Sunday, 25th February 2018

Preparing for Retirement

Posted on 23. Aug, 2012 by in FINANCE


Taking the right steps to ensure your financial security in the years leading up to retirement

Making a financial plan and all it involves–from saving for a child’s education expenses to planning for retirement–is a highly individualized process. Every person is different and financial plans should reflect that fact. This is certainly true of women, who may need to make different tactical moves than men during their career in order to accomplish financial goals. A good financial plan should focus on four main areas: income, expenses, risk management and investing. Within each of these buckets there are unique considerations and strategies for women who want to be prepared financially for the future.

The Foundation: Income
Even before starting a career, women should consider a degree or major in an area likely to lead to a good paying job so they can become the sole provider for their family if that becomes necessary. For example, women could consider choosing a field in which they are in high demand, such as engineering, business, computer science or math related fields in general.

Throughout their career, women should also focus on developing marketable skills to enhance their career and income, including leadership, public speaking, analytic, and sales skills. Online classes, evening courses, seminars and volunteer jobs are an excellent way to continue learning new things, even while working a demanding job. Additionally, keep an ongoing list of career accomplishments and update your resume yearly with specific achievements. And always talk with recruiters, even if you are not looking for a job.

The child-rearing years are a particularly important time for women and it often affects their income—if not immediately, then over the course of their career. It impacts 14.7 percent of potential working years for the average woman compared to 1.6 percent for the average man (U.S. General Accounting Office, October 2009). Develop strategies in advance to minimize this loss of income.


Saving: Treat It Like an Expense
Saving will be difficult no matter how much you make if spending is out of control, so make sure you factor saving into your budget alongside expenses like groceries and clothes. Always donate at least the percentage your company will match into a 401(k). Put additional money aside for other savings and investments and treat them like fixed expenses, increasing the amounts as your income goes up.

Saving is more easily said than done, but there are ways to make it more automatic. For example, directly deposit parts of your paycheck into a savings account and investment fund so you are not tempted to spend it. If it gets mixed with discretionary funds, it will likely be spent.

Don’t Forget Risk Management
Managing risk is a vital component of a financial plan, and it should start with health insurance. Even if you are selfemployed and insurance is costly, at least consider a policy that covers catastrophic expenses. Eventually your family will need to purchase health insurance in order to be in compliance with the Affordable Care Act (Obamacare) and avoid a hefty penalty /tax. Other ways to manage risk include purchasing long-term care and life insurance. Because women have a longer life expectancy than men, this is especially critical. Health insurance and medicare do not cover long-term care expenses for chronic conditions, including home-based care and assisted living or nursing home facilities. Life insurance is also important and can be purchased for a reasonable monthly premium. The amount needed will vary based on your situation, but it should be enough to replace a spouse’s income or yours in the event of premature death.

Other expenses, such as a child’s college education, should also be considered. Social security may not seem like something that belongs under risk management, but delaying when you begin taking social security payments can reduce the risk of running out of money later in retirement. This is particularly relevant to women since they live longer, on average.

Benefits can be decreased or increased significantly depending on when you start receiving them. If your full retirement benefit is $1,000 at age 66, for example, and you choose to start getting benefits at age 62, your monthly benefit will be reduced to $750 to account for a longer retirement.

This is generally a permanent reduction in your monthly benefit. In contrast, if you delay payments until age 70, the monthly benefit amount increases to $1,320.

Invest Smart (and Pick a Good Financial Advisor)
Achieving the right asset allocation with your investments can be more important than picking the right assets. Your advisor should know your primary financial objectives, including time horizon, risk tolerance, tax bracket and income needs before recommending an investment program. For example, suppose you are willing to take on a moderate amount of risk in order to achieve your retirement goal of producing $100,000 in annual gross income in twenty years. A good financial advisor will blend this information with the firm’s outlook for returns, risks and correlations of asset classes, and then develop a tailored investment plan.

Finding a financial advisor you can trust is important. Ask for recommendations from friends, relatives, bankers, and other advisors. Know their experience level and credentials, such as: Certified Financial Planner®, Chartered Financial Analyst and Chartered Life Underwriter. Also, make sure the advisor has experience working with others in a similar situation, whether you are an early saver, mid-career investor, imminent retiree or looking to focus on estate planning or wealth transfers–or maybe you are about to have a baby and would like to take a year off from work, but want to minimize the impact on your overall investment strategy. Your advisor should understand where you are and where you want to go financially.

Remember, whatever career stage you are in, it is not too early or late to begin planning for a financially secure retirement. Whatever your challenges, find an advisor who is willing to help you with them.

Raising Capital for your Startup

Posted on 23. Aug, 2012 by in FINANCE


Over the last few weeks, I have mentored fellow graduates of Harvard Business School, local DC based entrepreneurs, and a group of very smart high school students at Thomas Jefferson on the nuts and bolts of how to raise capital for their startup. As I talked to my friends and fellow entrepreneurs, I came to realize how little many entrepreneurs know about early stage financing. Over the last ten months, I’ve raised 3.5M for my own startup, TroopSwap, an ecommerce platform focused on veteran and military discounts. We raised the first million via convertible debt, while the additional 2.5M was raised through equity.

My experience with fundraising has exposed me to the advantages and disadvantages of different types of financial instruments. I’ve also learned about the psychology of raising a round and how to effectively structure a round in order to sustain forward momentum and to ensure that commitments to invest actually materialize in the form of deposits in your company’s checking account. While nothing I’m writing in here is a secret and no one method is more right than another, there are certain norms and best practices that should be followed in order to keep as much of your time free to focus on your business as possible. I certainly wish that there had been a blog post that covered everything I needed to know in detail when I was putting together my own round.

In addition, this is my first time building a company, and I certainly did not have experience raising capital before this venture, which brings me to my first point…

Find a Mentor
In order to raise capital, you need a mentor who has been successful in the vertical you are entering. Your mentor should have three vital characteristics:

1. An impeccable reputation among both investors and business contacts.
2. A passion for both your idea and for you.
3. They should have held executive level positions in the space you are entering.

