HNW Magazine November 2013 Issue

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HNW High Net World Magazine

The Bull isBack

NOVEMBER 2013

Staring Down the Bears asthe Markets Move Up

£2.95

hnwmagazine.co.uk

LINKING ENTREPRENEURS WITH INVESTORS & ADVISERS UK-WIDE

THE HNW INTERVIEW …Angels Den Founder Bill Morrow

Q Court, 3 Quality Street, Edinburgh, EH4 5BPFor further information, please contact Stephen Paterson on:Telephone: 0131 625 5151 [email protected]

DISTRIBUTION

Since its inception, High Net World HNWMagazine has been extremely fortunate in itsassocations with leading business angel,entrepreneurial, investment and networkingorganisations.

This includes the Angel Investment Network(AIN), founded in 2004, which has grown into thelargest angel investment community in the world.AIN has over 500,000 members across 30networks in over 80 countries.

The Angels Den, the world’s first integratedangel and crowdfunding platform which for oversix years has been successfully matchingentrepreneurs and angel investors. Sincelaunching in 2007, Angels Den has raised £16million of investment, through 10 globally basedoffices from over 6,000 angel members.

Par Equity, one of Scotland’s most activebusiness angel syndicates, is an investment firmwith a difference bringing a hands-on investmentapproach and extensive experience toopportunities that have the potential for significantreturns.

KILTR, The leading edge professional socialnetwork for everyone with a Scottish connection,was founded with the local-to-internationalScottish diaspora at its centre. The socialnetwork has over 40,000 members.

LINC Scotland is the national association forbusiness angels in Scotland with a membershipincluding individual investors and most of themain angel groups or syndicates. Since 1993,LINC has played a significant and active part inchanging the business culture in Scotland.

Thrive for Business is a membership-basednetworking organisation for business-to-businessSME’s across Scotland bringing together like-minded individuals willing to share knowledge,ideas and contacts.

“A hard day’swrite”

P.3

Steel’s View P .8

Mike Williams

CONTENTS

EDITORIALEd Emerson, EditorAlan SteelMike WilliamsJohn KennedyHetty GreenThe BrunetteJoshua Brown

HNW HEAT P7

WEALTH P10

INTERVIEW P17

WHAT ANGELS WANT P20

INTERNATIONAL P23

STARTUP DISEASES P24

INVESTOR P29

THE WALL P30

ENTREPRENEURS P32

YOUR ECONOMY P34

PRACTICAL BUSINESS P39

DIATRIBE P45

FEATUREThe Bull Is Back

“While the world islooking backtoward 2008, themarkets are lookingforward andbreaking

HEAT: HIGH GROWTHCOMPANY LEADERSMAIN SPONSOR

HEAT SPEAKERS

Stephen Paterson / Haines WattsRaymond McLennan / Angels DenBenny Placido / BlueMungusAlan Steel / ASAMRob Begg / Shirlaws

P13

HNW MAGAZINE LTD, OLDWOODPLACE, WEST LOTHIAN EH54 6UJ

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P.5

Vanity Fair author William Makepeace Thackerayonce asked: “Which of us is happy in this world?Which of us has his desire? or, having it, issatisfied?”

Snapchat founder Evan Spiegel may, in his quietermoments, now be pondering that same questionhaving today passed up on Facebook’s $billionacquisition offer, an all-cash deal according theWall Street Journal.

All cash you say?! (Boys, let’s get the New YorkFootball Giants in here to load these pallets ofmoney onto the truck!)

In June, HNW Magazine reported the self-destructing mobile messaging channel had closeda Series B funding round of $60 million from IVP,General Catalyst, Benchmark Capital and othersto ‘continue scaling’ the company.

The company valuation then? About $800 million. Ahem….ehh….though there remained a curiouslack of revenue on the other side of the balancesheet. In other words, zero. Zip. Nada.

Spiegel however now apparently believes the app,launched in 2011, and its estimated 200 million

FIRST WORD

“There’s acurious lackof revenueon the otherside of thebalancesheet. Andwhen I saycurious, Imean zero.Zip. Nada.”

daily ‘snaps’ (by the by, that number has beenreported as anywhere between 50 million and 300million per day depending on who youread/believe) will entice Facebook to up its largestever acquisition offer to…well…..

Mr Thackeray, have you any thoughts for us….?

“All is vanity. Nothing is fair”

It’s difficult to fathom the value here. CertainlySpiegel and his Stanford frat brother and co-founder Bobby Murphy have attracted a hugelyvaluable demographic in their droves and in a veryshort space of time.

But what remains, as with Facebook, Twitter andthe rest of social media, is the wee problem ofmonetizing that vast audience.

Or maybe that happens once the founders andfunders have begun to cash out and Snapchatbecomes the next NYSE plc as $SNPCHT at $45per share.

A valuation that’s likely to disappear faster thanone of their millions of exploding messages.Emperor? Clothes? Bueller? Anyone…..?

By Ed Emerson

Are you fed up with earning little orno interest on your savings account?

If you’re looking for an income to safeguard your long term financial future then simply

having all your eggs in a bank or building society deposit account basket won’t work.

AS MA L A N T E E L S S E T A N A G E M E N TAlan Steel Asset Management Limited is authorised and regulated by the Financial Conduct Authority.

Email us today for your FREE copy of our new guide at: [email protected]

Or call us on 01506 842 365 and ask for Carol McNicolIn the guide we explain and compare the risks and rewards in both a “saving for income” and an“investing for income” strategy. One of these alternative income strategies may now be right for you.It must also be remembered that the capital value of investments and the income return you receivefrom them can vary and may fall as well as rise. You may get back less money than you started with.

P.7

HNW HEAT

“Coolstartupsfrom WebSummitDublin”

Hats off to HNW Magazine HEATCompany Leader Graeme Bodysof nooQ Software and his 25 CoolStartups from the Web Summitextolling the Dublin gathering ofUK and Ireland-based high growthnewbies.

We’ve included a portion of Graeme’s piece, whichincludes HNW HEAT programme company leaderslike miiCard’s James Varga and Mallzee’s Cally Russell,with links to the full editorial at nooQ:

Cool Startups from Web Summit -Graeme Bodys

Aside from what we thought of The Summit event,we saw, met and chatted with a lot of greatcompanies in Dublin last week.

Here’s a list of 25 cool companies we liked.First of all some very cool companies working insimilar concepts or areas to nooQ.

HEATCOMPANYLEADERSnooQ-ING IT!

There were quite a few companies working on similartheories but with different approaches or targetingdifferent markets (social for business, gathering ideas,communication for teams, projects & tasks, visualisingsocial streams, message overload, working visuallyinstead of linearly, social analytics).

By Graeme Bodys

Unified Inbox Tackling the message overload problem.Reminds me of IQTell a little. Very ambitious project,which we love. A huge task which we are very familiarwith at nooQ. A different approach, them going forintegrating your existing streams in one inbox and atraditional linear style but all in one place.We have gonefor the non-linear visual style. I have registered for betaso will see how it works. They seem to have a greatteam and some investor backing too.

Par Equity invests in innovative young companies with high growth potential. Our approachis hands-on, investing where we can add value through our Par Advisers, deploying intellectualas well as financial capital. We offer qualifying investors access to both EIS and conventionalventure capital collective investment vehicles.

To find out more please contact either Paul Atkinson at [email protected] orPaul Munn at [email protected] or call +44 (0)131 556 0044.

www.parequity.com

Par Equity invests in innovative young companies with high growth potential. Our approachis hands-on, investing where we can add value through our Par Advisers, deploying intellectualas well as financial capital. We offer qualifying investors access to both EIS and conventionalventure capital collective investment vehicles.

To find out more please contact either Paul Atkinson at [email protected] orPaul Munn at [email protected] or call +44 (0)131 556 0044.

www.parequity.com

Par Fund Management Limited is authorised and regulated by the Financial Services Authority. Funds managed by Par Fund Management Limited are available only to electiveprofessional customers, who are able to invest in unregulated collective investment schemes. Retail investors will not be eligible to receive information about, or to invest in, such funds.

P.9

HNW HEAT

DaPulse Better user interface than Yammer. Socialcollaboration for teams. They like us have opted togroup conversations together by topic and don’thave a newsfeed, although our visual, non-linearapproach allows us to have several conversationthreads on one screen, all sized visually to yourpreferences, so no need to jump between differentconversation boards.

Timebox.io To-do lists re-invented visually. I like thevisual way they use box size to indicate importanceand relevance. Sounds familiar @nooqsoftware.

Box.com – Was nice for us to be approached fromthe big guys at Box asking if we were interested inintegrating nooQ. We much prefer Box overDropbox at nooQ, definitely the best file sharingplatform on the market.

CloudDock – they bring together all your docs frommultiple cloud storage systems.

