Posted by: admin | October 10, 2008

Sequoia Capital “RIP: Good Times” Presentation

Sequoia Capital is one of the most successful and longest running venture capital firms located in Silicon Valley.  Since they were founded in 1972, they have invested in some of the most successful companies of the last decade, including but not limited to: Electronic Arts, Google, Ebay, Paypal, Yahoo, and YouTube.

Just to give you an example, Sequoia invested a total of $11.5 million in YouTube from November 2005 to April 2006.  In November 2006, Google acquired YouTube for $1.65 billion.  Sequoia’s stake in YouTube has been estimated at roughly 30%, which would give it a value of $495 million, giving the firm a 43x cash-on-cash return in only 12 months!

These guys are obviously very, very sharp.  Sequoia Capital recently gathered the CEOs of its portfolio companies for a presentation on how to survive an economic downturn. The message is very simple – companies need to stay ahead of the curve as much as possible. Cut costs now, and raise capital if you can. If there’s someone out there willing to buy you, do it. Its 56 slides but has some really insightful points, you should check it out:

Sequoia Capital slideshow on the current economy

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Posted by: admin | October 9, 2008

High-End Female Asset Analysis

A husband and wife were having dinner at a very expensive restaurant this absolutely stunning young woman comes over to their table, gives husband a big open-mouthed kiss, then says she’ll see him later and walks away.
The wife glares at her husband and asks, “Who was that?”
“Oh,” replies the husband, “she’s my mistress.”
“Well, that’s the last straw,” storms the wife. “I’ve had enough! I want a divorce!”
“I can understand that,” replies her husband, “but remember, if we get a it will mean no more shopping trips to Paris , no more wintering in Barbados , no more summers in Tuscany , no more Lexus in the garage and no more yacht club. But the decision is yours.”
Just then, a friend of theirs enters the restaurant with a gorgeous babe on his arm.
“Who’s that woman with Jim?” asks the wife.

“That’s his mistress,” says her husband.
“Ours is prettier!” says the wife.

In hard economic times like these, you have to find some humor in life.  The guys over at Long Short Capital wrote a funny post analyzing “Who, in the current financial climate, is in the best position: the high-end wife, the high-end girlfriend or the high-end hooker?” as well as “their relative vulnerability in relation to the vulnerability of the Wall Street honcho who might be their husband, boyfriend and/or client?”

Also importantly, for clarification, their definition of “High-end” means “extremely firm buttocks and/or thighs that do not touch while standing”.  Hilarious.

Click here for High-End Female Asset Analysis by Long Short Capital

Excerp:

The High-end Wife is likely to adopt a simultaneous “flight to quality” strategy or, in layman’s terms, “pull a Jackie O”. But she lacks the understanding of markets to know that this is a GLOBAL financial and, soon-to-be, economic crisis, so her Aristole will really be a Raffaello.

Posted by: admin | October 8, 2008

The Best Online Personal Finance Website

I recently discovered Mint.com, and I must say it is the best online personal finance website.  In a nutshell, Mint.com aggregates all of your banks/credit cards/investment accounts information into one place online.

Here is a snapshot of the overview page that has all your accounts:

First, let’s walk through the process. You fill in your email address and passwords, and then almost immediately begin filling in sign-in information for the online banking service you use. The graphic user interface is fast and intuitive:

mintcom-adding-accounts.jpg

Within minutes, Mint has pulled the most recent 132 transaction from four credit cards, a checking account, and paypal. They support hundreds of different accounts, from banking checking and savings, credit cards, Macys and other store cards, as well as investment accounts. In the near future, they will support student loan accounts as well.

Yes, this is scary, but Mint claims they can keep you safe by not storing your banking login information themselves:

We ask for your online banking user name and passwords, but we do not see or store that information. That means no one at Mint, and no potential hackers of Mint.com, can access your banking credentials. Your online banking credentials are stored only with these institutions enabling Mint to automatically and securely update your transactions and saving you from updating, syncing or uploading financial information manually. All communication between Mint and its online financial service providers is encrypted using 128–bit SSL encryption, the financial industry standard for data protection.

