The Small Business Jobs Tax Relief Act of 2010, signed into law on Monday Sept. 27th, increases the exclusion from gross income for the gain from the sale or exchange of "qualified small business" stock (aggregate gross assets not in excess of $50 million) acquired after enactment and before January 1, 2011 from 50% to 100% if held for 5 years.
Admittedly that may sound like a bigger deal than it turns out to be because qualifying investments already had a fairly low tax rate, but it is still something to think about when considering a small business investment (or angel investment).
Rabu, 29 September 2010
Selasa, 28 September 2010
What is the appropriate discount rate for a startup DCF valuation?
Following a recent discussion with a local investment banker about the DCF valuation of a client where the topic of appropriate discount rate was a hot issue, I wondered what others were using and if there was a "right" rate.
For those that don't live and breathe financial jargon, a DCF (discounted cash flow analysis) is a method of calculating the present value of a future benefit and they are often used whenever someone needs to figure out a justifiable valuation for something that doesn't have a ready market value (and sometimes looking for valuation mistakes in things that do).
The most common reason I will use a DCF is for determining pre/post money valuations for startups, since they by definition have little more than pro-forma financials.
In preparing a DCF for a startup I need to know the expected cash flows and the appropriate discount rate. I can pull the expected cash flows from the proforma financial statements, but the discount rate is really mine to decide. As a definition, the discount rate is:
Of course a lot has changed in the economy since November 2007, so I wonder what others are using for a discount rate now or if that metric still holds true?
For those that don't live and breathe financial jargon, a DCF (discounted cash flow analysis) is a method of calculating the present value of a future benefit and they are often used whenever someone needs to figure out a justifiable valuation for something that doesn't have a ready market value (and sometimes looking for valuation mistakes in things that do).
The most common reason I will use a DCF is for determining pre/post money valuations for startups, since they by definition have little more than pro-forma financials.
In preparing a DCF for a startup I need to know the expected cash flows and the appropriate discount rate. I can pull the expected cash flows from the proforma financial statements, but the discount rate is really mine to decide. As a definition, the discount rate is:
the rate of return that could be earned on an investment in the financial markets with similar risk. WikipediaWith that rate in mind, I have started to use 27% as my discount rate for startup companies. Why 27%...because the Marion Kauffman Foundation published a report in November of 2007 based on their research that indicated a national average IRR (internal rate of return) of approximately 27% on angel investments. I haven't seen anything since then that would purport to be a better number, so that is still what I use.
Of course a lot has changed in the economy since November 2007, so I wonder what others are using for a discount rate now or if that metric still holds true?
Senin, 27 September 2010
Birmingham Angel Network - Meeting Update
Overview of the update that was sent to Bham Angel Network ("BAN") group members Friday:
BAN,
We had a good meeting last night and came away with three new candidates that will be presenting in our 4th quarter cycle.
We also had updates on some of our open deals and portfolio companies. Specifically, we covered Cuestion tequila and their latest news along with a status update on the due diligence report from TransactionTree along with general comments about others. Everyone seems to be moving along and that bodes well for both the companies and our group.
We will have a lot going on in the fourth quarter with the Southeastern ACA meeting, supporting our growing portfolio and current deal flow. It looks to be a banner end of the year for 2010 with a lot of good activity. See you in October and keep an eye out for updates in the meantime.
Best,
Josh
Rabu, 22 September 2010
New California Employer Workplace Poster and Pamphlet
Effective October 8, 2010, two new regulations impacting California employers go into effect:
1. All employers must post the new Notice to Employees, Injuries Caused by WorkFor more on employer workplace posters or to retain an employment attorney to advise and counsel you on California or Nevada business law issues, please click here.
2. Each new employee who begins work must be provided with the new Worker's Compensation Pamphlet, available here.
Senin, 20 September 2010
Branding...DNA of the business
I had a long conversation with one of our clients Friday about branding. The company is launching a new product and we were discussing the branding strategy.
Usually in the planning process we start with the Blue Ocean Strategic steps (article) as a beginning. We can use the value proposition developed in that planning process in conjunction with our adoption plan as the basis for our core message. Of course, at some point that high level strategy has to hit the ground and this is referred to in our office as the "roll out plan." The roll out plan is where we figure out the details of when& how we are going to reach our target audience...media types, creative messages, frequency, etc.
But the conversation we had Friday was a bit different because we weren't just talking about a strict "utility" to the consumer, but a more esoteric "who do we want to be and how do we want to be viewed" type conversation.
This has been interesting so far because we are looking hard at our target market and trying to determine the common traits, interests, etc. so that the brand image can be developed to maximize connection with that audience.
The reason I call it the DNA of the business is because, once the client settles on an initial brand image (we could change based on results), all of the marketing will be developed with that image in mind. We will try to take dead aim on that image and try to capture that ground while avoiding any muddying of the message with non-correlated messaging.
***For those of you that follow along, you may be able to guess the client and if so, keep and eye out and let me know how you think it is going.
