Start-up growth strategies for the New Order from Columbia to Commonwealth to Churchill

It has been a year on the road since the book launch. We started with the Ivy League MBA programs right before the stock market crash to the Commonwealth Club of California speech a few months ago wrapping up next month at the Churchill Club Start-up Growth Strategies for the New Order”.

Entrepreneurs should consider is it better to seek to be independent, or aim to be acquired? Should that be decided up front, and if so, what should be done differently? My view, courtesy of Tom Abate, is Silicon Valley hotshots should quit swinging for the fences and instead send a sharp line drive to the opposite field - or just bunt.

The world is not so flat

Fifteen years ago one of Friedman’s flatteners, the Netscape web browser, inspired me to drop out of college to start a technology company that eventually became part of AutoNation (NYSE: AN). Two years ago I finished a tour with Oracle Corporation that acquired my third technology company. Many of Friedman’s flatteners are technology related including Workflow software, Uploading and Search Engines so I might be a prime candidate to witness the world flattening.

What if something as tangible as the American home, including the number of privately owned new homes on which construction has been started (housing starts), is really the center of the economy making the world not so flat? It’s not counterintuitive when you think about all of the commerce that flows to and from the home. In 1973, housing starts plunged before the stock market plunged in 1974 and unemployment spiked dramatically. In 1975, when housing starts recovered in a classic ‘V’, unemployment immediately peaked and fell. The same pattern is evident in the early 80s and 90s. And, strikingly, the same inverse correlation between housing starts and unemployment in times of severe recession appears in Canadian, Japanese and United Kingdom cycles!

In 2006, housing starts plunged before the stock market plunged in 2008 and unemployment spiked dramatically. Now that housing starts have bottomed in April 2009, we should expect to see the completion of the cycle that is a quick peak and decline in unemployment (8% by end of 2010).

New kinds of economic forecasting

One year ago the budget forecast from the Office of Management and Budget (OMB) showed total debt rising to $12.3 trillion in 2013. In Q1, 2008 the administration's top economists saw annual unemployment remaining just below 5% through 2013. These people are not incompetent. They are well trained in traditional economic forecasting that must be supplemented with new kinds of economic forecasting. This is especially critical when unprecedented policy response is based on the outdated forecasting.

Business profitability and cash flow need not be distant cousins

I had another call with a business owner in debt to start off my morning. This is a talented guy who built a $M, profitable business with his fingernails and teeth. He has a real product that helps people. He’s a traveling salesman and has had his gloves up in a constant battle for the last 3 years. He’s tired but I don’t think he’s beaten. Unfortunately invoices take months longer to process and are often returned riddled with ridiculous fees so profitability and cash flow are distant cousins. He is suffering and his line of credit is running out.

CIT Group (the largest commercial financing and leasing to small business company) trades at $0.18/share in bankruptcy down from $60/share 18 months ago. The banks are not lending to small business. Maybe Revolutionary Angels will fill the void - 100 startups each pay $5,000 to compete for a maximum $250,000 initial round of funding. The runner-up gets $50,000. The rest get feedback.

Stanislaw Lem has some feedback for Revolutionary Angels and midlevel managers in large companies who abuse their vendors. Watch out because “Cannibals prefer those who have no spines.”

Emphasis Search and ApexMD

I made an investment in Emphasis Search last year that is an advanced physician search engine called ApexMD driven by a medical taxonomy. ApexMD is able to order physicians by relevance to the searched disease or procedure because of an in-depth understanding of physician specialization, training and practice patterns and the ability to standardize the physician profiling process across medical centers and regions. The medical "intelligence" of the search engine includes over 8,000 diseases and procedures and tens of thousands of related medical terms (synonyms) with a relevancy mapping between each disease and procedure and one or more of over 500 medical specialties, subspecialties or areas of concentration.

The company has at least one major medical center in each of 11 geographic regions around the country and Beth, the daughter of pancreatic cancer patient, writes "It took my family a couple of precious weeks to find specialists that your website found in a second."

Tiburon is unique

I’ve skiied the Klein Matterhorn at sunset and crewed to Bora Bora but there’s something about watching a Great Blue Heron fly over Racoon Straights that grabs me like no other place in the world.

Tonight the Tiburon Town Council approved a plan authorizing cameras along the two peninsula entry points for license plate photos as vehicles enter and leave town. Tiburon is unique because it is on a peninsula with Tiburon Blvd allowing for the efficient use of the cameras.

I understand objection to this but, in the end, this is simply a safety tool and a very good move by the Town Council this evening.

Zero capital gains like Taxpayer Relief Act

The most important thing President Obama can do for small business is to follow through on his campaign promise to set zero capital gains for small business sales. Capital gains policy response will serve as regulatory rocket fuel for small business not unlike the Taxpayer Relief Act of 1997 (exempting most home sales from capital-gains taxes) fueled the housing bubble. We already are heading into an M&A wave because it is the only way for large business to continue performing outside of cost cutting.

Only a few hours left to go in Linksify's logo contest

Nearly 500 logo designs have already been submitted, reflecting the interest in Linksify's growing network.

Those of you who follow my blog know about Linksify (www.Linksify.com), a contact management system for web and mobile phones that keeps your address book continuously up to date and in sync with other Linksify users and between your phone and email. Linksify just released its beta applications and the company is currently searching for a new logo which illustrates its mission to help people connect and maintain their relationships more effectively through seamless, automated contact management that runs in the background, without social intrusion.

CalculatedRISK Finance & Economics blog

CalculatedRISK blog (among others) disagrees with a new national unemployment forecast I made in a speech at the Commonwealth Club of California. CalculatedRISK is an amazing blog! They always thoroughly crunch the data to make a sound case and, amazingly, I find comment after comment related to their posts is thoughtful and respectful as opposed to the comments, especially anonymous comments, attached to most everything else online these days. And by “thoughtful” I mean the reader has obviously taken the time to read and digest each argument before commenting.

It would be an honor to further debate the 2010 unemployment number for CalculatedRISK readers.

One future of social networking involves less LinkedIn, Facebook, Twitter

I think one future of social networking involves more robust contacts management systems and less robust communication tools. There are millions of people who simply want their contacts maintained and up to date without all the social networking intrusions.

www.Linksify.com today released to select beta users a downloadable program for Blackberry mobile phones that keeps your address book continuously up to date with your other Linksify users automatically and in sync between your phone and email. An Apple iPhone downloadable program is scheduled before the holiday. Linksify currently has more than 50,000 contacts in its system after 30 days in beta. Linksify is initially available for sync with Gmail and Outlook via the Linksify web application and the downloadable programs allow full functionality without a website –a “set it and forget it” (Ron Popeil) dynamic.

Startup and sell before next recession cycle

The Tiburon Ark did a special weekly on “All about Finance” in which I contributed “Funding Savvy For Startups” including “Forecasting Success”:

I think we will see unemployment recovery much more quickly than consensus estimates, just as we saw an unemployment spike much more quickly than consensus estimates last year. Plot historical national new housing starts and unemployment for the United States, United Kingdom, Japan, Canada as lines on a graph, and you’ll notice a striking inverse correlation (as one goes up the other goes down) between the two economic indicators during the worst recessionary periods. The cycle begins with a sharp decrease in housing starts followed by a sharp increase in unemployment, concluding with a sharp rebound in housing starts followed very closely by a peak and decline in unemployment.

It was this striking relationship in only the U.S. data that I incorporated in an April 2008 forecast predicting U.S. national unemployment would nearly double to 9 percent by April, 2009, which it did. Some traditional economists I respect confirmed that the thesis was “interesting” but perhaps “too loose” or “too simple” to be quantifiably significant. Yes, so far, the thesis holds as it did in the mid-70s, early 80s and early 90s (data shows 2000 was not severe by comparison, and therefore the correlation was weaker), and now that we’ve reached a bottom in new housing starts I believe national unemployment will peak around 10.4 percent and quickly fall.

I think we will see a strong economic rebound in the next few quarters, defined by a significant decrease in unemployment, making for an excellent time to start and sell a company before the next economic collapse!

Toyota and the U.S. $12T debt

Barrons reports on alternate power auto technology patents filed in 2008. The list: Toyota 2379, Nissan 490, Hyundai 464, Honda 348, Matsushita/Panasonic 329. Toyota is a the clear winner -no surprise there- and they only list the top 5 but guess who is not on the list and is probably not in the top 10...

Innovation is hard. Getting a patent is hard. Generating a profit is hard. It took me 15 years to be able to do all three in one venture. Getting a bailout is easy. That’s one reason why the total U.S. public debt outstanding is officially $12T today.

The partnership between the administration led by Secretary of energy Steve Chu and the (electric) car companies is perhaps the only bailout that can be completely justified. But let’s make sure we don’t create another soft, bloated industry cloaked in moral hazard and incapable of competing.

“Small business” in need of massive makeover –getting killed by policy response

On April 18, 1922, John Johnson invented the adjustable wrench. What’s amazing is that it took over 70 years after the industrial revolution for someone to think up the seemingly obvious idea of an adjustable wrench. Until this invention people were forced to own different size wrenches, yet one simple invention solved that problem overnight.

The next John Johnson doesn’t work on Wall Street yet our entire policy response is dedicated to gamblers instead of people who build and service things in small businesses. One reason is the perception that there is no meaningful way to serve the approaching 20M businesses with no employees and/or this market is the opposite of too big to fail. But there are 6M+ businesses with <500 employees. Another way to describe a small business is assets less than $50M. These businesses are not so “small” to begin with especially if they’re generating a profit as opposed to being insolvent and propped up by policy response.

Here’s hoping future policy response will categorize business as profitable and unprofitable versus big and small.

Berkeley MBAs starting something from nothing

Berkeley MBAs will read my book Strategic Entrepreneurism ™ again this semester in New Venture Finance (EWMBA 295T). I’ve lectured at most of the leading business schools but there is something special about this class, area of the world and professor Randy Haykin. I kept up with the entrepreneurs at Fastpencil, Embee Mobile and Mobeze as well as an exciting venture yet to be announced since last class –all making it happen in the toughest economy of our lifetimes. I bet half or more of Professor Haykin’s graduates go on to actually co-found companies. There are too few places in the world truly preparing people to start something from nothing.

U.S., Canada, Japan, UK unemployment peaking and falling more quickly than consensus estimates

In the “supporting evidence from other countries” track of my Commonwealth Club of California speech (link below), I forecasted unemployment rates would quickly peak and fall in Canada, Japan and the UK (as well as the U.S.) in accordance with my thesis that there is an inverse correlation of housing starts and unemployment in the U.S. and in other G8 countries in times of severe recession. Perhaps you have noted that unemployment has fallen for the second straight month in both Canada and Japan and the UK also reported more than consensus unemployment decreases in the last reporting period. Canada and the UK already reached a bottom in housing starts and I think Japan has as well or else the thesis does not hold! U.S. unemployment is also falling and will quickly peak at 10.4% (or less if bottom in U.S. housing starts occurred earlier) and then quickly fall to ~8% by the end of 2010.

So goes the completion of the cycle that we’ve seen in every severe recession in modern history (mid 70s, early 80s, early 90s and data shows dot com recession wasn’t so bad!).

It’s important to note unemployment will peak and fall much more quickly than consensus estimates just as it rose much more quickly last year (my April '08 U.S. unemployment forecast called for 9% by April '09).

This isn’t my field but I study this stuff very closely so my next start-up need not get annihilated by the next economic catastrophe. The consensus ‘experts’ might want to take a look.

http://fora.tv/2009/08/05/Entrepreneurism_Begin_With_The_End_In_Mind_Jon_Fisher#fullprogram

Going Google if not IBM or Yahoo

Why Jaguar Jumped to Google Apps is the subject of a BusinessWeek piece today. “Spun out by Ford, the British automaker was free to drop its Microsoft programs and switch to Google Mail and other cloud software—saving millions of pounds”

IBM announced the launch of a web-based e-mail service and Yahoo has added web-based e-mail functionality lately.

“Going Google” is when an enterprise switches to Google Apps. Google claims 60% of the Fortune 100 and 60% of the world’s top brands have Gone Google.

Jobs forecasting

republicans.waysandmeans: The table below compares the White House's February 2009 projection of the number of jobs that would be created by the 2009 stimulus law (through the end of 2010) with the actual change in state payroll employment through September 2009 (the latest figures available). According to the data, 49 States and the District of Columbia have lost jobs since stimulus was enacted. Only North Dakota has seen net job creation following the February 2009 stimulus. While President Obama claimed the result of his stimulus bill would be the creation of 3.5 million jobs, the Nation has already lost a total of 2.7 million – a difference of 6.2 million jobs. To see how stimulus has failed your state, see the table below.

Startup without customer is un-American

We must solve a problem and solve a problem worth solving and solve a problem that makes for a repeatable business. Building your product with your customer/s provides a clear path to a lot of this but there are details. For example, you and the customer are collaborating and the customer has a good idea to improve your product for (his) business. Who owns the IP? You do –you must- but only after you have made the right moves before the collaboration began including your contracts and/or T&Cs, provisional patent filings even your decision regarding what employee faces the customer. Read The Art of War 是故百戰百勝，非善之善者也；不戰而屈人之兵，善之善者也。

Happy Halloween

Halloween has origins in the ancient Gaelic festival known as Samhain celebrating the end of the "lighter half" and beginning of the "darker half". On or about Halloween, if not before, if not tomorrow, the government accounting system producing the Public Debt Outstanding at around 11:30 AM ET will read $12.T. The current debt is $11.948T with a $12.867T end of 2009 forecast.