Your mentor plays an invaluable role when dealing with investors. Beyond giving a first time entrepreneur an invaluable dose of legitimacy (and reassuring investors that a first time entrepreneur won’t blow up his or her startup), your mentor can handle questions regarding the round that will help you avoid awkward or heated conversations with your investors. If the mentor and the entrepreneur divide their responsibilities with respect to financing and business questions, then you will have an optimal relationship to raise capital. There are only two rules:

1. The mentor demurs on questions of vision and strategy when dealing with investors except to note that you are a rockstar and the only reason he is spending time with you is because he loves you and the idea.

2. The founder demurs on questions regarding deal terms and the financing and allows the mentor to serve as the single point of contact for all investor questions.

The final thing you need is an investment from your mentor. Inevitably, investors will ask your mentor whether he or she is investing in the round as well. If the answer is no, then that will raise a ton of red flags. It’s also an issue of integrity and aligned incentives. As much as your mentor might claim to love you and the business, cash is truth and the smart money will walk if your mentor isn’t investing in the round.

Convertible Debt vs. Equity
An equity raise is relatively straightforward. The entrepreneur sells a percentage of his or her company, typically around 20–30%, for a particular amount of capital. A typical round might look something like this:

Pre-Money Valuation of the Company: $8M
Size of the Round: $2M
Post Money Valuation: $10M
Investors Stake in Company: 20%

The trick to putting together a round like the one described above hinges on arriving at an acceptable valuation for your startup. For a startup that may not have revenue, this is no easy task. In that scenario, the entrepreneur and investor might choose to finance the business through convertible debt.

Convertible debt is an instrument particularly suited for pre-revenue startups where an initial valuation would be a number pulled out of thin air. In this scenario, an entrepreneur might decide to offer a convertible note in order to defer the valuation of the company to the next round of financing when a sophisticated investor will be able to place a reasonable valuation on the company. In exchange, the entrepreneur will offer investors interest on the invested capital as well as the right to convert their capital into equity at a discount when the company raises a round at a specific valuation. For instance, a typical convertible note might have these terms:

Size of the Round: $1M
Interest Rate: 10%
Conversion Discount: 20%
Conversion to Equity Trigger: Series A
Round of $2M or greater
If an entrepreneur raised a round of equity twelve months later at a Share Price of $25, then the note would convert as follows:
Principal + Interest: $31.1M
Share Price: ($25)
Conversion Discount (.8): $20 Share Price to Convertible Noteholders
Convertible Noteholders Shares: 55,000
Series A Investor @ $1M: 40,000


I didn’t note how many shares were outstanding in this hypothetical scenario which would enable you to calculate the percentage of ownership. For example, if there are one million shares issued and outstanding then the convertible noteholders have 5.5% of the company. If there are 300,000 shares issued and outstanding, then they have 18.3% of the company. The large differential between 5.5% and 18.3% illustrates a deeper debate on the incentives associated with a convertible debt raise.

The large differential in percentage ownership noted above is related to execution. Linking the valuation to a later round of financing allows the entrepreneur to avoid dilution through superior execution; it also allows the convertible noteholders to capture a greater share of the company if the entrepreneur fails to execute well and raises equity at a lower valuation. In theory, the incentives inherent in a note should spur the entrepreneur to work harder to execute and to ensure the company succeeds, which creates a winning scenario for everyone, but investors also have an incentive to wait to help the entrepreneur until their convertible note becomes equity.

Depending on market conditions, an entrepreneur might choose to put a cap on the valuation at which the note converts into equity, say $8M, although some rounds go uncapped because the market supports more favorable terms for the entrepreneur or investors wanting an option to invest more money in the company during follow-on financings (Yuri Milner and SV Angel’s convertible note investments in Y Combinator companies is a good example of this strategy). The most important thing, however, is that your mentor and your board members are investing alongside your investors so that they share the same risk and accept the same terms.

No matter how you choose to raise your capital, through equity or through convertible debt, you will have to negotiate—and that leads to the next question…

When and with Whom Do You Negotiate?
First, you should remember that you aren’t supposed to handle this conversation, your mentor is the single point of contact. Not all investors are created equal and you shouldn’t treat them as if they are equal. If you are raising one million with a minimum investment of 25k, then you should resist the temptation to negotiate with investors who are only putting in 25k–50k. If you begin to make concessions to small investors, then you create a horrible precedent that will encourage your investor to keep asking for more stuff down the line and you open up every piece of the deal to negotiation with all of your other investors. Your mentor will never make this mistake if they are competent.

When dealing with an investor coming in at 25–50k who wants to negotiate, simply reply that you are open to changing the terms if they want to put in an investment of 500k or more, otherwise the terms are what they are. This position is a fair one and it will help you avoid needy investors who don’t have much skin in the game but try to armchair quarterback your company from the sidelines. It’s much better for you to hold firm and to only deal with investors who take your company seriously enough to put in a large amount of capital.


How Much Should I Raise?

You should figure out the number you think you need to hit your targets and then roughly double it. Entrepreneurs are overly optimistic—it’s in our DNA. If you think you need 500k then you should try to raise between 750k and one million. When the cash burn is higher than expected (and it will be), the extra capital can make all the difference because it allows the entrepreneur to keep operating the business rather than going out and wasting time raising capital. Your time is better spent on the business than with investors and you will be happier.

For the legal documents, you should instruct your lawyer to leave the round open up to double what you raised. That way, if you need to take on an extra 100–200k down the line you will have the flexibility to ask your investors to simply wire it over rather than to re-create an entirely new round. You get to save a lot of time and money because the documents are already on file and the terms of the deal are clear to your investors. Your investors get a bit of a sweetheart deal investing capital on the same terms after a significant amount of time has elapsed and you have (hopefully) increased the value of the company. Ultimately, it’s a win-win. How Should You Structure Your Round?

