Saturday, May 21, 2011

Who is the real Entrepreneur Magazine?

For entrepreneur’s, Entrepreneur Magazine (EMI) is a distinguished publication which promotes the success of new and growing businesses.  However, a recent Bloomberg article has come across my desk, which offers an alternative and darker side to EM.  The article outlines EMI’s controversial revenue, proceeds from trademark infringement lawsuits against those very entrepreneurs the Magazine was established to enable.  The most recent target for EMI is a website created by a serial entrepreneur in Austin, Texas,   EMI defends its actions by claiming it’s not an infringement if the noun is used in an informal context, such as, Dr. Wadhwani is an entrepreneur.  However, If Pacific’s Eberhardt School of Business honored a student with an award such as, Pacific’s Most Valuable Entrepreneur, then we would be infringing on EMI’s trademark.  So to EMI, I say to you – stop being such an ass!!   Either you are for the entrepreneurs or not.  The actions taken provide evidence that the heart of EMI is not with the entrepreneurs.  With that said, I will NOT renew my subscription to the publication and I hope you do the same.
Oh, by the way, the original founder of Entrepreneur Magazine was convicted of bank robbery.  I don’t consider that a conventional liquidity event.  However, to each their own.

Wednesday, May 4, 2011

So you want to invest in RenRen the next best thing?

Renren issued its IPO this week.  For those of you how don't know, Facebook available in China.  Thus, realizing the success of Facebook, Renren just knocked off the whole-site, just like it was an iPhone or popular new DVD.  Thankfully for Chinese companies, the Chinese government doesn't get bothered by US patents.  So the question is now that Renren is publicly traded in the US and Facebook is not, is Renren just as good?  According to a new MarketWatch article the answer is an astounding NO.  For no other reason than the lack of transparency into Chinese companies.  Keeping this thought alive, Renren had to restate some numbers its initial prospectus.  Also, a board member already stepped down in light of some accounting irregularities.  Hmmmmm, knowing all that, is the temptation too great to avoid the potential home run?  I have often thought of living life vicariously as a great action movie star, but I've never contemplated purchasing securities vicariously.  Maybe this time will be the first.

Is Renren a buy in place of Facebook?

Tuesday, May 3, 2011

Orleans Hill Winery from Lodi CA

Submission by Robert Shanahan

Orleans Hill Winery - Lodi, CA

I recently had the privilege of visiting with Donn Berdahl, co-owner of Orleans Hill, an organic and sulfite-free winery based in nearby Lodi, CA.  After working as chief winemaker at Nevada City Winery as well as other California and French establishments, Orleans Hill was founded as a sole proprietorship in 1989 by Tony Norskog.  Driven by very clear goals of producing a high quality product in strict adherence to USDA certified-organic requirements, business was slow to start in the early years, topping out at around 30,000 cases a year in 2003. 

It was in late 2003 that Tony met Donn, and the pair realized they shared a common vision of winemaking, which led to the restructuring of the company as an S-Corporation and Donn signing on as co-owner in March of 2004.  Orleans Hill is rather unique in that its two co-owners are its only full-time employees.  Donn and Tony buy the grapes for their wines from local growers in the Central Valley, and then outsource most of the processes of production, leaving only the core of the business, the choosing and the fermenting of the grapes to be controlled directly by themselves. 

The crushing operation is overseen by the founders at a third-party facility, and then mobile bottling units are hired for the bottling and packaging process.  Distributors are then used, in partnerships with the bottling company, to move the product to other facilities off-site for storage before shipping to the wholesalers and then on to the retailers.  This allows the business itself to run extremely lean, and through careful financial planning and reinvestment of the majority of the retained earnings, the pair have been able to maintain 100% control of the company without seeking any external financing.

Since Donn joined the operation in 2004, the complimentary skill sets have allowed Orleans Hill to ramp up to just over 160,000 cases a year in 2010, with distribution through nationwide stores such as Trader Joe's, and placement in 43 states; with more on the way.  By maintaining no-nonsense, clear communication with its suppliers, contractors, distributors, wholesalers and retailers, Orleans Hill is able to facilitate this largely outsourced operation with the utmost level of quality control. 