Entrepreneurs in the White House

“Obama looking at all options for creating jobs” is the latest headline. "Everything is on the table," senior adviser Valerie Jarrett said. Perhaps a place to start is to hire a few entrepreneurs around the president who have actually created jobs. They would tell him to honor a campaign promise by eliminating capital gains taxes for small businesses and start-ups. The revenue loss would not be significant, especially because it is future revenue, while the nationwide impact would be immediate –encouraging risk taking again. Democrats don’t want any tax cuts that would validate Republican ideology and so we get the usual.

Let IBM, Microsoft, Cisco, Oracle, Intel, Yahoo!, EMC and Google drive

Start with an end goal to have your startup acquired by a larger company including IBM, Microsoft, Cisco, Oracle, Intel, Yahoo! and EMC that have purchased more than 500 companies from 2001-2009. Google has also done >50 deals and is about to go on a run.

By defining a niche for your company to dominate, you establish your company as the leader in its field without competing against more established companies that have more resources than you. To find a niche for your company, look for a crucial problem that needs solving and then provide that solution for a Fortune 500 customer that a Fortune 100 company would want to do business with or is already doing business with. By solving the problem of a Fortune 500 customer, your company will most likely be profitable as a result of this customer. A Fortune 500 company can also vouch for the team and product capabilities as well as establish a basis for a repeatable business that is necessary for an acquirer to model synergy. By developing a solution for a Fortune 500 company, you make your company a desirable acquisition target by a Fortune 100 company.

The advantage of this strategic approach is that you position your company for profitability and acquisition from its inception and you can always decide to grow a larger business. Of course it takes an average of 9 years to complete an IPO while the next economic correction is at most 5 years away. And the average founder’s equity is worth ~$6M post IPO that can be earned in 1/3 the time and 1/10 the risk by raising less money and retaining more ownership.

Quadrupled the life expectancy of a worm by altering its genes

I serve on the board of the Buck Institute where President, Dr. James Kovach and the team are seriously interesting people. From ESPN Magazine: I had come to see former Saints linebacker Jim Kovach. He had already earned a medical degree, and then, after retiring from the NFL in 1986 following a seven-year career, earned a law degree too. Today the 53-year old still looks like he can chase a QB out of the pocket. As we walked through building’s polished halls, he spoke excitedly about the work unfolding behind it’s high security doors. One researcher had quadrupled the life expectancy of a worm by altering its genes.

Financiers will disappear

Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal. I think paying these people on a market appreciating from March 2009 until now is the equivalent of restructuring an insolvent company by slashing its product prices by 50% and then doubling the commission paid on each sale.

Entrepreneurs disappear if they don’t correct mistakes. A lot of us went away in the last recession because we built crappy companies. Financiers are fading and are going to further fade because they don’t correct mistakes. They’re going to disappear because more entrepreneurs will refuse to deal with them in every investment category. Consider the current bonus packages as severance over the long term.

The financiers have ensured there is no difference between -gambling- the wagering of money or something of material value on an event with an uncertain outcome and the trading or exchange of the underlying asset itself -a derivative- when traders enter into an agreement to exchange cash or assets over time based on the underlying asset.

10.4% unemployment peak 2010 fall to 8%

In May, 2008 the National Association for Business Economics consensus was unemployment would reach 5.3% in 2008 and 5.6% in 2009. My forecast at the same time was unemployment would reach 9% by April, 2009 http://tinyurl.com/yju73ft Now the NABE forecast is unemployment to hit 10% during the last 3 months of this year, and stay there through the first quarter of 2010. By the end of next year, it's only expected to fall back down to 9.5%. My forecast on August 5th, 2009 is unemployment will peak at 10.4% within the next few quarters (by February ’09) and fall to 8% by the end of 2010 http://tinyurl.com/mwpszg

Steve Wynn remember Tesla and DOE

I respect Steve Wynn’s accomplishments but this statement on the Rush Limbaugh show is off the mark. WYNN: Government has never increased the standard of living of one single human being in civilization's history. For some reason that simple truth has evaded everybody. The only thing that creates an increased standard of living is giving someone a job, the demand for their labor -- whether it's you and I, Chris, or anybody else. The people that are paying the price for this juggernaut of federal spending are the middle class and the working class of America.

My response is the recent lead from Time Magazine: Don't think the billions in government subsidies for automobiles are all flowing to Detroit. The U.S. Department of Energy (DOE) is ready to loan nearly $1 billion to Tesla Motors and Fisker Automotive, two fledgling automakers with deep roots in Silicon Valley and Southern California.

I quit Twitter

I quit Twitter tonight after accumulating enough followers and analysis to make for an acceptable sample (>1000, ~50 hrs). It was nice to block my last pornographic related follower. My analysis showed that <5% of followers viewed correspondence (picture views, blog posts) that I attributed to my dullness as well as the fact that it’s not possible for a user to actually follow everything from >few hundred users per day. Even if someone following 10,000 users is unemployed and addicted how many posts can be read? I followed zero. The alarming part is I found ~50% of my followers were inactive (no posts or no posts in months) and a good many of those looked like fake users (including no pictures, descriptions).

This was a big waste of time that I will make up shorting the entire web 2.0 category if any manage to complete an IPO.

Oracle and ConocoPhillips and California

An earnings surprise is when the reported earnings differ from the consensus forecasts. If the difference is positive it is called a positive surprise. Oracle Corp, the largest enterprise software company in the world, had earnings surprises of 0.0%, +9.4%, +4.5% and 0.0% in its last four quarters reported on Yahoo Finance –perhaps the most tumultuous economic environment in the history of man. ConocoPhillips (COP), involved in exploration and production of oil and gas around the world (while the price of oil completely collapsed) as well as dozens of other hugely complex things, had earnings surprises of +8.5%, +5.8%, +30.0%, +14.1% in its last four quarters. California revenue is already 5.3 percent less than assumed in the $85 billion Budget passed 10 Weeks ago.

Wall Street 2 -Gekko released from prison

In April 2009, 20th Century Fox confirmed that the sequel, now tentatively called Wall Street 2 was still in development. The film will focus on Gordon Gekko, recently released from prison, and re-entering a much more chaotic financial world than the one he once oversaw.

It’s 7 times in a generation that financial explosions have profoundly changed our lives including the current crisis as well as, Asia, Mexican and Latin American crises, LTCM, the S&Ls and Internet companies with no revenue trading at $100/share. I wonder how many of these financial executives played a role in more than one of these explosions? There are some at the top who played a role in most of them.

Policy response to financial explosions is always the same. Sarbanes Oxley policy response proved more harmful to the economy than the Enrons it was supposed to protect us against because IPOs became more difficult to complete by an order of magnitude. Current policy response in the form of debt and gigantic increases in government bureaucracy will end up being more harmful to the economy than the current economic crisis and that’s not so difficult to envision.

Financial executives aren’t evil. They just keep winning doing what they’re doing more or less unchecked. It might be a primal and cathartic experience watching Oliver Stone portray one financial executive rebuild after getting what he deserved.

Wall Street Journal economists

"The labor market will take years to heal, according to the latest WSJ forecasting survey." I think economists got unemployment wrong on the way up and are now getting it wrong on the way down. Unemployment has quickly peaked and declined after every bottom in housing starts in every severe recession. Unemployment has also spiked after every significant decline in housing starts in every severe recession. There is an inverse correlation of housing starts and unemployment in severe recessions. I’m an entrepreneur not an economist by training but we lose our companies if the forecasting is off while economists and members of the administration simply ‘revise’.

http://fora.tv/2009/08/05/Entrepreneurism_Begin_With_The_End_In_Mind_Jon_Fisher#Rebounding_Housing_Market_Signals_Peak_of_Unemployment

Retrade

An acquirer confirming the buyout price has changed is called a retrade. It is likely not a renegotiation without reason rather it happens when something new is discovered in due diligence. Of course sellers can say every business has blemishes when viewed up close and buyers can always argue assumptions have changed for whatever reason. Sellers should always disclose everything up front and sell through imperfections rather than concealing them. If the seller is confronted with a purely opportunistic buyer in the exclusivity period (i.e. the finish line), best for the seller to communicate the retrade was forecasted and best for the seller to agree to a fraction of the retrade price –a rounding error for a symbolic gesture as the buyer can always walk. If the buyer demands the full retrade price, even when confronted with a dispassionate seller willing to make a gesture, the seller should walk.

Do entrepreneurs need MBAs?

They gave me an Entrepreneur Of The Year award and they gave me a teaching gig. Do entrepreneurs need MBAs?

I wanted to be a musician until I came to my senses and realized how low the odds of success were. Unfortunately, the odds are stacked against Entrepreneurs too. For every 100 start-up ventures every year, 98 of us will never raise enough money to get off the ground. Out of the remaining two ventures that do manage to get start-up money, the odds are 90 percent that we will fail despite any amount of funding we may receive.

Why is “Nature or nurture” always the center of this discussion as it is in this worthless Economist piece http://tinyurl.com/ydu46wq reading like the thousand before it “that entrepreneurship may actually be in the blood—more to do with genes than classroom experience. All of which invites the question—does an entrepreneur really need a business-school education?”

I think entrepreneurs need mentors and Starbucks and pianos to play.
We need fantastic families and colleagues and running shoes.
We need to know about leadership and persistence and strategy.
Most importantly, we need to be in the right place at the right time.
Oh yeah, we need encouragement and capital.

Of course we need MBAs! We need all the help we can get!

Now that U.S. dollar is lead story

Housing starts fell from ~2.2M (Jan ’06) to ~1.4M (July 07) before the stock market reacted falling from ~14k (July 07). Over the past 6 months, the dollar has fallen 11.5% on a weighted basis. The debt on the books is 11.93T (off the books infinity, 12T coming in days) so the question is how much pressure on U.S. currency and credibility is already baked in and what will the market and world reaction be? The pressure on the dollar is already mainstream news that means the problem manifested 6-12 months ago (like commercial real estate) but we knew that because of all the new U.S. debt this year. Again, the question is how will this be managed now that the U.S. dollar issue is the lead story?

Online data encryption and decryption

Co-inventor with Varghese; Harris; Durai of Online data encryption and decryption (patent 7,596,701 September 29, 2009) http://tinyurl.com/yecautg

Systems and methods for providing encryption and decryption of data transmitted on a computer implemented network, preferably user authentication identifier data, such as a password, at the point of entry into the user's computer. The systems and methods enable an end user to mentally select a marker from one of the randomly arranged elements on a first portion of a graphical image. A second portion of the graphical image includes an arrangement of possible elements of any individual authentication identifier sequence, and is positioned adjacent to the first portion. The systems and methods prompt a user to enter each element of the identifier by moving the selected marker and the first portion as necessary to substantially align the selected marker with a chosen element of the authentication identifier appearing on the outer portion. According to one embodiment, the image portions are concentric wheels. According to another embodiment, the image portions are arranged in adjacent rows. http://tinyurl.com/yecautg

VC partners as angel investors

There are likely twenty VC firms with good returns over the last ten years. Perhaps there are fifty partners within those top twenty firms who can really add value to your business including customer, partner and M&A contacts. Why deal with the rest of the VC partners in these top twenty firms and their limited partners and a lousy valuation? Instead, seek out the desired VC partner as an angel investor in your round. She might say “I have to sign a waiver” that is just another way of saying no. Any VC strong enough to help you is strong enough to do what she wants.

Unemployment number

The administration can always forecast anything it wants without consequence. We entrepreneurs, who continually miss forecasts, lose our companies unless we are too big to fail. We have more unemployment pain ahead of us but we will see an unemployment recovery much more quickly than consensus estimates just as we saw an unemployment spike much more quickly than consensus estimates last year.

The market is factoring a worse than expected unemployment number Friday but the forecasting error is that unemployment will continue as a significant problem in the next few quarters. This is the most critical metric related to economic recovery. In April 2008 (5%), I forecasted (9%) by April 2009 (actual 8.9%). In August 2009 (9.4%) I forecasted a quick move to as high as 10.4% followed by a quick fall in the next few quarters.

My forecast is based on a thesis involving an inverse correlation of new housing starts and unemployment. We have reached a bottom in new housing starts therefore we will quickly reach a top in unemployment followed by a fall. This looks simple but it has happened in each of the (severe) recessions (mid 70s, early 80s, early 90s). Data shows 2000 was not severe by comparison and therefore the correlation was weaker.

Good forecast explanation
http://www.marinij.com/business/ci_13016645

Thesis and forecast methodology http://fora.tv/2009/08/05/Entrepreneurism_Begin_With_The_End_In_Mind_Jon_Fisher#fullprogram

Stanford and Schawlow and Physicists

What’s especially important to me is my family life, and that includes being close to my father, a co-author of my book, who studied under Dr. Arthur Leonard Schawlow at Stanford University. Dr. Schawlow invented the laser and won the Nobel Prize. Back in the 60s during the height of the Vietnam War, Dr. Schawlow wrote a letter to the United States government confirming that my father would be of more service to this country as a physicist than as a soldier. Perhaps I owe my life to one of the world’s greatest entrepreneurs and I certainly intend to spend the rest of my life trying to become one.

FDIC operating like distressed start-up

In the wake of a disastrous quarter, distressed start-ups often restructure existing sales contracts in order to make-up revenue shortfalls. Converting term to perpetual licenses or soliciting customer pre-pays make for desperate tricks to hit forecasts. Customers should always be concerned with these machinations. We should all be concerned when these tactics are embraced by the Federal Deposit Insurance Corporation.

