Posts tagged: venture-capital

How the 2017 Tech Bubble will blow

By , January 8, 2017 6:03 pm

Exorbitantly overpriced, yes. Some are not even break-even yet, yes.

The 2017 Tech Bubble however differs from the 2000 dot-com Bubble in one thing: Funds are not pressing Unicorns to IPO.

The most successful recent IPO was Facebook. Facebook senior managers knew exactly what the firm should do. The business model has already been there, advertising platform and suppliers have already been there. Whenever the BOD presses, the firm tweaks its ad and generate abnormal revenue while keeping operational expenses incremental.

Facebook post-IPO. This was Goldman Sachs’ game not moms and pops’.

But most other firms are not that lucky. Some retain their business models ‘promising’. Some are solving further-arching physical, geographical, operational, political problems.

Tech firm went bust in 2000 under mercy of the public stock market. In 2017, VC and PE funds are keeping Unicorns private to avoid just that. A PE party to which public mutual funds have yet been invited.

Who are looking forward to IPOs when neither the co-founders nor funds managers are in a hurry? Employees with ESOP under their belts.

The 2000 dot-com burst was public market correction. The 2007 GFC was partially financial engineering. The 2017 game is corporate governance engineering.

IPOs now are more for hatching celebrity plus savior like the kind of Elon Musk than evolutionary.

Người không giàu loay hoay tìm chỗ để tiền

By , December 16, 2015 8:12 am

Tài sản chia làm 3 loại: tài sản đầu cơ, tài sản phòng vệ, tài sản depreciating.

Chữ depreciation theo nghĩa ngôn ngữ là giảm giá trị theo thời gian, theo kế toán là khấu hao. Khấu hao thì lại được cộng ngược vào Lợi Nhuận Sau Thuế để tính Operating Cash Flow, Free Cash Flow nên lằng nhằng. Giữ nguyên chữ depreciating quách.

1. Tài sản đầu cơ

Equity

Bao gồm cổ phiếu trên sàn, trứng OTC, private equity, venture capital.

Đất

Có bạn cảm thán vì sao người giàu Việt Nam không bỏ tiền cho khởi nghiệp công nghệ mà toàn quăng tiền vào đất. Là kỹ sư có code thì mình thấy là mình không chứng minh được cái đầu mình có gì hay hơn cục đất thì người ta quẳng tiền vô cục đất chứ sao.

Quỹ mở cho nhà đầu cơ tạp hoá (mom n pop)

Cũng có mà làm hoài không lớn nên thôi, buồn.

2. Tài sản phòng vệ

Đất

Đất vừa đầu cơ vừa phòng vệ. Tính phòng vệ của đất nằm ở chỗ đất có rủi ro thanh khoản nhiều hơn rủi ro giá. Bị đóng băng thì để đó chờ mấy năm thôi. Theo dữ liệu lịch sử đất mất giá chừng 40%, trong khi equity có thể mất 90%.

Căn hộ

Tăng giá trị (capital gain) không nhiều mà có fixed income từ tiền thuê có rate tốt hơn so với nhà đất.

Kim cương

Kim cương mất giá nhiều hơn vàng nhưng nhỏ gọn dễ giấu hơn vàng.

Lãi huy động ngân hàng

À có mấy điểm vui. Thứ nhất là tỷ lệ hút tiền từ dân vào ngân hàng chưa đúng khả năng của ngân hàng thì ngân hàng đã đi Huyền Như khách và áp quá nhiều phí nên dân càng ngại. Thứ hai là có nhiều cụ luôn mồm “lãi không bằng ngân hàng thì dẹp” mà biết trước mấy dự án IRR thấp hơn cả lãi ngân hàng mà vẫn cứ đâm đầu vào làm. Không tin ngân hàng là không tin. Lãi ngân hàng chưa bao giờ cao hơn tăng rổ hàng hoá thực nhưng mà nếu khả năng không đủ ra lãi đều đặn cao hơn mà còn emo thì chịu.