If you are raising capital via a VC, then you don’t have to worry as much about the mechanics of taking on capital and organizing a round. On aggregate, VCs are moving away from pre-revenue startups, however, and investing capital in growth businesses. Happily, the cost of starting a tech company has fallen dramatically (thanks to cloud computing) and angel investors have largely stepped in to fill the gap. When you are raising capital via angels, your investors will ask what your “first takedown” or “first close” is for the round and you should be ready with an answer.

The first investor to give you 25k takes a much greater risk than the last investor who puts in 25k to move your round from 975k to one million when the risk is shared and you already have plenty of capital. So why would that first investor take more risk and write a check? Without some sort of protection for that first investor, you could go out and spend the capital they invest without raising from anyone else. Most investors don’t want to hear, “I’m sorry. I bought ten MacBook Pros, your 25k is gone. No one else invested.” Since most investors only want to invest if other people think your idea is viable and will open up their network to help you, that scenario is unacceptable. The “first close” solves this problem.

When structuring the round, the entrepreneur must decide the minimum amount of capital needed to achieve key milestones that would enable the company to achieve organic profitability or to achieve traction that would enable the company to raise more capital at a higher valuation. For a one million raise, the first close might be 500k. That number will be written into the legal documents for the round.

The first close binds the entrepreneur to raise 500k before the company is allowed to access the capital or “take down the round.” If the entrepreneur raises 475k but no more than that, then tough luck—the money must be returned to the investors. This legal protection ensures that your first investor who writes you a check is only committed to you insofar as you can convince other investors to invest as well until you have cleared your first close target.

Okay, investors agreed to my terms and “are in.” now what?

You should anticipate that 20–30% of the money that investors have verbally committed to you will not end up in your company’s bank account. Additionally, investors have an incentive to wait and watch your company perform. The more time that elapses before they actually write a check, the more time they have to observe you execute and to see if the company risk is going down or up. The way to force the issue and to get a hard yes or no from people is to set a deadline for your first close. (Give yourself plenty of time! You’ll need at least 2–3 months to hit your target.)

Once you’ve set your deadline for your first close, you should set a deadline one week in advance of that date and tell your investors to wire or mail their funds in by COB that day. Even after you and your mentors follow up with your investors, I can guarantee that at least a third of your investors will not wire funds over by the soft deadline. The excuses will cover the spectrum: unexpected business trip, family emergency, time needed to free up investments for liquidity, etc.

Even with your mentor helping you to herd your investors, you will find that the remainder of your investors will only wire funds over at the very last minute when you inform them they are about to miss the deal. Some investors will fade away altogether, so prepare for a first close that is lower than you had anticipated. No round is secure until you have the cash in hand, regardless of the great things you hear from prospective investors at your meetings. Plan accordingly.

Should I always go for the highest valuation?
Simply put, no. There are many different reasons that could influence you to choose an investor offering less money (not all investors are created equally), but just as important are the implications that your valuation will have for future financings. If you raise five million at a 40 million valuation, you might feel like a hero, but, if you miss your targets, the market softens and you have to raise again—at a lower valuation—you will lose the majority of your company. Beware Pyrrhic victories.

Anything else?
The first investors you pitch will have a lot of questions. Write them all down and you will find that they are themed around weak points in your pitch and business plan. Those questions will keep your investors from writing checks. For example, they could be related to the size of the market, your team, the business model, or distribution. Once you figure out what is holding investors back from writing a check, you need to get out on the street and talk to customers and recruit talent. Be tenacious and never take no for an answer. You are only as strong as your will.

HelloWallet Snags NPR Product Lead & Former Michelle Obama Advisor

Posted on 20. Apr, 2012 by in Blogs, FINANCE


Washington, DC – April 19, 2012  – HelloWallet, a provider of personalized financial guidance, announced today that it has hired Michael Yoch as Vice President of Product and Trooper Sanders as Senior Advisor for Public Sector Initiatives. Yoch was previously at National Public Radio (NPR), where he oversaw product strategy and management for NPR’s Digital Media team. Sanders previously served as Deputy Director of Policy to U.S. first lady Michelle Obama. These two hires will help HelloWallet significantly accelerate its growth through further product innovation and market expansion.

HelloWallet Founder & CEO Matt Fellowes said, “We could not be more excited. Both Michael and Trooper are rockstars. Michael helped lead NPR into the digital age, building the organization’s reputation as a market leader in online journalism with a track record of innovative product launches. Trooper has worked at the highest levels in two Presidential administrations and is well versed in democratizing financial services. Together, they will further strengthen our mission to help all Americans take control of their money and get ahead.”

Yoch is a veteran of product management. He served over a decade at NPR, where he started as a developer, moved to business development, and then took a leadership role in product strategy. Among other accomplishments, Michael launched NPR podcasts, NPR’s mobile products, and oversaw NPR’s push into the connected home and TV spaces. At HelloWallet, he will be leading product development.

Sanders comes to HelloWallet from the White House where he helped advance a number of Mrs. Obama’s priorities. Prior to working in the Obama administration, Trooper led the economic opportunity program at former President Clinton’s foundation and served as the former president’s domestic policy advisor at the foundation. At HelloWallet, he will lead the company’s work with the state and local governments.

This news comes on the heel of a number of recent announcements at HelloWallet. In January, the company announced that it raised $12 million in Series B funding from Morningstar Inc., TD Fund, and other investors. Additionally, in February, HelloWallet hired former General Motors executive Aaron Benway to become its new Chief Financial Officer. The company is expanding its team to serve its growing base of clients.

Want to try HelloWallet’s personalized financial guidance? Start your free trial of HelloWallet today. –

About HelloWallet

HelloWallet is a provider of technology-based, personalized financial guidance to employees of Fortune 1000 companies and other large institutions. It helps workers save money, improve their wellbeing, and manage their financial responsibilities through personalized, independent guidance and management services. Additionally, the company gives one membership to a family in need for every five subscriptions it sells. The company is led by former Brookings Institution Fellow Matt Fellowes.