From NY TIMES: Banks to Prepay Assessments to Rescue F.D.I.C. WASHINGTON — Acknowledging that they had greatly underestimated the problems plaguing the nation’s banks, federal officials on Tuesday proposed a $45 billion plan financed by the industry to rescue the ailing insurance fund that protects bank depositors.

On Facebook and Twitter and Oracle and posting anonymously

I'm vocal about Facebook and Twitter missing the liquidity window http://tinyurl.com/ku29u2 and critics anonymously post about hindsight bias. I served as CEO of a technology company that was successfully sold to Oracle in 7/07 http://www.oracle.com/bharosa/index.html right as the recession began. My original publisher of Strategic Entrepreneurism ™ pushed from 9/08 to 4/09 so I fired them, returned most of the advance and signed with Select Books, New York to crash the book by 9/08 one month before the stock market collapsed http://tinyurl.com/6zlby2 In 4/08, I predicted national unemployment would rise to 9% by 4/09 that turned out to be right http://tinyurl.com/y9p279b I led a financing in www.linksify.com (a kind of anti-Facebook and anti-Twitter) as Twitter growth slowed http://tinyurl.com/yc8ob9v

I let most things go but sign your name to posts about hindsight bias and let’s debate.

President Obama's economic team has blind spot for small business

Al Angrisani, the former assistant Labor Department secretary under President Reagan, said he believes that Obama's economic team, led by Larry Summers, has a blind spot for small business because no senior member of the team -- dominated by academics and veterans of big business -- has ever started and grown a business. "The Reagan administration had people who knew of small business," he said.

Unemployment rate for young Americans

From NYPOST: The unemployment rate for young Americans has exploded to 52.2 percent -- a post-World War II high, according to the Labor Dept. -- meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time. And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults -- aged 16 to 24, excluding students -- getting a job and moving out of their parents' houses are long. Young workers have been among the hardest hit during the current recession -- in which a total of 9.5 million jobs have been lost.

Designing a company to be acquired

Companies not designed from the start to be acquired have no choice but to succeed on their own. When the online grocery store WebVan, began, they pursued the single-minded strategy of going for an IPO. Then they promptly burned through billions of dollars of investors’ money, leaving them with little choice. They either had to go for broke and earn back all those billions, or go bankrupt. Saddled with such huge debts, they went bankrupt.

Consider how different this story might have been if WebVan had designed themselves as an acquisition target from the start. Because WebVan saw the established supermarkets as direct competitors, they spent billions creating their own infrastructure, essentially duplicating the infrastructure of warehouses and delivery trucks that the brick and mortar supermarkets had taken decades to establish and refine.

The main idea behind WebVan was online shopping and home delivery of your groceries, so they could have focused on their core competency and made alliances with the established supermarkets. In exchange for using the supermarkets’ existing infrastructure, WebVan could have bought their products from these supermarkets and given them an additional source of revenue.

Since none of the existing supermarkets were offering online grocery shopping and home delivery at that time, this could have given WebVan a fast and far less expensive route to profitability. By not duplicating the traditional supermarket infrastructure, WebVan would have been perfectly positioned as an acquisition target. Any supermarket that bought out WebVan could have added a new service.

Once WebVan sunk billions into duplicating a supermarket’s infrastructure, it immediately eliminated any possibility of being acquired. Few supermarkets would want the added cost of a duplicate infrastructure to support and maintain. By not designing WebVan as an acquisition target, its founders gave the company only one chance to succeed and that was through the long shot of an IPO and subsequent growth. Because the odds were stacked against them, it’s no surprise that WebVan failed a few billion dollars later.

Failing through self-inflicted wounds

Perhaps the most tragic result is when a company fails through self-inflicted wounds. This often occurs because entrepreneurs are often more talented at starting up a company than they are at managing a company. As a result, an entrepreneur risks staying too long in a company and making decisions that can literally kill that company.

At one time, Gateway Computers was a major mail-order manufacturer of personal computers. After growing from a small mail-order company, the company went through a successful IPO where its stock peaked at a high of $84 a share in late 1999. Unfortunately, the company founders, who proved so adept at starting up a mail-order computer business, made several critical mistakes in trying to grow their business.
First, they opened a chain of retail stores, which increased costs without increasing revenue. Second, they branched out into consumer electronics. Instead of focusing on selling Gateway computers, the company tried to sell Gateway television sets and other high-end electronics. This also sapped the company’s resources without giving them a corresponding boost in revenue.

The struggling company soon closed all its retail stores, abandoned its entry into the consumer electronics market, and returned to its personal computer mail-order roots – only to find it had been far surpassed by its competitors. In 2007, the company agreed to be acquired by Acer Corporation, which paid the equivalent of $1.90 a share for the entire company, a far cry from its once lofty stock price of $84 a share.

The nature of any business is that the longer you run a company, the more likely you’ll make a critical mistake that could drive your company into the ground. The goal of starting up any company is to make money. The longer you hold on to your company, the more you risk that your company will drop in value. The sooner you can sell your company, the more likely you’ll earn a hefty profit for your efforts in the shortest amount of time.

The forgotten man

Amity Shlaes’ “The Forgotten Man” –About a half century before the Depression, William Sumner wrote: “As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine…what A,B and C shall do for X.” But what about C? Shlaes writes. There was nothing wrong with A and B helping X. What was wrong was the law, and the indenturing of C to the cause. C was the forgotten man, the man who paid, “the man who never is thought of.”

If elected, Roosevelt promised, he would act in the name of “the forgotten man at the bottom of the economic pyramid.” Whereas C had been Sumner’s forgotten man, The New Deal made X the forgotten man –the poor man, the old man, labor or any other recipient of government help.

Roosevelt’s work on behalf of his version of the forgotten man generated a new tradition. To justify giving to one forgotten man, the administration found, it had to make a scapegoat of another. Businessmen and businesses were the targets.

Business plan competition disclosure

I helped kill two start-ups in two hours last year. I was the Master of Ceremonies of the University of San Francisco business plan competition. I introduced twenty teams to an audience of three hundred. I privately spoke with three teams that had very good ideas after the event asking –“have you filed any patent applications?” Two hadn’t filed meaning two had disclosed their ideas to hundreds of strangers invalidating the potential for international protection and most likely U.S. protection as well.

Since 1995, the Patent office has offered inventors the option of filing a provisional patent application which was designed to provide a lower-cost first patent filing. The last one I filed two months ago cost $110. Applicants are entitled to claim the benefit of a provisional application in a corresponding non-provisional application filed within 12 months.

F.D.I.C. May Borrow Funds From Banks

JON FISHER: WTF? We have an insolvent government insurer supposed to protect insolvent banks now looking to borrow money back from insolvent banks?

Isn't this robbing Peter to rob Paul to loan to Mary and call the American public complete idiots?

Public debt structure like a start-up?

I like to complete an equity financing to give my investors their risk/reward line in the sand and then I like to layer debt so the company doesn’t have to continue pricing equity. Given the debt converts in a future financing/sale, it’s like I’m running a dual-class company where there are two classes of common stock offered, one of which has superior voting rights. It seems the government is doing the same thing. Intragovernmental Holdings are Government Account Series securities held by entities like Government trust funds accounting for ~$4.3T of the current ~$11.8T gross public debt. The piece of the ~$11.8T held by everyone else including foreign governments (debt held by the public) is ~$7.5T. As of July, foreign governments owned ~$3.5T of the ~$7.5T including >$1.5T by China and Japan alone meaning approaching 50% of all debt owned by foreign governments and 20% of all debt held by the public. Ownership as a percentage of all debt is most often reported significantly diluting China and Japan’s ownership when examined by debt class.

Does China and Japan get to vote the foreign government debt class? (a little joke). If not, what do they get? (not so funny).

AIG is threat to national security

AIG continues to be a threat to national security. This is because AIG’s bailout (rewritten three times since September 2008 to nearly $200B and now subject to a forth revision) establishes a precedent that the size and scope of any government bailout is meaningless and/or unlimited because of the next revision. The moral hazard that is created is the threat.

Health insurance logistics

The insurance research council estimates 1 in 5 California drivers are uninsured though required by law. President Obama said on Meet The Press this AM “So what we've said as long as we're making this genuinely affordable to families then you've got an obligation to get health care just like you have an obligation to get auto insurance in every state.” I think a discussion of health insurance logistics should receive more attention.

People in the technology business know that rolling out a technology to *all* users in any size user population requires that the technology simply appear (i.e. mandate) versus require forced registration (i.e. no mandate). This is because it takes an infinite amount of time to get every single user to take action - something President Obama also confirmed “And — what — when I talked to health care experts on both the left and the right what they tell me is that, even after you make health care affordable, there's still gonna be some folks out there who — whether out of inertia, or they just don't want to but — spend the money — would rather take their chances.”

The insurance research council estimates 14% of all drivers in the U.S. are uninsured.

In case you're not Google

A Harvard Business School study found that 93 percent of all companies emerged (at exit) with a completely different strategy from what they had initially set out to implement. Furthermore, the study found that it took four to five years for a company to discover the right product and business model.

A Crescent Ventures study concluded that “a funding strategy that deploys capital incrementally while the business model is sharpened and the market is better understood” is infinitely preferable to a strategy that releases the funds in more conventional large amounts. The common thread is iteration. Receiving additional capital should be dependent on achieving specific company milestones. Good teams iterate products as quickly as they can learn from their customers. Good businesses change their strategies.

What this means is that the average startup releases a product, and then modifies its product and business model gradually over the next five years until it discovers the optimum business strategy. This approach is inefficient and more like blindly groping in the dark until you stumble across the optimum business model.

Strategic entrepreneurism ™ essentially reverse engineers each step. Instead of starting with a product and business model and gradually shaping it through multiple iterations, Strategic Entrepreneurism ™ begins with the specific goal of having your company acquired by another company. To achieve this you should:

Decide the type of business and product a larger company would most likely want to acquire. Create that product in collaboration with a strategic customer that a potential acquirer finds attractive. Put together a team of people that provide skills necessary to create your product or run your company while also providing contacts to a potential acquirer. Start up your company with as little outside funding as possible using high-technology to keep costs to a minimum.

Under Strategic Entrepreneurism ™, you aren’t guessing what the market might want and wasting time for five years continually modifying your product for acceptance. Instead, you’re collaborating with the customer to create the exact product needed right away.

The goal is to sell your company. By beginning with this goal, you work backwards so that everything you do brings you one step closer to achieving that goal. By steering straight toward your goal, you’re more likely to reach it than a similar startup that fumbles around, constantly redefining its product and business model until it stumbles across one that works.

Verisign, Vasco, and Entrust searched for Holy Grails

By its nature a Holy Grail problem is extremely difficult, if not impossible, to solve. So rather than trying to solve the impossible, you simply need to try to solve the possible. That means identifying an existing Holy Grail problem and applying current solutions to that problem in a unique and creative way, which I call a not-so Holy Grail.

In the case of Bharosa (Oracle ’07), the Holy Grail was solving the problem of authentication. If someone connects to a web site over the Internet, how can you verify that the person logging in is authorized to access that web site?

Previous solutions to this Holy Grail problem involved additional hardware, such as requiring users to carry an ID token or log in to a computer using a fingerprint. The theory was that only authorized users would possess the necessary ID token or valid fingerprint. Unfortunately, such hardware measures made the computer clumsier to use. If an authorized user lost the ID token, then the computer would lock that person out.

Employing passwords offers an alternative to such hardware measures. The problem with passwords is that they can be easily stolen, especially if someone peeks over your shoulder as you type your password in. Trying to solve this Holy Grail problem meant using a variety of solutions, none of which were practical for everyday use.

That’s the market that Bharosa targeted, and solved the password problem by essentially incorporating the hardware authentication features entirely in software.
In the authentication industry, one Holy Grail is a method whereby a user enters a password securely right in front of a hacker. The hacker literally watches the computer keyboard and screen but cannot decipher what is being entered. At Bharosa, we invented the Virtual Keyboard and Slider interfaces, which was part of our Authenticator software that enabled secure password entry. Essentially, all a hacker could see was a turning wheel, a virtual keyboard, or a slider as the user entered password characters.

Another Holy Grail in the authentication industry is a strong security solution (e.g. smart card, one-time-password generating or biometric solution) that millions of users can easily adopt and use. If a hacker steals the online password, the theory goes, the password will change 60 seconds later and/or the hacker will also need a smart card or gadget for access that are very difficult to steal. These are strong security solutions but not good practical solutions for many users because of the high logistics costs and complexity. Bharosa’s Tracker program turned the computer, something already in the user’s possession, into the smart card or gadget by tracking IP address and other characteristics unique to the computer and therefore the user. The only way a hacker could get access would be by physically gaining access to the computer as well.

Verisign, Vasco, and Entrust as well as a slew of privately held competitors searched for both Holy Grails in the authentication market. For a time, Bharosa was the only company that deployed both an Authenticator-like and a Tracker-like solution under one roof. That was one of the factors that led to significant customer wins.

A Holy Grail problem is nearly impossible to solve, but a not-so Holy Grail solution is possible to create: Just use existing technology to improve or tweak an existing application. Everyone has already found partial solutions to a Holy Grail problem. Your idea just needs to improve on an existing solution to make it less expensive, faster, easier to use, or more convenient. A not-so Holy Grail doesn’t need to make massive improvements to solve a problem, but just needs to make incremental ones. In a sense, a not-so Holy Grail solution gives you a first-mover advantage since you’re carving out a niche within an existing field.