Huyền Như (động từ): mày đưa tiền cho bố, bố vui thì bố giữ đấy, bố buồn thì bố lấy luôn.

Bảo hiểm

Mấy bạn sale ngồi chém nguyên dàn rồi đưa cái bảng tính gồm mười mấy cột, 180 dòng ra là cỡ khoảng 2700 số. Mình ngồi tính nhẩm 2700 số đó là reverse engineer lại nguyên mô hình bạn actuary analyst vẽ ra để đưa cho bạn sale đi bán.

Kết luận là: (1) mấy bạn sale chả hiểu đang bán cái gì nên hù những người dễ bị hù sẽ hiệu quả (2) mấy bạn actuary analyst chắc lười giải thích cho đội sale nên trong mấy buổi tập huấn sale chắc là nói cho qua chuyện (3) sản phẩm actuary làm ra đậm văn hoá truyền thống cải lương chèo hát bội.

Trái phiếu và các loại fixed income ngoài nhà cho thuê

ở Việt Nam mãi không bán đủ nhiều cho nhà đầu cơ tạp hoá được, khó quá cho qua.

Mà căn hộ và trái phiếu thì lãi khó vượt qua tăng giá rổ hàng hoá tiêu dùng các con buôn thành thị, còn những người lướt sóng căn hộ mà có IRR từ capital gain + fixed income cao hơn rổ hàng hoá của họ thì họ giỏi.

Vàng

Thị trường Việt Nam nằm trong 4 thị trường dùng vàng để mua bán hàng hoá và trữ giá trị tài sản lớn cùng với Ấn Độ, Trung Quốc, Đài Loan. Mà giờ vàng từ tài sản phòng vệ đã biến thành mấy thanh SJC treo tòn ten ở cổ. Còn đâu sàn vàng tài khoản (gold futures, balanced and settled in Singapore Exchange), tiệm vàng nhộn nhịp hồi xưa.

3. Tài sản depreciating

Nhà

Bản thân xây cái nhà xong thì đã khấu hao. Đất tăng chứ nhà ít tăng giá trị ngoại trừ: căn hợp phong thuỷ người hỏi mua, căn quá xuất sắc. Định xây nhà để già bệnh chết ở nhà đó thì xây hao cũng được, mà nếu thích tiền hơn ego bản thân thì tính sao cho con cái dễ bán được giá. Khu nào thì xây cỡ đó. Xây cái nhà tốn tiền hơn hẳn trung bình khu thì người mua cố ý không thèm hiểu giá trị của căn nhà nên bán chả được giá.

Các thứ tiêu hao (consumable).

Xe

Tha cái xe về còn chưa kịp chạy miếng nào là thành xe lướt, giá giảm ngay 150 triệu. Kể ra thì xe là cái cần thiết, mà đối với những người lỡ sống bằng chi phí cơ hội thì sống khổ.

**

Sống bằng chi phí cơ hội khổ ở chỗ: Mua cái xe để đi làm deal là chính đáng mà cứ vừa đạp vừa tiếc tiền đó quẳng vô đầu cơ thì ra tiền lời rồi. Tương tự cho những tài sản depreciating khác.

Người trong gia đình mà thèm nghĩ cho nhau thì nên lấy tiền của người có chi phí cơ hội thấp nhất để trả cho đồ dùng gia đình. Nói cho dễ hiểu: ai có khả năng dùng tiền đẻ ra tiền tệ nhất thì lấy tiền người đó xài.

**

Hình minh hoạ: muốn quẳng tiền túi vào Venture Capital thôi chứ không gì

"The smart guy uses other people’s money" in theory and practice

By , April 8, 2014 6:53 pm

I’ve seen this argument from wantrepreneurs, enthusiastic young professionals, jaded middle-aged white-collars, magazine articles, self-help blogs…

What’s the story behind?

There are two major categories one can use others’ money.