Practical Challenges in Brazil for Multinational SME’s

Posted on 01. Feb, 2012 by in FINANCE


The major focus given to Brazil from mainstream media outlet over the last years has led many multinational SMEs to Brazil with the goal of capitalizing on the quickly growing Brazilian market.

Dealing with foreign SMEs is a fairly new thing in Brazil, for only 20 years ago, Brazil was a closed market with little or no room for importing and exporting goods or services. The new trend of smaller international companies willing to do business in Brazil has somehow taken the Brazilian society by surprise. This new wave of foreign companies is not investing in factories nor hiring local staff to maintain their Brazilian operation. Multinational SMEs have rather taken a lean approach to the Brazilian market and want as little upfront investment as possible before closing deals in Brazil. Unfortunately, Brazil’s legislation and Brazilians’ mindsets tend to favor multinational corporations that are willing to do a major upfront investment in the market.

1. Local Competition

Brazil is a melting pot of people and cultures. Most people will agree that Brazilians are extremely open and friendly to foreigners, and it does not matter whether you are visiting their country or relocating permanently. It is easy to misinterpret their personal friendliness towards foreigners as a general appreciation of foreign companies, but this is not the case. There is a deeply founded bias against foreign companies in Brazil. They are seen as both expensive and difficult to deal with due to time zone and language differences. This leads to a preference for products and services from local companies, even when the price is higher or the quality might be lower.

To circumvent these perceptions, multinational SMEs should not expect to make their usual margins on their first order from Brazil. Taxes can eat as much as 50% of your sales price in Brazil because you import the product or services. For a Brazilian company, it seems unfair that the additional tax burden of being an international company without operations in Brazil should affect the price they are paying.

Two simple ways of addressing the challenge of local competitors are to either find the price point of your local competitors and match them, or hire a Brazilian intern/trainee in your company to address the language differences.

2. High Import Taxes

If you ever had any doubt, import taxes are indeed extremely high in Brazil. Taxes are high in order to protect Brazil as it has an underdeveloped domestic industry. Typically, the locally produced products are of lower quality and are more expensive than what you will find abroad. Both high costs of doing business in Brazil and the unqualified work force are important sources of the problems that the domestic industry is facing. Without high import taxes on goods and services, Brazil would risk moving back into the colonial economy, when they would export commodities and import high value industrialized goods. To ensure Brazil is able to take advantages of foreign innovations, there are special schemes to reduce import tariffs or tax deductions for imported capital goods not available locally.

My previous recommendation of not having margins on your first deal in Brazil would not make much business sense without a solution for how to reduce taxes on your second deal. Any foreign company can significantly reduce the tax burden by creating value in Brazil. This means you should either subcontract to Brazilian partners or hire your own workforce in Brazil. Typically, local subcontractors can be responsible for solution assembly or highvalue, onsite work with clients.

Creating local value in combination with owning a local entity that can pay out dividends to the foreign HQ is usually the most optimal tax constellation for multinational SMEs.

3. Forming a Legal Entity
As a multinational SME, you will at some point have to form a legal entity in Brazil. The legal entity will be needed either for taxation reasons or because a client expects a Brazilian contractual partner. In many industries, it is common that Brazilian companies send out RFPs where one of the preconditions is that you operate as a Brazilian entity.

Forming a legal entity in Brazil is usually done as a limited company. In a limited company, at least two parties are required, but both parties can be foreign. However, a Brazilian entity needs a legal administrator that can be either a Brazilian citizen or a resident in Brazil. Eventually, this is the person who will be responsible for making the company comply with the Brazilian laws. The process of forming a legal entity in Brazil takes from six weeks to six months, depending on the nature of your business. Forming a legal entity for foreign service companies usually takes from 12 to 18 weeks.

When forming a legal entity, it is important to evaluate carefully which municipality will be the most beneficial for your company. Brazil has more than 5000 municipalities; each of them has a unique tax profile in terms of municipality taxes as well as in terms of refund of federal and state taxes.


4. Dealing with Customs
Most multinational SMEs doing business in Brazil at some point will have to declare goods through Brazilian customs, including product samples, marketing material or commercial products. The golden rule is that you should never ship goods to Brazil with a value exceeding USD $500 without making sure that the recipient has the necessary import licenses for the goods in place and the necessary paperwork is processed in advance.

Having goods stuck in Brazilian customs is time-consuming and expensive. You may have to pay storage fees and large fines for undeclared or mis-declared goods. Customs agents that are located in the port where your goods should arrive are best suited to handle the import of larger goods.

Even international parcel companies like FedEx and DHL have problems getting goods like product samples and marketing material through customs in a timely manner if the correct documents are not processed in advanced.

5. Contracts and Agreements

Contracts and agreements are as important in Brazil as in American business culture. Brazilian courts are considered to be fair, and even foreign companies can expect fair resolutions of disputes. Although fair, the system is slow as a result of legal instruments used by the attorneys to delay judgment and fi nal sentences and to force unappealing decisions.

Foreign companies are often taken by surprise when they have negotiated a deal in Brazil − presenting an English contract with the Brazilian counterpart refusing to sign it.

Although your industry uses English as contractual language worldwide, it is common to run into Brazilian companies that refuse to even sign simple NDAs in English. A common workaround is to write a contract both in Portuguese and in English side-by-side and have it validated by a sworn translator.

Due to the slow processing in the Brazilian court system and Brazilians’ general skepticism against foreign companies, it is common to spend a lot of time and energy negotiating with Brazilian companies to decide in which jurisdiction a contract should be governed.

The negotiation is not only frustrating and time consuming, but it can cause you to lose the deal. The truth is that, all too many times, negotiating governing and jurisdictions have little or no practical difference.

Choosing to govern a contract in a foreign jurisdiction does not necessarily solve the problem, as a court ruling from a diff erent country will be diffi cult to enforce in Brazil. It is often possible to establish a compromise by governing contracts in a neutral jurisdiction, like the International Chamber of Commerce.