Normally a niche might seem to limit your company to the fringes, but by tackling a Holy Grail type of problem, your solution will create a dominant position since you’ll have much less competition. This allows you to compete against larger companies simply because they won’t have an equivalent product to compete against you. (This also makes your company attractive as an acquisition target for a larger company too.)

http://www.amazon.com/Strategic-Entrepreneurism-Shattering-Start-Up-Entrepreneurial/dp/1590791894/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1224520383&sr=8-1

Searching for a Market

Unfortunately, too many entrepreneurs believe that all you need to do is to build a better mousetrap and the world will beat a path to your door. In other words, they believe if they offer a slightly improved product, they’ll gain market share. What usually happens is that if a product only offers marginal improvements, there will be no incentive for customers to switch from competing products.

Too often, entrepreneurs start up a company that competes too closely with a much larger and established rival. You may have a better mousetrap, but you’ll waste valuable resources trying to convince people that your product is superior. There can be only one leader in any given field, and if you’re not the leader, you’ll be just one of many also-rans picking up the crumbs that the leader leaves behind.

While it’s possible to knock off a leader, it’s far wiser (and less expensive) to become a leader in a new area where there is no clearly established winner. Essentially, you need only to define a new area of competition, but you define yourself as the new leader in that field at the same time.

For example, no startup has the resources to compete directly against IBM. However, back in the 80s, IBM sold mainframe computers (hardware) so Microsoft avoided competing against IBM’s strength by selling an operating system for personal computers (software). By skirting around IBM’s strength as the leader in mainframe computers, Microsoft carved its own niche.

Now that Microsoft is the undisputed leader of operating systems, no one would dare risk funding a startup that challenges Microsoft’s dominance in operating systems. However, other companies are still challenging Microsoft’s dominance in the operating system market by not trying to compete head-on.

Red Hat Software doesn’t rely on selling operating systems. Instead, the company generates its revenue by selling services for its version of the free operating system called Linux, which is popular on server computers typically used to run networks and web sites. Apple also doesn’t try to compete against Microsoft directly. Instead, Apple designs and controls its entire Macintosh computer. Although Apple makes its own operating system, Apple isn’t selling an operating system but a computer that just happens to have a different operating system.

Both Red Hat Software and Apple are dominating in their newly defined areas. Microsoft can’t compete against Red Hat Software since Red Hat gives away its operating system for free. Microsoft also can’t compete against Apple because Microsoft sells only software while Apple sells computers. With the old rules, you were expected to build a product and compete against everyone else based on the merits of your product. In today’s world, you simply cannot afford to compete directly against the products of a larger, more established rival. Instead, the key is to compete indirectly against a rival by finding your own market and establishing your leadership in that market.

The next Cisco or Microsoft or Oracle

Silicon Valley hotshots should quit swinging for the fences and instead send a sharp line drive to the opposite field -or just bunt- is a good way to put it. As long as we connect with the ball, (universe of $50M acquisition, 50% + ownership), we leave “swinging for the fences” to the guys with a death wish or some VCs trying to save a business model that hasn’t worked in approaching 10 years or members of the media who don’t know any better.

Cisco, Microsoft and Oracle (“Some Of The Greats”) together bought 29 companies in 2008 and have an R&D budget of at least $10B. You think your product is revolutionary enough to change the world? You want to sit with Some Of The Greats? All power to you but make sure you don’t have any competitors because they will sellout and then you will be competing against One Of The Greats + your competitor.

http://www.amazon.com/Strategic-Entrepreneurism-Shattering-Start-Up-Entrepreneurial/dp/1590791894/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1224520383&sr=8-1

Luck of the Irish?

Every foreign holder of U.S. treasury securities in the world bought or held recently (7/09) except Ireland http://www.treas.gov/tic/mfh.txt

Regulatory rocket fuel

I'm wondering what 41st Parameter, CardCops, Edentify, ID Analytics, iovation, LifeLock, MarkMonitor, Tricipher and TrustedID are up to these these days? FFIEC and HIPAA were regulatory rocket fuel for security companies working in financial services and wondering when web 2.0 will be forced to upgrade security?

Collaboration Creates a Loyal Customer

Come up with a great idea and within a few months someone will come up with a copycat idea to steal customers away from you. That’s why a great idea by itself is never enough to run a company. You need both a good idea and strategic implementation of that idea at the same time.

What you need to do is approach a potential customer, identify their most pressing problem that needs to be solved, and then design a product to solve that customer’s problem.

Since you won’t fully understand the problem, you’ll need the customer to tell you. Since the customers can’t solve the problem themselves, they’ll need you to build it for them. Such a close collaboration allows you to create the exact product that the customer needs.

Now if conditions change and the customer needs new features or changes to the existing ones, they have two choices: switch to a rival product or continue collaborating with you to redesign a new product. Switching to a rival product is never an easy decision, but it’s far less likely if the customer themselves had a stake in designing your product. Close collaboration with the customer insures that the customer gets the product that he or she needs and has a compelling reason to stay with your product and your company.

While you may never have heard of the Immersion Corporation, you may have used their product that is embedded inside the latest mobile telephones, video game consoles, or automotive controls. Immersion specializes in tactile feedback technology, embedded in other company’s products, such as smartphones with touchscreens. When you press a button displayed on a touchscreen, the smartphone may vibrate slightly to give you tactile feedback that you pressed the button correctly.

Once another company has Immersion’s tactile feedback technology embedded in its products, switching to a competitor’s products will be much more troublesome. It’s easier just to continue using Immersion’s technology. Immersion had to collaborate its various customers to get its technology to work in other companies’ products, but now that Immersion is as an integral feature of that product, Immersion holds a dominant position with each of their customers.

A large ship (can) stop and turn on a dime

White house metrics and rationalizations

The White House reports today that 1 million jobs created or saved and promised that the $787 billion stimulus plan will create or save 3.5 million jobs by the end of next year. The meaningless and therefore brazen “created or saved” metric is the kind of rhetoric used to support the notion of “too big to fail” that I said on CBS months from now, years from now is going to be seen as a gigantic rationalization and one of the biggest mistakes this country has made http://cbs5.com/video/?id=48203@kpix.dayport.com

Public debt

The annual interest on the current public debt is ~$329B that was the total number circa 1970. That’s the annual profits generated by the top ~75 Fortune 500 companies (combined) assuming a zero versus negative contribution by the ones losing money. The President of the United States should not be called a liar on television but maybe the President of the United States should also pass on borrowing another trillion dollars this week.

Choose a Strategic Customer for Collaboration

When you collaborate with a customer in order to design a product, you want a solution tailor-made for the customer. You can also sell it to other customers who need similar solutions. That’s why choosing a customer to collaborate with can be so crucial. Collaborate with the wrong customer and you may wind up with a solution that only that particular customer can use. Collaborate with a strategic customer and you can create a solution that others can use and are willing to buy too.

A strategic customer is one that is both representative of your target customer and possesses a reputation as a leader in its field. For example, if your company sells medical billing software, you could customize and sell your product to any hospital in the country, or you could focus on a hospital with a reputation for using cutting-edge technology or that specializes in certain types of research.

Your product’s close association with a well-known and reputable customer validates your product in the market place in the same way that celebrity endorsements validate soft drinks or running shoes in the eyes of the public. Gain a strategic customer as a collaborator and you define the right product to solve a pressing need to generate revenue from day one, and you leverage the reputation of the strategic customer to help sell your product to similar customers.

Ironically, one of Google’s initial customers was Yahoo! Yahoo! contracted with Google to provide the underlying search technology for their web portal. Initially Yahoo! had the reputation of being the most popular search engine on the Internet. By working with Yahoo!, Google gained a strategic customer that provided revenue and gave Google credibility as a search engine.

Perhaps the final, and most important, purpose of a strategic customer is to help your company to get acquired. Once you collaborate with a strategic customer, you develop a relationship with that customer who has helped to shape the design of your product. A fast way for a larger corporation to gain your strategic customer as their own customer is to buy out your company. By buying out your company, a larger corporation essentially buys the assets and customer base that your company has created.

The more important your strategic customers are to others and the closer these strategic customers are linked to your own company (through their involvement in designing your product), the more attractive your company becomes as an acquisition target.

Any corporation that buys out your company will inherit your customers. Sometimes during an acquisition, customers may leave a company that’s being acquired if their business relationship changes. However, if you’ve collaborated with your customers and linked them closely to your startup, customers will be far less likely to switch to a rival product. This helps to guarantee that the majority of your customer base will remain intact for the acquiring company.

A start-up feeds 9/9/09

Start-ups need whatever one calls this. Linksify.com, where ~9% of unique visitors currently convert to new users and unique visitors equal ~9% of site hits, is launching out of beta today on 9/9/09.

Let Secretary Steven Chu print money

PROBLEM: Total mortgage debt outstanding rose ~$2.5T from 2005-2007 and has held at ~$14.5T during the great recession. The U.S. population was ~200m in the late sixties with an average household credit card debt of ~$40.00. Today, ~300m U.S. borrowers create an average household credit card debt of >$8k = >200x. There is overwhelming credit card and mortgage and other kinds of debt accumulating interest while a real 20% of the country is unemployed in some capacity and asset values are detoriating because markets are shot. The consumer debt looks scary enough factoring only the make believe ~10% unemployment number and the $11.785T Total Public Debt Outstanding is 'surreal' that Webster defines as "marked by the intense irrational reality of a dream".

SOLUTION: I said I was anti-bailout to the SF Chronicle on Oct 1, 2008 http://tinyurl.com/nr749y I said to BusinessWeek on Feb 13, 2009 “If you bail out some, you pretty much have to bail out everyone” http://tinyurl.com/mnn5bj I said the administration didn’t have its story straight on NPR Feb 16, 2009 http://tinyurl.com/mwoapm I said to the Wall Street Journal on April 8, 2009"Treasury’s Bailout Plan: First, Stop Handing Out Cash" http://tinyurl.com/cxp9ox

I don’t know how to restructure the debt bubble besides paying off debt but I suppose if we’re going to keep printing money at least hand it to United States Secretary of Energy Steven Chu who knows what to do with it.

Make your first two quarters in beta

Ari Gold said “There are no asterisks in this life –only scoreboards.” A technology start-up CEO’s concern should be revenue as well as product readiness when launching out of beta. Can we forecast good looking quarters including the right customers and acceptable growth? If not, let's keep "testing the product". Remember, this is not a services business or delicatessen that might be acquired for 1X EBITA. This is a technology company that needs a growth trajectory justifying an acquisition for 3X next year revenue -current economy notwithstanding. So, let’s work harder than we thought we could to make acceptable numbers as well as a great product. Somebody said “Entrepreneurship is living a few years of your life like most people won't, so that you can spend the rest of your life like most people can't”.

Amazon and authors

My book Strategic Entrepreneurism (9/08) is currently Amazon ranked #23,894 (#14,692 on Kindle?) but that's all meaningless because Amazon has zero author tools. 2010 is fast approaching yet I can’t login to Amazon to see how many of my books they sold. Of course Amazon’s direct customer is my publisher so it may take a radical restructuring of the publishing industry (similar to the music industry shakeup) before APIs are opened so to speak. Perhaps Amazon should pay more attention to authors who will eventually be the customers after the publishers file bankruptcy.

Panic of 2008 anniversary

Next week is the beginning of the “panic of 2008” anniversary starting with the September 10th, 2008 Lehman quarter and conference call. The DOW closed at 11,268 on September 10th, 2008 falling to the current value of approximately 9,500 less than one month later. We’re still trading at the radioactive levels established during the crisis.

The government announced 18% of GDP in debt in 6 months to prevent catastrophe that is >100% more debt as a percentage of GDP established in the 5 years post great depression. One can assume there won’t be another Lehman around the corner.

The bad news is any businessperson can see we’re simply piling debt on a house of cards. More bad news is the length of this terrible recession and the impact on the unemployed. How long can someone service mounting debt while looking for work? Is there a Lehman-like wave of consumer confidence ready to break as 20% of this country is unemployed, underemployed and in severe financial trouble? Some estimates confirm >50% of U.S. consumers are in serious financial trouble as a function of current home values.

The good news is Secretary of Energy Steven Chu, who should be the recipient of a few end of year awards, may be one of only a handful of people available to ensure the U.S. rebuilds the way it should. Even our best technology CEOs are not fully vested as they generate half of revenue abroad.

Web 2.0 is ready

We never met but here’s the information I want you to know about me http://www.linksify.com/jbf Click on the link and we’re automatically connected. I also see only as much information as you want to show me. Let’s not exchange absurd link or friendship requests that we ignore or politely decline –Linksify PassKeys ™ are better don’t you think? They make for cool auto-signatures and business cards as well.

You’re my close friend and I show you a lot more personal information. How about storing my contact information as simply “http://www.linksify.com/jbf “ in your address book especially the one on your PDA? You need only click on the link to automatically work from my profile but, if your address book is compromised, a stranger clicking on the link will only get to see my default profile available for any user because the device he’s using to access the link won’t be authorized.

The Linksify PassKey ™ is brought to you by some of the Bharosa (Oracle ’07) team members who secured some of the largest banks in the world from fraud. To do this, we needed a robust but very easy to use approach. We think web 2.0 is ready.

Building Startups To Get Bought

Fisher thinks people will want to join Linksify — to encourage them, he’s dropped out of Facebook and LinkedIn (although he still uses Twitter). He argues that the big social networks have raised too much money and have gotten weighed down by too many features and by lax security and privacy practices http://www.pehub.com/49310/building-startups-to-get-bought/

Did Facebook and Twitter Miss Their Window for Profit?