Orleans Hill is most famously the maker of "Our Daily Red", but also makes a Trader Joe's exclusive wine called "WELL REaD" under the Heartswork Winery brand, and a full line of wines under the Orleans Hill Winery brand including: Lodi Zinfandel, Lodi Syrah, Santa Maria Merlot, Cote Zero, Cabernet Sauvignon, and Alexandria.  With demand picking up at increasing speeds, it remains to be seen if this model can be sustained forever, but for now, Tony and Donn are extremely happy with their business, their family lives, and the great wine they have been able to share with millions of Americans to date. 

Check out the shelves of your local store for Tony and Donn's hard work, and check out their website for more information on their products!

Thursday, April 21, 2011

ZipCar IPO

By Tiffany Chu-Chuuuu

It was nice to apply what we learned about initial public offerings to a company we read a case on – ZipCar. The article briefly introduces ZipCar’s business model, its board of directors (AOL co-founder Steve Case and former eBay CEO Meg Whitman), its investment groups (ie: Norwegian investment firm Smedvig Capital AS), and its individual investors that are selling the shares. Planning to trade on theb Nasdaq, Zipcar is aiming for a IPO value of “about $125 million at the midpoint of its expected price range of $14-$16 per share. Of that, the company expects proceeds of about $89 million, $46 million of which it plans to use to pay down debt.” 1 The offering is expected to price Wednesday night, with the stock to start trading Thursday, April 14, 2011. Overall, the article expects ZipCar Inc to “get a warm reception from Wall Street for its planned initial public offering”.

While I was waiting for Zipcar to premiere on the Nasdaq, I looked up the only investment group Christina Rexrode, AP Business writer, mentioned in the article, Smedvig Capital AS.  Smedvig has 30 business in their portfolio with one company standing out – Streetcar, Ltd. Christina had mentioned Zipcar moving overseas last year (2010) by buying a UK rival Streetcar Ltd. So, I thought it was interesting how Zipcar partnered up with the same investment group that represented the company that Zipcar had acquired. Opening at $18 per share on April 14, 2011, “Zipcar closed at $28 per share, climbing up 60% in a day.” 2 Zipcar definitely performed better than the usual 10%-15% increase we learned in class. (Most definitely fared better than Knoll Furniture!) As Henry Blodget mentioned in his article in “Business Insider”, “Zipcar’s underwriters, Goldman Sachs and JP Morgan, just screwed the company and its shareholders to the tune of an astounding $50 million”. 2 In addition, an IPO ZipCar thought that charged a “7% IPO fee” on the $180 million the company raised (~13 million) in fact cost the company about $63 million”.

Even though it may seem that ZipCar got the bad end of the stick, the company’s shares performed exceptionally well for a company that has “not earned a profit in its 11-year history; that is has nearly $100 million in debt; that it posted losses of more than $14 million last year; and it expects to lose money again in 2011.” 3 ZipCar’s prospectus also warned, “We do not know if our business operations will become profitable or if we will continue to incur net losses in 2012 and beyond”. 3 It seems that the “textbook reason”, as Dr. Wadhwani puts it, why ZipCar went public is to raise capital to pay off its debts. As of April 21, 2011, ZipCar’s (ZIP) stock value is at $29.15 with 596,070 in volume and a 52-week high of 31.50 and low of 25.90. 

Wednesday, April 20, 2011

Is the Ivy League really killing innovation?

A new Business Week article criticizes "big business" for failing to provide us with any remarkable new innovations. The article blames this lack of innovation on the idea that managers hire Ivy League professors (or similar counterparts) to help standardize all the processes in a business, whereby innovation and creativity are stifled. Their argument is that "big business" need to gain back the entrepreneurial spirit they once possessed. This entrepreneurial spirit is what helped the largest of the large companies end up where they are now.

An interesting point raised is because established companies have become so risk averse, now when a creative mind attempts an innovation and fails, they innovator is subsequently fired for failing. Therefore, the managers who allow such attempts are reprimanded and unlikely to allow further attempts at innovating something new. The authors argue, instead of the innovator being fired, they should be given a raise and an atta-boy and told to continue their pursuit.

(we know prof. wadhwani is NOT one of those stifling ivy league types!!)

How the Ivy League Is Killing Innovation