The next step is to classify and review your transactions. Mint lets you put them in buckets–and naturally it will get a few wrong to start with–but you can set up rules to classify new transactions how you like. For example, I set one that sets any checks with the amount of my rent to go into the rent bucket:

mintcom-transactions.jpg

By doing this, you let them do some analysis on your spending or earning trends. Note, the trends feature appears to update daily, not in real time, so if you classify a bunch of transactions, it won’t update the trends page with your new categorization for some time. This is unfortunate, but probably necessary. This lets them make, say, a graph of your spending v.s. the average NY spender:

mintcom-spending-01.png

mintcom-spending-02.png

I guess I need to spend more money at Amazon and Best Buy to fit in these days. Lastly, there is their “ways to save” page, which is basically targeted affiliate ads with various banks. This is their revenue stream–getting you to sign up for new credit cards and open new accounts–tread lightly here and don’t go overboard with the new sign ups:

mintcom-savings.jpg

Conclusion

Mint.com is award-winning online personal finance software that manages most personal finance account types, provides budgeting tools and generates personalized money-saving ideas. Mint automates many personal finance tracking tasks, and sends out account alerts so you do not forget to pay bills. Mint does not have advanced personal finance tools, but the available features are excellent.
Posted by: admin | October 8, 2008

Watch the Oct. 7, 2008 Presidential Debate Live Online

Breaking news

Round 2: Barack Obama vs. John McCain.  The 2nd of 3 presidential debates before the elections.  Everyone needs to watch this; the upcoming election is one of the most important factors that will affect your life for the next 4 years.

Click here to watch the online Presidential Debate between Obama & McCain live

Posted by: admin | October 7, 2008

How To Get Back Overdraft Fees From Your Bank

Let’s be honest, nobody likes paying overdraft fees to your bank, especially when they charge +$25 each time.  I’ve had to argue with my bank several times for them to reverse a ridiculous $25 “fee” when I went over my account by a mere few dollars.  I realize how frustrating the process can be and how it seems banks nickel-and-dime their customers as much as they can.

One guy decided to fight back. He asked none other than perennial Green Party presidential candidate and consumer advocate Ralph Nader what he should do.  Nader offers some good advice on how to get your $$$ money back.  Turns out if we all did this, the banks would flip their shit.  Or eventually, simply hire more lawyers to defend themselves. Here’s the great video of one guy’s journey to ‘beating the bank’ at their overdraft fees.

Posted by: admin | October 6, 2008

$700 billion Bailout Visual Summary

I’m a huge fan of visual learning. The above graph is a great way to understand the US government’s strategy to address the current financial crisis.  The biggest question I have of all is how the gov is going to value the distressed assets they will buy off all the financial institutions.  In the debt capital markets, asset backed loans such as mortgages are defaulting, credit card balances are rising from high interest rates, and auto loans are going unpaid from a saturated & depressed auto market.  How do you value these accurately when you don’t know how much farther they will fall?

Key Points:

  • President Bush signed the $700 billion financial bailout package into law Friday October 3, 2008, after the the House voted 263-171 in favor of the legislation.
  • The new law authorizes the Treasury Department to spend up to $700 billion to buy mortgages and other troubled assets from financial institutions. It requires the department to modify mortgages whenever possible to keep people in their homes.
  • Companies that sell mortgages and mortgage-back securities to the government will be required to provide warrants to the government so taxpayers will benefit if the companies’ earnings improve. The bill also includes limits on golden parachutes and executive compensation for companies that participate in the program.  In addition, the bill also creates a government insurance program to guarantee troubled assets.
  • The Senate added additional provisions, including a temporary increase from $100,000 to $250,000 in Federal Deposit Insurance Corp. coverage of bank deposits.
  • The bill also extends a variety of expiring tax breaks, ranging from the research and development tax credit to tax incentives for alternative energy. The bill also would keep the alternative minimum tax from hitting an additional 24 million people considered “middle class”.
Posted by: admin | October 5, 2008

A SWOT Analysis On America

Fred Wilson over at his blog Musings of a VC in NYC shared a great post one of his commentors left on his website.  Fred is a venture capitalist for a successful firm called Union Square Ventures.  His blog provides great insight into VC deals and the thought process behind them.  I’ve always been interested in early-stage venture capital deals but they fall out of my firm’s target criteria so we don’t give them much thought before we pass, which is unfortunate given how many VC info memorandums that come down our pipeline.  Check out the link below:

A SWOT Analysis on America

Excerp:

Weaknesses:
1. Decay of rationalism. Right there is your biggest problem. The War on Science; the ascend of bullshit artists and religious nutjobs; the contempt for reality, facts, numbers, data that has pervaded the business, financial and political elites.
2.  Very poor lifestyle energy-efficiency, especially in transportation
3.  Unsustainable military spending and engagements
4. Proliferation of a “heads I win, tails someone else loses” model in the economy and finance, also known as “Privatization of profits, socialization of losses” (And yes, many venture capitalists can be blamed for that, too.)