From Fora.tv and the Commonwealth Club of California: http://tinyurl.com/ku29u2

CleanTech Initial Federal Offerings (IFOs) have begun

Tesla got $465M and now Solyndra gets $535M and I seriously think this is exactly the kind of loans (ok bailouts but still OK) the government should be pursuing. Energy Secretary Steven Chu is a pro.

Unemployment forecast

I have been writing about national unemployment for the last year though I’m not a confirmed expert. I do run companies that I can lose if my forecasting isn’t correct. The administration couldn’t run these companies. They were wrong about how quickly and severely unemployment would spike and now they’re wrong about how quickly and severely it will peak and fall http://tinyurl.com/mwpszg and this impacts all of us because their forecasting defines their policy response.

Solution:

I had dinner with the CEO of a hospital group who confirmed the current healthcare plan is a disaster. I had coffee with the CEO of a bank who confirmed policy response in that sector is equally bad. When is President Obama going to hire one of these guys full time to sit each day with the rest of his career policy people who keep getting it wrong?

Global Security Challenge and Ciosynergy

@jonbfisher speaking at Global Security Challenge this month http://www.globalsecuritychallenge.com/page_display.php?p=7&id=125 and Ciosynergy next month http://www.ciosynergy.com/walktheline.pdf

Consumer spending fuel alternative

Perhaps the most important alternative energy discussion at the moment is a consumer spending fuel alternative to the mortgage equity withdrawal.

1.19 percent of all U.S. housing units (one in 84) received at least one foreclosure filing in the first half of the year. Bankruptcies are up nearly 10% month over month including 126,434 in July. An alarming number of people are still hitting the wall though I think a kind of stabilization is on the way in the form of a peak and decrease in unemployment more quickly than the administration is forecasting. The problem is millions need a payout rather than a paycheck to have any chance of digging out of the current situation. This payout is typically in the form of a mortgage equity withdrawal that is not possible without equity and/or without real lending.

We must now be more concerned with the length than the severity of this great recession. I think the biggest risk of another 10-20% market correction is the wall for millions more consumers as a foreclosure and/or bankruptcy can only be delayed for so long.

Commercial mortgages

$7B of commercial mortgages were in foreclosure last quarter, nearly four times the level in fourth-quarter 2007, when the recession began.

Precipitous decline

is speaking with smart and influential investors betting on a ski jump recession meaning stimulus creates bump leading to precipitous decline.

VC-backed IPO

OpenTable (OPEN) is a real company and the first VC-backed IPO in three quarters and one of only a handful in nearly two years. OpenTable is also trading at its low because of pressure from the usual insider selling in a small float and will soon be the falling knife that is the rest of the recent VC-backed IPOs.

Half of the bankers are gone. Let’s see if the VCs adjust their model when half of them are gone.

Problems with LinkedIn

This approach (Linksify) addresses a lot of my problems with LinkedIn — to the extent that I use LinkedIn at all, I use it as a contact service and barely look at the other social features and applications. The service is free, but Linksify will eventually charge for premium options like syncing multiple address books and mobile devices. -Anthony Ha VentureBeat http://digital.venturebeat.com/2009/08/27/linksify-raises-500k-for-better-contact-management/

TechCrunch piece on Linksify investment

TechCrunch piece on my Linksify investment http://www.techcrunch.com/2009/08/27/linksify-gets-a-500000-injection-aims-to-improve-contact-management/

Here's to a Facebook sale

A new study finds the average Facebook user with 100 friends in network regularly keeps in contact with only a fraction of them. Men who have 500 online friends stay in touch with ten, women with sixteen. How many users are fake? How many users login only once? How many login once every blue moon? How many are users only through partners? What are normal user attrition rates? What are attrition rates after security breaches and/or significant outages? Why is nearly half of the money raised and most of the money raised in the last two years from outside the U.S.?

Here’s to an enormously successful sale of Facebook in the next twelve months leaving the window open for an enormously successful CleanTech IPO. Perhaps the IPO window isn’t big enough for both of them.

Art of the Slider

Art begins in imitation and ends in innovation -Mason Cooley

Equifax is the best regulator

Equifax is the best regulator we have absent a federal funds rate precluding borrowing. Millions of foreclosures and bankruptcies mean millions denied credit to participate in the system for many years to come. But millions more will be locked out when the federal funds rate returns to other post-recession levels.

Strategic design in enterprise software

In the enterprise software industry eighty percent of the market (and profits) go to a handful of companies while thousands of other companies fight over the remaining twenty percent. A new startup in this market could challenge one of the three leaders, but the odds are that the startup wouldn’t survive in direct competition. While such dismal odds might discourage anyone from starting up a company in the enterprise software industry, the fact is that every industry has its handful of dominant leaders with many smaller companies scrambling for the remaining crumbs left behind. If you want your company to survive, you must design it from its inception to survive in such a hostile environment, and the best way to do this is through strategic design for acquisition.

Administration forecasts

U.S. unemployment will surge to 10 percent this year higher than previous Obama administration forecasts because of a recession that was deeper and longer than expected, White House budget chief Peter Orszag said Aug 25th. The administration got it wrong on the way up and will get it wrong on the way down. Now, watch this http://tinyurl.com/mwpszg

Change in control

Do not join a start-up without a change of control (CIC) provision in your employment agreement. I just received another horrifying phone call from a first timer. He did everything right but didn’t negotiate a trigger. A trigger is unvested stock vests upon a CIC and/or firing. He receives <50% of his equity now and gets to work out of state for the man to get the rest and the rest is subject to an earn out that means the acquirer can do whatever it wants. This is his reward for co-executing an early sale.

FDIC getting it right

The FDIC is expected on August 26 to vote on relaxed guidelines for private equity firms to invest in banks that I called for 6 months ago http://cbs5.com/video/?id=46483@kpix.dayport.com

Web 2.0 bankruptcy good for planet

I believe we will see a top 10 web 2.0 bankruptcy within the next quarter as well as serious signs of web 2.0 user growth decay. This will send a shock wave through the web 2.0 industry closing its Q1, 2010 IPO window causing more destruction. I think this is good for the planet because it will enable the same liquidity window to remain open for the CleanTech guys as I believe liquidity markets are a zero-sum game now and for a long time to come.

We replace the CEO

In the September 30, 2002 edition of The Wall Street Journal, Barnaby Federer wrote, “If you ask a VC (Venture Capitalist) what value they add, and you get them after a few drinks, they'll say, ‘We replace the CEO.’“ In roughly 50 percent of all companies that succeed in raising venture capital, the founding CEO gets fired within the first year. After agreeing to fund a company, the venture capitalist seeks to put one or more additional people on the board of directors, ostensibly to add additional managerial experience. In an effort to please the venture capitalist, the entrepreneur feels obligated to agree to these changes. These new additions to the board can now allow the venture capitalist to control the company and make wholesale management changes, which usually involve firing the founding team and replacing them with friends of the venture capitalist. This occurs not because of the founding entrepreneur’s performance, but because the venture capitalist prefers having his or her friends controlling the company.

Debt

Debt as a percentage of GDP peaked during WWII and then decreased consistently for 30 years until bottoming during the severe mid-70s recession. Mid-90s wealth creation provided some relief but we have been accumulating more debt as a percentage of GDP for more than 3 decades. 2009-2010 projections call for near WWII levels. Here’s the thing. Debt tripled 1950-80, tripled again 1980-90, doubled 1990-00 and is forecasted to triple again 2000-10. China is the only country in the world capable of doubling GDP in a decade and we grew GDP by 60% from 1990-2006 before the great recession. The question is could debt to GDP quickly go to apocalyptic percentages especially with all the off balance sheet guarantees? The White House under the usual after hours/weekend cover of darkness announced projected deficits over the next 10 years totaling $2 trillion more than had been forecast.

www.linksify.com/jbf

I just quit LinkedIn

I just quit LinkedIn because I want to:

•stay connected without invitations
•update and sync my outlook and PDA address books automatically
•show different portions of my profile to different people
•increase security by encrypting my contacts

Enter Linksify www.linksify.com

Start-up equity

Do not join a start-up for less than 2 percent of the company. For every 100 start-up ventures every year, 98 of them will never raise enough money to get off the ground. Out of the remaining two ventures that do manage to get start-up money (often called “seed capital”), the odds are 90 percent that they will fail despite any amount of funding they may receive. Out of the few ventures that manage to stagger past this high failure rate, another 6 percent may go out of business within three years while 3 percent may become a moderate success.

Will tech lead economic recovery?

From Marketplace/NPR: John Dimsdale -But are skittish consumers ready to start buying? Jon Fisher -I think consumers are literally going to have to see their home prices stabilize and recover, so that they get that fuel to actually have either mortgage equity withdrawals or borrowing potential to inject into the economy. John Dimsdale -That means new gadgets will have to wait http://marketplace.publicradio.org/display/web/2009/08/19/am-tech-recovery/

UCLA forecast

UCLA forecast continues to give my unemployment forecast public heat.

Hey UCLA, Time for you to exit stage left don't you think?

UCLA Forecast June 18, 2008
In an accompanying essay, UCLA Anderson Forecast Director Edward Leamer addresses the most recent unemployment data and reveals his economic bottom line: “I am holding to what is now a shaky view: no recession this year.” Among Leamer’s arguments is that the rising unemployment rate is more of a “hiring freeze” than the massive layoffs associated with an actual recession. This one month’s unemployment figure stands alone and, therefore, does not indicate a negative trend. http://www.uclaforecast.com/contents/archive/media_6_08_1.asp

December 11, 2008
In addition, the unemployment rate is forecast to rise from October 2008’s 6.5% to 8.5% by late 2009/early 2010. Associated with the rising unemployment rate will be the loss of two million jobs over the next 12 months. http://www.uclaforecast.com/contents/archive/2008/media_121108_1.asp

Linksify

Linksify http://www.linksify.com/ "Passkeys" (protected by provisional today) going to take the world by storm.

Tiburon exec: Jobless rate to keep falling

A Tiburon entrepreneur with a knack for economic forecasting says he expects the national jobless rate, which dipped to 9.4 percent last month, to drop precipitously http://www.marinij.com/marinnews/ci_13016645

Entrepreneur’s economic forecast at Commonwealth Club of California

http://fora.tv/2009/08/05/Entrepreneurism_Begin_With_The_End_In_Mind_Jon_Fisher

Commonwealth Club of California talk on "Mornings on 2"

On "Mornings on 2" (CH2) Thursday 845AM discussing tonight's Commonwealth Club of California speech on entrepreneur’s economic forecast https://tickets.commonwealthclub.org/open.asp?show=1288

Commonwealth Club of California

Aug 5, 530pm reception, speech 6pm @jonbfisher at Commonweath Club of California https://tickets.commonwealthclub.org/open.asp?show=1288

Coast Guard rescue

We were eating breakfast in time to phone in this Coast Guard rescue of a fishing boat (Tiburon, CA) –many geopolitical analogies come to mind.

TARP new lending?

Hearing on Confirmation of Mr. Timothy F. Geithner to be Secretary of the U.S. Department of Treasury January 21, 2009. Page 84: Mr. Geithner “I intend to make sure that the TARP funds are used to promote new lending activity,” http://finance.senate.gov/sitepages/leg/LEG%202009/012209%20TFG%20Questions.pdf

WSJ July 27th, 2009 “The total amount of loans held by 15 large U.S. banks shrank by 2.8% in the second quarter, and more than half of the loan volume in April and May came from refinancing mortgages and renewing credit to businesses, not new loans, an analysis by The Wall Street Journal shows.” http://online.wsj.com/article/SB124865259057482435.html

Ocean’s Eleven and the start-up

Danny orchestrates the most sophisticated, elaborate casino heist in history. To help him pull this heist, Danny recruits a handpicked 11-man crew of specialists including an ace card sharp (Brad Pitt), a master pickpocket (Matt Damon) and a demolition genius (Don Cheadle), who will attempt to steal over $150 million from three Las Vegas casinos owned by Terry Benedict (Andy Garcia), the elegant, ruthless entrepreneur who just happens to be dating Danny's ex-wife Tess (Julia Roberts).

Although creating a startup isn’t quite as dramatic as planning a multimillion dollar heist on a heavily guarded casino, the idea is still the same. Find the most talented people you need and put them together on the same team. Then find some mentors who have knowledge and experience identical or similar to yours, perhaps with success in their own startups, and let them point you in the right direction while telling you what to avoid.

Don't sign your term sheet

After guest lecturing at 7 of the 10 leading business schools this last year, I’m convinced students still don’t understand how onerous financing term sheets are. I’m writing about this now because I just heard about another tragic bankruptcy that might have been avoided. Take a very close look at Stock Sale, Voting, Drag-Along and Exit Rights before you sign. Better yet, don’t sign.

Eliminating a Competitor

My new Sandhill.com post: One common quip about the oil industry is that if an inventor ever created an engine that could run off water, the oil companies would buy up the rights so that the invention (or the inventor) would never be seen or heard from again. This story points out another reason corporations acquire smaller companies. If it's not practical to compete, then it's often less expensive just to buy out the competition instead... http://www.sandhill.com/opinion/daily_blog.php?id=63

Selling to a strategic customer

The idea of designing a startup to be acquired may seem counter-intuitive, but it greatly simplifies the path to success. You focus on selling to a strategic customer of a potential acquirer, and then you sell your company to that acquirer. If your company doesn’t get acquired by another company, you still have your strategic customer to generate steady profits for your company.

