business, Current Events, Random, Technology

My Thoughts On A Potential CVS+ Aetna Deal

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Some context….We’ve seen high levels of consolidation in the healthcare industry over the last 4- 5 years….a lot having to do with ACA and inter-industry competition. Yesterday, Amazon won regulatory approval to wholesale pharmaceuticals in 12 states. While it does seem Amazon will enter the pharma sales business, the larger elephant in the room, which I think CVS Health acknowledges with this move, is pharmaceutical benefits management (PBM). PBM has been a major driver of profits and growth for CVS and a key differentiator from the Walmarts of the world. Adding aetna will re-inforce their PBM business by giving them a larger network to play with and helps with diversification to weather an Amazon entrance into the pharmaceutical space. Amazon will start by selling pharmaceutical products but will eventually use Amazon Prime as a PBM which will ultimately drive down the cost of prescriptions for Amazon prime members while they take a cut of course. Interesting time to be a consumer.

#MentalNote, business, communication

Opportunity In Crisis: What Entrepreneurs Can Learn From Tesla and Alphabet

Hurricane Irma devastated Puerto and created a humanitarian disaster rarely seen in the United States. While the federal government’s response hasn’t been the best (based on infrastructure challenges, over stretched FEMA, leadership, etc), we’ve seen the private sector companies like Tesla and Alphabet step up to be partners in crisis response. While these projects are small in comparison to the larger needs, they are a step in the right direction and serve as models to how companies can work with customers in challenging times.

  1.  While crisis sucks for those who are involved, it’s a great opportunity for companies that have solutions ready to help. Natural disasters are an extreme example, but consumers, businesses, and governments all undergo crisis of varying magnitudes and need the help right away.
  2. Crisis often means the breakdown of barriers to entry for new participants. After destructive hurricanes in Puerto Rico, the normal distribution networks for electricity, internet, and water were destroyed. Not only was there a sense of urgency to get those services operating as quick as possible, the downtime provided an opportunity for distributed solutions like Alphabet’s stratospheric balloons nicknamed project loon, or Tesla’s powerpacks powering a rural hospital to jump in as a solution. As a founder, be on the lookout for key areas where an incumbent’s strength becomes an inherent weakness.
  3.  Understand the long term value when you successfully deliver a solution in a crisis situation. Compensation is important but the larger priority is proof of concept and a customer that’s fully invested in the success of your deployment. Crisis situations can be used as a transformational case study and will speak more within an industry than a clever advertising/ marketing campaign. Some short-sighted companies will look at a crisis situation as an opportunity to increase the cost of services or products. I believe the value derived from assisting customers in a crisis situation with a long term view in mind trumps the short term gain from exploiting crisis to drive revenue.

 

 

business, Leadership, Technology

Why We Should Listen To JP Morgan’s CEO About Bitcoin

Jamie Dimon had a lot to say about Bitcoin the other day.

We should heed his warning. Just like they should have listened to Steve Ballmer, CEO of Microsoft in 2007. “The Iphone is too expensive,” he said. “It wouldn’t appeal to the business professional. Apple is the incumbent and they are going to have to play by our rules.” It’s almost 10 years to the day and Apple just released the Iphone X, a 1K+ phone.

 

 

Here… Lets go way back on  to 1946……“Television won’t be able to hold on to any market it captures after the first six months.  People will soon get tired of staring at a plywood box every night.” — Darryl Zanuck, 20th Century Fox. Sorry, I couldn’t find a video for this one.

I can go on and on. If you want, here are some other random predictions here. Seems like a lot of people were just flat out wrong on Apple.

Executives, especially those who are incumbents and gatekeepers in their industry,  are rarely capable of seeing disruption. Actually, the best way to foreshadow a key challenge to basic industry assumptions is to look at the industry leaders and watch them make comments like Jamie Dimon did above. While some may argue, he’s talking about bitcoin and has much respect for the technology behind it ( JP Morgan is investing a ton of money into blockchain companies), I believe his comments on bitcoin are less about the coins and more about control. A decentralized reality for a control focused financial industry is scary. It reminds me of the Blockbuster snub on Netflix. To say there would be a day when people didn’t need physical copies due to the mass adoption of the high speed internet would have been a tough pill to swallow.

The people who face the biggest threat from disruption seem to call it wrong. Sometimes its just theater. I’m sure shareholders don’t want to hear there’s a technology/platform that could fundamentally change how their industry works. There’s definitely a confidence game going on with many executives, but I believe there’s a way to be confident and realistic.

We should listen to Jamie Dimon. His comments are a prelude to a major shake up in the financial industry.

 

Africa, business, venture capital

Re-thinking Venture Capital in Emerging Markets

For the last year or so, the team at tiphub has done a lot of interesting research and testing to identify key needs to accelerate entrepreneurship in emerging markets like Nigeria. One of the most common challenges, as most would assume, is access to capital. However, speak to VCs and they say they don’t see enough invest-able companies and are constantly fighting for the best opportunities with other vcs.
There seems to be a deeper disconnect that we haven’t been able to capture. In the next couple of paragraphs, I’ll discuss the actual amount of money in the VC space in Nigeria. (Nigeria will be our case study) Identify where I believe they key gaps are, and present a viable solution that will be the catalyst for start-up funding at scale.

Based on a triangulated estimate, there’s about 300 million USD under vc management in Nigeria. This does not include foreign based funds that operate in Nigeria.  To better put this in perspective, we took GDP/ VC asset ratio to give some context. Its relatively easy to see that Nigeria is lagging in vc capital as an available asset class.  This isn’t the only issue. If we look at how 3oo million USD is deployed year after year, we’ll see that most vc firms look to invest in later stages in lifecycles of most start-ups. This translates into entrepreneurs who need to prove viability and scalability before investment. However, its the chicken or the egg argument. How do companies prove the validity of an idea without funding?

There’s an abundance of growth captial in Nigeria. The key issue is the lack of early stage “market validation” capital needed to get companies off the ground. In more developed markets, entrepreneurs find early capital from the three f’s (Friends, Family and Fools). There are also more opportunities for funding through banks and government grants. Family members are willing to bet on the next big idea.  Ultimately, entrepreneurs in developed markets have access to a diversified stream of capital that 1. is at a smaller amount 2. Friendlier terms and capital structures for young companies.

The key gap, as I see it, is access to friends and family capital in emerging markets. At its core, it stems from lack of access to credit and disposable income in rising and emerging markets. This is the real gap. Early stage companies don’t have the capital to fund their first MVP or to validate their market. As a result, many ideas never get tested in the market.

VCs won’t dare touch risky early stage opportunities due to the demand for returns. There’s not enough disposable capital in emerging markets to make a dent in funding for start-ups. How do we create a bridge from pre-seed to growth stage?

In the ideal world, VCs would partner with foundation and governments to fund small scale experiments/ projects. These projects would either fail or succeed and would move to a scaling phase. For example, if we took Nigeria as a case study, the Nigerian government would match $100 million USD with the Elumelu Foundation’s TEEP program focused more on grants to validate….lets say… 2000 ideas. After a year, 400 (20%) of those companies would be invest able opportunities. 400 is a decent pipeline. Key issue here is sustainability. 200 million dollars a year to identify 400 invest able companies is a tall order. However, 100 million dollars  a year vs  the cost of unemployment  in a place like Nigeria seems like a drop in the bucket.

Maybe later, we can also talk about ways to jump start merger and acquisition activity so people see the light at the end of their investment

Key points to remember:

  1. There’s a lot of money in emerging markets.
  2. The key to differentiation in the early stages of a company is what they’ve learned vs their competitors. Cashflow and other financial indicators don’t start to matter until the later stage.
  3. Entrepreneurs need flexible and attainable early stage capital to validate their ideas.
  4. Private/Public partnerships have to find a way to work together to create the bridge for early stage companies.

Random statistic to leave you with: Nigeria ranks 170 out of 189 for raising finance for a business and 129th (up 9 places since 2014) in starting a business.

business, startups, venture capital

On Fundraising

 

Had the holidays so I took a break…. This week is the Bola special. It’s dedicated to fundraising like a boss.

For those who don’t want to read everything, here are the 4 takeaways on how to fundraise. I will most likely go super granular on each part in the future.

  1. Know why you need to fundraise
  2. Know who you’re fundraising from
  3. Have your fundraising game plan and have your end game in mind
  4. ABC. Always Be Closing

Know why you need to fundraise

Most founders will say they need to fundraise because they need money. While for many, that’s always the case, sometimes cutting cost, going after a more attainable growth trajectory, or eating what you kill (customer driven growth) is a better option. The metric most used to identify what needs to be spent is milestones. From there, understand how much each milestone will cost the company (people, time, $$$). Understanding milestones and use of funds along with market comparables will ensure you’re in a better decision to identify whether you need to fundraise or not and will also make your justification to family and friends, angels, and vcs sound more persuasive.

Know who you’re fundraising from

When I engage venture capital firms or angels, I try to know as much as I can about them…. How long have they been in existence? Who have they invested in? What is their thesis? Who are the key decision makers? What is it like to have them as an investor? Founders need to approach investment as if your hiring. You want to do as much due diligence on the investors you’re interested in as they will on you.

It’s also important to start the investment conversation before you need money. You’ll get a chance to “date” the investor a little bit and see if there is a fit. Also, they’ll get to date you and see if there’s interest. I normally advise reaching out and developing/creating these relationships 6-8 months before you need to fundraise.

I know the most common question after the last two paragraphs is “Where do I get all this information from?” Well, I’m glad you asked. The first place to start is to look at your networks. Who do you know and who do your friends know? I often start with all my friends in business school, law school or people I met at investment conferences. From there, I can get warm intros. If I don’t know anyone or need to know more information about their firm, I usually start with their website. Hopefully, you’ll see their investment thesis, portfolio companies and partners. From there, you can use LinkedIn, CrunchBase, Mattermark (sign up for a free trial and get information on all the investors you need…don’t tell them I told you that though.) or other platforms like VC4Africa, Angel List, Pitchbook (very expensive, find someone in the private equity industry who has access)

There are three strategies I’ve seen from founders raising capital for their company,

  • Make as much noise as possible through marketing and PR that potential investors will come talk to you (seldom effective but works.)
  • Research and develop a target list based on investment profile (geography, size, stage, industry) and reach out via warm intros.
  • Get an email list of potential investors and send (cold emails).

I’m sure most people have use a combination of all three.

Have a realistic perspective on how long and how much effort it takes to fundraise

Once you’ve made the decision to fundraise, you’ve got to develop a fundraising plan. You should understand and document the following:

  • How much you’re fundraising, valuation, terms, and how you intend to use the funds.
  • The type of investors you’re going after and clip you’re accepting
  • A real timeline: when you’re starting, when you intend to close, and when you really intend to close
  • How you’re going to reach out to investors… Communication strategy, relationship building and how you’re going to gain access to them

In putting your plan together, be realistic about how long the process will take. There’s one company I’m working with now and it’s taken 9 months to finally get the company into fundraising mode. Sometimes crafting the narrative is more than just words, it means acquiring the right customers, bringing on the right team members, or evaluating a new business model.

ABC. Always be Closing

In fundraising mode, those who are focused on it (should not be the whole organization, will take away from operations) should be focused on driving activities which will get interested parties down the funnel. I believe fundraising is essentially like sales for your company but to a different customer and product. Every activity should be tracked to bringing people more information to get an investment decision. This doesn’t give you the license to be entitled and pushy, but it does allow you the opportunity to be realistic and upfront to investors where you are in the process (to a certain extent…will follow up on a negotiations post)

Don’t half step

To conclude, fundraising is a skill and expertise that is essential to any company. You must learn how to go through it and how to be successful. To do that, you’ve got to be fully committed. An alternative way to think about fundraising is encapsulated in a saying I heard in my previous experience at Fortify VC, “The best investor is the customer.” You’d be really surprised but sometimes, customers are willing to bend over or pay for the idea of a problem being fixed. I know business models can vary but getting customers to pay ahead to create value is something which has been around for a long time. That’s a conversation for another day.

Toolkit

Here’s an example of an excel sheet I use to track engagement. Some of you may be fancy and have a crm to do this for you.

https://docs.google.com/spreadsheets/d/1ghPJOUGlD95oEQV_tq8QYYgiSouCQilnXEwB8UvmLaY/edit?usp=sharing

I use mixmax to track my emails and create templates for broad distribution.

I just got hip to a new investor crm/manager that looks cool. I smell a clone opportunity for African markets (writes down in idea notebook) https://foundersuite.com/

business, startups

The Key to Finding a CoFounder

I seem to be getting this question a lot from companies that are just forming or looking to expand. Where can I find a Cofounder? To be honest, there’s no real science to it.

Have you ever lost your keys? It’s next to impossible to find where they are in the exact moment. That sucks.

The common fix to this challenge is you have a specific place you put your keys…whether it’s the foyer,  or a hook, or a drawer. You know exactly where to go when you’re looking for your keys.

It’s the same way with finding a cofounder. By the time you’re looking for one it’s too late. One of the key functions of founders/ executives in the making is to always know good people. It’s important to have a solid network of colleagues and acquaintances. Apply the same rigor you would to attracting customers and investors to hiring/ building a founding team. Here are some things I’d recommend just shooting off the hip.

  1. Network. You need to meet smart and intelligent people on a weekly basis that challenge common perceptions, from different fields, and walks of life. It almost needs to be second nature to be attracted to these type of people. I remember one time I went to an interview for a position and I didn’t get it, but I had the opportunity to speak with the company’s founder and his insights were career changing. The chance to speak with truly intelligent and driven people is underrated. Savor those moments because it will come in handy like when you need a co-founder. You can reach out to those same people to help begin your search.
  2. Know your strengths, blindsides, and what skills and experience will enhance your company. You’ll often hear solo founders say, I need someone who can sell, or market, or a tech guy or gal. While that’s a good start, think about where that function should sit in your organizational chart and how it advances your goals. If the skill that’s missing is essential to your unique value proposition, I’d say the person should sit at a founder level. If not, it’s a good move to bring them on in a non-founder role.
  3. Talk to people who are in the same position you’re looking to fill. If you’re looking for a CTO type founder, talk to CTOs in established and up and coming companies. Conversations with people who are in the trenches help you identify common traits that make a good CTO. They are themes. Sometimes, you can see these same themes in people that may not traditionally be on the path to CTO/cofounder status. Same rule can apply to other positions in a company.
  4. Have leverage. If you don’t come from a position of strength and opportunity, it will be challenging to convince someone to leave the comfort of their squishy job or commitment to join your early stage adventure. As a founder, you have to be convincing and show the unique product, market opportunity, and upside in a way that is exciting to potential candidate.
  5. Date. If you’ve filled your funnel of potential co-founders, start dating! I mean… try a one off project together that is super challenging. Get a chance to see how you collaborate in stressful situations. It also gives you more data to evaluate candidates.

(There’s definitely more. It’s time for my Sunday nap. I’ll add more as I think about them. I would also encourage you to add some in the comments.)

Adding a co-founder in the early stage of a company is a major milestone for any team. I believe it’s the beginning of a string of major decisions that set the foundation for what a company will grow to be. Be sure you’ve done you’re due diligence and you feel comfortable about growing and building with the person you select.

#MentalNote, business

An Executive Story

A fellow had just been hired as the new CEO of a large high tech corporation. The CEO who was stepping down met with him privately and presented him with three numbered envelopes. “Open these if you run up against a problem you don’t think you can solve,” he said.
Well, things went along pretty smoothly, but six months later, sales took a downturn and he was really catching a lot of heat. About at his wit’s end, he remembered the envelopes. He went to his drawer and took out the first envelope. The message read, “Blame your predecessor.”
The new CEO called a press conference and tactfully laid the blame at the feet of the previous CEO. Satisfied with his comments, the press — and Wall Street – responded positively, sales began to pick up and the problem was soon behind him.
About a year later, the company was again experiencing a slight dip in sales, combined with serious product problems. Having learned from his previous experience, the CEO quickly opened the second envelope. The message read, “Reorganize.” This he did, and the company quickly rebounded.
After several consecutive profitable quarters, the company once again fell on difficult times. The CEO went to his office, closed the door and opened the third envelope.
The message said, “Prepare three envelopes.”
In the process of looking for the author to give credit. I heard it as a story during a network event.