Accredited Investor Verification Guidelines
The following outlines the different approaches required for Investors to qualify as Accredited Investors under Rules 506(b) and 506(c). More >
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 is 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 >
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 More >
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 >
Debt Security Basics
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 >
Defaults: being reasonable can be rational
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 >
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 >
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 >
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 >
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 >
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 >
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 clearunderstanding 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 the More >
How realistic is your sales pipeline?
A freight train without a track ahead is just 200 tons of metal. Until a new Venture has 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” for More >
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 customers More >
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 >
Measuring ROI in a private company is tough
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 >
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 >
Venture Capital: Not the only way to invest privately
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 >
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 >
Is this the entrepreneur’s first rodeo?
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 a wrong team rated high on the list.. Here’s a fundamental More >
If you’re going to sell something, you ought to have something to sell.
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 2000, IT constituted close to 35% of the Market More >
New Product + Market Disruption = One Tough Investment Decision
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. Significant sales will take longer (see Crossing the Chasm by Geoffrey Moore) and cost more per early customer. In our series of nine questions to ask before investing More >
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 >
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 >
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 that experience is everything, and you can learn from ours. Numerous lenders already were providing equipment financing with broad claims on the company’s assets – so we couldn’t use that collateral More >
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 >
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 >
8,000+ locations and $6.1 Trillion Dollars in tax savings
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 >
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 >
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 More >
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 >
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 >
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 >
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 discussions 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 More >
Wealthy in the Hamptons Set Their Sights on Private Investments
In an 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 >
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 >
What You Should Know About Underground Mining investments
Just as numerous industries suffered in the great recession, so did surface and underground mining, and, consequently, mining equipment. But that was then, and this is now. The industry has reclaimed territory, and investors are taking notice. More >
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 >
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 >
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 >
Why Pay Attention to Blue Gem Coal?
Okay, I know. Most people think of “dirty” coal or the Coal Miner’s Daughter. Understandably so, if those types of coal constitute greater than 95% of all the world’s known coal reserves. Did you know that Blue Gem Coal (and some valuable minerals derived from it) is used to make clean solar panels, cell phones, More >
The U.S. Solar market is going mainstream.
It might be surprising to many investors to learn how large and how quickly the solar power market is growing. In 2017, 30% of all new U.S. electric generating capacity came from solar, ranking 2nd only to natural gas.SEIA-GTM (2018). U.S. Solar Market Insight In 2010, only 4% came from solar. And what may be even more surprising is that More >
Private Equity Term Sheet: Typical Terms and Conditions
You’re considering an equity investment in a private company with exciting prospects… Great, but do you really know what your “equity” investment in the company will get you? Investment characteristics of one type of private equity investment can be very, very different from another. This guide can help you understand better what’s being offered to you. More >
Private Lending Term Sheet: Typical Investment Terms and Conditions
What should you look for when making a private loan to a business? It’s very important that you understand the standard commitments a business Borrower should be making to you… and that they are part of your loan documentation! More >
What is a Balance Sheet?
Accounting 101 – Not your best subject. But, if you intend to invest in a private company, spend a few minutes on these crib notes. They may save you a bundle down the road. More >
Why Do Companies Use Debt Financing?
The following outlines the major reasons why businesses may choose to use debt financing over issuing equity when capital is needed. Businesses and other entities can finance their enterprises by issuing equity or using debt, such as borrowing funds through loans or by issuing notes. Unlike equity, debt has a specified interest rate and a schedule of dates when interest is to be paid and all the principal fully repaid. Many fast-growing companies would prefer to use More >
Private Placement Memorandum and Other Private Investment Documents
You’ve decided to invest in a short-term private debt Security. Or, perhaps, a private equity investment. Great! Now what? Let’s review what you can expect in the way of Closing Documents, such as the Private Placement Memorandum. Closing Documents include agreements between the Issuer and the Investor in which the parties commit to participate in the offering and state the specific terms of the investment relationship. The More >
So, I’m Eligible. What Should I Know Before Investing in Private Market Investments?
Your brother-in-law tells you this Company is going to revolutionize the (…pick an industry). And these people are incredibly experienced in this field. “Let’s invest together,” he tells you. Well … let’s take a deep breath and think about private investing and what it might mean for you. More >
Why Invest in Alternative Investments? Here are 3 Reasons.
Been watching the stock market recently? Does it make you feel warm and fuzzy, or, like many investors, do you feel a bit uncertain and powerless? If so, join other Investors seeking higher returns, lower volatility, less correlation, and greater flexibility across their portfolios by investing some of their wealth in “Alternative Investments.” More >
Private Lending to Operating Companies
You don’t need to be a genius to understand what happens when you lend money to a private company, but there are important things you need to know. Let’s take the mystique out of private loans! More >
