Top of the Food Chain
Mark Burnett - Founder Mark Burnett Productions, Inc.
Should You Let Your Employees Talk Directly to Your VCs?
Mark Burnett, the king of reality TV, was quick to recognize how entertaining desperate businessmen can be. First he brought the world The Apprentice, and now we're deep into his latest production, Shark Tank. This time, he's pitted venture capitalists (the "sharks") against entrepreneurs (let's call them the "chum"), in a battle to get business funding. We caught up with Burnett just after the show wrapped, with a few questions for the big fish himself.
When did business become a spectator sport?
Well, I think The Apprentice started it on many levels. But certainly, I have to make business entertaining. Otherwise, its forum wouldn't be television. Otherwise, people who had a hard day at work won't want to watch it.
Why are you picking on entrepreneurs now?
For our country to get back on track, it's not about the giant businesses, it's about small companies, so the problem is how small companies starting up are going to get financing. The banks are hard-pressed right now to invest in an idea, and I just don't see loans happening. Hence, Shark Tank's philosophy is exciting. Maybe only a small number of companies get funded, but the big picture is the enthusiasm created that will spur entrepreneurs on, reigniting the economy.
Brad Feld - Co-Founder Foundry Group.
Tony Hawk Carves a New Niche
You are the CEO of a VC-backed company. While you are eating lunch with a customer one day, you notice your VP of sales walking into the same restaurant with your lead VC. You are in the back of the restaurant and they don't notice you, so you sneak out after you are finished. At the end of the day, you notice that neither your VP of sales nor your VC has mentioned this lunch to you. Should you be concerned?
Probably. Your problem isn't that they had lunch together or that they're talking--it's that neither of them mentioned it to you. It's likely that you haven't established the appropriate communication dynamic between your VCs and your executive team.
I have a simple rule as a VC: Anyone on the leadership team should be able to talk to me at any time, about anything. However, they should assume that anything they tell me (other than instances of fraud) will be something I will be comfortable talking to the CEO about. This doesn't necessarily mean that I will--just that I reserve the right to. It should be expected that I will at least communicate that the conversation took place.
Tony Hawk - Entrepreneur and action sports pioneer
When did you realize that skateboarding could be more than just a sport?
Conquering Your Fear of Fees
I got a taste of it in high school. Skating was popular, but it wasn't mainstream. It had this underground following and you could go on tours, win decent prize money and make royalties from signature products--that's how I came to buy a house when I was a senior in high school. Then skateboarding fell out of fashion in the early '90s. A lot of skate parks were closing and there were liability issues. People didn't see it as an acceptable sport for kids to get into.
And yet you started Birdhouse in 1992.
It seemed insane, but I wanted to be in control of my destiny. I took out a second mortgage on my house. My partner was also an ex-pro skater, Per Welinder, and he took out a second mortgage on his house. I got $40,000 and Per put up $40,000, and off we went. It seemed like a big risk, but my heart was in skating, and I felt it was going to come back in a big way. And the skating industry was so small it wasn't hard to establish ourselves as a major brand.
Was it hard to move from skateboard to boardroom?
When I started the business, I thought that I was easing my way out of being a pro skater, that I would work more behind the scenes. But at some point I realized that was the completely wrong approach: I was more effective being a pro skater and being an ambassador for the company, instead of being the guy that created the ads, which someone else could do better than me.
Rosalind Resnick - founder and CEO of Axxess Business Consulting
Your Startup May Be Worth Less Than You Think
As business owners, we pride ourselves on knowing what things cost and on never paying retail (unless, of course, we run out of toner cartridges in the middle of the afternoon before a big presentation).
That's why, when it comes to investing, trying to get the best deal on money-management fees can be so frustrating. Even if you decide to manage your own money instead of handing it over to a brokerage firm, it's hard to avoid paying fees.
Turn to the Authority
The Financial Industry Regulatory Authority (FINRA), the largest independent regulator of securities firms doing business in the United States, offers a wide range of investment education materials on its website, including calculators, tools and quizzes.
Features such as an investor knowledge quiz, for example, tests your investment knowledge against the results of a FINRA survey (and explains the answers).
FINRA's fund analyzer, meanwhile, offers a live data feed that captures expense information for thousands of funds and analyzes the impact that mutual fund fees can have on your investments over time. Choose up to three funds, type in the amount of money you plan to invest and how long you plan to keep the fund, and the analyzer does the rest. For investors with a wide range of knowledge, FINRA's tools are useful for everything from calculating potential return on investment to checking the background of a broker.
Asheesh Advani - founder of CircleLending and Virgin Money USA
Getting a business from the idea stage to reality is never easy, and now the economy has added a new twist: Valuations are suddenly dropping for all types of businesses at the startup stage.
The valuation--a documented estimate of a company's worth in the marketplace--is an essential piece of the idea stage of a business. Historically, recessions have not affected them because angel investors and venture capital firms largely base valuations on the experience of the management team and the size of the opportunity, not the prevailing market conditions.
But this recession appears to be different.
For the first time in my career, I'm seeing idea stage valuations drop. I've spent time talking to investors and entrepreneurs about it, and several factors seem to be driving the trend.
First, the availability of investment capital has dropped at the source. For example, money raised by VCs from limited partners has dropped by well over 50 percent from 2008 to 2009, according to the National Venture Capital Association. This has dried up the appetite for raising new funds and focused VCs on supporting their existing portfolio with later stage investing.