REBLOG Forbes Finance by JD Morris

REBLOG: Seeking Capital For Your Startup? Remember: It’s About Returns For Your Investor by JD Morris from Forbes

One of the most daunting tasks you are likely to face after having successfully founded a growing startup can be securing enough capital to pay the bills until the expanded operations begin to pay for themselves. Startups seeking funding for their expansions have a number of options for securing capital, but you still need to convince investors that your business is worthwhile as an investment. An understanding of the funding landscape will help hone your sales pitch and increase the odds of a successful capital campaign.

Unfortunately, the American business ideal of steady growth over the long term has been replaced in the minds of many entrepreneurs by dreams of founding a unicorn company that explodes onto the scene and cashing out through an initial public offering. Startup founders need to keep in mind that the likelihood of founding a unicorn is incredibly small, but there are other successful strategies for rapid growth using outside capital. Those strategies should be centered on producing a high company valuation and creating significant wealth for yourself and your investors.

Few modern startups succeed without outside capital.

The Fortune 500 list features a few companies that made it to the top as startups and by expanding the family business. Bill Gates was lucky enough to have a product IBM desperately needed. Jeff Bezos got his seed capital from his parents’ savings and raised $8 million through a series A round from Kleiner Perkins in 1996. Both companies also benefited from fantastic support from advisors and investors. For example, Amazon’s investment bankers played a crucial role in raising debt for them during the dot-com collapse, which resulted in Bezos retaining a large share of the company. When looking at the success of the founders of Facebook, Google, Microsoft and Amazon, you should know that this type of success is even rarer than the unicorn model.

Of course, there is still the chance your company will succeed without the help of outside capital. The bootstrap model, where an entrepreneur can entirely self-fund operations until the company is financially viable, can still work. With luck and products that offer high profit margins, the founder can take home a considerable paycheck. However, bootstrapping is unlikely to land you on the Forbes 500 list of billionaires any time soon. About half of businesses fail within five years, and capital is always needed for rapid growth.

If you are lucky enough to get capital from SoftBank, Sequoia Capital or other mega-funds to stay solvent until an IPO, then you are one of the very rare unicorns. The great IPOs of today tell a unicorn success story. However, there are significant failures. Jawbone’s pivot to health-tracking devices did not keep it from its 2017 liquidation. Dream of a unicorn, but remember, most investors are not looking to deploy capital to develop a unicorn.

PROMOTED

Investors know the odds are against you.

Startup investors generally use a high-risk model where they spread their capital among numerous startups, knowing that it only takes one or two to be successful enough to pay back the initial capital investment. Companies that produce such returns are called dragons. Unicorns are more based on valuation. A dragon is one deal that pays the return for a fund after investing in many deals.

Normally two to three startups will provide enough of a return to make a venture capital fund successful, while the others fail to make any return for the fund. Based on this math, startup investors are generally looking for an exit when a company has achieved a valuation that is roughly seven times greater than their total investment in a company, in my experience. Sure, an investor could buy into an existing unicorn, but a high return after the B round is unlikely and often will not cover the losses from their other investments. Most investors need high valuation that will be supported by acquisition valuation versus the longer and riskier path of an IPO.

Laying out a realistic exit strategy is key.

Venture capitalists and startup investors know that most of their bets will be on losers, so if you think your idea is going to be a surefire unicorn that will dominate its market, go ahead and pitch it that way. Investors love to see enthusiasm in a startup, because it lets them know you believe in your company and are willing to put in the work necessary to make it successful. However, you should also lay out a more realistic exit strategy for investors, such as selling the company. I earlier suggested that “entrepreneurs should stop dreaming of the shiny IPO” and focus on being attractive for an acquisition.

Remember, investors are looking for a dragon to show their limited partners (i.e., 700%-plus return). A unicorn can be helpful for venture capital funds to show their investors should they want to raise more money for future funds, but the bottom line is the return they get from investing in you.

ABOUT JD MORRIS

Mr. Morris (JDM) focuses on serving on the board of advisors and board of directors of several private companies.  His family of Special-Purpose Vehicle (SPV) invests in a wide range of businesses. JDM has helped close more than $91 billion in deals—leading more than $7 billion in enterprise value of these deals.

He has been a speaker at various industry forums, has been quoted in numerous leading publications, and has made several appearances on Bloomberg, CNET, CNBC, ESPN, and many media outlets. Mr. Morris hosted an educational radio show about financing deals and other hot topics after Bloomberg morning news.

Mr. Morris received a B.A. in economics with mathematics from Hampden-Sydney College in Virginia, where he worked in the development office to pay his way through college. He is an Omega Rho Honor Society student in Washington, D.C., with The George Washington University (GWU). JDM is currently working on finishing a program under MIT Sloan Business School, as well as the MIT Computer Science & Artificial Intelligence Laboratory (CSAIL).