Koze ranked #1 by Marin Magazine

Darla Fisher’s boutique in downtown Tiburon, CA (Koze www.getkoze.com) ranked #1 by editors of Marin Magazine http://tinyurl.com/nnace7

New economic indicator, time your startup

It’s interesting that a Google search for <> or < > is blank because the symbol resembles one of the most destructive patterns in the world economy. Plot historical United States, United Kingdom, Japan and Canada national new housing starts and unemployment as lines on a graph and the <> shape leaps out at you symbolizing a potential inverse correlation (i.e. as one goes up the other goes down) between the two economic indicators during the worst recessionary periods. The cycle begins with a sharp decrease in housing starts followed by a sharp increase in unemployment, concluding with a sharp rebound in housing starts followed very closely by a peak and decline in unemployment. It was this striking relationship in only the U.S. data that I incorporated in an April, 2008 forecast predicting U.S. national unemployment would nearly double to 9% by April, 2009 http://tinyurl.com/n68a9y Some traditional economists I respect confirmed that the thesis was “interesting” but perhaps “too loose” or “too simple” to be quantifiably significant. Yet, so far, the thesis holds in other G8 countries (thanks to Kurt Christofferson for data gathering assistance). That is really interesting because the implication is that the world may not be flat –rather the home and resulting commerce may be the center.

Take a look at the 2007-2009 cycles in U.S., UK, Japan and Canada (below) clearly forming the < in the <> cycle. If the cycle completes at the conclusion of the recession as it has in past, severe recessions (see one chart that doesn’t look like the others containing 3 completed U.S. <> cycles), we may be looking at a peak and decline in national unemployment much more quickly than experts are currently predicting just as unemployment spiked more significantly than they predicted at the beginning of the cycle.

I will be discussing this thesis in the context of operationalizing good start-up timing at the Commonwealth Club of California August 5th https://tickets.commonwealthclub.org/open.asp?show=1288

The economy will recover

People will put up with almost anything and that means the economy will recover. Tonight, a major airline re-routed overbooked passengers flying New York-Germany to San Francisco so they could fly direct to Germany.

Buy a great company at the wrong time

If market conditions change too rapidly, that target company may no longer be worth acquiring. Mattel made this mistake back in 1999 when it paid $3.5 billion to acquire The Learning Company, a publisher of educational software for children with popular products such as Reader Rabbit, Myst, Carmen Sandiego, and National Geographic. Mattel believed that it could expand its toy business to include computer software. Unfortunately for Mattel, it soon discovered that the educational software market never grew as fast as predicted. Unlike business applications that generated revenue through upgrades, educational software rarely needed upgrades. A program that taught multiplication to children would work today and ten years later without needing any changes. Instead of earning $50 million as Mattel had projected, The Learning Company wound up losing $105 million. By 2000, Mattel was losing $1.5 million a day with The Learning Company. Mattel eventually sold The Learning Company to Gores Technology for nothing more than a percentage of The Learning Company's future profits, essentially writing off its entire $3.5 billion initial investment as a complete loss.

The problem wasn’t that The Learning Company didn’t produce decent products, but that the window of opportunity for educational software had passed. Buy a great company at the wrong time and you’ll still wind up losing, just as if you had bought the wrong company in the first place.

Capital gains tax

Historically, raising capital gains taxes tended to harm the US economy more than help it.

Capital gains remained below 7% from 1913 to 1921. The Revenue Act of 1921 moved to 12.5%. The tax then increased with the 1969 and 1976 tax reform acts, only to be reduced in 1978. The Taxpayer Relief Act of 1997 lowered it.

The cutting of capital gains taxes has proven to benefit the economy when tried in the past on multiple occasions.

The real tech IPO market

For a long while now, a tech company goes public because it must. It’s losing money and the IPO is the most viable form of financing as there are even fewer larger, mezzanine, pre-IPO financings than IPOs because there are so few IPOs. Then, the tech company trades an average of 100k/shares a day from a tiny, controlled float for a month or two before it starts to sink and finally plummet as the lockup expiration approaches and expires. Then, it limps along or worse quarter after quarter like GDP.

An IPO is a next round of capital. Doesn’t it make sense to take a next round of capital when, thanks in part to the previous round, the company is scaling successfully? What is it going to take to change the thinking that top line revenue and/or number of users is the most important indicator of successful growth? Perhaps a web 2.0 bust that sucks the last bit of oxygen out of the public markets killing the Cleantech and Green companies that *must succeed will change things.

Double rainbow in Tiburon, CA

High humidity in Tiburon, CA produced double rainbow without a drop of rain. Notice how the spectrum reverses? Rainbows are caused by a double reflection of sunlight inside the raindrops, and appear at an angle of 50°–53°. As a result of the second reflection, the colours of a secondary rainbow are inverted compared to the primary bow, with blue on the outside and red on the inside.

Commonwealth Club of California Speech

Half of total seats now sold to my Commonwealth Club of California Speech in 26 days so time to get moving https://tickets.commonwealthclub.org/open.asp?show=1288

Every entrepreneur has 30 seconds

Every entrepreneur has 30 seconds to appreciate 17.Qd3xf3 -one of the finest chess moves of the 19th century http://tinyurl.com/mn9s69

National Institute of Health

I'm on at least one non-profit board doing well because of National Institute of Health (NIH) grants.

Grilled Cheese ToGo from Yale University

To Grilled Cheese ToGo team I met from Yale University: McDonald’s started selling hamburgers from a single restaurant and gradually branched out across the world, but imagine if they had started trying to sell millions of hamburgers from their first restaurant in the beginning. They would have been swamped with too many orders and not enough resources, and would have failed no matter how large their potential profits might have been. By knowing how to recognize and avoid this problem of rapid growth, they can make a crucial decision that can spell the difference between success or failure for Grilled Cheese ToGo.

Yale University keynote

Giving Yale University keynote Monday ---operationalizing fuzzy “luck” by examining the market, synergy, valuation and a Caltech Fly.

California IOU

Small business needs the most help but will be hurt most by the government of the world's eighth-largest economy printing IOUs.

National and international unemployment, The world may not be so flat

Historical data indicates, in times of severe economic correction, U.S. housing starts and unemployment are inversely correlated meaning (begin cycle) unemployment increases significantly after a severe decrease in housing starts and unemployment peaks and decreases after an increase in housing starts (end cycle). The thesis holds for Canada, the first of G8s that Kurt Christofferson is helping me analyze. With all of the factors contributing to national and international unemployment, what if the country by country housing market represents the most significant correlation? That might mean the world is not so flat!

Darla Fisher in Marin Magazine

This is a nice piece about my wife Darla in Marin Magazine http://www.marinmagazine.com/Marin-Magazine/July-2009/Tiburon/

Yale speech

I have to be in California July 6th so Yale speech changed to Webcast.

Start-up math

My new sandhill.com blog post is http://bit.ly/DGFiu

The length of time that a venture-backed company goes from founding to IPO is now 8.6 years, which hit a 27-year high in 2007. In considering the value of a company, you must examine the investors' returns as a function of time and value, not just value. $1.00 invested for 8.6 years must become $2.30 just to get an approximate 10% compounded return to give a nominal profit for investors. $1.00 must become $4.80 after 8.6 years for a compounded 20% return that makes a company profitable to most venture capitalists.

Why $5M on $9M pre-money series A is the last round entrepreneurs will ever close

Founders typically receive 80% ownership in the company leaving 20% for employees. F = 0.80 (Founders’ latest % ownership). L = 0.357 (Outside investor’s % ownership calculated as $5M divided by $14M post-money valuation). The dilution formula is 0.80 * (1 – 0.357) = 0.80 * 0.643 = 51.4%

Founding entrepreneurs raising $5M on a $9M pre-money series A dilute ownership to 51.4% of the company. If they raise another dime, they lose majority control (including the ability to approve an acquisition) that technically means they’re working for someone else.

Right kind of bailout

Washington Post: The Energy Department announced this morning that it would lend Ford $5.9 billion to retool plants in five states for fuel-efficient vehicles. The department also awarded Nissan $1.6 billion and Tesla Motors $465 million to ramp up electric car production.

Operationalization of timing

Operationalization is the process of defining a fuzzy concept so as to make the concept measurable in form of variables consisting of specific observations. Operationalizing “timing” is becoming more interesting.

Start-up financing and new housing starts

We accept correlation does not imply causation. The data suggests there is a correlation between the amount of start-up financing and management’s IRR. Other data suggests there is an inverse correlation between national new housing starts and unemployment. I believe there is a third variable strengthening the correlations of both pairs of variables therefore increasing the likelihood of causation. Developing…

Yale keynote July 6th

Speaking at Yale July 6th (Summer Fellowship program) including bit of relating start-up forecasting to economic forecasting.

On the ground economic indicator

My wife owns two clothing boutiques in Tiburon, CA (Koze and Koze Beginnings) and travels to various “markets” to purchase inventory. She confirmed the most poorly attended market she could remember was last August (’08) meaning fewer of her colleagues attended that market to buy inventory than in the last 15 years. These markets run more or less quarterly and store owners purchase inventory to be used 1 season in advance (i.e. summer purchase for fall inventory).

1 year later, tonight, she returned from the 2nd most poorly attended market. Are many of these small businesses not buying and/or dying? Is this a leading or lagging on the ground indicator? Stay tuned…

Zero capital-gains tax

Where is Obama's campaign proposal to offer zero capital-gains tax to founders/original investors when companies are sold?

Worst of unemployment may be over

Housing starts up 17% April-May ’09 and, if this is a bottom, unemployment will peak at about 10.4% falling to 8% in 2-3 quarters.

VICE PRES. BIDEN on Meet The Press

June 14, 2009 Meet The Press:

MR. GREGORY: Right. But the, but this package was sold on the premise that it would in fact keep unemployment at 8 percent. It's exceeded that...
VICE PRES. BIDEN: The economy was worse off when we made the assessment than anyone thought it was http://tinyurl.com/m6gwlh

April 03, 2009 Wall Street and Technology:

GREG MACSWEENEY: A little more than 11 months ago (May 29, to be exact) I wrote a blog that called for 9 percent unemployment by April 2009, when the official numbers are reported in early May of this year. At the time, the forecast received some criticism — mostly from people in denial about the severity and depth of the financial crisis. Well, it looks like 9 percent national unemployment is a reality, but if you read on, there is good news to report as well. The forecast, based on commentary and analysis from University of San Francisco business professor Jon Fisher, tracked the correlation between decreases in housing starts and rising unemployment. Fisher (and it was all Fisher’s analysis, I’m just the messenger) tracked data back to 1959 and found that as housing starts fall, unemployment rises shortly thereafter. It’s an amazingly simple correlation, but so far has proved to be dead-on accurate http://tinyurl.com/n3mmue

Fallacy Of Composition

Sowell: A baseball fan at a ballpark can see the game better by standing up but, if all the fans stand up, they will not all see better. Many economic policies involve this fallacy, as politicians come to the aid of some group, industry, state or other special interest, representing the benefits to them as if they were net benefits to society, rather than essentially robbing Peter to pay Paul.

EV1 and Prius

Back in 1997, General Motors developed and marketed an electric car dubbed the EV1. At the same time, Toyota introduced the Prius, a combination gasoline-electric hybrid car. By 2003, General Motors had cancelled the EV1 despite growing demand and interest. In comparison, Toyota continued to improve on its hybrid engine technology to the point where the Prius has become the most popular alternate energy vehicle in the world.

Both Toyota and General Motors spent millions of dollars developing their technology, but General Motor’s EV1 struggled with short endurance because of the limited amount of charge its batteries could hold, as Toyota’s Prius simply advanced technology just a little bit to achieve the market success and profitability that eluded General Motors.

R&D in a tough economy

did this piece with Walden University “Research and Development in a Tough Economy” http://tinyurl.com/mnx2o5

Anyone can be an entrepreneur

Colonel Sanders became an entrepreneur at the age of 65 when he started Kentucky Fried Chicken. Michael Dell formed PC Limited (the predecessor to Dell Computers) from his dormitory at the University of Texas in Austin when he was only 19. Julie Aigner-Clark started the Baby Einstein Company from her suburban home in Denver, Colorado. Because entrepreneurs can make their own rules, they’re not limited by age, race, sex, location, educational background, or public policy response.

Google Syncs With Microsoft Office

This may enable start-up #4!

Commonwealth Club of California

I will be relating start-up forecasting to economic forecasting shortly https://tickets.commonwealthclub.org/open.asp?show=1288

Start-up

Filed some provisional patent applications today. Start-up #4?

GM is still trading

Five minutes of what I think about GM and the sector this AM http://tinyurl.com/pfg43d

Success test

In 2005, when a record 16.9M cars were sold in the U.S. fueled by $1T in mortgage equity withdrawals, GM lost $10.6B. Shouldn’t there be a success test applied to the straightforward businesses like autos to see if they make sense in optimal conditions versus a stress test applied to banking to see if they can withstand once in a lifetime crisis?