Usually in the planning process we start with the Blue Ocean Strategic steps (article) as a beginning. We can use the value proposition developed in that planning process in conjunction with our adoption plan as the basis for our core message. Of course, at some point that high level strategy has to hit the ground and this is referred to in our office as the "roll out plan." The roll out plan is where we figure out the details of when& how we are going to reach our target audience...media types, creative messages, frequency, etc.
But the conversation we had Friday was a bit different because we weren't just talking about a strict "utility" to the consumer, but a more esoteric "who do we want to be and how do we want to be viewed" type conversation.
This has been interesting so far because we are looking hard at our target market and trying to determine the common traits, interests, etc. so that the brand image can be developed to maximize connection with that audience.
The reason I call it the DNA of the business is because, once the client settles on an initial brand image (we could change based on results), all of the marketing will be developed with that image in mind. We will try to take dead aim on that image and try to capture that ground while avoiding any muddying of the message with non-correlated messaging.
***For those of you that follow along, you may be able to guess the client and if so, keep and eye out and let me know how you think it is going.
Kamis, 16 September 2010
Debt Collection Scam Phone Number 760-284-1423
Please note that if you have received a call from an alleged paralegal or other person claiming to work at, with, or from the Law Office of Jonas M. Grant, and demanding the payment of an alleged debt, and threatening "prosecution" or anything else if payment isn't made, note that these calls are not originating from this office, which does not practice consumer debt collection law and does not employ paralegals or others to make calls on behalf of debt collection agencies or creditors.
Calls have been reported to originate from 760-284-1423, an area code in which this law office does maintain an office, employees, attorneys, paralegals. Nor does this office have or use any 760 area code telephone. Note that the number displayed on the caller ID may be spoofed, and therefore the owner(s) of this telephone number may or may not be involved in this scam.
Furthermore, the United States abolished debtor's prisons more than a century ago; all collections and debtor-creditor matters are civil in nature, there is no jail time or criminal prosecution for failing to pay a debt (unless there's also fraud or something else going on).
Please do not cooperate with these individuals, and report to them to appropriate authorities. If you have any additional information about their whereabouts or identity, or aren't sure if a call is originating from this office, please contact the office.
Here's what others have reported about the nature of calls from this number. In sum, it's always a scam, but the scam and the alleged name of the caller varies from call to call.
Calls have been reported to originate from 760-284-1423, an area code in which this law office does maintain an office, employees, attorneys, paralegals. Nor does this office have or use any 760 area code telephone. Note that the number displayed on the caller ID may be spoofed, and therefore the owner(s) of this telephone number may or may not be involved in this scam.
Furthermore, the United States abolished debtor's prisons more than a century ago; all collections and debtor-creditor matters are civil in nature, there is no jail time or criminal prosecution for failing to pay a debt (unless there's also fraud or something else going on).
Please do not cooperate with these individuals, and report to them to appropriate authorities. If you have any additional information about their whereabouts or identity, or aren't sure if a call is originating from this office, please contact the office.
Here's what others have reported about the nature of calls from this number. In sum, it's always a scam, but the scam and the alleged name of the caller varies from call to call.
Selasa, 14 September 2010
Moonlighting (and IP transfer provisions)
As we are working with a number of deals at the moment, but without a lot ready to report, I thought it would be a good time to talk about one issue that has been a thorn in my side on past deals. Moonlighting...
Now, don't get me wrong, I am not in the "you aren't committed if you don't quit your day job" camp, in fact, I think keeping the cash flow pressure off of the newco until it is ready is a sign of good thinking. However, I have had situations where founders did a lot of work moonlighting on the front end only to realize that they had broad intellectual property ("IP") transfer provisions in their employment agreements. What a disaster...and those provisions are very common for technical employees.
Of course, there are arguments that can be made and the founders may end up succeeding in court, but the cost/risk is significant and probably more damaging, the cloud from potential litigation can (and often does) run off any would be investors.
So, with that in mind... PLEASE, if you have a great idea, make sure and read your employment contract before you spend a bunch of time/money developing that idea. Furthermore, if you find out that you do have language in your contract that is problematic, go see a proper employment law firm and talk to them about it because you may be able to fix it.
Now, don't get me wrong, I am not in the "you aren't committed if you don't quit your day job" camp, in fact, I think keeping the cash flow pressure off of the newco until it is ready is a sign of good thinking. However, I have had situations where founders did a lot of work moonlighting on the front end only to realize that they had broad intellectual property ("IP") transfer provisions in their employment agreements. What a disaster...and those provisions are very common for technical employees.
Of course, there are arguments that can be made and the founders may end up succeeding in court, but the cost/risk is significant and probably more damaging, the cloud from potential litigation can (and often does) run off any would be investors.
So, with that in mind... PLEASE, if you have a great idea, make sure and read your employment contract before you spend a bunch of time/money developing that idea. Furthermore, if you find out that you do have language in your contract that is problematic, go see a proper employment law firm and talk to them about it because you may be able to fix it.
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