TaskMessenger very nice UI for team based tasks.Irish based startup. Very interesting to find out.

WikiDocs extremely cool real time editing – almostlike google wave. 37Signals very interested in thisand I can see why. Watch this company.

StorkUp – social shopping for Mums. Great design,potential and team. Check out the site and followthem on Twitter. Craig has some great startupcontent.

Swarmly – location based app showing real people inreal time. Like Waze but for people. Love the real timebubbles showing where is popular. Or findingsomewhere quiet can be just as useful.

Mallzee – personal shopping & recommendations. Likehow they take your style preferences and recommendothers brands and items. Cally Russell, CallumStuart and Jamie Sutherland all pitching like mad.

miiCard – Prove and Protect your online identity.Pushing now into USA market. CEO James Varga,Cassie Anderson and team.

PrintAR – their PrintAR app turns 2d images into 3D ads.A lot of tech behind this but they make it look easy.

FloatApp – cashflow forecasting now integrated withXero. Recently received large investment too.Accounting is not so cool, but cashflow definitely isking. Colin Hewitt captain of that boat.

A full twenty minutes of guilt-boredom ensued as I watchedthe equations run wild across the lecture hall’s chalkboard,guided by this mathematical madman as our usualprofessor looked on and nodded sagely from a corner seatnear the front.

Until the big reveal, that is, when the fund manager finallystopped his scribble and said: “But that’s all really justguesswork. If you want to beat the Index for your clients,buy Vodafone.”

Our recollections of history often have a wonderfulproclivity toward the Hollywood-style ending, like theSpartans at the narrow coastal pass of Thermopylae.

Folks tend to forget the circa 700 Thespians, 400 Thebans and a few hundred other no-namers with swords and shields in that pass who hung around to be slaughtered as well.

Maybe 300 just sounded better.

Oh, and wasn’t the popular view on Gold just 18 monthsago when it was $1800 an ounce that it was a ‘no-brainerto hit $3000…’.

Slam Dunk, you say?

I’ve already had me some of that.

Well, the NBA’s Slam Dunk Contesthas sucked for years, with about 36misses and only 15 certain-to-succ-eed slams in 2013. That’s like shoo-ting 30% from the field. And that would be a generousmeasure of the media’s market prediction success rate.

When crystal ball commentary becomes the mainstreammaelstrom it’s usually a good sign that, sooner or later, areversal is en route. And many will follow that JudasGoat, the one trained to go out into the fields, round upthe flock and walk them merrily back to the safety of theslaughterhouse.

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BY ALAN STEEL

STEEL’S VIEW

GLOBAL WARMING RETURNS

WEALTH

I’m somehow unconvinced that WarrenBuffett will hoist his morning copies of thebroadsheets-r-us, alongside his first slugof Coca Cola, read Goldman Sachs callingout Gold to drop to $1050 by the end ofnext year, and like Bill Nunn’s character‘Bradley’ nursing a debilitated HarrisonFord in the movie Regarding Henry think:“I gotta get me some of that….nextChristmas.” Someone even referred to theexpected precious metal plunge as a‘Slam Dunk’.

“Gold at $1800 an ouncewas a ‘no-brainer’ to hit$3000…’ Now it’s $1200”

One of several cruel lessonslearned during a 2-and-a-bityear MBA incarceration thatbegan in 1999, occurred whilestruggling through Statistics& Business Markets.

The usual professor, anactuary and mathematician,had invited a renowned fundmanager to lead the class inan exercise designed topredict the market’s next bigwinners.

Sadly, my remaining 300 or sobrain cells (another generousassumption) were busilyslipping on the blood of thosefallen before them – like 300desperate Spartans atThermopylae without thevainglorious ending.

The slaughter lasted all ofthirty minutes before a suddenink blot made for a convenientwhite flag, and laid my pen torest on the desk.

By Ed Emerson

Judas Goat:Predicting AGold SlamDunk?

P.11

Oops! And this kind of thing’s nothing new. WhenGeorge Bush Senior lost out to Bill Clinton in the1993 USelections it was due to his alleged mismanagement ofthe US Economy, thanks to “Official” GDP estimates atthe time showing the economy to be tanking.

After a good few years of checking and re-checkinghowever the Nerds decreed they’d miscalculated. USGDP had been positive instead. Beating around theBush anybody? (Alan Steel, Gross DistortionPredictions)

It’s all looking very Glengarry Glen Ross out there. We’redrowning in circumstance, like actor Ed Harris’sseductive character Dave Moss enticing us into a sedan,tired and desperate on a rainy evening, and we suddenlyfind ourselves complicit in a crime we’ve yet to commit:

Moss: In or out. You tell me, you’re out you take theconsequences.

Aaronow: I do?

Moss: Yes. (Pause.)

Aaronow: And why is that?

Moss: Because you listened.

Dow at 16,000? Hey, isn’t there still a recession on?

And so it begins. Oh, to hell with it. Settle for secondplace. There’s a set of steak knives waiting for you atthe door.

WEALTH

“Wall Streetwill call it aDow Jones16000 megabubble, butthe Bears areon the run…”

Someone out there, somewhere, will today try andconvince you that the Dow Jones Industrial Averagebreaking through the 16,000 barrier for the first time inhistory is somehow, and for some mind-f–k justificationreason, (probably to convince you to ‘be safe and keepbuying up those bonds, suckers’) a signal that we’vejust gone ‘2008’ all over again.

Wait for it. The Wall Street machine will call it a bubble,an over-priced equities market, a searing glimpse intothe next recession just on the horizon.

They’ll pepper you with Greek austerity, fiscal cliffs,Government shutdowns, SARS, tapering, quantitativeeasing and an impending sell-off of social media andcloud-related stocks.

They’ll blame inflated company earnings, low borrowingcosts, Warren Buffett, Tesla, frackin’ in the Bakken,Kyoto, spontaneous human combustion, Area 51 andChina owning $1.3 Trillion of US debt.

And you’ll follow that Judas Goat who has been trainedto go out into the fields, round up the flock and walkthem merrily back to the safety of the slaughterhouse.

Why? Because drama sells, bleeding gums mean‘rinse with Corsodyl or become a gum-diseasedpariah’, and the doom-and-gloom predictions of theOffice of National Statistics (ONS) can be hiddenaway after the fact in the digital ether once theretractions reveal their UK GDP “findings” wereactually wrong for the previous 15 years thanks tosome error or other in their theoretical calculations.

By The Brunette

A Record-BreakingDow

WEALTH

P.13

The Bull isBack

Staring Down the Bears asthe Markets Move Up

The media seems to be taking a break from hypingObamacare disasters and the upcoming (just afterthe Holidays) all out battle over the budget anddebt ceiling issues again.

Instead, they are focusing the crowd on theterribly ugly idea that markets have actually donewell this year.

In a continuing backward slant, they seem to feelthis is all bad - and has led to the new problem:Too many bulls. Hmmm, let's see if that is in thecards.Bullish sentiment in the latest AAII data droppedto the lowest levels seen since late August. Huh?

How could that be?

Didn't the headlines tell us that we simply cannot goup anymore with all these bulls? Wasn't the cover oflast weekend's BARRON's all about bubbles?

Do we recall what cover contrary history there is? Imuch prefer to see fears about bubbles on majorcovers vs. seeing "Hey, Man....the sky is no longerthe limit in stocks....go all in quickly...."

Yes indeed, after declining 4.8 points to 34.4% in thelatest reading, bullish sentiment in the AAII InvestorSentiment Survey is the lowest since justbefore everybody "knew the Fed was going to taperin September."

The long-term bullish average is 39%. At 29.5%, thelatest bearish sentiment is about inline with the long-

By Mike Williams

The issue at hand today is that after 12 years of sh#*, thecrowds will not readily understand we are in the midst ofbreaking into new highs. That does not mean it will besmooth and a bed of roses. Actually, we are praying for afew thorns indeed.

It is perfectly normal for this sloppy internal gyration asmarkets try to break away from a twelve year trade range.

Yep...that's what I said: a 12-year trade range. "Are youcrazy Mike?" Well, heck, let's admit it...yes. But that haslittle to do with what we are covering.

Trade Range It Is...call it "digestion" of the previous secularbull (from 1982 to 2000). Keep in mind that it is notabnormal to see breakouts tested eventually but as weknow from the last few weeks, waiting on corrections isoften when they do not come.

After having been in a 5-month range since May, the SPYbroke out recently - and so far, even a little red ink scaresthe pants off the crowd.

I cannot imagine what a week or two of red ink and severalhundred points back would do to them. Mind you, I amusing the term several hundred points on a 15,900 pointaverage.

Itchy sell fingers are everywhere--hence the AAII readingabove.

P.14

STEEL’S VIEW


WEALTH

term average of 30.5%. Neutrals at 36.1% compares tothe 30.5% long-term average. So, net-net, over 65% ofthe crowd is either bearish or neutral in their stance.