GM

There are various techniques of restructuring that are familiar in the business world, none of which are being used by the government http://tinyurl.com/cxp9ox

Housing starts and unemployment

3 biggest housing starts declines (72-75),(78-81),(05-09) resulted in V shaped recovery followed by unemployment cap http://zimor.com/link/23

Juxtaposition of bailout and suffering

I have said many times bailouts will be seen as the worst of policy response http://tinyurl.com/pjvhx8 all the more egregious when we so casually let our citizens fail. Auto manufacturers are now taking more bailout than the largest banks (GM proposal is $50B and counting) while the California administration, to close a $21 billion deficit, wants to eliminate a welfare-to-work program that provides more than 500,000 families, saving $1.3 billion but forgoing $4.2 billion in federal matching funds. Schwarzenegger also seeks to cut health care coverage for nearly 1 million low-income children under the Healthy Families program, saving about $250 million for the year. For the state's students, he wants to phase out a college aid program and reduce $335 million in funding for the University of California and California State University systems.

Teahupoo

My LLC, Teahupoo, named after the fiercest wave on earth http://tinyurl.com/odbgpb

兵不厭詐。

兵不厭詐。

Regulators seized BankUnited

Regulators seized BankUnited-sold to private equity as I recommended in this CBS piece a few months ago http://cbs5.com/video/?id=46483@kpix.dayport.com

Too big to fail

My “too big to fail is far worse than axis of evil” comment was edited from national broadcast that just played...

University of San Francisco

On campus 28th that will be my last USF event for awhile and wanted to give a shout out to my colleague and friend Dr. Mark Cannice http://www.usfca.edu/sobam/nvc/pub/svvcindex.html

OpenTable IPO

OpenTable.com is real so let’s hope it goes well tomorrow so a cleantech co gets out before a web 2.0 co explodes http://online.wsj.com/video/slowdown-hits-silicon-valley/687E9973-5165-4071-BB43-528DB760F695.html

EO webcasts, fax machine and rule of 72

Enjoyed working with some talented entrepreneurs on EO webcasts, please do not forget:

Back in 1843, a Scottish inventor named Alexander Bain, patented a revolutionary new communication medium capable of transmitting images across distances. Nobody bought the product. In 1851, Frederick Bakewell made several improvements to Bain’s invention, and still nobody bought the product, despite its clear application and obvious convenience. In 1861, Giovlanni Caselli sold the first machine based on this new communication medium, years before Alexander Graham Bell invented the telephone - yet sales failed to take off. In 1924, Richard H. Ranger demonstrated the usefulness of this 80-year old invention by sending a photograph of President Calvin Coolidge from New York to London. Sales of this invention finally began, although they were often restricted to transmitting weather charts. In an effort to improve the usefulness of this invention, Herbert E. Ives modified this device to transmit colors as well as black and white images.

It wasn’t until the mid 1980s, nearly 140 years later, that the world finally embraced this new communication medium, originally known as a wireless photoradiogram, but now referred to as the fax machine.

You may have a great idea but investors can get 2X in 9 years at 8% (rule of 72).

Great Blue Heron

I snapped a great picture from my home office:

Better than Blue Diamond

And they grow in our backyard

Truth on Marketplace and NPR

On Feb 17 Marketplace / NPR told the truth as usual this time regarding Chrysler and GM. It's sad but necessary. Additionally, we must go through this process with some of the big banks.

Either way, University of San Francisco professor Jon Fisher doubts GM or Chrysler can become profitable:

Jon Fisher: I think the only way to truly restructure these companies is to protect them in bankruptcy and fundamentally realign cost structures.

http://marketplace.publicradio.org/display/web/2009/02/17/gm_deadline/

Kepler's evening

I met some nice folks at my Kepler's speech. The 2008 documentary Paperback Dreams chronicles Kepler's and now defunct Cody's Books in Berkeley, CA.

Small Business Podcast interview

http://www.smallbusinesspodcast.com/programs/transcripts/2009-05-11_Strategic-Entrepreneurism.html

Is the worst over?

In the mid 70s, early 80s, early 90s we experienced a V shaped housing start recovery closely followed by a cap in unemployment. So, consider, if we have experienced a bottom in housing starts we might have experienced an economic bottom. Intuitively, one might think more people losing their jobs means more people losing their homes means more impact to new construction but, actually, it’s an inverse correlation historically that is pretty striking. Indeed, all the recessions in these periods were marked by a dramatic declines in new housing starts (indicating systemic damage to the economy) followed by spiking unemployment that is a lagging indicator. Then, when housing starts recovered, employment recovered. A plot of the 2008-2009 new housing starts with unemployment cycle looks almost identical to 1974-1975 http://www.wallstreetandtech.com/blog/archives/2009/04/unemployment_ma.html

A different kind of good to great

I think it’s important entrepreneurs try to make an impact and perhaps the path of least resistance is making sure your good company winds up under the umbrella of a great company http://www.oracle.com/pls/ebn/swf_viewer.load?p_shows_id=7350389&p_referred=0&p_width=800&p_height=600

Business Leadership Council, Kepler's

speaking at Business Leadership Council / Kepler's monday http://bit.ly/WbP15

From USA Today's Del Jones

Unemployment/housing starts have precise correlationback to 1959 http://bit.ly/lu8ju says @JonBFisher, author of Strategic Entrepreneurism http://twitter.com/jonesdel

Don't stress bad bank bought by good bank

said on NBC tonight "worst case is your bad bank bought by good bank" so let's not stress about stress test that is meaningless anyway..

Grow! Awards @ Computer History Museum

Look for Strategic Entrepreneurism book at Grow! Awards, Computer History Museum tonight!

@ Hewlett Packard

I will be lecturing about unemployment forecast at Hewlett Packard May 28th.

Speaking early May

I'm speaking at Fundraising Day 2009, SF (Monday), my book in the bag for Grow! Awards (Tuesday) and at Kepler's Menlo Park (11th)

Wally Wang's ComputerEdge

Nice post about Strategic Entrepreneurism by Wally Wang / ComputerEdge, San Diego http://webserver.computoredge.com/online.mvc

Strategic Entrepreneurism on Amazon's Kindle

Strategic Entrepreneurism is finally on Amazon's Kindle http://tinyurl.com/c6mjvp

From Daily Candy "Koze Beginnings"

Koze Beginnings Opens!
What: Waterfront boutique spawns a store next door, offering togs from the likes of Splendid, Minnie Rose, and Michael Stars, plus artisan-made gifts for moms and minis.
Why: Make waves.
When: Opens Sat., 10 a.m.
Where: 18 Main St., nr. Tiburon Blvd., Tiburon (415-435-1916).

Identity crisis in the digital world

According to Dhruv Singhal, Oracle India's director for Sales Consulting -Oracle Fusion Middleware, it's very crucial for enterprises, organizations and financial institutions to retain customers' confidence against online frauds and crimes on the Internet.

Singhal suggests that using Oracle Virtual Authenticator and Oracle Adaptive Authentication Manager (OAAM), user identity can be protected and also helps to block unauthorized access, externally as well as internally in any organizations.

http://www.ciol.com/Enterprise/News-Reports/Identity-crisis-in-the-digital-world/17409118565/0/

Sandhill.com and Tiburon Belvedere Chamber of Commerce

Blogging for Sandhill.com http://www.sandhill.com/opinion/daily_blog.php?id=63 and the Tiburon Belvedere Chamber of Commerce http://tiburonchamber.wordpress.com/tag/jon-fisher/

Bank insolvency and housing

If a bank is not insolvent now, what delta in its overall assets yields insolvency? Given another new low in housing starts today, price stability may be further out of reach further deteriorating the banks.

Fruit from Yale University book signing

Very much enjoyed book signing at Yale last year http://newhavenadvocate.com/event_detail.cfm?eid=20010 and just received word one of the students may be exiting successful merger that will be fun to report!

Strategic Entrepreneurism Trademark

Looks like I was just officially awarded a "Strategic Entrepreneurism" trademark.

NewsHour With Jim Lehrer Silicon Valley

From NewsHour With Jim Lehrer "Silicon Valley Navigates Changing Economic Landscape" (October 9, 2008):

SPENCER MICHELS: The concept that the gloomy economic news may not hit Silicon Valley hard is fairly widespread. Despite drops in high-tech stocks, that's still what many Valley spokesmen are saying publicly.

JON FISHER, University of San Francisco: I think they're delusional.

http://www.pbs.org/newshour/bb/business/july-dec08/siliconvalley_10-09.html

And then from San Jose Mercury News today:

2008 the worst year for Silicon Valley 150 since 2001

http://www.mercurynews.com/businessheadlines/ci_12101093

THE GOOD NEWS is Silicon Valley, like unemployment, is a lagging indicator this time..

2008 the worst year for Silicon Valley 150 since 2001

From Mercury News: Brandon Bailey

"I think some people were looking for a V-shaped bounce back," meaning a steep decline followed quickly by a sharp ascent, "and that's not going to happen."

But if some companies are cutting back on spending this year, the smarter ones are pursuing growth and innovation through new acquisitions, said Jon Fisher, a University of San Francisco business professor.

Smaller market capitalization means some companies with valuable assets, including new technology and talented workers, can be had for a lower price, noted Fisher, a former Oracle vice president who's also been a serial entrepreneur.

He noted that Oracle CEO Larry Ellison has relentlessly increased revenue by acquiring a steady stream of startups and big companies too.

http://www.mercurynews.com/sv150/ci_12101093

From Forum with Michael Krasney "Wells Fargo is one of the finest run companies in the country"

On Forum with Michael Krasney (October 13, 2008 during the worst of the crisis) I said “Wells Fargo is one of the finest run companies in the country” and I praised the Wells Fargo / Wachovia transaction. This is an hour long program and one can hear more of the specific details here http://www.kqed.org/epArchive/R810130900?itemMD5=7132916702e98b5e2fc059c5cff1b995 The biggest problem we have in this country is propping up make believe businesses with taxpayer money so I do hope the government provides incentives and guarantees, not taxpayer money, to facilitate acquisitions of bad banks by good banks like Wells Fargo.

From Wall Street Journal "Treasury’s Bailout Plan: First, Stop Handing Out Cash"

Jon Fisher: The difference with a guarantee is that public perception won’t be that the money coming in from government coffers will be going into executives pockets, as with the bonus outrage. The other difference between the guarantee and the investment is the model that is followed by the Small Business Administration. They don’t wire money. They guarantee banks to make loans to small businesses. With a guarantee, you have a model where the government could simply guarantee private investment, and there are no onerous covenants and terms associated with the government making a direct investment or taking a control position.There are various techniques of restructuring that are familiar in the business world, none of which are being used by the government. The reason many of these bank entities are insolvent is not that they’re out of cash. It’s that the debt is overtaking the equity in the business. So you can restructure some debt to convert to equity, or you can guarantee the restructuring done by private professional. The good news is that there are some nuggets of classic restructuring that the government could embrace — but it has clouded classic restructuring with all this other stuff that make no sense to business people, which is these direct massive injections of cash. That’s the last thing the government should want to do with taxpayer money — because of the public perception against it, and also because of the raw logistics. The government is now the owner of AIG, but if the government were just a guarantor we could get into the weeds of this and take it off the federal balance sheet. Guarantees are more beneficial to the federal balance sheet than investments, so it could leverage guarantees rather than actually losing cash flows through direct investments.

http://blogs.wsj.com/deals/2009/03/23/treasurys-bailout-plan-first-stop-handing-out-cash/

Another Silicon Valley bust

New speaking engagements at Yale, Kepler's, College of Marin, Brown spreading the word that entrepreneurs should engineer their companies for acquisition. Unfortunately another Silicon Valley bust is coming that (can) be avoided...

Historically dead-on accurate unemployment forecast predicts peak at 10%

Wall Street & Technology
April 03, 2009
Greg MacSweeney

Unemployment May Peak at 10%

A little more than 11 months ago (May 29, to be exact) I wrote a blog that called for 9 percent unemployment by April 2009, when the official numbers are reported in early May of this year. At the time, the forecast received some criticism — mostly from people in denial about the severity and depth of the financial crisis. Well, it looks like 9 percent national unemployment is a reality, but if you read on, there is good news to report as well.

The forecast, based on commentary and analysis from University of San Francisco business professor Jon Fisher, tracked the correlation between decreases in housing starts and rising unemployment. Fisher (and it was all Fisher’s analysis, I’m just the messenger) tracked data back to 1959 and found that as housing starts fall, unemployment rises shortly thereafter. It’s an amazingly simple correlation, but so far has proved to be dead-on accurate.

But now, it seems we are nearing the bottom of the housing start decline, which means national unemployment should stabilize and not surpass 10 percent, according to Fisher, who is also the author of Strategic Entrepreneurism. Privately-owned housing starts in February were at a seasonally adjusted annual rate of 583,000, according to U.S. Census Bureau and the Department of Housing and Urban Development. This is 22.2 percent above the revised January estimate of 477,000, but is 47.3 percent below the revised February 2008 rate of 1,107,000.

The good news in these numbers is the increase in housing start numbers from January to February 2009, indicating that the market may have hit bottom. The March housing start numbers aren’t available yet and, yes, the number could drop again, but indications are the number will at least stabilize and hopefully rise. “If you look at the graph, once the new housing starts hits bottom, it is a classic v-shaped recovery in the new housing starts and then very quickly — not a year later, but a quarter or two later — there is a corresponding cap in national unemployment, which stabilizes and then decreases,” said Fisher in a voicemail message. Finally, some good economic news! (See the chart at the bottom of this blog).

If the model holds true, we may see a period of stabilization and then recovery later this year. There were 663,000 non-farm payroll jobs lost in March and January's job loss tally was revised up to 741,000. Investors were expecting job losses of around 650,000 to 700,000 in March — shocking numbers in any economy, but after a while it seems these huge numbers are numbing. Overall, the national unemployment rate moved up to 8.5 percent and the economy has lost over 5 million jobs since the recession began in December 2007.