Posted by: admin | October 3, 2008

The bailout effect on PE

Introducing the newly designed US dollar.

So today Congress approved an unprecedented $700 billion government bailout of the battered financial industry sent it to President Bush who quickly signed it.  At its core, the bill gives the Treasury Department $700 billion to purchase bad mortgage-related securities that are weighing down the balance sheets of institutions that hold them.  The flow of credit in the U.S. economy has slowed, in some cases drying up, threatening the ability of businesses to conduct routine operations or expand, and adversely affecting consumers seeking financing for mortgages, cars and student loans. Some state governments have also experienced difficulty borrowing money.

What effect does this have on private equity funds?

The credit markets have gotten a lift from Uncle Sam.  PE shops will have easier access to debt financing for their deals, albeit not nearly as much, or as cheap for that matter, as they did during the mega LBO days of 2006-2007.  Funds seeking deals today can only lever them with senior debt 1-2x EBITDA and 2-3x sub debt as opposed to +5x a few years ago.

My firm is targeting an Oct. 31, 2008 close on a $60 million LBO.  Obtaining financing was hell.  A year or so ago if we sent out a financing prospetus to banks, we would have calls back the same day.  Today, we are the ones calling the banks back to see if they even looked at the deal.  Eventually, after much effort, we hired a 3rd party investment bank that specializes in private placement of debt to help us in obtaining financing.

On another note, the entrepreneur in me loves the following tie in between innovation and Fight Club’s subliminal enlightenment principals.  Check out the link below:

Tyler Durden’s 8 Rules of Innovation

Excerp: Tyler’s Seventh Rule of Innovation:

“Sticking feathers up your butt does not make you a chicken.”

On the other hand, wearing black hipster clothing and hanging in cafes smoking Gaulloises cigarettes does not make you creative. Buying a MacBook Pro and an iPhone doesn’t get it done either.

Creativity and innovation are mainly about hard work. It’s about constantly coming up with ideas and thinking through problems instead of vegging out. And it’s about taking action, plain and simple.

Posted by: admin | October 2, 2008

Flipping my 2001 Honda Accord EX Coupe

A few months ago I was searching for a new car on craigslist and stumbled across a 2001 Honda Accord EX Coupe for sale.  It had 84k miles and was listed for $6,000, which seemed unusually low to me.  I quickly looked up its Kelly blue book value, which returned ~$8,300 in good shape, and ran a carfax report which turned up a clear title with no accident.  I phoned the owner and arranged to test drive it that day.

When I arrived I inspected the vehicle and test drove it, and to my satisfaction it appeared to be in okay shape but needed new brakes.  I negotiated with the owner and agreed to buy it for $5,700, which I paid him in cash.  I then drove it straight to Midas and had them put on new rotors and brake pads that cost me ~$350, bringing my total cost to $6,050.

I’ve been posting it on craigslist for sale the past few weeks at a price below KBB at $8,000 and have had about 4 people come test drive it.  So far I had one offer at $7,700 but I declined it thinking I can hold out for at least $7,900.  Problem is the other interested people never made an offer so I’m kicking myself for not selling it over a measly $200 price difference, which translates to about 2.5% of the purchase price. Doh! Next person to offer $7,700 or more I will accept.

Summary

$7,700 (assumed selling price) – $6,050 (purchase cost) = $1,650 profit

$1,650/$6,050 = 27.3% return, over about 4 months, which translates into an annual rate of return of 81.8%.  I’ll take that any day, especially in today’s economy with the beating the stock marking is taking.

In my net worth update below, the value of the car is listed $5,600 because I booked the asset at cost and have accounted for depreciation for the 4 months that I’ve had it.

Posted by: admin | October 1, 2008

October 2008 net worth update

*Note: net worth as of first day of month, i.e. October figures are as of October 1, 2008.

Summary: September was a down month, at a bad hit of -6%, or $6,175.  Most of the losses were a result of a decline of my investments in the stock market, which given current events, it seems like everyone is down.

Investments: The Revenue Direct & Sedo balance are the earnings owned to me from my domains, which currently earn me ~$3,000 per month income.  These earnings are paid 2x a month on the 10th & 25th to my Etrade checking account.  The balance shows $1,500 because that is what I am owed but have not yet been paid (once I am paid this amount is transferred to my Etrade checking account).

Credit cards: I accidently overpaid my Southwest Visa credit card, and now have a $236 credit.  My Chase Cash Plus Rewards balance is a 0% balance transfer deal, which I used to finance the purchase of my domains.

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