Too bullish? I'd bend towards not....even though I wouldlove to see some red ink.

However, "Houston, we do have a problem"

The issue we are more likely dealingwith is the same issue felt in late 1982when one was forced to buy stocks atlevels not seen....well, ever....in history.

Ouch!

After the last 12 years of watching stocks hit the upperregions of the trade range twice and crash, what buffoonwould buy stocks here? Right?

I can recall just the other day, "Mike, wait a minute, afterthe last 12 years of garbage and 2 horrible bear markets,along with a total collapse in 2008, you want me to buythe highest price ever?"

Oh wait, that was late 1982...not just the other day. Orwas it?

Get my point?

“Imagine what a week ortwo of red ink would doto this jittery crowd.”

Cloudy wit h a chance of....storms

Guess what...in the business of reading tealeaves or crystal balls about the future...itis ALWAYS cloudy with a chance of storms.

It gets cloudy right after your next breath.It gets cloudy stepping off the curb. No oneknows what is next. We can only try tounderstand that the largest part of thecrowd mentality (when it comes to greedand fear) is more often than not …eventually...wrong.

Mind you, that does not at all relieve of usof the fact that the masses can be right inthe short-term. Markets are in effect,self-fulfilling prophecies.

WEALTH

P.15

Staring Down the Bears asthe Markets Move UpThe latecomers will have little patience in seeing setbacksunfold. By the way....that's good.

So use corrective action wisely.

My Concern....? We won't get corrections. Yes indeed,there it is....I am a broken record.

The point is this: The more we see the markets meanderup, the more unlikely it is we will see the significantcorrections we became accustom to over the last 12 years.

Why? Altitude sickness.

New highs have a way of spooking the human mind.Recency bias "tells us" what happens at new highs...theycrash. Period.

This is nearly exactly how it felt in 1982.....all cloudy, aworld full of problems....and a DOW at 1,040.

Melt-UP Instead?

For so long, the world has been awash in worries overwhen the next meltdown will hit us all. There have beenhundreds of funds, ETF's and various trade programscreated to "protect you from the next meltdown".

Heck, they don't even call it a meltdown anymore. It hasits own moniker, 'another 2008'.

All the while, as the various hedge and protectiontechniques mount on one side of the trade log, the marketshave simply ignored all those things and have gone fromone 'Apocalypse Now' to the next, rallying after eachend-of-the-world scenario is overcome and we live on tofight another day.

It was not too long ago (earlier this year, in fact) that wehad lunch with our good friend, Dr. Ed Yardeni. He hadinvited us to join him in a Chicago presentation he wasmaking to clients over the lunch hour.

At the end, we sat and listened to an introduction cyclearound the table. Each person there described theirconcerns and what they had positioned the portfolios for.

As one might expect, there were a myriad of concernsand worries, sure to be something that should beprotected against after these last 12 years and the so-called 'lost decade'.

We went last and I pointed out one simple, yet verydifficult psyche to overcome; no one at the table haddescribed the scenario by which the market simply goesup. No one had even suspected that we could very wellbe witnessing the dawn of a new secular bull market.

None of the participants (other than Dr. Ed) hadconsidered that we may be witnessing a market whichhas repaired itself enough to work toward old highs,reak out from this 12 year trade range and move on tonew bull-market driven frontiers.

We suspect we will look back on the last 3 to 5 weeks asthe market timidly reached into new highs and realizethat is exactly what we have witnessed.

Remember that it was many years before the damage ofthe 70's was erased and the masses began to embracethe new opportunity in the early 80's.

We suspect this time it will be no different, even thoughwe do see a few things to fret over which should keepmany on their heels.

INTERVIEW

P.17

Bill Morrow… ….The Angels Den Savant

Angels Den founder Bill Morrowdoesn’t do ‘gluten-free’. There’sno watered-down or vegetarianoption on offer during his angelinvestment talks, no pre-discussion health and safetywarnings or hints at theimpending rush of businessreality breaks (the ones about toovertake you like an amateurswimmer caught in a riptide), andcertainly no hint of audiencebaby-kissing.This is classic Morrow; stood before a gathering ofestablished and wannabe entrepreneurs, a few high-net-worth individuals, a gaggle of bankers perched insolidarity near the back, some age-wizened angels and,like myself, a scribbler or three, notepads in hand nearthe front of the Glasgow SECC main speaker space.His guise is disarming, the blue suede shoes, waistcoatover flannel shirt, dress jeans, left wrist noosed with arainbow-like collection of rubber, leather and wovenconcert bands (his in-law is Fatboy Slim); the effect issomewhere between transatlantic retro chic and SantaClaus on his day off.

And when he launches into it, the expletives arrivesuddenly and without reservation, like little explosionsnext to the more ordered and soldierly investmentnomenclature of ‘crowdfunding’, ‘investor-ready-business’, and ‘angel’ and ‘venture capitalists’.

It’s impactful, a swift kick to the sensibilities; a diatribe ofhonesty like few can (or would) offer up to an audienceof relative strangers.

“Some forty or so peoplegathered together expecting aprototypical starter lesson inbusiness funding and angelinvestment, and instead witness ajarring personal and professionalreverie served up like a bottle ofspecial reserve Richebourg 76′and a 12oz sirloin……..blood rareand steeped in horseradish.”For some that approach would be about as welcome asFranz Kafka in a Burger King.

But on Morrow it simply works.

Of course, as is his way, he turns the angel fundingprocess inside out, starting with a well-researched ‘Top3′ reasons why angels invest; 3) make money, 2) to beneeded, and the leading reason 1) fun!

By Ed Emerson

He turns the angelfunding processinside out, startingwith a well-researched‘Top 3′ reasons whyangels invest; 3) makemoney, 2) to beneeded, and theleading reason 1) fun!

“As entrepreneurs we understand thatour biggest risk will always be the

performance of our business.”

Martin Cook B.Acc.C.ADirector

Martin Cook Accounting Services Ltd

19 Monktonhall PlaceMusselburghEast Lothian EH21 6RR

Tel: 0131 665 7238Mob: 07866 465 223E-mail: [email protected]

www.mcaccounting.co.uk

Helping contractors and consultants to keepwhat they earn

INTERVIEW

P.19

This all arrives from the angel savant who lectures atuniversities throughout the world, and then quite merrilydrops in that the average age of death of his 6,000 plusAngels Den investor tribe is fifty-two….makes youwonder how taxing the organisation’s renownedspeedfunding events really are.

The stories abound. He dovetails into the now infamousLevi Roots, the Briton Reggae Reggae culinary sauceking, whose pitch Morrow describes as nigh to diabolicalbut ‘everyone loved him’, then meanders throughformer The Apprentice runner-up Luisa Zissman and herinstantaneous funding success with Angels Den…atabout half the equity ask that would have applied hadLord Sugar given her the £250k.

There’s no reticence to self-deprecation as he flirts withhis own personal investment foibles, returning sharply byreminding a would-be audience upstart that 36% ofentrepreneurs fail right out of the gate at the “tell meabout your business” question.

And then he asks the man, the would-be heckler, pointblank to do just that. ”Tell me about your business.” There’s a stuttering pause, and a slaver of sense mixedwith a lot of ‘…you know…’ and ‘….maybe…’ and ‘…I’mthinking about…’ speech ticks and pleading hiccups,eventually slowing to an excruciating pause. Morrowthen holds that silence, like the microphone beneath hischin. He knows the lesson in the example, “Know yourbusiness”, and now so does the audience.

Shuffling up and down the centre aisle he cycles throughthe lessons, seeming to ignore the eerily simplePowerPoint even as he flicks forward to each supportingslide:

If you can’t write your own business plan, you’redead

Women take 3x longer to write a plan than men The average Angels Den angel looks at a

business plan on site for 2 mins, 12 seconds If you think all you need is money, you’ll never

have it (Henry Ford) If you fail to understand your own

business….refer back to bullet point one (above) Does anyone really want to have a F-ing

genetically engineered giraffe as a pet in theirbedroom….meaning, does the market want orneed your incredibly clever product

Business plans are a fantasy, but they allowpotential investors to see how stupid orotherwise you really are

Consider your own social skills; your halitosis,sweaty palms, bad dress sense, and factor thatinto whether or you would make for a goodpartner in 35-month-or-so investor relationshiphoused in that close-quarters shop of yours inLinlithgow

He finishes by dipping into the mirthful undercurrent ofhis own experiences, revealing what he has found to bethe most ridiculously shitty products suggested forfunding.

But I won’t give those ones away.

You’ll just have to check him out yourself. AngelsDen @angelsden

Bill Morrow (cont.)