6. Money Transfers & Payments
Payments from Brazil to abroad are a challenge for Brazilians and foreigners alike. As a foreign company, you cannot open a Brazilian bank account without having a Brazilian entity in place. Clearing money out of Brazil includes a signifi cant level of bureaucracy that the Brazilian party will have to deal with. Even international banks in Brazil are not truly international; so do not be surprised if a Brazilian bank takes two weeks to clear a payment abroad.

You should not misinterpret the payment challenge as a lack of willingness to pay from the Brazilian party’s side; it is simply the way banks work in Brazil. Although your Brazilian client might have the best intentions, it’s wise to make sure that payments are due ahead of product or service delivery, as there are no simple ways to enforce payments in Brazil, even with a contract in place.

7. Security for Professionals
A primary concern for business professionals living in a safe western country is the security situation in Brazil. Th ere is no question that Brazil has a problem with crime, but the situation has improved over the last years.

Brazil is a country with huge contrasts between the rich and the poor. Th is has created an image of Brazil as an unsafe country, especially in the metropolitan cities like São Paulo and Rio de Janeiro. Although the occasional mugging happens all over the large cities, it is unlikely for a foreign business professional to visit areas where violent crime related to drug traffi cking often occurs.

From a personal security perspective, foreign business professionals should pay more attention to the danger of the traffi c than the crimes. Drunk driving is still a huge problem in Brazil, and every year more than 40,000 people die due to car accidents in Brazil.

8. Everyday Corruption
The reality of corruption in Brazil today is very different from the picture the news headlines are trying to paint. Corruption may be a problem in high-stake negotiations, but these are usually projects where foreign SMEs are excluded.

Leveraging friendships is common in Brazilian business culture and can lead to an exchange of values. Foreign businesses should not try to bribe their way through the bureaucracy or off er bribes to win a deal. However, you should seek advice about what is considered to be common practice for earning goodwill in your industry.

If you are put in a position in which you are asked to exchange bribes, you will have to consider your options carefully. Corruption happens sometimes very openly in Brazil, and you will always meet people with a hidden agenda. If you choose to pay bribes or accept bribes, there will be people who will use this against you in future negotiations.

What’s next?

The Brazilian business culture and legislation are clearly not in favor of foreign SMEs entering the market. However, there have never been better opportunities for a lean approach to the Brazilian market than the present.

Bureaucracy and language have, for a long time, been the main challenge to closing deals in the Brazilian market. Since a large part of the Brazilian population is now speaking English, new opportunities will be opening up for foreign SMEs.

My advice is to have a lean approach to the Brazilian market. Not all foreign businesses will be successful in Brazil, but with a lean approach and clear guidance from local industry specialists, any company with a competitive value proposition can successfully generate profit in the Brazilian market.

Local Banks

Posted on 31. Oct, 2011 by in FINANCE


With the emphasis on promoting local businesses these days, it seems we are craving a return to one-on-one, personalized customer service. And no more apparent is this need than during our daily rituals dealing with our banks. Menu options, muzak, lengthy hold times, remembering pin numbers, passwords − we’re growing weary of too many options and the lack of human interaction. In this post-911 era, patience and trust are slowly eroding and many of us are hanging on to them for dear life.

Larger banks are certainly convenient with technological advances in online banking, apps on personal devices, paperless ATM machines, etc. For the Type A personalities, this instant gratification is just what the doctor ordered. But when I think of my 93-year old father-in-law who just needs a simple question answered and a nice caring voice on the other end, it can be a scary scenario of frustration wrought with impersonal and confusing options for some.

But just around the corner, hometown banks are making a revival. Reminiscent of a slower time, they are but just one avenue available to us where we might find that warm and fuzzy feeling we all yearn for. The pros and cons of big banks versus small banks are really pretty obvious, and can be found on any internet search. It really boils down to what your needs are on an emotional level.

So maybe the smaller institutions don’t have 25 ATM machines up and down the coast. And, yes, if you relocate, you may have to change banks. But it’s also easier to grab pre-packaged veggies in a cold grocery store, scan your own purchases and never have to commune with a human than it is to scour the area for a local market that provides fresh, sustainable produce, friendly people, less overhead and a sense of community. It’s the same with banks. Sometimes it’s not the end result, but the journey itself.

Big banks these days are making a concerted effort to replicate the coziness of the smaller institutions by having that lonely bank employee pounce on you the minute you walk into the lobby, but their hands are usually tied to an extent once you’re up to bat. Signin sheets, form filling and an assembly line of customers is usually the norm. And you better remember your mother’s maiden name.

The fees in a smaller bank will probably give you less heartburn than those associated with bigger banks. Bounce a check accidentally? The lack of bureaucracy in the small bank may trump dealing with the exorbitant fees charged by a larger one. Need a loan? You will probably deal with someone in an executive capacity much quicker in a small bank. Never going to happen in a large bank. And instead of relying on “transaction banking,” in which formulas and calculations govern lending decisions, community banks rely on “relationship banking” where personalized considerations are often taken into account. Good ole Frank at the local bank may have known you since you were knee high to a grasshopper. And as cliché as it sounds, it’s not always what you know, but who you know. That is unless you were the kid that threw the baseball through his window 15 years ago.

Angela Oddone, who splits her time between D.C. and New York, had a friend recommend a coop credit union when she was looking to apply for a mortgage. Having most of her accounts at a larger bank, she called for assistance, but was put off by the “hostile nature of the representative.” She followed her friend’s advice and approached the credit union, where she was treated with courtesy and respect by a friendly representative and she was hooked.

Large banks today tend to be public companies. Their stockholders are spread all over the globe, especially on Wall Street. The short-term interests of these shareholders are rarely attuned to your well-being or of the community where your bank operates. And, according to an article in The Washington Monthly (“Too Small to Fail,”), small-scale financial institutions are, for the most part, holding steady − and sometimes even better than steady. According to FDIC data, the failure rate among big banks (those with assets of $1 billion or more) is seven times greater than among small banks.