1. Operating with negative Net Working Capital

This is Accounting 101:

Net Working Capital = Account Receivables + Inventory – Account Payables

When a firm sells things but collects cash later, the sale proceed is booked to Revenue, Account Receivables, and no cash. If you collect cash at sale at all times, Account Receivables from sale will be zero. So less Account Receivables normally equates happy.

When a firm finishes a product but hasn’t sold it yet, the accountant books the product value in Inventory. Firms must constantly balance between "having stuffs ready to sell when customers place order" and "limit finished goods collecting dust in our warehouse". Entrepreneur school usually teaches Just-in-time inventory, the Japanese process. Technology can help with the fulfillment process. Amazon does. Many orders placed at Rocket Internet Vietnam companies achieve JIT. Theoretically, if you only need to manufacture or buy the product after customers place the order, it’ll be good. That’s theory.

When a firm buys stuffs from suppliers but hasn’t paid cash, the value is booked to Account Payables. Now you can imagine that if you theoretically delay paying for a long time it’ll be good that you’re using resources for your manufacturing for free. Assuming you can pay off the payables when they due, you theoretically want the Account Payables to be as high as possible.

So NWC is the capital of yours but perpetually gets stuck in the process of operations. If you manage to limit Account Receivables and Inventory, and increase Account Payables, you’re using other people’s money.

The latest (in)famous business model that achieves negative NWC is that of Groupon: collect cash first, and pay suppliers (Account Payables) much later.

2. Take advantage of Angel Investors and Venture Capitalists

What most wantrepreneurs more frequently mean by "using others’ money" is starting a company using money from others.

College Entrepreneur schools persuade students to Bootstrap. Bootstrap means using your own money until you hit the upper limit. Why: you control your own fate. Then, funds raising skills are taught.

College Finance schools teach students to invest, invest, invest. Then they discuss Corporate Governance i.e. exercising shareholder’s control power.

Disclosure: I teach both views and set of skills to my MBA students.

Perhaps the most well-known case study of losing power because of giving up control is the struggle between Steve Jobs and John Scully. In 1983, Jobs invited Scully, then Pepsi president, to be the CEO of Apple with the famous quote "Do you want to sell sugared water for the rest of your life? Or do you want to come with me and change the world?" Scully then sided with Apple BoD and removed Jobs from the company Jobs had founded. Apple plummeted to near-bankruptcy under Scully.

In Vietnam, we have had a highly-publicized and sensational precedent.

From my experience with thousands entrepreneurs I have talked to, the majority hate sharing power. I find the pecking order holds in reality, the majority of business owners I’ve met would rather borrow at a high interest rate than selling their stake to outsiders.

Theory of pecking order: firms should use capital in this descending order: Retained Earning, Debt Instruments, Preferred Share, Common Equity.

Still, many entrepreneurs invite investment early on. I detected some common patterns in this group: Western-educated U35 (thus more open to the idea of investment), or work in the Tech industry which enjoys vibrant VC.

In this case, the entrepreneur team bring on the table their own assets: skills (through prior training), experience (including prior entrepreneurial failure), time, network, idea, and opportunity cost. All sum up to some value that is converted to money through the mystical process known as "valuation".

The easiest way to justify this is to assign a value to the working Prototype, or at least a full-pledged Business Plan.

Then the company needs to justify with regulators in its accounting.

Let’s say the company has $10,000 in total asset, but is valued $1 million post-money by the VC. The Prototype and commitments specified in the Term sheet will be worth $990,000 post-money. The excess after booking to Shareholder’s Equity will be booked to Capital Surplus.

In sum, I work with both the argument and the counter-argument on a daily basis in both theory and practice to be any impressed by sheer enthusiasm for the sake of arguments. But an occasional good fund raising pitch always sparks a delightful (and productive) day.

Image source: Dilbert

Beginning books on Private Equity and Venture Capital

By , November 4, 2013 3:12 pm

Private Equity Funds: Formation and Operation (July 2013 Edition)

Stephanie R. Breslow

**

Venture Capital Fund Management: A Comprehensive Approach to Investment Practices & the Entire Operations of a VC Firm

Lin Hong Wong

**

The Global Venture Capital Handbook An International Look at Deal Structure, Legal Agreements, Term Sheets, and the Intricacies of VC in All Major Markets

The prospects of SMS-powered mass messaging in Vietnam

By , April 20, 2009 2:05 pm

Micro-blogging is raising a trend in Vietnam, not by the number of users, but by the level of media coverage. Obviously, the coverage of Vietnamese media is not as high as the hype of all the global ones on Twitter and its ecosystems, but still, it is perceived by many to be the main trend of Vietnam internet market in 2009.

I don’t. Well I don’t talk about micro-blogs for Vietnam. I see different things.

Moreover, there are two missing pieces of important information from media coverage: appropriate market and the greatest monetization opportunities.

Without the knowledge of the target market of Twitter-like services, reporters easily fall into the trap of comparing micro-blogs and blogs, and users will be confused.

Without seeing the monetization opportunities, people will be reluctant in using/investing for them.

This article solves this issue by discussing the two points mentioned.

1. What is the market for Twitter-like services?

I identify 4 groups of users:

  1. Geeks. Obviously, this group has already been there. They are innovators and early adopters of the services. Most use Twitter and not the clones anyhow.
  2. Users who want to use Twitter as a substitute to Yahoo! 360 blast. Check Kazenka’s out.
  3. Those who want to keep up with the Joneses. i.e. want to show that they’re cool by using a trendy stuff.
  4. This group has not existed: those who want SMS incentives for using the service(s) to send mass messages

It’s the last group which has not existed that is potentially profitable.

2. What is SMS incentive and why is it a group when it hasn’t even existed?

In an over-simplified example:

P1 does not use service S User P2 uses service S and has 1000 followers, 500 in which are followed back. 50 in those 500 are P2’s real friends
P1 organizes a trip to Nha Trang P2 organizes a trip to Nha Trang
P1 sends 10 SMSs to 10 friends. This costs him VND2,000 P2 sends 1 SMS to 10 friends through S with “Incentive” option selected. This costs him VND60
P1 and his friends send SMSs back and forth. At the end it cost them a total of VND50,000 P2 and his friends send SMSs back and forth. At the end it cost them a total of VND6,000
Why VND50? Because:

  • Business B advertises on S by sponsoring S’s users with VND150 per SMS
  • In exchange, B’s advertisements are displayed on the SMSs
  • S gets VND10 out of 150 from B
It’s simple, painless, and costly. Full stop. It’s a market that never existed in Vietnam!
Now. Think about celebrities, attention-seekers and those who want to send mass messages in general.
Is it an attractive market?

3. Devices and platforms

  1. Device: Only smart phones or laptops can access Wi-Fi. All phones can SMS.
  2. Platform: good Wi-Fi is not ubiquitous even in urban areas. Mobile coverage is country-wide.

Hope that (2) and (3) answer @firstjames’ wonder.

4. Which player has the potential?

I would say ASAO. Their Ola Me is more than a Twitter clone; the product is one in ASAO’s mobile package suite. And the company may have the credentials to negotiate for SMS incentives.

Addendum: lamgi.vn also has SMS incentives.

5. Summary

This entry is not about micro-blogging. It’s all about the market of SMS incentives, powered by Twitter-like services.

Ambiances to take into accounts

By , February 10, 2009 3:31 am

The three stories that trigger this post

I’ve been occupied with some thoughts resulting from some articles I read or discussions I joined for some time. Here are three of them:

Story 1: focus

AnhHung and I had a discussion in our three blog posts on whether companies would want to pick a direction and fully focus or experiment with their ideas.

Just a quick note: I explicitly express my support for neither, in my post I pointed out where experiment is sensible.

Story 2: the registration form

Here is the story of how changing a button brings $300 million revenues.

I didn’t get it. That was not a small change in “only a button”. That was a major change in flow + database + architecture + graphic design, and it resulted from an R&D result.

With a change at that level, the Product Manager, Business Analyst (if any), System Designer (if any), Project Manager, DBA, Developer should be involved. Why does the article only highlight the designer?

Story 3: prototyping

Today I read about how great products like Gmail and AdSense were born from experiments and thought about where innovation should be placed. Before Paul had done what he did, AdSense had been a laugh, and because he did his experiment, Google had a billions-worth business.

However, some Gmail’s siblings from Labs didn’t make it.

So should they continue their experiments or should they focus?

The points we missed

Comparing different ambiances where the stories took place helped me realize the points we did not take into accounts which could somehow relieve the thoughts in my mind.

1. Type of product

1a. The reason why I put the flow from story 2 on the table was that we once had an issue when a developer changed a flow to make it more convenient for users and changed a form design to make it more attractive without going through the Business Analyst. When I saw the changes I freaked out as the they violated some regulations of the industry and we had to quickly revert the system before releasing to clients. It is not to blame anyone, it is to clearly state that there are might be reasons why something so inconvenient stays in the system.

However, for products that come from new & creative ideas, innovation deserves its space and time. If changes and new features suggestions must go through a lengthy process, two things could arise: the product does not move fast enough and the idea initiators might get frustrated and gradually lose their passion.

1b. Another aspect is whether the product is commercial or customized. Commercial products are offered to a large number of clients, and customized products are usually ordered by specific clients for their use only. For commercial products, the product team to brainstorm improvements and clients’ input take the form of feed backs. For customized products, users’ response can be obtained by taking the product directly to the client.

2. Software methodology

If the team employs Rational Unified Process, changes must go through change management process. If the team goes Agile, changes can be implemented quicker with more clients involvements. Smaller teams might be even more flexible.

If RUP is used then it’s valid to question where the Business Analyst is in a change, but if the process is different, it’s perfectly okay for the web designer to initiate a usability improvement.

3. Corporate type: established or startup

A good example to take is Google itself. There are tales about how open it was and how data was easily accessible and how anti-corporate the team was when the company was still a startup. But now Google is a mature enterprise with corporate hierarchy and naturally enough management practices are in place.

How large the companies are is a big factor in their choosing strategies.

And it’s funny if we compare a public company with 20 thousands employees to a startup with ten people.

4. Era

The time when Gmail took of and the time 6 of her siblings were axed are not the same. 2004 was a good year to start a new service and 2009 is when companies need to cut costs.

5. Position

Lastly, the arguments people brings to a discussion of one topic vary depending on their perspective and position.

For example, the product builder might want to try out with different intiatives, the analyst might want to draw the patterns, the marketer might want to emphasize the position of the brand, the venture capitalist might want to see a business model out of an idea.

It’s fascinating how we have different people with different interests joining together and personally this reminds me that sometimes we can never reach a consensus from a debate.

Summary

This entry is meant to organize some fighting thoughts inside my mind and that’s all it should do.

I don’t intend to make a point here, but I hope you enjoyed the articles that I quoted. Here they are again for your convenience:

Jared M. Spool, The $300 Million Button

Paul Buchheit, Communicating with code

What You Need To Know About Raising Venture Capital (By Mark Davis, DFJ Gotham)

By , February 2, 2009 3:40 pm

What this slow time means to us

By , November 26, 2008 4:17 pm

Corporate Level

An opportunity for thinkers to take a step back and strategize for the next steps. Haven’t they we been too absorbed in the fast-moving everyday tasks before?

Companies can spend the time to actually sit down uninterruptedly with their Consultants.

A good excuse to hold on to the core business.

Innovate. Pull ideas from the pool, try some.

Individual Level

Self-teach new skills or pursue formal higher education.

Renew.

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