Spencer Silver’s adhesive applied to Arthur Fry’sPost-it Note

Fahlberg’s laboratory spill becomes sweetenerSaccharin

George Crum’s handling of a customercomplaint becomes the potato chip…

But this only tells half the story. The ‘instantaneousheroes’ we’re citing, the creators of microwave ovens,Nutrasweet and vulcanized rubber, understood throughtheir own failures that good ideas are a dime a dozen.And while the tales are intoxicating, the reality is that theproject-based approach was the catalyst for the divineinnovation accidents that followed.

Successful innovationrequires three things:

1. Your passion

2. Your ability topersevere

3. Your ability tocollaborate and implementRemember, it was the entrepreneur’s open mind thatturned the above ‘accidents’ into the innovation endgame.

And as Mark Twain wrote: ”It ain’t what you don’t know thatgets you into trouble. It’s what you know for sure that justain’t so.”

P.20

STEEL’S VIEW

Passion topersevereand smartenough tocollaborateand thenimplement

WHAT ANGELS WANT

The vast majority of inventions takeyears to design and develop, andthereafter introduce into and gainmarket share.

It’s a process; the initial idea, the business plan, theproof of concept, market testing, finance, personnel,marketing and sales, competitor analysis, positioning,and so on. Some make it all the way, but most witherand die on the vine, or struggle through a hundredhurdles, a cornucopia of considerations, and miles ofopen highways before simply running out of time,support or interest.

“There will always be catalysts out there. Sometimesthey’re digital, sometimes chemical, and sometimeshuman, like Steven Marx who invented the hashtagwhen he inadvertently sent a Tweet with the line#NBCFail mocking the station’s coverage of the LondonOlympics.”

But some seem so entirely serendipitous and destinedto become reality, that we mistake the daunting journeythrough history’s retelling as a straight line from a-to-b.Albert Szent-Györgyi said: ‘A discovery is said to be anaccident meeting a prepared mind’.

And the list of examples to support it is lengthy:

The brothers Kellogg and their Adventists-centric wholesome corn flakes

Neil McElroy’s pursuit of increased Camaysales for P&G pioneers the concept of brandmanagement

Percy Spencer’s magnetron vacuum leads tothe first microwave oven

James Wright’s failed effort to create asynthetic rubber becomes Peter Hodgson’smarketing gambit, Silly Putty

INNOVATION ISNO ACCIDENT

The Brunette

WHAT ANGELS WANT

P.21

“….But everybody’s likecrystal, Maybach,diamonds on your timepiece. Jet planes, islands,tigers on a gold leash. Wedon’t care, we aren’tcaught up in your loveaffair…..”For me, the missing link in the logic chain at a recentManchester gathering of startup-stage entrepreneurswas Kiwi songstress Lorde and her electro-urbanhit Royals.

Her heady mantra of immediate gratification avoidanceshould have been spun through Nigel Tufnel’s ‘special’amplifier from Spinal Tap….set to ‘eleven’.

In a nutshell it was: Pitch to win. Money is the mantra. And the rest of the business dynamics can be scribbledon the remainder of the fag packet.

Let’s do overnight success, create the online audience,worry about perfecting the tech later, pull in the VC’s withzero revenue streams, shoot for the $billion IPOvaluation…

And all of this money-only malarkey was sung out to asizeable patch of Google-eyed entrepre-wannabes eagerfor confirmation that their invitation to the WorldEconomic Forum in Davos is just round the corner….witha star on their dressing room door.

Yup, a little dose of the prescient pop princess wouldhave been just the tonic.

No such luck though. They even took the name of theother Lord (Noam Wasserman) in vain, manipulating hisrenowned Rich vs King mandatory pre-incorporationstage mental massage conducted with mentors andadvisers, into the equivalent of a backroom rub downwith a girl named ‘Trixie-Bell’.

There’s much discussion just now about economicbubbles, a return to the 1999 global tech-zeitgeist,people dancing The Charleston in a rejuvenated get-rich-quick-before-it-bursts world.

Maybe, maybe not. But the bubbles of real concern arethose empty shells being soaked in pitching steroidswithout a clue as to what comes next.

What happens if this army of newly trained pitch-monsters reels in the funding from Government andother partially blind organisations?

With the dynamics of businessdelivery on the line, they’ll findthemselves suddenly thrust offthe cliff of post-startup supportinto a Grand Canyon-sized abyssof anonymity, and once theAngels and VCs have had a look(if they even got to those tables),no prospect of Second Round orSeries B.They’d be better off at the crap tables in Las Vegas.Meanwhile, flocks of these doe-eyed sheep are beingrounded up (at £199 per shear), perpetuating the cycleand then led to the slaughter by the teeth-whitenedpodium lotharios HNW calls the Judas Goats.

And We’llNever BeRoyals….By Hetty Green

STEEL’S VIEW

INNOVATION ISNO ACCIDENT

The Brunette

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INTERNATIONAL

P.23

I’m reading through a book called 1339i Facts and noticed a surprising factoid- just opposite "The bite of the BrazilianWandering spider causes an erectionthat lasts for several hours." (must getthat on the Christmas list!) - that says:“If North Dakota seceded from the USand became an independent country itwould be the world’s third strongestnuclear power.”

Wow! Frack me.

The once sleepy North Dakota backwater, home to suchiconic audience draws as the Theodore RooseveltNational Park and the world’s largest Buffalo statue, isnow the new Wild West of oil production, where ‘fracking’cities like Williston have become booming mining towns,dripping with nouveau millionaires and boasting less thanzero unemployment figures.

Why? Because the mining techniques of hydraulicfracturing and horizontal drilling have allowed access -steady on all ye Greenpeacers - to that natural shale oilresource that until recently technology and legislationwould not allow.

But the earth has opened. And despite the fear-mongering of environmentalists whose picket line optionsare declining after the more recent global warmingfindings went cold, the only thing being ‘swallowed up’ is40 plus years of US oil dependency on OPEC, and theMiddle East’s ability to set petrol prices as they see fit.America’s holy grail of oil independence seems now wellwithin reach.

Skip with me across the Atlantic to Norway to theirglobally impressive $800 billion sovereign wealth fund,into which the ‘Wegians’ channel most of their incomefrom oil and gas.

What’s their biggest problem? How best to deal with thefund’s growth as the new administration of Prime MinisterErna Solberg reviews its investment mandate.

Norway started the oil fund in 1996. They made theinvestment in an attempt to avoid overheating their $500billion economy.

But the move backfired…in a good way. Norway is nowScandinavia’s richest economy.

“And despite the fear-mongering of environ-mentalists whose picketline options are decliningafter the more recent glo-bal warming findingswent cold, the only thingbeing ‘swallowed up’ is 40plus years of US oil depe-dency on OPEC, and theMiddle East’s ability to setpetrol prices as they seefit. America’s holy grail ofoil independence seemsnow well within reach.”

And when we look at Scotland, at the impendingreferendum, at North Sea Oil, you have to wonder ifthose examples are not signposts to the future.

Setting aside the political allegiances, the North-Southbiases, the yes or no consensus on whetherindependence is to be or not to be….

It’s really about the wealth, isn’t it?

By The Brunette

Oil’s Well…That Ends WellFrom North Dakota to Norway

to Scotland’s North SeaBy Alan Steel

The 9 Deadly Startup Diseases and Howto Cure Them - Daniel Tenner

Startup Disease 1: The Imaginary User Syndrome

A product that’s not geared towards a specific user is unlikelyto benefit anyone in particular; hence, there’s no such thingas a generic user.

No matter how great your initial vision might seem, if youdon’t have a target audience in mind, your startup will lackdirection and flounder.

In addition, it’s difficult to market to everyone, so not only willyour product suffer, it’ll be hard to sell too.

P.24

STEEL’S VIEW

LOBAL

FEATURE: STARTUP DISEASES

The problems that arise in startupworld are numerous and potentiallyfatal. Distinguishing the venomousfrom non-venomous issues can bechallenging, but like snakespotting inthe wild, where you steer clear ofrattling sounds and diamond-shapedheads, there are telltale identifiers touse as your guide. The signpostsrarely change. Daniel Tenner wrotesome years ago The 9 Deadly StartupDiseases and How to Cure Them, andit remains a crucial document, one Ikeep with me to help from getting bittenin the business jungle. And Irecommend you do the same.

The Brunette

How to distinguish between a business dimple and a strategic pothole

The most common business startup ailments

Cures that don’t kill

How do you distinguish between ‘business dimples’, those cherubicbirth defects that make our new companies appealingly naive andneedy to angels, and strategic potholes that, like acne scars, wouldrequire a more surgical procedure to correct?


P.25

Symptoms:

Your product is targeted at all or most small businessesonline. You don’t know any of your likely userspersonally, but you’re sure they’ll find your product veryuseful. Your product seems so versatile that it will beuseful to practically anyone.

Cure:

Stop developing until you’ve established a small, definedset of users who could benefit from your product. Thencontact these users and convince them to test-drive yoursite. Tailor the product so that it benefits them, andchances are it will appeal to other like-minded users.