What’s good for one isn’t always good for the other Banking regulators prevented small banks from taking on the kind of debt ratios assumed by their big brother competitors, and when all those under-regulated behemoths started peddling ugly subprime mortgages, community banks steered clear − a blessing in disguise, I’d say. Some small banks completely got out of single-family mortgages. Instead of offering “interest-only, no-down payment ARM options,” they learned to just say no. Small banks would prefer to reach out to their niche borrowers, such as local churches and other smaller establishments.

Certainly there is an important role to be played by properly regulating financial institutions. Nobody wants small-scale bankers to be coddled or protected, eroding their competitiveness and enterprising spirit. But friendlier policies certainly would be helpful to counter the decades of bias that has been seen toward the big guys, and promoting community building prevents monopoly finance.

Radhika Murari, owner of a small business (, uses Middleburg Bank in Loudoun County for her business account. “We did not want to continue to support the big banks which had been responsible for the mortgage fiasco and the ensuing financial crisis.”

Small banks are closely tied to the fortunes of the community and, unfortunately, that can make them more vulnerable to local downturns. On the bright side, it gives local bankers more incentive to bring their business community together to solve common problems and find new ways to prosper.

Prior to the recent meltdown of the global financial system, small-scale banks were mainly viewed simply as nostalgic and romantic. But after the bursting of the financial bubbles in the last decade, it certainly would be in our best interest as a society to reconsider the old adage, “What’s old is new again.”

And I bet my father-in-law could use that new toaster that’s being offered to open that new account.


Posted on 19. May, 2011 by in Blogs, FINANCE


With the resignation of the IMF managing director Dominique Strauss-Kahn now confirmed, a fight is brewing between the East and West, developed and developing worlds for control of the Fund. The Euro dominated IMF is now being challenged, for the first time in earnest, by those who would like to see the Fund led by representatives of countries that are on the rise: Brazil, China, India being the most vocal opponents of European dominance.

German Chancellor Angela Merkel has explained that though those in the developing world had “legitimate claims”, the current fiscal crises in the Euro makes having someone with solid European credentials and connections that much more important.

Dominique Strauss-Kahn resigned yesterday, after being arrested for sexual assault. The agency’s second in command, John Lipsky, is currently acting as the managing director until a permanent director is found.

Ask A VC with Harry Weller

Posted on 02. May, 2011 by in FINANCE

Ask A VC with Harry Weller

Most of the post analysis concerning the failures of big U.S. names in China focus on erred approaches to the market. These companies followed a blueprint based on their previous success in the U.S., but the strategy failed to excite Chinese consumers. Could you give some examples of U.S. businesses thriving right now in the Chinese market?
Despite some notable failures, there are plenty of U.S. businesses that have successfully expanded to China, including companies like Coca-Cola, KFC, Nike, Boeing, and Goldman Sachs. Above all, a strong value proposition is the common factor linking these success stories. Each offers a product or service that addresses (or addressed at the time of entry) an under met but fast-growing need in China. They either have a tremendous first mover advantage, or have succeeded in a business by virtue of superior branding, execution or technology.

When companies like Mattel’s Barbie Best Buy and Home Depot are returning home, what are the chances that smaller companies will be able to succeed in the Chinese market?
In addition to the characteristics mentioned above, efficient decision making is critical in a rapidly evolving market like China. Without flexibility in process, product and strategy, any U.S. company is destined for a rough ride. Small American companies have the wonderful advantage of streamlined organizational structures that can adapt quickly to market shifts versus their larger brethren. This kind of dexterity coupled with the relentless execution that is a hallmark of the American startup is an indispensable trait of success in China. In NEA’s case, we’ve learned that the areas of greatest opportunity in China don’t always mirror our investment focus within the U.S., and we’ve tailored our strategy accordingly over the last decade.

One of your companies, Groupon, has recently entered the Chinese market as, which is taken from a Chinese phrase meaning, “cherished friend sitting around the table.” We’ve heard that Groupon was actually inspired by Chinese group buying habits, so jumping into the Chinese market should be like a return home for them. How will Groupon succeed in the $2.51 billion a year Chinese market for group buying?

Group buying has long been a common practice for Chinese consumers. Therefore when the Groupon clones started popping up in China back in Feb 2010, they grew like wildfire. The Chinese daily-deal market grew over 600% last year, and though it’s fragmented, consolidation has occurred with the top cohort of 10 or so players recently. Consolidation has raised from the barrier to entry and forced major players to focus more on deal quality and customer experience.

Groupon has several distinct advantages at this stage of the game, most notably their relentless quality control across all aspects of the business. Our technology and business intelligence platforms allow us to better track and target consumer preferences and lower the risk of fraud. Our product development and sales teams target the more affluent and brand conscious customers as we build an enduring consumer brand among the upper-middle class.

Gaopeng is a JV between Groupon and China’s Tencent (600m strong online community). The company will combine the know-how of Groupon with the local network and knowledge from Tencent. Add a little secret sauce, and I think you’ll see something special.


Recently, we have seen numerous newspaper stories about faltering U.S. companies finding a lifeline from Chinese investors. The varieties of companies where Chinese businesses are investing are surprising and they include RV makers to silicon wafer manufacturers for solar panels. What can DC Metro companies do to solicit capital investment from China? Do you recommend that they actively pursue Chinese investments?
Chinese investors increasingly see strategic value in investing in a range of U.S. businesses. With capital in relatively short supply, this is great news for U.S. businesses. Many of NEA’s portfolio companies have received capital from Chinese investors, and in our experience they add value far beyond capital.

Startup companies today have a global component to their business plan from day one; this has been one of the most interesting shifts we’ve seen during the last decade. Groupon is case in point. To the extent a company is eyeing China as an end-market or supply-chain, Chinese partners can help the company navigate the web of relationships and offer guidance during the negotiation process. For example, Suniva, our U.S. solar cell manufacturer, just closed a round of financing with significant participation from its Chinese suppliers and buyers.