“I forecast 5 percent to 9 percent unemployment in 12 months,” added Fisher. “And if we have indeed reached the bottom in new housing starts, then I will also forecast a cap in national unemployment at 10 percent, and then we will start to decrease. This is really message of hope in this whole terrible dialogue.”

http://www.wallstreetandtech.com/blog/archives/2009/04/unemployment_ma.html

President delivers ultimatum to GM, Chrysler

From CBS/Hank Plante: I said "I think the notion of 'too big to fail' is a gigantic rationalization and will be seen months from now, years from now as one of the biggest mistakes this country made http://tinyurl.com/de6e96

Administration demands auto restructuring

WASHINGTON (KGO): Industry analyst and entrepreneur Jon Fisher, an adjunct business professor at the University of San Francisco, says no business is too big to fail, and both companies should file for bankruptcy to address the debt and long-term obligations that are a drag on cash flow, profitability, and most important, viability. President Obama himself mentioned bankruptcy as an option this morning. GM, in particular, is facing huge costs to provide retired employees with health care  an estimated $6 billion annually four and five years from now http://abclocal.go.com/kgo/story?section=news/business&id=6736355#bodyText

Marketplace "unintended consequences"

JON FISHER: We thought that Sarbanes Oxley legislation after the collapse of Enron and Worldcom was largely a good thing. And the unintended consequences are that it's extraordinarily difficult for U.S. companies to complete initial public offerings.

Fisher fears the unintended consequences of regulating new financial services could end up stifling growth.

In Washington, I'm John Dimsdale for Marketplace.
http://marketplace.publicradio.org/display/web/2009/03/26/pm_shadow_banking/

Will NOT hit 10% unemployment IF..

Perhaps you recall my analysis of housing starts and unemployment over the last 50 years. I wanted to wait until the forecast was seen to fruition (May ’08 forecasted national unemployment to 9% May ’09) that I think we all agree is on target. Now, take a look at the fact that all large declines in housing starts have rebounded via V shaped bottom and almost exactly aligned with a cap in unemployment (within few quarters). If we have indeed seen a bottom in housing starts (Feb ’09 confirmed ~20% spike), I think unemployment will peak <10% and then head down on the data!

Image below is from May '08 plot:

AIG bonues spark backlash in Bay Area, Nation

...http://cbs5.com/video/?id=47625@kpix.dayport.com

AIG symmetry

"However, I don't think strengthening Small Business Administration guarantees is the most effective policy response. Rather I think the government, via the SBA and other channels, should be injecting money directly into small businesses to provide at least some symmetry with the AIGs of the world." http://www.thedeal.com/dealscape/2009/03/luke_warm_is_the_reception.php

Small business and AIG

I think the Obama administration focusing on small business is critical because an estimated 25M U.S. entrepreneurs responsible for 75% of U.S. employment are woefully underserved by policy response. However, I don't think strengthening Small Business Administration guarantees is the most effective policy response rather I think the government, via the SBA and other channels, should be injecting money directly into small businesses to provide at least some symmetry with the AIGs of the world. The government could give every Entrepreneur $7,500 to protect his business or $10,000 to every unemployed person to start a business with the money AIG has cost the taxpayers so far. Perhaps the biggest problem we face in this country is the propping up of insolvent companies at the expense of everything else.

Entrepreneurs are silver bullet

"In this economy and the effects we are going to experience from this economy, I think entrepreneurs are really the silver bullet," he said. "These are the people who are going to lead us out of this recession. They're gonna create jobs, they're gonna create their own stimulus by putting good products and services into the market and we need to embrace them and protect them." http://tinyurl.com/aq3cs3

Marketplace "Unemployment may be nearing bottom"

Some economists predict at least a 9 percent jobless rate by this summer. Jon Fisher, who teaches business at the University of San Francisco, says that's the result of last years' hits to housing and banking.

Jon Fisher: There is a limit to these things and I think the data we're seeing in unemployment and related data is indicative to past damage in our economy and not that the economy is getting worse and worse. So I think we are nearing a bottom, both in the national unemployment data as well as the severity of the market corrections.

Fisher says now that construction is at a standstill, housing demand will finally out pace supply. And that should create jobs. He thinks stock market investors are overreacting to where we've been, rather than focusing on where we're going.

In Washington I'm John Dimsdale for Marketplace.

Guide Your Company to a Great Sale

U.S. News & World report picked up nice review of my book/thesis http://tinyurl.com/de5lta

Koze Beginnings, Tiburon

Darla is following up "Koze", a women's clothing boutique in Tiburon, CA with her 2nd store "Koze Beginnings", a specialty boutique for children coming Spring 2009.
www.getkoze.com

Where is Citi's buyout?

Why can’t the government convene the buyout folks to take Citi private (only costs $10B now) guaranteeing let’s say 80% of the buyout investment risk while sharing in 20% upside in a future sale? This single action sends the correct message (private money coming in) versus the incorrect message (nationalization) causing panic. Bank of America only costs $19B http://cbs5.com/video/?id=46483@kpix.dayport.com

Both GM and Chrysler are living on borrowed billions

From MarketPlace Janet Babin: Either way, University of San Francisco professor Jon Fisher doubts GM or Chrysler can become profitable:

Jon Fisher: I think the only way to truly restructure these companies is to protect them in bankruptcy and fundamentally realign cost structures.

http://marketplace.publicradio.org/display/web/2009/02/17/gm_deadline/

GM can restructure

http://tinyurl.com/bvk4fr

MarketPlace: The Obama administration decided the problem was bigger

John Dimsdale MarketPlace: The Obama administration decided the problem was bigger than a single car czar..

University of San Francisco Management Professor Jon Fisher agrees a task force will be more effective. But he worries about the implementation.

Jon Fisher: I think the fact they switched gears so close to the deadline is again an indication they don't quite have their story straight.

To see their way out of a downward spiral, Fisher says the companies will have to squeeze more concessions from all sorts of stakeholders -- parts suppliers, workers, bondholders http://marketplace.publicradio.org/display/web/2009/02/16/pm_auto/

BusinessWeek "Should Small Businesses Get a Bailout?"

As told to Jeremy Quittner

JON FISHER
Serial entrepreneur and business professor, University of San Francisco, and co-author, Strategic Entrepreneurism

— If you bail out some, you pretty much have to bail out everyone, so small business deserves its share. Small business contributes roughly three-quarters of the country's payroll. Auto-makers employ only about 3 million people.

— Government is capable of isolating every profitable small business in this country. We should give bailout money to the very good companies that are oppressed by this uncertain economy.

— A good portion of the bailout will be in the form of tax relief. This type of policy will create an unprecedented boom in entrepreneurship.

http://www.businessweek.com/magazine/content/09_62/s0902067774795.htm

CNBC contributor gets it right

This is an interview I did with Jerry Bowyer (CNBC contributor) that really sums up my thesis and thinking more than most things I’ve done http://recordings.talkshoe.com/TC-26344/TS-173681.mp3

You're a long way from Microsoft

From Entrepreneur Magazine: It probably looks like a long way from where you and your company are now to where Bill Gates and Microsoft are. And it's further than you think, says Jon B. Fisher, entrepreneur and author of Strategic Entrepreneurism. That's because IPOs--the traditional way entrepreneurs and venture capitalists fund growth and eventually cash out--have grown increasingly rare. "The model has to change," says Fisher, who has started two companies and, rather than going public, sold them to larger acquirers. Startups today should strive to emulate that model rather than the example set by Microsoft, Google and other entrepreneurial icons, he says. He offers these tips for guiding your company to a great sale:

http://www.entrepreneur.com/magazine/entrepreneur/2009/february/199610.html

Entrepreneur Magazine reviews Strategic Entrepreneurism

Strategic Entrepreneurism.
Small Press Bookwatch • Dec, 2008 •
Strategic Entrepreneurism

Jon B. Fisher, Gerald A. Fisher, Wallace Wang

Select Books
1 Union Square West, Suite 909, New York, NY 10003
9781590791899, $21.95, www.selectbooks.com

There's a lot of advice out there, but which is the right kind to heed? "Strategic Entrepreneurism: Shattering the Start-Up Entrepreneurial Myths" seeks to dispel the myths that society has laid out for the aspiring businessman who's just getting started in the game. Laying out strategies for business men trying to cut through the jungle and climb the mountain that is start up, Fisher offers much sound advice, making "Strategic Entrepreneurism" a must for business people just starting up.

Venture capital industry is in the process of reinventing itself

From SF Chronicle: Jon Fisher, a software industry entrepreneur and business professor at the University of San Francisco, said the drop in merger activity coming on top of the IPO slowdown will force a change in the capital-raising mechanism that has nourished the startup economy.

"The venture capital industry is in the process of reinventing itself," Fisher said.

Housing Turnaround in '09

From TheStreet: Jon Fisher, entrepreneur and business professor at the University of San Francisco, is a shade more optimistic. He says the number of new homes built in the U.S. has begun to bottom, and that pricing stability won't be far behind.

Even if inventories will start the year at elevated levels, it's important to note that the number is declining, said Fisher. Many homes may be selling because they're in distressed situations, but "the point is the inventory is decreasing."

"The longer we stay at this level of productivity, the more damage that signals for the economy," said Fisher.

Start-up relief act of 2009

Obama's campaign proposal to offer zero capital-gains tax to founders/original investors when companies are sold may fuel unprecedented start-up merger activity if executed not unlike the Taxpayer Relief Act of 1997 (exempting most home sales from capital-gains taxes) fueled the housing bubble.

Yahoo layoffs

I commented on ABC this evening that “Google was started after Yahoo! and is now many times the size of Yahoo! and now time for Yahoo! to partner up to survive.” BUT it should be noted that laying off 1,500 saves at most $30M that is <10% $400M cost cutting effort so why drive another stake through the heart of morale for such a small savings especially from a profitable company?

Said bailout is WORKING in WSJ

Fisher, a serial entrepreneur, has been the CEO of three companies in the Valley; he sold the last one to Oracle. He told Wall Street Journal: While I’ve called for a variety of market problems, the data are showing post-bailout package that we are showing stability in the post-bailout markets. The amount of destruction has reached where we’re near a bottom and everything stabilizes. We’ll lose a lot more jobs, but I don’t think we’re going to see things shrink too much further and we’re seeing the start of that today. As for mergers out here in the Valley, we talk about this all the time: if you want to get in ahead of the wave, you have to get in now.

Design your company to become an attractive acquisition candidate

From day one, create and design your company to become an attractive acquisition candidate. Identify the companies that you believe would most benefit from acquiring your company. Of course, you can never control what another company does, but by understanding which company may acquire you and what their own needs may be, you can steer your company in their direction as an acquisition target.

How to save GM

Suppose the federal government spends $14B to buy GM’s 7,000 U.S. auto dealers? This is a fragmented industry so an average of $2M per dealer should do it. Make it $3M per dealer and we’re still under $25B. And, I don’t think it would take long for most of the 7,000 dealers to queue up for a fair market transaction given the current and future market they face.

GM remains the manufacturer and the government becomes the distributor. The government need not benefit from retail markup so the entire GM dealer network is converted to non-profit status with key management lockups for three years in consideration for the acquisitions. Without retail markup, GM can significantly lower the cost of its cars to increase competitive advantage without losing profit or it can keep current prices significantly increasing profit.

The government holds the dealerships in trust for three years until GM can buy them back or the government sells the dealerships to Toyota if GM can’t right itself.

This plan enables Main Street to directly benefit from government funds and it clearly delineates a bailout partnership between GM and the government for accountability. Perhaps, customer service also improves and perhaps Wayne Huizenga is appointed Auto Czar and special assistant to the President.

It’s No Time to Forget About Innovation from New York Times

“Innovation has to be embedded in the daily operation, in the entire work force,” says Jon Fisher, a business professor, serial entrepreneur, and author of “Strategic Entrepreneurism,” which advocates building a start-up’s business from the beginning with an eye toward selling the company. “A large acquirer’s interest in a start-up or smaller company is binary in nature: They either want you or they don’t, based on the innovation you have to offer. The best way to foster innovation is to create something, put it to the test, build a good company and then get it under the umbrella of a world-renowned company to move it forward.”

Janet Rae-Dupree writes about science and emerging technology in Silicon Valley. (New York Times)

From Wall Street Journal

Jon Fisher, Adjunct Professor of Business at University of San Francisco

Fisher, a serial entrepreneur, has been the CEO of three companies in the Valley; he sold the last one to Oracle. He told WSJ: While I’ve called for a variety of market problems, the data are showing post-bailout package that we are showing stability in the post-bailout markets. The amount of destruction has reached where we’re near a bottom and everything stabilizes. We’ll lose a lot more jobs, but I don’t think we’re going to see things shrink too much further and we’re seeing the start of that today. As for mergers out here in the Valley, we talk about this all the time: if you want to get in ahead of the wave, you have to get in now.

See comments from Ben Bernanke, Bob Doll, vice chairman, BlackRock, Fitch Ratings, Standard & Poor’s, Dennis Lockhart,President, Atlanta Federal Reserve and George W. Bush, President in this piece as well http://blogs.wsj.com/deals/2008/10/20/experts-the-bailout-worked-we-think-so-far/

NewsHour With Jim Lehrer

SPENCER MICHELS: The concept that the gloomy economic news may not hit Silicon Valley hard is fairly widespread. Despite drops in high-tech stocks, that's still what many Valley spokesmen are saying publicly.
JON FISHER, University of San Francisco: I think they're delusional.
SPENCER MICHELS: