bsmith@carofin.com

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So far bsmith@carofin.com has created 57 blog entries.

A Time for “Meaningful Investments”

2020 is proving to be a time for reflection – a relatively chaotic period that’s forcing us, both personally and professionally, to reconsider how and why we conduct our lives the way we do. Your investments are, obviously, an important reflection of your values and priorities. What Carofin offers, and why we hope you will More >

A Time for “Meaningful Investments”2020-08-12T10:29:56-04:00

Has COVID-19 Killed Renewable Energy? Consider These 6 Data Points.

by Chris Wedding If you only considered headlines like the ones below, you would think that COVID has obliterated the solar, wind, and related clean energy industries. Covid-19 Lockdown Could Kill 500k Cleantech Jobs (Forbes) Wind Energy Group Says $43 Billion at Risk from COVID-19 (Power)  Tesla to Reduce On-Site Staff at Nevada Gigafactory by More >

Has COVID-19 Killed Renewable Energy? Consider These 6 Data Points.2020-07-08T16:51:16-04:00

PPP Legislative Update: Congress Changes Terms in Favor of Flexibility

In 72 hours, the first round of the Paycheck Protection Program exceeded the $350B capacity. In contrast, $120 Billion in loan capacity is still available after a month into Round 2. Congress interpreted this to mean that the loan forgiveness terms were too strict and passed legislation last night to add flexibility. Here we relay More >

PPP Legislative Update: Congress Changes Terms in Favor of Flexibility2020-06-12T16:05:25-04:00

Identify a Market Opportunity (1st principles of investing)

Consistency is critical in our business.  When it comes to investment analysis, this “First Principle” – “What primary market opportunity is the issuer pursuing?” – is the first question successful investors apply in their consistent approach to company analyses.   Identifying the fundamental rationale for an enterprise is central to helping retain your focus on the ball.  It’s what we consider first before bringing More >

Identify a Market Opportunity (1st principles of investing)2020-07-08T16:53:20-04:00

Articles of Innovation: Biomimicry as a Cure

By adopting a basic set of nature-informed rules as common practice, business owners can thrive to an even greater degree within the existing economic paradigm. While dyscalculia (in laymen’s terms, difficulty with math) often gets between me and the correct number, I have immense respect and appreciation for the concreteness of accounting—truly, even more so More >

Articles of Innovation: Biomimicry as a Cure2020-06-05T07:05:48-04:00

Recession (or worse) — What each of us can do to fight back

While I now live in North Carolina, I’m originally from Kentucky where our state motto is “United we stand, divided we fall.”  An essential attitude for these times … When I hear doubts about the U.S. and its ability to get through this crisis, I’m not buying it.  We still, collectively, have enormous financial reserves More >

Recession (or worse) — What each of us can do to fight back2020-06-04T15:13:53-04:00

Planning our Future

At this point, we’re probably each wondering what the world will look like when this crisis ends and whether we’ll get back to the “good ole days” of last month. I hope not. I hope not because, before COVID-19, the U.S. already had other major crises – we were just kicking those cans down the More >

Planning our Future2020-06-05T07:02:40-04:00

Time for Private Investors to Suit-up

The U.S. Treasury, the SBA and the Federal Reserve are moving quickly - trying to shore-up our economy. Nevertheless, private investment will soon be critical to our ability to respond to the “long tail” of COVID-19.   HNW individuals, family offices and private investment funds will soon become the investors (lenders and equity holders) of last More >

Time for Private Investors to Suit-up2020-06-05T06:52:19-04:00

What does it mean for longer-term investors?

As an investment banker for 36 years now, I’ve observed a significant number of world events during my career. I’ve always found myself wondering each time whether it’s signaled some new “world-order.” Usually, they didn’t, e.g., the 1987 stock market crash and various Recessions. But sometimes they did, such as the Berlin wall coming down, More >

What does it mean for longer-term investors?2020-06-04T17:20:25-04:00

$2 Trillion CARES Act Stimulus: Easier Said than Done

This CARES Act update sends two messages: If you have applied for any of the SBA stimulus programs, you aren’t crazy, and you aren’t alone. Odds are that you haven’t received the $10,000 grant that was promised in 3 business days -- and your application to the Paycheck Protection Program (“PPP”) has not been accepted, More >

$2 Trillion CARES Act Stimulus: Easier Said than Done2020-06-05T06:47:36-04:00

CARES Act Summary

  The CARES Act now offers much needed financial assistance to business owners, but it can be a confusing process to navigate. Below are summaries of the most important SBA programs, steps to follow, and the forms and other company documentation needed to successfully apply. Eligible recipients include U.S. businesses that: Have been affected by More >

CARES Act Summary2020-06-05T07:01:54-04:00

Overcome a Challenge (1st Principles of Investing)

We all have challenges to overcome. But, when it comes to private investments, understanding the challenges a business must overcome in order to capture a market opportunity, are fundamental when considering an investment in that company. In our series of articles on First Principles, we show you how to easily define the basic elements of a More >

Overcome a Challenge (1st Principles of Investing)2020-04-02T22:33:16-04:00

What do Aristotle, Charles Munger, and Thomas Edison have in common?

They all use something called First Principles to simplify complex problems. We use them for analyzing private investment opportunities. You might be surprised at how simple, yet effective, it can be.  Investment analysis can be highly challenging.  Each Issuer of securities (the company seeking your investment) is likely rather unique and is different from the previous company you analyzed. More >

What do Aristotle, Charles Munger, and Thomas Edison have in common?2020-04-02T22:18:15-04:00

Provide a Solution (1st principles of investing)

To provide value (and generate income as an individual or a business), you need to solve a problem for someone.   It’s actually why we get out of bed every day and go to work. If a company you’re looking to invest in doesn't do the same, it’s likely that company will fail.  In this series of articles on First Principles, More >

Provide a Solution (1st principles of investing)2020-06-05T07:59:59-04:00

Danger, Will Robinson

  For those of us who remember “Lost in Space” (the 1965 TV series), these words are part of our lexicon.  In the show, a robot would warn a young man living in space of impending danger. Well, some potential investors react the same way when a company pledges its assets as collateral.  If the More >

Danger, Will Robinson2020-04-02T21:35:48-04:00

Being reasonable can be rational (when a borrower defaults on a loan)

It may seem clear at first – your tenant (Jeff) signed an iron-clad lease.  Now, he hasn’t paid rent for 2 months. So, do you go through the time-consuming (and, oftentimes, expensive) process of an eviction, hoping you land a new (paying) tenant quickly, or is it more reasonable for you try to fashion a deal — one that never was envisioned in the rental agreement? More >

Being reasonable can be rational (when a borrower defaults on a loan)2020-06-05T07:03:10-04:00

Does the early bird always catch the worm?

Have you ever observed someone who is always busy? He comes into the office early and leaves late, but he never seems to deliver projects on time?  It’s likely that psychologists have a name for this “syndrome.” When you’re considering whether a management team deserves your investment, however, this may be a material factor in More >

Does the early bird always catch the worm?2020-06-04T17:21:14-04:00

Some Red Flags are Self-Evident

Look in any finance primer – you’ll see how highly structured and proscribed the public securities process is. Not so for private company securities. That’s why we spend so much time and effort up front on a deal doing our due diligence if for no other reason than to help our investors succeed. Some red More >

Some Red Flags are Self-Evident2020-05-12T14:37:58-04:00

The Case of the Slipping Shipping

Does it surprise you how inventive entrepreneurs are when problems arise? Here’s one that struck our fancy. We call it “The Case of the Slipping Shipping.” Years ago, a business owner was mystified. He would load a truck in one location for a customer delivery about 50 miles away.  Each time he did so, what More >

The Case of the Slipping Shipping2020-04-02T18:02:05-04:00

Painting Shoes and Private Debt

My grandson asked me whether he should “give” some money for six months to some other 8th graders who had started a shoe painting business. No, I didn’t make that up. It reminded me of conversations we have every day with investors about loans to private companies. Without drawing too close a parallel, you’d probably More >

Painting Shoes and Private Debt2020-06-05T07:04:50-04:00

One Person Can’t Do It All

History is replete with famous, even eccentric, successful entrepreneurs.  But the great ones also had the capacity to motivate others to do their best, to make great personal sacrifices for the company and to stay the course during tough times (e.g., Steve Jobs).    Before making an investment in a new venture, ask whether a capable More >

One Person Can’t Do It All2020-06-05T07:06:57-04:00

Venture investing succeeds when the entrepreneur knows its customer

Psychology plays a massive role in a customer’s purchasing behavior, and consumer products companies take advantage of this. Obviously, this is not news, but any company in which you invest must have a clear understanding of what motivates potential customers to buy their products.    Are you sure that the company’s buyers are just as motivated to buy as you are to invest? Consider carefully More >

Venture investing succeeds when the entrepreneur knows its customer2020-03-17T23:48:26-04:00

How realistic is your sales pipeline?

A freight train without a track ahead is just 200 tons of metal.  Until a new Venture has a distribution channels and a robust pipeline, it's basically the same. One important aspect to determine when evaluating the future prospects of a company (and the investment you are considering) is whether the company has “laid the track” More >

How realistic is your sales pipeline?2020-03-17T23:50:08-04:00

Has the entrepreneur (you funded) ever tangled with the competition?

Are there other businesses vying for the same sale and/or aggressively protecting their turf?  Competition can limit a new venture’s success — and your investment return. So be aware of other businesses — or the status quo — before investing.  There’s good news about the competition!  More businesses are educating customers on the buying opportunity.  Unfortunately, the company must convince More >

Has the entrepreneur (you funded) ever tangled with the competition?2020-03-17T23:51:39-04:00

Are they ready to scale?

Any new venture can project growth.  Before investing, check the practical realities that support the 10x, 100x, 1000x growth.  All too often, the relatively mundane is ignored during the analysis process - the unexpected “snakes in the grass” often seriously derail business growth.  In general, businesses which are manufacturing a physical product are much more challenging to scale.  This is, in part, More >

Are they ready to scale?2020-03-17T23:50:31-04:00

Some things are tough to measure, such as ROI in a private company…

The pricing of private securities is obscured by several factors: each is unique, analyses available for public securities don’t exist privately, and easy comparisons don’t exist. Cash-on-cash, simple interest, and IRR are useful metrics, but only if you apply them correctly. Let’s make sure that, when we’re talking about a Return on Investment (ROI, return More >

Some things are tough to measure, such as ROI in a private company…2019-11-20T13:20:32-05:00

Investing in Private Companies vs. Publicly traded ones.

The rules are very different in the private markets, and you should know the difference if you’re going to play the game. We all know that you can trade public securities.  The most well-known exchanges include the New York Stock Exchange and NASDAQ for U.S. public equities and the institutional “bond markets” for government and More >

Investing in Private Companies vs. Publicly traded ones.2020-06-05T08:02:59-04:00

Venture Capital isn’t the only way to invest in private companies

Just as with public securities, private securities are generally either equity or debt, but that’s the simple part. The most commonly encountered forms of equity are called venture capital and “Private Equity” for private equity (yes…it’s used interchangeably), and senior vs. subordinated debt for private debt. They attract investment because they command higher returns, based More >

Venture Capital isn’t the only way to invest in private companies2020-06-05T08:06:05-04:00

When your investment has greater risk, you should expect greater rewards

Stock prices and bond yields are easy to find.  But it’s challenging to confirm whether the terms of a direct investment in private placements are fair. Given that the private securities markets (over $2.4 trillion/year raised in the U.S.Wall Street Journal, April 2018 ) are now larger than the public markets, we offer this framework More >

When your investment has greater risk, you should expect greater rewards2020-03-19T13:00:32-04:00

Is this the entrepreneur’s first rodeo?

(watch 3 minute the video related to this article) Let’s start with some facts: In year one, 20% of small U.S. businesses fail. By the end of the 5th year, 50% do so.  Throw in a newbie entrepreneur, and those statistics may be generous.  Studies have pointed to a myriad of reasons; no market need, ran out of cash, and wrong team rated high on More >

Is this the entrepreneur’s first rodeo?2020-03-17T23:47:33-04:00

If you’re going to sell something, you ought to have something to sell.

(watch the 3 minutes video related to this article) You may not remember what was happening in information technology around the turn of the century (It’s known as the “The dot-com bubble”). For many people, the lesson we’re talking about in this article was learned the hard way.  According to FactSet, in the early part of More >

If you’re going to sell something, you ought to have something to sell.2020-03-17T23:49:18-04:00

New Product + Market Disruption = One Tough Investment Decision

(watch the 3 minutes video related to this article) If what you are investing in “rocks the world,” be prepared for the company to face unexpected challenges convincing customers.  Double any timeframe presented as well as the cost of success.  When it pertains to customers, this means a longer timeframe to achieve a significant level of sales (see Crossing the More >

New Product + Market Disruption = One Tough Investment Decision2020-03-17T23:48:49-04:00

Articles of Innovation: Robbing Our Own Cradle

For sustainably-minded businesses, there are myriad solutions that will bridge us from a cradle-to-grave culture to one of a closed, cradle-to-grave goods market—and a thriving biosphere. Instead of moving on to a wholly separate subject matter from my previous column on biomimicry in business, I’d like to dive deeper. More specifically, I’d like to talk More >

Articles of Innovation: Robbing Our Own Cradle2020-04-30T20:08:08-04:00

Customers, or a lack thereof

Sure, there may be 7 billion people in the world with close to 14B legs, but how many of those individuals will stop what they’re doing and switch to this company’s brilliant new brand of pants? Customers, or a lack thereof.  It’s why businesses thrive or eventually fold. Every business plan projects ever-increasing sales (often exhibiting More >

Customers, or a lack thereof2020-03-17T23:49:40-04:00

What to do after you loan money to a private business

We financed a scrap metal dealer once, that needed additional working capital to purchase and process scrap because it had high cost overruns in building its large-scale shredding operation.  Let’s just say, experience is everything, and you can learn from ours.   Numerous lenders already were providing equipment financing with broad claims on the company’s asset – so we couldn’t use that collateral to support our More >

What to do after you loan money to a private business2020-03-17T23:41:24-04:00

Red Flags in Due Diligence

We were approached by a small company in the consumer goods business looking to raise capital to build inventory.  It’s true, experience is everything, and we’re game to share.  In our normal course of conducting due diligence, we discovered that the owner of the company previously had exited and sold another business and, rather than pay federal taxes, he had More >

Red Flags in Due Diligence2020-03-17T23:52:59-04:00

Regulation Best Interest has been approved, now what?

In the evening of June 5, 2019, the Securities and Exchange Commission approved its final rule regarding Regulation Best Interest and Form CRS. How will that impact you? The new rules are designed to enhance investor protections while preserving retail investor access and choice in: (1) the type of professional with whom they work, (2) More >

Regulation Best Interest has been approved, now what?2020-04-30T20:08:51-04:00

8+ thousand locations and $6.1 Trillion Dollars in tax savings: A.K.A. Opportunity Zones

If you’re an accredited investor, you’ve probably heard about Qualified Opportunity Zones (“QOZ”). Here’s a short guide to outline the what’s, why’s and who might consider this investment strategy. What opportunities and challenges do QOZs address? Opportunity zones were created to spur economic development in distressed communities across the nation by the Tax Cuts and More >

8+ thousand locations and $6.1 Trillion Dollars in tax savings: A.K.A. Opportunity Zones2019-07-10T20:15:10-04:00

What would you do for 20% more?

By Henry Yoshida | CEO of Rocket Dollar The Power Of Tax Deferral In A Self-Directed Account When we’re talking about your tip on a lunch out, 20% hardly seems worth discussing (especially if the service is good). When we’re talking about your retirement accounts, 20% could mean hundreds of thousands (even millions) of dollars More >

What would you do for 20% more?2019-10-11T14:35:40-04:00

Debt & Equity Investment Overview

When we talk about private securities, they can be split into two basic categories: Debt & Equity. While there are many many, different flavors of each, every savvy investor needs to have a solid grasp on what makes one more appropriate than the other—especially before purchasing.  We put together a slightly exhaustive overview of both More >

Debt & Equity Investment Overview2020-03-17T23:38:45-04:00

Primary Investment Considerations (or First Principles)

Investment analysis can be highly challenging. Each Issuer of securities (the company seeking your investment) differs in significant ways from others, and it’s easy to miss “the forest” for a few particularly compelling “trees.” Therefore, it is essential that you apply a consistent approach to your analysis that first identifies the fundamental rationale for an More >

Primary Investment Considerations (or First Principles)2019-05-01T16:54:48-04:00

Seven Questions for Evaluating a Private Company

After evaluating thousands of unique private companies and alternative investments over the past 20 years, we have created this list of fundamental investment considerations for our use, and we are happy to make it available to you.     If you want to dive further into the Seven Questions framework, our complimentary white More >

Seven Questions for Evaluating a Private Company2019-05-06T19:13:00-04:00

Articles of Innovation: Sustainability 101 

By Gillie Roberts | Ware Don’t let the bureaucrats fool you: It is less about what a business is doing and more about how they’re doing it.   For such a long word, “sustainable” seems to have found its way onto websites and advertisements by everyone from the service industry, to tech, to beauty products—reminding us all that no one pays by the letter for marketing materials anymore. More >

Articles of Innovation: Sustainability 101 2020-04-30T20:20:25-04:00

Taking your retirement by the reins: What is a Self-Directed IRA?

By James Jones | CEO of IRAeXchange.net  I’ve spent a lot of time in and around IRAs and Self-Directed IRA or “SDIRA,” writing books, speeches, and, generally, educating folks on the topic.   Inevitably, when people get a chance to engage with me after a panel discussion or other presentation, they ask questions.  Shockingly, they are often CEOs, Fund Managers, and other financial professionals asking questions about a tax-deferred vehicle that, recently, is growing in popularity by leaps More >

Taking your retirement by the reins: What is a Self-Directed IRA?2020-03-17T23:33:00-04:00

Wealthy in the Hamptons Set Their Sights on Private Investments

In a recent article in Bloomberg, Simone Foxman discusses the rising trend among the centimillionaires investing directly in private enterprises and away from managed products.  While I agree with the author, let me expand on a few points.  You Don’t Have to be a Centimillionaire to Play in This Market First of all, it’s not just the centimillionaires who More >

Wealthy in the Hamptons Set Their Sights on Private Investments2019-04-10T21:07:22-04:00

Blue Sky Laws: History and Application to Private Investments

If you’re thinking of Willie Nelson crooning “Blue Skies,” you’d be in the right state of mind.  That’s because each state has its own state Securities laws, or “Blue Sky” laws, that further protect Investors from Securities fraud.   Here’s a brief overview of what those laws do for you.  More >

Blue Sky Laws: History and Application to Private Investments2020-03-17T23:55:51-04:00

Deciphering the Signal out of a Noisy [but Mature] Residential Solar Market

Recent solar industry headlines (see the latest from Forbes) would suggest that international trade negotiations (or perhaps more precisely, disputes or wars) are among the most important things to know about solar. Opinions vary on the efficacy of such international policy, but suffice it to say that this escalating trade kerfuffle is masking the growing strength of the More >

Deciphering the Signal out of a Noisy [but Mature] Residential Solar Market2019-01-28T20:42:54-05:00

Oil and Gas Forecast

In this article we ask and answer: “Should a private investor look closely at oil and gas exploration and development opportunities now? What do the pundits think?” More >

Oil and Gas Forecast2019-02-13T21:11:03-05:00

Angel and Venture Alert: The Case for Investing in Orphan Drugs

No, we’re not talking about developing drugs for orphans. But for 25 million Americans, according to the NIH, an “Orphan Drug” (one that serves fewer than 200k users and includes diseases such as cystic fibrosis, Lou Gehrig’s disease, and Tourette’s syndrome, among others) can spell the difference between misery (or worse) and getting through the More >

Angel and Venture Alert: The Case for Investing in Orphan Drugs2019-04-10T21:10:21-04:00

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