Startup Disease 2: The Frenetic Distraction Pox

A startup’s primary resource is the time and intelligenceof its founders. That resource can easily be squanderedon non-essential tasks that don’t bring the businesscloser to break-even (and then to profit). Until you havepaying users, every activity in your startup should beaimed squarely at achieving that objective.

Symptoms:

You’ve had a productive day, but didn’t actually do anyproduct development. You’ve just spent a weekpreparing stationery and business cards for your startup.You haven’t released a new version of your product toyour users in the last month.

Cure:

Refocus. For a startup, there are only two activities thatmatter: building the product and attracting users.Although there is a constellation of other nuisances suchas business administration and accounting, these shouldbe avoided, or at least delegated to those who have theappropriate expertise.

Startup Disease 3: The Wrong Hire Infection

The caliber of the people who work on a startup isdirectly related to the quality of the product that theydeliver. The raw material of startups is people. Bring onboard the wrong person, and it could cost you yourstartup. Bringing in friends and family who lack therequired skills is a common cause of a startup’s earlydemise.

Symptoms:

You find yourself micromanaging one of your cofoundersor employees. You have to establish a policy of howmany hours people will work each day. Someone isn’tpulling their weight.

Cure:

Startups have no room for people who need to bemicromanaged. The time you waste and unnecessary

distraction could kill your startup. The smart, bravesolution in those cases is amputation. Let them gogently if you want, but let them go.

Startup Disease 4: The Implicit Promise Fever

Assumptions are dangerous, particularly if they occurbetween cofounders who are close friends. Sometimesclose friends assume that they know what the other’sthinking. Unless your friend has telepathic power, that’snot the case.

Symptoms:

There are a number of issues that bother you, but,although they haven’t been discussed, you’re sure theywon’t be a problem later. You’ve not discussed sharepercentages, or voting rights, or what to do if there is amajor disagreement. Everything is always done face-to-face (or on Skype); nothing is written down.

Cure:

To cure this disease, make the implicit explicit. Havethose discussions. Write the results down. You will findmuch more disagreement than you expected, but that’sgood. Work it through, come up with compromises, andagree on a way forward. You’ve come this far already.Together, with a distinct understanding, you can solvewhatever problems you dig up. In your discussions,don’t avoid the question: “What if it all goes wrong?”

Startup Disease 5: The StealthProduct Delusion

In my experience, most product developers have anatural inclination to wait as long as possible beforeshowing off their creation to others. After all, until youreceive external feedback, you can continue to nurturethe illusion that your product will soon be flawless, andyou can work hard to make sure it will be, right? Right?

Symptoms:

You want your product to be just perfect before you letreal users near it. You’ve been working on your startupfor several months now, but no one outside the found-

“A startup’s primaryresource is the time andintelligence of itsfounders. That resourcecan easily be squanderedon non-essential tasksthat don’t bring thebusiness closer to break-even (and then to profit).”

Cure:

No one likes to discover that they’ve been wrong allalong. However, if you’re trying to go south and you findyourself walking north, it’s always best to turn around.“We’ve walked this far already” isn’t a good enoughreason to continue heading in that direction.

Chances are, you’re much, much further from thecompletion of your product than you think. If you’reconvinced that you need to change platform, do so now– don’t wait until you’ve invested even more resources inthe wrong direction.

Startup Disease 7: The Other Interest Disorder

The creation of a startup is an all-consuming fire. Fewpeople can successfully pull off that extraordinary featwhile simultaneously spending their energy on anotherproposal (though they do exist). Entrepreneurs, bydefinition, like to start projects. For them, the distractionsare many. After all, there are so many interesting,worthwhile things that one can do in the world.

Symptoms:

When you explain what else you’re doing, you feel theneed to finish the sentence with “but I’m still working onmy startup.”

You haven’t found the time to work on your startup in thelast week, but you’re definitely going to return to it soon.You’re working on several startups simultaneously.

P.26

STEEL’S VIEW

LOBAL


ing team has seen it. You haven’t shown your applicationto your significant other or your best friend, because “it’snot ready yet.”

Cure:

All of your friends (or at least those who own a computer)should know about, and have provided feedback on, yourstartup. Even more importantly, find some real users andask them to have a look. Yes, they’ll tell you that it’s farfrom perfect. With any luck, they’ll give you enoughfeedback so that you can fix the problems and have a shotat building a good product.

Startup Disease 6: The Wrong Platform Fracture

Picking the right platform (language, framework,technology) for a startup is complicated. The platformneeds to be robust but flexible, allow for rapiddevelopment, and, of course, it must be a platform youare able to work with; at the very least you or one of yourcofounders should be familiar enough with it to be able tocreate your product.

It’s worth doing your research to make sure you’ve chosenwisely from the beginning. And you really should switchto the right platform as soon as possible if you discoverthat you’ve made the wrong choice; choosing anunsuitable platform can be a surefire way to snatch defeatfrom the jaws of victory.

You definitely want to avoid a scenario where, uponlaunching, you suddenly realize you have to rewrite theapplication from scratch. It happens more often than youmight suspect!

Symptoms:

No matter how hard you work, it takes forever to build newfeatures because of your platform’s limitations.You know that you’d be better off using framework X, butyou think you’re too far down the line to change.

Your gut is telling you your choice of technology is wrong,or the way you’ve applied it is flawed, but you’re almostdone so you figure that you may as well press on.

“All of your friends (or at least thosewho own a computer) should knowabout, and have provided feedbackon, your startup. Even moreimportantly, find some real users andask them to have a look. Yes, they’lltell you that it’s far from perfect. Withany luck, they’ll give you enoughfeedback so that you can fix theproblems and have a shot at buildinga good product.”

No one likes todiscover thatthey’ve beenwrong all along


P.27

Cure:

This disease is deadly if left untreated. After all,sometimes there is an enterprise that’s more interestingand rewarding.

A new undertaking often looks more exciting than aproject you’ve already spent many months on. However,if you’d rather be working on a different venture, andyou’re not bothered by wasting all the effort you’ve putinto your startup, then perhaps you should jump ship.

If you decide to abandon your startup, you should do soopenly. If other people are involved, you also need to askyourself whether it’s worth letting them down. And if it is,you should pull out cleanly, rather than pretend to still beworking on the startup.

Startup Disease 8: The Perfection Hallucination

All good product designers are perfectionists. The rightkind of graphic designer feels physically sick when thefont is misaligned by one pixel. The right kind ofprogrammer will refactor the code even when it’s workingfine, because it’s just not right.

However, if you want to deliver a product of which you’recompletely satisfied, then perfection must be balancedwith a good dose of pragmatism. Otherwise you risknever launching your product at all.

This disease often hits later in the product developmentcycle, when you’ve already built a startup that peoplehave liked. The expectations have been set, so you feelthat every subsequent update must be perfect.

Symptoms:

You plan to spend two months on a new feature beforeshowing it to users. Even though the basic functionalityis there, you’re afraid that the new feature is going to failif you release it now.

You’ve built a lot of new stuff recently, but none of it hasbeen released to users because it’s not quite ready yet.

Cure:

Users are more forgiving of progress in the wrongdirection than of a lack of progress. What you’ve built willnever be perfect, but if it’s close enough your users willtell you how to improve it.

However, they can only do that once they see the newchanges and features. Release early, release often. Theonly way to learn from your mistakes is to accept thatyou will make them.

Startup Disease 9: The Marketing Blind Spot

“Build a better mousetrap, and the world will beat a pathto your door.” If only!

Some startups (in particular, a certain well-knownsearch engine) have succeeded using little or nomarketing, relying largely upon word-of-mouth referrals.

While this may work for some, it is far from a safe,repeatable marketing philosophy! Simply assuming thatusers will sign up to your web site just because you’vebuilt a great product could cost you your business, evenif it is a great product.

Symptoms:

You’re counting on word-of-mouth marketing alone tospread the news of your product.

You have no idea how you might reach your targetusers via traditional marketing.

You think marketing and sales are second-rateactivities, and you’d much rather spend all your timedeveloping the product.

Cure:

Spending your time on development is never a mistake,but no magic fairy will deliver your users to you.

Balance the two activities. Find out how to reach yourtarget users, and make the effort to do so.

Once your startup is worth marketing (for example,when it is capable of turning a profit), market the heckout of it! Marketing doesn’t have to cost much, but if youdon’t do enough of it, you’re setting yourself up forfailure.

Final Advice from the Doctor

There are many more ways for startups to fall ill, wither,and die.

The bad news is that some of them may well afflict yourstartup. The good news is that almost everything thatcan go wrong can be fixed – if you figure it out quicklyenough.

Still, prevention should always be your priority.

By monitoring the wellbeing of your startup andwatching out for these deadly diseases, you’ll ensureyour business enjoys a healthy and prosperous life.

Users are more forgiving ofprogress in the wrong direc-tion than of a lack of progress

“Build a better mousetrap,and the world will beat apath to your door.” If only!

Are youembarrassedabout yourcompanys’website?

you are not alone...

to be able to stand tall and feel good again contact

0131 240 3390

geckonewmediaInteractive solutions for proactive business

Web: www.geckonm.com Tel: 0131 240 3390

44 Melville Street, Edinburgh EH3 7HF

INVESTOR

P.29

I love all the confusion out there right now, all thetech bubble chat being blown about by lofty marketvaluations, shorting bears and shorter memories ofwhat 1999 was really like.

We seem to have forgotten how the millennial lunacydrove an inexplicable belief that the Internet couldsomehow magic away the need for marketfundamentals, or at least in the minds of investors.

And now here, ensconced in dot.com 2.0, the sequelto the original of a baker’s dozen years ago, comeththe bubbles.

It’s he says she says: Expert 1: “Sure there’s abubble. Snapchat, Twitter, the revenue bupkisbrigade.” And the economist in the room: “There’sactually another much bigger bubble wrapped aroundthe smaller tech-sector bubble, like a double-bubbleor sorts.”

It gets better (or at least more creative). Then ourfriendly neighbourhood analyst chimes in: “Don’tworry, unlike dot.com the market bubbles now are farless co-dependent. We’ll likely have a collapse butnowhere near the scale of 200/01.”

Did he just say co-dependent? Does this come withcounselling?

Double

BubbleThis just in from Mike Williams, the contrarian voice of reason from America’s windy city of Chicago. Mike’s not blowing anybubbles, and by the sounds of it neither should you. Sentiment moves markets. The chart below tells us that we’re right inthe midst of a Bull market. And while the figures tell the tale, majority view continues to hate or deny it.Sounds like the beginning of every other bull market in history to me. And that’s no bad news.

By The Brunette

Well, maybe in a laboratory….or to gatekeepers at analcoholics anonymous “Newbie Night”.

It’s like innovation without insight, putting Descartesbefore des horse, and so far removed from marketablereality that even a “Kibu.com” engrossed late-90’s tech-funding frenzy would have gagged on the Water-from-Whisky idea.

A business requires far more than good intentions andtechnology to succeed, a conclusion super cropstartup business Kaiima exemplifies, having firmly placedthe innovation plowhorse at the front of the businessin the land of Galilee. Kaiima Bio-Agritech is sowing the

P.30

STEEL’S VIEW


After years of strenuous endeavour, anAsian entrepreneur has finallysucceeded in developing a way to turnwhisky into water…..

Nope, no punchline required. Is the concept interesting?

THE WALL

Kaiima Startup SeedsSuper Crops

By Ed Emerson

THE WALL

P.31

seeds of a food revolution in an experimental rice field.Backed by Li Ka-shing, Asia’s richest man (he’s the onebolstering Hong Kong’s property market, because, well,he owns it), Kaiima CEO Dr Doron Gal has the ambitiousgoal of helping to feed the world while making money inthe process.

How so?

Kaiima hich means ‘sustainability’ in Hebrew, appears tohave developed the technology to boost crop yields byup to two-thirds.

The test site in Galilee’s Moshav Sharona is the launchpad for the use of a genome multiplication process to, inthe words of Bloomberg’s Elliott Gotkine, ’increase yieldpotential, improve water use efficiency and fortify plantsagainst harsh environments’.

And it doesn’t stop at rice.

Tests on corn and wheat farming are said to haveyielded 15% to 50% increases in production.

That’s a lot of upward traction in a global wheat, cornand rice market where demand has increased 90% in thelast 30 years.

Is an edible tractor next?

Doran Gal founded Kaiima in 2007, enticing not only LiKa-shing but a number of other wealthy and powerfulinvestors including World Bank Group’s InternationalFinance Corp.

The duo served up a $65 million financing round inSeptember of this year to fund further research and

Kaiima’s holisticapproach permeatesevery aspect of thebusiness,from increasing yieldsand sustainability rightdown to the castor-fueled tractor thatharvests its own gas.And since castordoesn’t make for goodeating, little is wasted.

Stephen Paterson

PatersonLeads£2.5mHealthCareServicesDeal

HW Corporate Finance is pleased toannounce the combined £2.5m saleof Scottish domiciliary serviceproviders Lowland Care and AlphaHome Care to Real Life Optionsbased in Nottingham, England.

HW Corporate Finance inEdinburgh, led by CorporateFinance Director StephenPaterson, managed this transactionfrom inception to completion.

Stephen Paterson says, “LowlandCare and Alpha Care are well runbusinesses with long establishedtrack records in domiciliary careservices both to the private andpublic sectors.

This sale demonstrates that thereare solid business opportunitiesavailable to both management andinvestors.”

HNW? Unique? USP? Let’s checklist that one.Your unique selling point is that compelling thing, thatattribute, that distinguishes your company from thecompetition.

The accountant has now given the ‘red ink’ question over tothe FD who looks like he too might have fallen into a Bullock-style reverie for a moment there. Think he’s more of a Jolietype though.

And it’s that message that you cluster bomb your targetaudiences with, over and over again in ever morecreative ways.

You integrate it into all marketing efforts. It’s the reasonyou’re in business.

Someone has opened the door interrupting the proceedings tooffer more coffee. Everyone round the table appears ready fora breather.

But what if you’re in one of those ‘generic business’areas? I once heard that if you find yourself ‘generic’,

P.32


Thursday evening. Sat with a financedirector, an accountant and a clowder ofnon-execs. And while I used to dreadthese financial journeys, now I find thembetter catalysts for ‘think time’ than aquiet 20 minutes in the loo with mySamsung.

I’m dropping in every so often on the conversation. Blah,blah blah … outgoings…blah blah blah ….. deadline ….blah blah blah … “Hey, what do you suggest we do withthat, Ed? Ed. Ed?”

I’m miles away. No, not lost in that old ‘I happened to runinto Sandra Bullock at a bar in Monte Carlo’ mind twerk.

Nope, it was a stray chat grenade, pin pulled and rolled atme earlier today, that has me pensive.

“HNW?” He said. ”Remember Ed, you’re unique just likeeveryone else!”

One line in a much larger conversation and he’s got myNew York paranoia tingling. I never even noticed the pinprick he’d made until the hole started bleeding out thoughtbubbles in my head.

The accountant is now sage-faced, tapping a silver pen at anuncomfortably large number on an excel in front of me…andit’s on the wrong side of the balance sheet.

ENTREPRENEURS

Searching For YourBusinessUSP’s…?

…Here’s ThreeWays to Fork It!

By Ed Emerson

“HNW?” He asked. “Sure.Just remember Ed, you’reas unique as everyoneelse!”

ENTREPRENEURS

P.33

create an extra value proposition or EVP. But EVPplucks at my paranormal strings – electronic voicephenomenon – and pulls up visions of TAPS’ blackScooby Doo like ghost hunting Dodge van. So let’s justcall it ‘forking’ instead. It’s more my speed.

Three Ways To Fork It

How do you create an additional motivation to buy fromyou in the minds of your current or potential customers?

1) Cost

This is usually the death knell for a sector desperately inneed of innovation. There’s only going to be one‘cheapest’, and the race to the bottom of that barrelusually leaves it empty.

2) Differentiation

Are you doing it better, faster, safer, cooler or leanerthan your competitors? It’s the alternative to the aboveoption of price slashing, and it means routing throughyour offerings, your people and your business processesto unearth that critical mass that means something to themarket.

No differentiation? No secret sauce? No FCUK moniker?No Air France plastic cutlery that converts into an

‘airplane’ (I’ll tackle that one in a minute). No Meerkats,or mythical dancing Joe McKinney Guinness anticipationadvert. No differentiation, no business.

3) Niche-ing

Finding a market within a market. Credit to Aussie AdamTregear @AdamTregear for that one! It starts when youfocus on and then narrowly define a market. Then younano-focus and either lead on cost or differentiateyourself in that narrower space.

The coffee arrives. There’s an ‘in very bad taste’joke that has taken the gathering through bouts ofrecurring laughter.

Then the sobriety kicks back in with theaccountant’s austere sounding: “How are wegoing to resolve this?”

Andy Sernovitz, on his Damn I Wish I’d Thoughtof That blog writes the following:

Delivering the expected doesn’t spark a word ofmouth conversation. (But it does get customersatisfaction.)

To get people talking, you need to do somethingextra.

But most companies get it wrong. They try tocreate a big, expensive, splashy thing. Which, ofcourse, is so obviously a marketing stunt thatcustomers ignore it.

Instead, you need one simple conversation-worthy bit of awesomeness. It’s easier than youthink.

Like the Air France cutlery that becomes a toyplane (page opposite).

