgage bonds. The settlement to the US Justice Department reads like a $13 billion Snapchat ‘market selfie’: “Big thumbs up everyone, the pay-out to the US Government won’t affect profits, and now we’ve got a Wiki profile for helping to fabricate ‘2008’ into a synonym for disaster. It reminds me of me dear ol’ daddy who, while retrieving my newly-DUI’d ever-the-prodigal brother from a Westchester County (NY) police cell, said to me: “Eddie, it ain’t right, but most of life’s problems go away if you throw money at them.” Wonder if he owned any JP?
The message, one likely to Snapchat self-destruct in T-minus 10 seconds and counting, is simples: When you’re the biggest US lender by assets you’re allowed to mislead investors and the public.
To be fair, JP Morgan only seeded the clouds to rain, it was the public who went out and got wet wet wet by agreeing to outrageous 6-times salary mortgages to buy the dream home….oh, and opted for the 125% loan-tovalue deal taking the extra 25% as unsecured debt. And, like all those sated mortgagees at the time, JP Morgan was not alone in bundling toxic loans for sale to unsuspecting investors. Wheel out JP CEO Jamie Dimon to say the $13 billion pay-out is covered by reserves and up goes the share price, a stock that has returned 79% including dividends since January 2012. Mr Dimon, it’s time for your close up.
P.39
PRACTICAL BUSINESS HNW Magazine’s Practical Business section looks at key areas of business needs across legal, accountancy, marketing, finance, leadership, strategy, research and other areas of support.
RISKY BUSINESS Joshua Brown,The Reformed Broker
P.41
COVERING YOUR ASS-ETS Alan Steel, ASAM
P.42
DIATRIBE - JUDAS GOAT: INKSPOTTING Ed Emerson, Editor
P.45
PRACTICAL BUSINESS
Risky Business Joshua Brown, The Reformed Broker Earlier this year, everyone in the invest- ment universe seemed to be plowing money into funds and products marketing the low volatility anomaly. There were a host of new “low-vol” strategies launched and a handful of ETFs, all of them showing the decades-long superiority of low beta strategy. Those with a quantitative background immediately recognized what was really going on – it was just dividends and the value premium in drag – you see, low volatility sectors and stocks tend to have a lot of overlap with high-yielders and “cheaper” names. Unfortunately, by adding low-vol index products to their portfolios, well-meaning advisors and investors were essentially chasing the most expensive, overbought stocks in the marketplace just as they were peaking out in valuation for the cycle. Merrill’s chief of quant strategy, Savita Subramanian, looked at this phenomenon and notes that all of our notions of “risky” and “defensive” may need to be flipped upside down as the year draws to a close…
The changing risk profile for sectors: With this year’s equity returns being largely driven by sectors generally thought to be lower beta areas of the market (Utilities, Staples and Telecom), our work suggests that the definition of risk versus safety could dramatically change following this year. Sectors that have grown higher beta, as measured by the biggest positive discrepancy between 1-year and 5-year betas, are Telecom, Utilities and Consumer Staples. On the flipside, some decidedly cyclical sectors like Financials, Materials and Industrials have seen a collapse in betas using a 1-yr versus 5-year measure. Josh here – So where is the true low beta investment to be had? It’s very interesting to see the materials stocks and banks and industrials declining in volatility relative to the supposedly stable sectors like telecom and utilities. The market always keeps us guessing.
P.41
PRACTICAL BUSINESS
Covering Your Ass-ets
By Ed Emerson The world turns round and round. The seasons change in cycles - winter, spring, summer, autumn (unless you’re in Canada, where it’s more like ‘almost winter’, ‘winter’, ‘still winter’, and ‘road repairs’!). The sun comes up every day (debatable in Scotland) and then sets (or so they tell us). Everything moves round in turn. And that includes the markets. They operate in cycles just like the seasons…except longer sentiment driven cycles, just like in the picture (opposite): And the vast majority of folks out there get the timing wrong every day, every month, year on year, leaving the market when they’re told things look bad and joining the market when everyone believes that things are wonderful. Buying high and selling low…just like Wall Street wants you too. Hey, who do you think is populating those papers with miles of media ink?! Despite the lessons the herd continues as before, an unvirtuous cycle indeed.
P.42
As George Bernard Shaw wrote: “The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”
PRACTICAL BUSINESS Covering Your Ass-ets (cont.) They run to the ‘safety’ of bank deposits with their cash and earn little or nothing, or to an index tracker - an investment that operates like a nightlight whose sensors are broken; it only comes on in the day and won’t light up when it’s dark. And they wait, en masse, until the papers say it’s ok to come outside again. But the media’s ability to move the herd exactly the wrong way is the stuff of legend. Once it’s in the news, folks, it’s usually too late. There’s nothing wrong with being risk averse or wanting to follow the crowd. It’s both a natural reaction and perfectly reasonable. But there’s the rub. As George Bernard Shaw wrote:
Case in point. Yesterday I came across a Christmas clock countdown site - www.xmasclock.com - while rummaging around the Internet looking for stories, market opinion and the whole Wall Street he-said-shesaid dross. Xmasclock shows you a snowy scene with a simple display running backwards from now until Christmas day. The image somehow reminded me that I had yet to see a newspaper announcement predicting this years retail sales will be all doom and gloom. So I tweeted that comment and didn’t think about it again. Not 24 hours later…..Ta Daaaaa! The first story appears on Reuters. Let the crap retail sector barrage begin!
“The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”
And now everyone will be in a panic, talking over cubicles, in pubs and on public transport, about how everything sucks…when everything actually doesn’t. It’s all cycles.
Folks with real money like Warren Buffett (who started out with nothing in Omaha, Nebraska) are very unreasonable in that way.
Try it yourself. Google: ‘Fiscal cliff November 2012’. If you read one of the articles that come up it will sound like it could be from today.
You’ll find them walking into those rooms that people have abandoned in a panic, when in fact the best investment deals are waiting there because they’re cheap. Simply put, when it comes to investment Buffett doesn’t like crowds. And neither should you.
The only thing that’s been changing out there are the markets. They’re breaking records, and they’ve been moving upwards now for four years. But you’re still busy covering your assets.
P.43
The talents and experience of our graphic designers, combined with the in-depth technical knowledge of our web team, provide the complete solution for all your marketing requirements
Graphic Design | Web Design | PR | Marketing Advertising | Photography | Social MediaInternet Marketing | Exhibition Design
studio. 1190 Argyle Street, Glasgow, G3 8TE tel. 0141 337 3333 fax. 0141 337 3335 em ail. george@geo-graphicsdesign.com @geoflamedesign
www.geo-graphicsdesign.com
DIATRIBE
Judas Goat INKSPOTTING By Ed Emerson About a month ago I wrote a piece for HNW Magazine called Crowd Misfunderstanding about the lack of market clarity surrounding crowd funding, and included the excerpt below as a personal example of not seeing the woods for the trees: I remember years ago my tech-geek neighbour made a rare appearance at my door to gather opinion about a new thing he referred to as ‘blogging’. “So let me get this straight.” I said. ”Everyone with a computer can now just write stuff onto the Internet, with no practical content controls, and randomly communicate with anyone else for no apparent reason?” “He nodded: “That’s about it.” “Sounds f-ing stupid.” There ended my career as a soothsayer.
A Judas Goat is a trained goat used in general animal herding…with a twist. This bearded Billy associates with groups of sheep or cattle and then leads them to a specific destination like, for example, slaughter. It is as active in the business world as it is in the barnyard, and just as dangerous.
Back to the present, and the aforementioned fundamental shift in communications called social media has since grown arms, legs, a beard, raised a family and is now moving global markets.
And right alongside it stands the citizen journalists, once widely perceived as anarchic weeds in the garden of traditional media, openly questioning the daily press and their reporting ‘sameness’; a downright odd coincidence that begs the question: “Hey, are you guys all feeding from the same information trough?” P.45
DIATRIBE And some of these citizen scribblers – call them entrepreneurs – gathered mass, honed their skills and offered insights, rolling their respective blogs forward like snowballs across the Internet’s front yard as more and more readers began to stick.
The Joshua Browns, the Mark J Perrys, the Alan Steels and Mike Williams’, the Paul Grahams, Mark Susters, Brad Felds and Andrew Chens started giving us something other than the press releases of Government agencies. They started to think it through, challenged conclusions, and upended the urban myths that littered our thinking, feeding it back to us in a way reminiscent of the columnists of yore; the ones you looked forward to reading. Mistake me not, those traditional scribblers are still out there too, but they’re few and far between and increasingly constricted by all the foibles of modern day media and publishing; choking on their chosen art like a sexual asphyxiast chasing a happy ending.
P.46
The Judas Goat in all this is the belief those offerings outside mainstream press are insignificant, irrelevant or less than equal to their broadsheet brethren. You just need to get in there and find them, like shoveling through 900 or so Sky channels before you come upon modern day Waltons-style Duck Dynasty or Man vs Food’s Adam Richman testing his gastronomic prowess and suddenly realising your hooked. And citizen ‘ink spotting’ is getting easier as a few entrepreneurial legends have gone mainstream. You need look no further than Amazon’s Jeff Bezos buying the Washington Post from the Graham family, John Henry (finally) picking up the Boston Globe from the New York Times, Berkshire’s Warren Buffett adding The Press of Atlantic City to his 30 plus daily titles. OK, so maybe Sam Zell’s ’07 purchase of The Tribune ended badly..very badly, as did Brian Tierney’s Philadelphia Equirer experiment. but the entrepreneurial move into the traditional media space continues. Or as Bob Dylan famously crooned:
“Gather ’round people, wherever you roam, and admit that the waters, around you have grown…for the times they are achangin’…”
Aye Cloud
New Technologies New Economy New Scotland One Constant ...
To find out more visit nvtgroup.co.uk Tel. (+44) 08453-893-300 NVT Group