From Unicorn To Unicorpse In 12 Painful Steps

My client was a unicorn way back in 2008, before the present day meaning of the word was repurposed to mean private companies valued at more than $1 billion.  Last time I checked, the company was worth about $10 million, a stunning loss of 99% of the company’s value.  Here’s how the company’s 12 step ascent and descent went:  

  1. Invent a new financial product.
  2. Validate the concept by putting personal capital at risk.
  3. Fearlessly try new ways to sell the product and show-up every day willing to reinvent the company.
  4. When when the right marketing mix that is found, make a huge, eight figure bet on it.
  5. When profits are accelerating, bring in private equity investors as majority shareholders to “scale” the business further.
  6. Begin by augmenting the founding entrepreneurial management team with professional managers.
  7. Let the professional managers refine the company’s processes and practices such that they are “customary and reasonable” to reduce/eliminate any liability claims from future shareholders or stakeholders.
  8. Use the stable earnings of the company to take on nearly a billion in debt and use the bulk of the proceeds to pay dividends to private equity investors and founders.
  9. Watch the founders get neutered then ousted by the private equity investor.
  10. Watch the private equity firm use its close ties to Wall Street to get a bulge bracket investment bank to take the company public.
  11. Months after the initial public offering, read a press release announcing a new strategic direction for the company.
  12. Watch the stock go into free fall as earnings swing from positive to negative under a massive debt load and management distraction.

The inflection point began at step seven in my view.  Perhaps this was nobody’s fault per se.  How could the company orchestrate a liquidity event with entrepreneurial skeletons in the closet?  For all the other unicorns out there, maybe this offers a cautionary tale. Step eight? Perhaps some restraint.  Step 11?  The most egregious in my view. Investment banks and private equity investors are all about the forecast, but in this case failed to see or acknowledge an oncoming train? read more

A Christmas Story

Just a few weeks before Christmas, I was a volunteer at a holiday party for underprivileged children.  Underprivileged isn’t my word.  To get to the party they had to be identified as ‘at risk’ by their teachers.

I was helping my friend Carol who had been a volunteer at the event for several years and ran the ornament booth. Groups of kids, organized by their elementary school, descended upon our ornament station along their merry journey to all the booths, each one created exclusively for their delight. read more

The Spouting Whale Gets Harpooned

With his high profile arrest and perp walk this morning, Martin Shkreli has a massive public relations problem on his hands.  As the photo demonstrates, the full force of the law is lined up against him.

Mr. Shkreli is the hedge fund manager turned pharmaceutical entrepreneur who provoked outrage when his Turing Pharmaceuticals increased the price of cancer and AIDS drug Daraprim by 5000%

I would offer his current problem with the media has its roots in a poor public relations strategy right out of the gate.   Sometimes blunting exposure is more important than gaining exposure.  Better to lay low and gauge sentiment than arrive on the scene with guns blazing.  His 5000% price increase might have ultimately faded from view if he stayed out of the spotlight.  And what he learned from the reaction of a smaller more manageable audience might have given him clues how to manage a larger national audience. read more

50 Questions Your Business Plan Should Answer

Sadly, most investors don’t read business plans.  However, writing one is the only way you will be able to answer the following 50 questions you will be asked before investors show up to the closing table.

1. What is the price of your product or service and why?

2. How much capital is required to execute your business plan?

3. How much is the company is worth?

4. What are your company’s existing products/services?

5. What are the use of the proceeds?

6. On a summary basis, what is the historical financial performance of the company (even if, and perhaps particularly if, you have no revenues)? read more