It’s a goofy thought that I’m gonna fly Air Francefor the stackable plastic crockery or cutlery thatbecomes an airplane, but it’s cool for kids, and anever-so-slightly unforgettable brand additive.

It’s easily a social step removed from competitorEmirates’s service design complimentaryChauffeur-drive to get you to the airport offering,but still remarkably target audience focused andfriendly.

I’m consciously now back amongst the nowsombre gathering. Thank god these aren’t myaccounts. What a F-ing mess. The lesson: don’tkid yourself by thinking you’re in better shapethan you are or that you’re naturally unique…anddon’t bring me in as non-exec. I’m perenniallydistracted.

“To get people talking,you need to do some-thing extra.

But most companiesget it wrong. They try tocreate a big, expensive,splashy thing. Which,of course, is soobviously a marketingstunt that customersignore it.”

Are you doing it better, faster,safer, cooler or leaner thanyour competitors?It’s the alternative to the aboveoption of price slashing, and itmeans routing through yourofferings, your people andyour business processes tounearth that critical mass thatmeans something to themarket.

when we thought it was safe to leave the Dark Room.The fear generated by last November's gloomy wall towall predictions sadly once again generated widespreadfear among investors and pundits.

Despite rising stockmarkets all that year, one problemafter another, including headlines of the end of the Euro,the collapse of Greece, Italy, Spain or Portugal --- youchoose --- in the US where most folks have no ideawhere these places are, nevertheless led to panic sellingby investors with $125 Billion leaving the US marketbound for "safer" places like Deposits.

What happened next? Once again "problem" solved.Stockmarkets rose and economic blizzards failed tomaterialise while the worried shivered in "safe" havens,Deposits and Bonds, which delivered next to nothing.

Statistics show the Footsie Total Return over the last 12months up 19.3%. Those brave enough to sit out thenoise and sticking to our premise that things are betterthan they've been for years did even better, with oneexample, an M&G Income fund managed by a favouriteof ours, Stuart Rhodes, up over 26% even after chargesthe media insist are too high.

Here's another question. When do you reckon this quoteappeared in Business Week magazine?

P.34


Quite a month November..... EarlyNovember two years ago, following twoconsecutive unpredicted severe wintersthat left Fran and I unable to drive up thesteep hill to our home for weeks, Ireceived through my research a Reportfrom Climatologists predicting, thanksto Atlantic Ocean Temperatures andCycles, one of the most severe Winterssince 1947, the year I was born.

Unwilling to face again the arduous trek to the house, werushed out and bought a 4x4. A couple of days later, on avisit to Dougal Philip's Garden Centre for candlespreparing for power loss resulting from the expectedblizzards, I asked Dougal what he expected that winter.

Dougal, I asked," with you an expert on Nature, the trees,plants and behaviour of animals and birds, what's wintergoing to be like? His response was he confidentlyexpected a mild one.

On what basis I asked? Well, he said, we've run out ofSnow Shovels already, can't get Road Salt anywhere, andI hear the price of 4x4s are going through the roof!" (it wasa mild winter by the way, as was the following one).

It's a lesson worth learning --- When it's in the headlinesit's time to be contrarian! Especially when it comes toEconomics and Markets.

Any idea what was to bring down the World Economy lastNovember? Do you remember the hysteria about DebtCeilings and Fiscal Cliffs?

CNN Money summed it all up last November with thefollowing headline --- "Debt Ceiling May Collide WithFiscal Cliff" and went on to remind us that in 2011 "USCongress eventually agreed to raise the Debt Ceiling butthe brinkmanship earned the US its First EverDowngrade, and rocked Stockmarkets." Oh no, and just

YOUR ECONOMY

"This was no mere Recession, it wasa Contained Depression and we'restill in it. Profits which are normallyup about 60% at this stage of theRecovery are only up 25%. Thereason is .... that the US has entered aNew Era of sharply reduced CapitalSpending with Investment droppingsignificantly. This Fall has beencaused by Overcapacity and ExcessDebt which take longer to right .......these troubles have been brewing fordecades ...."

Remember,Remember…..The Myths of November

By Alan Steel

YOUR ECONOMY

P.35

What's your best guess? After the Dotcom bust of2000/01? Or how about after the Great Financial Crisisin September 2008 when the world held its breathas Banks tottered on the brink and worldwide millionslost their jobs? ...... No ......actually it was from November1993!

Yes, twenty years ago this month there was no hope forinvestors. The Footsie was a smidgeon above 3000.The total return from it since then is 332% would youbelieve, with well managed Global Growth funds higher,even after charges.

One more example underlines why investors shouldignore popular headlines. Five years ago wasn't tooclever either. September '08 saw one of the world'sbiggest banks, Lehman Brothers, collapse bringing withpanic not seen since the Wall Street Crash 80 yearsearlier.

By November, chemists were running out of sleepingpills and toilet paper supplies were running low. Only afool would invest at such times. Fortunately one theworld's best economic lighthouses, Warren Buffett, isone such "fool."

Unsurprisingly in the last 5 years the Footsie's up,net Dividends reinvested, by 93%, while sadlymillions sit in Deposits or worse thinking safety'sbeen the better option. Incidentally Stuart's GlobalDividend fund, mentioned earlier, is up 131% on thesame basis.

Ooops .... I have to remind you that's after charges,and you should also bear in mind the value ofinvestments can go up as well as down. As to theweather this winter I hear "experts" predict a severewinter, but I did spot in a friend's car today a brandnew Snow Shovel.

Regarding Stockmarkets, now we're told it's too lateto join the party to which pessimists weren't invited.They've been wrong for 20 years, butunembarrassed by such failure now they've becomeWest Ham supporters --- Bubbles everywhere!

First there was no hope, but now the system'soverheating causing bubbles. Economic numbersdon't show that. Sentiment statistics agree there'sno bubbles in sight, but hey, they've have to findsomething to worry us about. And if their Bubble

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P.37

theory proves wide of the mark, an unlikely replacementsits in reserve ...... Pensions.

You must have seen recent articles or the recentChannel 4 programme "Pension Rip Offs." Pensions arethe new enemy.

On what basis? Charges are too high. GreedyInsurance Salesmen are conning us for highcommissions. Investment returns are poor. Nobodybothers to explain them. When you die, all the so calledpathetic returns disappear.

If you live long enough and manage to fight off moresalesmen trying to sell you even worse plans, the incomeyou're paid by way of Annuity is so pathetic you won'tafford rising energy bills. Trouble is, that's mostlyrubbish. No wonder most of us don't save for retirement.

Today a well designed well invested Pension plan has noequal in over-all effectiveness. Tax Relief up front givesyou an uplift of between 25% and 81% depending onyour tax rate.

Charges should be no higher and in many caseslower than those attaching to Stockmarket ISAs.Profits made in the plan roll up tax free. The betterthe funds invested inside the higher the returns. Ifyou die before taking benefits and before 75, yourfamily receive all the money tax free, free of DeathTaxation too. You don't have to buy Annuities ever.

Things have changed for the better. Headlines willprobably continue to lead you the wrong way though.So, as Monty Python reminds us"Always Look OnThe Bright Side Of Life".

Do remember there arevery few if any millionaireJournalists. Mainly theyexist to grab attentionaway from the rest. Sadlybad news sells.

YOUR ECONOMY

P.39

Doing the Bloomberg Shuffleshuffle of late. Let’s see, JPMorgan is “acknowledgingthe statement of facts” but“not admitting to anyviolation of law” in order toresolve probes into its sale ofmortgage bonds.The settlement to the US Justice Department reads likea $13 billion Snapchat ‘market selfie’: “Big thumbs upeveryone, the pay-out to the US Government won’t affectprofits, and now we’ve got a Wiki profile for helping tofabricate ‘2008’ into a synonym for disaster.

It reminds me of me dear ol’ daddy who, while retrievingmy newly-DUI’d ever-the-prodigal brother from aWestchester County (NY) police cell, said to me: “Eddie,it ain’t right, but most of life’s problems go away if youthrow money at them.” Wonder if he owned any JP?

The message, one likely toSnapchat self-destruct inT-minus 10 seconds andcounting, is simples:When you’re the biggestUS lender by assetsyou’re allowed to misleadinvestors and the public.

Those bonds backed by faulty residential mortgageshelped sow the seeds of the meltdown.

To be fair, JP Morganonly seeded theclouds to rain, it wasthe public who wentout and got wet wetwet by agreeing tooutrageous 6-timessalary mortgages tobuy the dreamhome….oh, and optedfor the 125% loan-to-value deal taking theextra 25% asunsecured debt.And, like all those sated mortgagees at the time, JPMorgan was not alone in bundling toxic loans for saleto unsuspecting investors.

Wheel out JP CEO Jamie Dimon to say the $13billion pay-out is covered by reserves and up goesthe share price, a stock that has returned 79%including dividends since January 2012.