The issue with Chinese investment is finding the right partners. Navigating the region’s capital sources is complicated, more so than domestically. This is one of the reasons NEA has expanded internationally. Our startups compete in a global market and, to help our portfolio companies, we needed a presence on the ground in emerging regions. Fundamentally, venture capital is undergoing the same transformation investment banking did in the early 1900s led by John Pierpont Morgan himself — it is institutionalizing from a boutique business into a multinational effort. NEA has developed the capability to identify pools of capital, partners, buyers, suppliers, regulators and so forth in emerging regions for our companies, assets inaccessible to other venture firms.


Are there private Chinese investors or is all investment abroad done by the Chinese government?
There are many private Chinese investors. For these investors, investment decisions are made no differently from private investors in the U.S. The Chinese government plays a role in those transactions to the extent that they could potentially influence the state-owned banks to be strict or loose in extending loans to private investors in their overseas investment activities. It’s worth noting that in recent years, we have seen Chinese banks increasingly supporting private clients in making investments overseas. For instance, SolFocus, an NEA portfolio company engaged in the design and manufacture of CPV (concentrated photovoltaic) modules, received an investmentfrom a purely private domestically listed Chinese company. This company ultimately became its parts supplier and distributor in China.

Do: Buy gifts. While this practice is shunned in many western business cultures, it’s welcomed in China. Beware however; your gift should reflect the status of its recipient. If asked by your Chinese counterpart what you would like as your gift, don’t be shy, but make sure that the gift you choose is China specific.

Don’t: Lose face. The concept of ‘face’ is all-important in China. Face roughly translates to honor, or a person’s reputation. Once this cultural redline is crossed, you might as well pack your bags and come on home.

Do: Hand your contacts your business card using two hands. If you write on a card that was handed to you, or put it away without first closely examining it, the meeting might be over before it starts.

Don’t: Be informal. You are not an individual; you are your company’s representative. Speaking out of turn, or making jokes will be frowned upon.

Most of the media coverage about China has a fear-based undertone. You can almost hear the cry, “The Chinese are coming…” Yet when you look at foreign direct investment, China including Hong Kong and Macau has only 6% of the global share. Compare this figure to England at 45% in 1914 and the U.S. peaking at 50% in 1967, and a different picture is painted. Is the fear over China much ado about nothing?

The fear-based undertone in much of the media coverage about China’s growth is not unlike the media portrayal of Japan’s overseas asset grab in the 80’s. Even worse, you see some denial in the U.S. press about the true capabilities in China, writing off the Chinese as simple copycats and weak in innovation. The English Parliament in the 19th century propagated a similarly false view of American innovation calling us “a nation of counterfeiters.”

Rather than focusing on fear and denial, I believe the more Chinese companies are integrated into in the worldwide economy, not just as suppliers, but as customers and owners as well, the more responsibly they will act as a natural consequence of protecting their own interests. Weak intellectual property laws in China, a weathered complaint of many U.S. companies, have been strengthening as their market becomes more integrated. That very same process occurred as the U.S. emerged as an economic power. I agree with President Obama that China’s “peaceful rise” is good for the U.S. and that the two countries ultimately have a huge stake in each other’s success.

You are also investing in China. What types of companies are you investing in China?
Since 2004 we have invested over $300 million in almost 30 companies in China across a range of sectors including semiconductor, consumer technology, financial services, cleantech, and healthcare. Our strategy favors industries undergoing transformation, with a focus on companies with not just innovative technology but also highly scalable business models. For example, healthcare is going through major structural changes as it shifts from a 100% state-owned entity to a more diverse ownership model. We like cleantech because China is not only the world’s foremost manufacturing base for renewable energy, but is also potentially the largest market, with the government setting a hard 20% renewable energy target for 2020. We also continue to like the broad consumer space as the country’s economy evolves from being export driven to being consumption driven, and at an especially accelerated pace since the global financial crisis in 2008.

How do you cope with the uncertainty risks in the Chinese market, such as government interference, competition from government owned companies, and changing rules that seem to be stacked up against foreign companies?
Like anything else, you need to understand your environment. For instance, investing in alternative energy in the U.S. is a very complicated endeavor with competition from government regulated entities and constantly changing policies that don’t always seem fair to the new entrant. Sound familiar? In our energy practice, NEA spends a lot of time on Capitol

It’s no different in China. At NEA, we help our companies build relationships with Chinese regulators and we work hard to maintain them. One of our venture partners, Songde Ma, was the former Vice Minister of Science and Technology for China. This helps the NEA community grasp the fundamental motivations behind policies that may otherwise seem befuddling or simply nationalistic. If you understand the intent behind policy, it’s easier to demonstrate commercial strategies that are closely aligned with the government’s objectives.

For example, a cleantech company in our portfolio recently received invitations to open factories across China. Eager to develop cleantech both as a political and an economic mission, the government in some of these locales used their influence on local banks to make sure the company receives favorable terms with local credit facilities.

The fact is, the Chinese government is like the U.S. government was in the post World War II era — the best and brightest are attracted to public service. They are very effective to work with if you foster the relationships.

What advice would you give to U.S. companies looking to expand in the Chinese market?
Those looking to expand into the Chinese market must first gauge the strength of the opportunity. China is certainly a massive market, but in many industries, China is also one of the most competitive markets. If the market opportunity is there and the organization has the ability to scale, then start building the relationships you’ll need to succeed. Find experienced, proven, referenceable partners that can guide you. It’s also critical to localize your team in China fairly quickly. A strong on-the-ground presence will make all the difference.

The Funders’ Top 10 List

Posted on 14. Apr, 2011 by in Blogs, Entrepreneur, FINANCE


If you’re searching for angel or venture funds in the Metro DC area, and you missed the Potomac Techwire breakfast roundtable on Tuesday, then you’ll want to take note of what the funders’ panel had to say. Many of the themes investors found most important paralleled the entrepreneurs’ advice.