CONCEPT: There is no place like Silicon Valley or is it now the Bay Area – kinda

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Source and Quote from E&Y Report by

Despite an overall slowdown in Q4, emerging regions like Los Angeles, Seattle, San Diego, and Orange County bucked the trend with increased investment across the board. Combined, they raised over $3.8 billion in funds during the final quarter and Seattle (18%), San Diego (29%), and Orange County (24%) saw double-digit growth. The leading sectors responsible for this increase were consistent with national results, including information technology, business and financial services, and health care.

CONCEPT

Seattle, Boston, Los Angles, San Diego, Austin, DC Metro (Potomac?) are all on the radar.  However, should you still move to the Bay Area or a second-tier city or stay at home?

Planning on interviewing people and place a paid article in Forbes or other freelance opportunities.

More to come on concept………………..

INTERVIEWS: Planning to reach out to EY for an interview and welcome others.

Forbes Finance CouncilJD full body

JD Morris

Member of Forbes Finance Council 2020

Contact JDM.networking@gmail.com if you are an accredited investor and want to get published on this topic or others.

CONCEPT = VR/AR racing F1 or NASCAR

“When you write NASDAQ vs. NASCAR, you know that it has more power with the common man than F1”- J20.01.28.0720P

Ferrari F1 by JDM at Beverly Hills During January 2020

Source of Photos: JDM Beverly Hills

CONCEPT

UPDATE F1 01/28/2020: Before his death, Niki Lauda was the non-executive chairman of Mercedes-AMG Petronas. Following Lauda’s demise, questions were raised regarding Lauda’s stake in the team- which stood at 10%. However, Team Principal Toto Wolff said the issue would be resolved after the summer break.  Source:  https://www.essentiallysports.com/f1-news-niki-laudas-family-to-return-his-10-stake-in-mercedes-f1-back-to-the-team/

Research on NASCAR (FORBES):  The top nine Nascar teams are worth $141 million, down 3% from last year as sponsorships at high prices continue to be a tough sell. There is optimism in the garages though after a multiyear slide that saw fans and sponsors abandon the sport. TV ratings for the season increased 10%, attendance at the tracks.  Source: https://www.forbes.com/pictures/mli45hfeg/the-most-valuable-nascar-teams/#4c16cabf43ae

Research on top F1 for branding: (FORBES 2016) That benchmark was set in January 2017, when billionaire John Malone’s Liberty Media finally stepped in to buy the series for $8 billion. F1 has since seemed to find some solid ground. Last year, the series generated $1.83 billion in revenue, a 2.5% year-over-year increase. F1’s tracking stock, FWONK, has a $10 billion market cap and is trading around an all-time high (the share price is up 48% since Liberty’s purchase). American television audiences are growing—up 22% this season—as is global race attendance. Source: https://www.forbes.com/sites/chrissmith/2019/11/26/formula-one-team-values-ferrari-mercedes/#44f036f01ddb

OTHER RESEARCH:

https://www.essentiallysports.com/sebastian-vettel-has-some-interesting-suggestions-to-improve-the-current-show-in-f1/

Continue reading “CONCEPT = VR/AR racing F1 or NASCAR”

REBLOG: JD Morris featured in Forbes Article on October 17, 2019.

Thanks Forbes for featuring me in one of many articles.

Forbes 5x2 Banking

Choosing The Right Bank Or Credit Card: 10 Tips From Finance Experts

10. Look For Apps That Can Help

Experian and a few others have apps that will provide recommendations based on your credit score. They have apps that will allow you to compare features including annual fees, intro rates, annual percentage rates, etc. Not all people and not all cards are created equal, so take advantage of Experian or others that have apps to help. – JD Morris, Red Hook Capital

For full article visit: https://www.forbes.com/sites/forbesfinancecouncil/2019/10/17/choosing-the-right-bank-or-credit-card-10-tips-from-finance-experts/#165222321733

JD Morris Quoted in Forbes – Seven Clear Signs Your Business Is Ready To Go Public

For the full article from Forbes Online:

https://www.forbes.com/sites/forbesfinancecouncil/2019/07/15/seven-clear-signs-your-business-is-ready-to-go-public/#538332f149d1

JD Morris Quote:

2. You Have A Backup Plan For A Delayed Or No IPO

Billion-dollar-revenue companies get their IPOs pulled! IPOs are expensive and risky. Having a plan for a delayed IPO—or possibly no IPO—is a must. If your company will succeed with or without the IPO, you can safely test the IPO market. This means you have lots of investors wanting to invest in your next round. – JD MorrisRed Hook Capital

 

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JD Morris Quoted in Forbes: 15 Financial Experts Share The Industry’s ‘Best-Kept Secrets’

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7. Invest In Real Estate

There are lots of strategies, but a 1031 exchange in real estate allows you to defer paying capital gains taxes on an investment property when it is sold. Almost all high-net-worth individuals have investments in real estate and the 1031 exchange is one of the key tools. – JD Morris, Red Hook Capital

 

read the full article:  https://www.forbes.com/sites/forbesfinancecouncil/2019/08/29/15-financial-experts-share-the-industrys-best-kept-secrets/#59a6322a77bf