Mr Dimon, it’s time for your close up.

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PRACTICAL BUSINESS

RISKY BUSINESS P.41Joshua Brown, The Reformed Broker

COVERING YOUR ASS-ETS P.42Alan Steel, ASAM

DIATRIBE - JUDAS GOAT: INKSPOTTING P.45Ed Emerson, Editor

HNW Magazine’s Practical Business sectionlooks at key areas of business needs across legal,accountancy, marketing, finance, leadership,strategy, research and other areas of support.

PRACTICAL BUSINESS

P.41

Earlier this year, everyonein the investment unive-rse seemed to be plowingmoney into funds and pro-ducts marketing the lowvolatility anomaly.

There were a host of new “low-vol”strategies launched and a handfulof ETFs, all of them showing thedecades-long superiority of lowbeta strategy.

Those with a quantitative backgroundimmediately recognized what was reallygoing on – it was just dividends and thevalue premium in drag – you see, lowvolatility sectors and stocks tend to havea lot of overlap with high-yielders and“cheaper” names.

Unfortunately, by adding low-vol indexproducts to their portfolios, well-mean-ing advisors and investors were esse-ntially chasing the most expensive,overbought stocks in the marketplacejust as they were peaking out in valua-tion for the cycle.

Merrill’s chief of quant strategy, SavitaSubramanian, looked at this phenom-enon and notes that all of our notionsof “risky” and “defensive” may need tobe flipped upside down as the yeardraws to a close…

The changing risk profile for sectors:

Josh here – So where is the true low beta investment to be had? It’s very interesting to see the materials stocks andbanks and industrials declining in volatility relative to the supposedly stable sectors like telecom and utilities. The marketalways keeps us guessing.

RiskyBusinessJoshua Brown, The Reformed Broker

With this year’s equity returns being largely driven by sectors generally thought to be lowerbeta areas of the market (Utilities, Staples and Telecom), our work suggests that thedefinition of risk versus safety could dramatically change following this year. Sectors thathave grown higher beta, as measured by the biggest positive discrepancy between 1-yearand 5-year betas, are Telecom, Utilities and Consumer Staples. On the flipside, somedecidedly cyclical sectors like Financials, Materials and Industrials have seen a collapse inbetas using a 1-yr versus 5-year measure.

P.42

The world turns round and round. Theseasons change in cycles - winter,spring, summer, autumn (unless you’rein Canada, where it’s more like ‘almostwinter’, ‘winter’, ‘still winter’, and ‘roadrepairs’!).

The sun comes up every day (debatable in Scotland) andthen sets (or so they tell us). Everything moves round inturn. And that includes the markets. They operate incycles just like the seasons…except longer sentimentdriven cycles, just like in the picture (opposite):

And the vast majority of folks out there get the timingwrong every day, every month, year on year, leaving themarket when they’re told things look bad and joining themarket when everyone believes that things are wonderful.

Buying high and selling low…just like Wall Street wantsyou too. Hey, who do you think is populating thosepapers with miles of media ink?!

Despite the lessons the herd continues as before, an un-virtuous cycle indeed.

PRACTICAL BUSINESS

As George BernardShaw wrote:

“The reasonable manadapts himself to theworld: the unreason-able one persists intrying to adapt theworld to himself.

Therefore all progressdepends on theunreasonable man.”

By Ed Emerson

CoveringYourAss-ets

PRACTICAL BUSINESS

P.43

They run to the ‘safety’ of bank deposits with their cashand earn little or nothing, or to an index tracker - aninvestment that operates like a nightlight whose sensorsare broken; it only comes on in the day and won’t light upwhen it’s dark.

And they wait, en masse, until the papers say it’s ok tocome outside again. But the media’s ability to move theherd exactly the wrong way is the stuff of legend. Onceit’s in the news, folks, it’s usually too late.

There’s nothing wrong with being risk averse or wantingto follow the crowd. It’s both a natural reaction andperfectly reasonable. But there’s the rub. As GeorgeBernard Shaw wrote:

“The reasonable man adapts himself to the world: theunreasonable one persists in trying to adapt the world tohimself. Therefore all progress depends on theunreasonable man.”

Folks with real money like Warren Buffett (who startedout with nothing in Omaha, Nebraska) are veryunreasonable in that way.

You’ll find them walking into those rooms that peoplehave abandoned in a panic, when in fact the bestinvestment deals are waiting there because they’recheap. Simply put, when it comes to investment Buffettdoesn’t like crowds. And neither should you.

Case in point. Yesterday I came across a Christmasclock countdown site - www.xmasclock.com - whilerummaging around the Internet looking for stories,market opinion and the whole Wall Street he-said-she-said dross. Xmasclock shows you a snowy scene with asimple display running backwards from now untilChristmas day.

The image somehow reminded me that I had yet to seea newspaper announcement predicting this years retailsales will be all doom and gloom. So I tweeted thatcomment and didn’t think about it again.

Not 24 hours later…..Ta Daaaaa! The first story appearson Reuters. Let the crap retail sector barrage begin!

And now everyone will be in a panic, talking overcubicles, in pubs and on public transport, about howeverything sucks…when everything actually doesn’t.It’s all cycles.

Try it yourself. Google: ‘Fiscal cliff November 2012’.If you read one of the articles that come up it will soundlike it could be from today.

The only thing that’s been changing out there are themarkets. They’re breaking records, and they’ve beenmoving upwards now for four years.

But you’re still busy covering your assets.

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DIATRIBE

P.45

Judas GoatINKSPOTTING

A Judas Goat is atrained goat usedin general animalherding…with atwist. This beardedBilly associateswith groups ofsheep or cattle andthen leads them toa specificdestination like, forexample,slaughter. It is asactive in thebusiness world asit is in thebarnyard, and justas dangerous.

About a month ago I wrote a piece for HNWMagazine called Crowd Misfunderstanding aboutthe lack of market clarity surrounding crowdfunding, and included the excerpt below as apersonal example of not seeing the woods forthe trees:

I remember years ago my tech-geek neighbourmade a rare appearance at my door to gatheropinion about a new thing he referred to as‘blogging’.

“So let me get this straight.” I said. ”Everyone with acomputer can now just write stuff onto the Internet,with no practical content controls, and randomlycommunicate with anyone else for no apparentreason?”

“He nodded: “That’s about it.”

“Sounds f-ing stupid.”

There ended my career as a soothsayer.

Back to the present, and the aforementionedfundamental shift in communications called social mediahas since grown arms, legs, a beard, raised a family andis now moving global markets.

By Ed Emerson

And right alongside it stands thecitizen journalists, once widelyperceived as anarchic weeds inthe garden of traditional media,openly questioning the dailypress and their reporting‘sameness’; a downright oddcoincidence that begs thequestion: “Hey, are you guys allfeeding from the sameinformation trough?”

The Judas Goat in all this is the belief those offeringsoutside mainstream press are insignificant, irrelevant orless than equal to their broadsheet brethren.

You just need to get in there and find them, likeshoveling through 900 or so Sky channels before youcome upon modern day Waltons-style Duck Dynasty orMan vs Food’s Adam Richman testing his gastronomicprowess and suddenly realising your hooked.

And citizen ‘ink spotting’ is getting easier as a fewentrepreneurial legends have gone mainstream. Youneed look no further than Amazon’s Jeff Bezos buyingthe Washington Post from the Graham family, JohnHenry (finally) picking up the Boston Globe from the NewYork Times, Berkshire’s Warren Buffett adding ThePress of Atlantic City to his 30 plus daily titles.

OK, so maybe Sam Zell’s ’07 purchase of The Tribuneended badly..very badly, as did Brian Tierney’sPhiladelphia Equirer experiment. but the entrepreneurialmove into the traditional media space continues.Or as Bob Dylan famously crooned:

“Gather ’round people,wherever you roam,and admit that thewaters, around youhave grown…for thetimes they are a-changin’…”

P.46

And some of these citizen scribblers – call thementrepreneurs – gathered mass, honed their skills andoffered insights, rolling their respective blogs forward likesnowballs across the Internet’s front yard as more andmore readers began to stick.

The Joshua Browns, theMark J Perrys, the AlanSteels and MikeWilliams’, the PaulGrahams, Mark Susters,Brad Felds and AndrewChens started giving ussomething other thanthe press releases ofGovernment agencies.They started to think it through, challenged conclusions,and upended the urban myths that littered our thinking,feeding it back to us in a way reminiscent of thecolumnists of yore; the ones you looked forward toreading.

Mistake me not, those traditional scribblers are still outthere too, but they’re few and far between andincreasingly constricted by all the foibles of modern daymedia and publishing; choking on their chosen art like asexual asphyxiast chasing a happy ending.

DIATRIBE

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HNW Magazine November 2013 Issue

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