The funders’ panel recommended that entrepreneurs:

  1. Know who you are.
  2. Know your competition.
  3. Validate your business concept. Talk to a lot of people early.
  4. Prototype. It helps tell your story in a big way.
  5. Show investors that you can execute and reach milestones.
  6. Understand your limitations. The founder is rarely the CEO five years later.
  7. Be realistic. Don’t get hung up on valuation and walk away from a good deal.
  8. Bootstrap and be as resourceful as possible. It brings independence and the valuation you want.
  9. Have a business plan. Don’t spend a lot of money making it pretty. Oh, and don’t tell investors your forecasts are conservative.
  10. Do as much due diligence on the investors as they do on you.

And just like yesterday’s blog, one more tip: Don’t approach funding like it’s a conveyor belt. Your company and the business climate aren’t that predictable. Expect to engage in a long, intense process. Each investor has a sweet spot, and it’s all about finding the right fit for both of you.

The sweet spot isn’t just about the sector, the stage you’re at, or the amount of funding you need. It’s also about chemistry. The people who invest in your company will influence how you move forward in a big way. Discord detracts from your ability to focus, execute, and ultimately limits your potential. A synergistic fit between entrepreneur and investor mitigates weaknesses and amplifies strengths. The right investor becomes a trusted, valued member of your team.

I learned a couple of important things about angels during the roundtable. First, most invest in companies within a 1-2 hour drive. It’s a red flag when companies seek angel funding beyond that radius. Unless of course, you use AngelList, which changes the game for both investors and early stage companies. Offered as a free service, AngelList creates an efficient, online marketplace with 1,500 participating angels looking for interesting deals. They’ll ping you if they like your story. AngelList can compress the early stage funding process into a matter of days or weeks.

Thanks again to the sponsors and panelists for Seed Stage Capital Outlook 2011. You offered sound advice. What we’ve discovered during our search for capital is that you’re often generous with your time and offer excellent advice offline as well. While it’s up to the entrepreneur to decide what’s best for the company, your expertise and generosity at this stage make a big difference to startups.

National Museum of Crime & Punishment Will Remain Open During Pending Government Shutdown

Posted on 07. Apr, 2011 by in Blogs, FINANCE, LIFESTYLE

National Museum of Crime & Punishment

WASHINGTON, D.C. – If speculations are accurate and a government shutdown is imminent, popular tourist attractions such as the Smithsonian museums and the Cherry Blossom festivities will no longer be available for the thousands of tourists descending upon Washington this spring season.  In light of the pending government shutdown, the National Museum of Crime & Punishment encourages all tourists coming to Washington to enjoy their time by exploring the three floors and over 600 artifacts of information related to the most interesting subject in America.

“We truly hope that a government shutdown does not become a reality for a variety of reasons,” explains Janine Vaccarello, COO of the museum. “Not only does it hurt the country as a whole, but it negatively affects tourism here in Washington, D.C. during our busiest season.  We want guests to the Nation’s Capital to be aware that our museum will remain open no matter what happens with the government, so they will still have the opportunity to experience a unique Washington attraction.”

Approaching its 3rd anniversary here in Washington, the National Museum of Crime & Punishment (NMCP) has received rave reviews, rated 4 ½ stars by The Washington Post and a “Must see for CSI Fans” from Good Morning America. Admission to the museum offers guests access to interact with a realistic forensics lab, create ID cards and fingerprints, and use a lie detector test. Visitors will also experience first-hand the skills necessary to fight crime through such interactive components as a simulated FBI shooting range and high-speed police chase simulators. Artifacts include J. Edgar Hoover’s badge and boxing gloves given to him by James Braddock (“Cinderella Man”), John Dillinger’s car, the 1967 Hollywood film “Death Car” of Bonnie and Clyde, and the collections of Poncho Villa and Jesse James.

In anticipation of the shutdown, guests have already begun to purchase tickets online for their upcoming Washington itineraries.  Tourists and locals alike are encouraged to purchase tickets in advance at to ensure ticket availability.

About the National Museum of Crime & Punishment

The NMCP’s mission is to provide guests of all ages with a memorable insight into the history of crime, crime fighting and solving, and the consequences of committing a crime in America through a captivating interactive, entertaining, and educational experience. The museum is located on 7th Street NW between E and F Streets in downtown Washington, D.C. at the Gallery Place/Chinatown Metro (Arena exit). Learn more at

LivingSocial—What the Venture Capitalists See that You Don’t

Posted on 06. Apr, 2011 by in Blogs, FINANCE, LEADERSHIP

LivingSocial—What the Venture Capitalists See that You Don’t

Living Social – Tim O’Shaughnessy

When I read in Potomac Tech Wire that LivingSocial closed a $400 million round, the figure was almost too large to comprehend. What makes LivingSocial so valuable? While I haven’t read everything there is to know about this particular investment, I have some thoughts.

It begins with leadership. CEO Tim O’Shaghnessy has a clearly articulated vision of success that inspires his team to execute and achieve astonishing results. His essay about the company’s victory over Groupon, dated July 2012, gives evidence to that fact.

Next is culture. Building a great business is all about the people. Pair deeply rooted core values with a rock-solid identity and you’re able to attract the kind of talent you need (and want). Establish a fun, empowering culture around a product or service your people are passionate about and you’ve created perpetual, positive momentum. When your people come to work energized and engaged, they naturally do the right things and your customers get the best possible experience.

Finally, LivingSocial may be disruptive. Think of Amazon. Think not only of how Amazon changed the game, but also that the company has invested $175 million in LivingSocial. Why on earth would they do that?

Amazon sees tremendous value in what goes on behind the scenes—the same value the VCs see. LivingSocial is about gaining broad and deep market intelligence and refining that data to become more and more powerful over time. The company’s intrinsic value isn’t based on an affiliate program so much as the abilitity to become a monster aggregator of consumer data and intelligence. This core compentency wholly aligns with Amazon’s.

Where does online privacy fit into all of this? I’m not quite sure yet. Anonymity and privacy are not really the same thing. I feel pretty confident that the information LivingSocial aggregates is, in fact, anonymous.

Will the mega investment pay off? I rather suspect so. It all gets back to leadership and having a strong sense of identity and purpose. And it doesn’t hurt that LivingSocial is currently #2 in the industry. Fighting to be #1 is a powerful rallying cry.