Volume and deal velocity have gone up dramatically at the PPX in recent weeks, especially post bailout. One of the trends we are tracking at the PPX - and one that we feel is most responsible for the rise in activity is the following, which I’ll describe as a trend in investment firm activity toward multiple local participation.

What is happening is investment firms (folks engaging in private capital formation on behalf of clients) are ratcheting down risk parameters and attempting to spread the risk by syndication. Which is a relatively new concept as applied to capital formation. Small firms are still doing the small deals. But they are increasing reaching out to other firms to take down part of the deal as a risk mitigation strategy.

This requires a somewhat new skill set, as well as a wholly different way of thinking and approaching the process.  Private capital formation has traditionally been a sort of opaque, specialized activity largely controlled by a small number of participants. Firms have traditionally been highly competetive, secretive and protective of clients, relationships, etc.  But this is changing  - in part duet to technological advances, but I think it is more due to today’s economic conditions. We live in a time of accelerated returns, where the old methods of doing business are simply inefficient given today’s market structure. Another relevant factor is the declining comission structure of traditional brokerage business and the more recent fallout in managed account business by advisors (clients have been burned in the Meltdown, and there is a crisis of confidence in managed products. We’ll find out how bad things are when the hedgies start reporting at the end of the next quarter). So smaller providers of investment advice are having to find new ways of adding value, and one of them is capital formation.

Sure there are many firms that are used to doing business one way and are reluctant to adapt. But there are a far larger number of small firms that are trending toward a more open way of doing business - and seeking the participation of other firms in the process. Deals are becomming collaborative. and they are taking on a more local flavor, as well. Firms hired to raise capital are not only looking to include multiple participants (insofar as financial services firms are concerned) but they are starting the search for collaborators on a regional basis, local to the firm for whom they are doing the raise. Over time, as more and more firms begin to participate in deals, there may well be a strong tending to local sources of capital.  And this all fits in with the concept and evolution toward so called “resilient communities” - but that’s another story, for another time.  

Whether or not the Meltdown was the trigger for this structural change in private capital formation, or whether the trend is organically risen out of secular changes in the marketplace remains to be seen. But what is clear at this point is that this trend is real and strong, and we’ll all find out how it works in short order.

Personally, I believe this trend to be a harbinger of very positive things. Of course I am biased, the PPX has been designed with this trend as a forecasted inevitability - and we have tools in place to assist those institutions who are proceeding embrace the trend toward efficient, collaborative structuring. This trend, if it continues, will support investor confidence, while increasing the relative availability of capital to small firms, and increasing their throughput.

But there is something even more important at stake, given the times we live in. True, the old model no longer works, and true, there are solutions like those offered by the PPX.   But there is an imperative to participate in these solutions, and to participate in capital formation. Beyond the necessity for small firms to find new ways of adding value to stay alive. There is a national imperative that the world wide credit crisis not be allowed to stymie productive growth in the US. As a nation, we need as many participants in private capital formation as possible. Because we need the engine of growth to continue running.

So - to all financial services firms who are licensed and registered to engage in private capital raising, you have a duty, not only to your firm, but to the Country. Keep the wheels turning. Explore that business. There is the perception amongst many  small financial services firms that Private Capital formaion is a terribly complex process, fraught with danger, and that the only folks who make money out of it are deeply ensconsed in the Old Boy Network. But in this day and age, you should know that nothing could be further from the truth. While the regs are not easy, they are manageable by the brokerage community. And firms are waking up to this fact and wading into the waters on an increasing basis.

If you are a “gray area” finder, you should really register at a firm now. Firms are more open to adding reps who understand this business than at any time in the past. Once you are registered, you can take advantage of institutional platforms like the PPX. And to firms who have been reluctant to throw their hats in the ring, you should really learn the regs. Compliance is manageable; especially if you are running a registered firm already. Throw your hat in the ring! There are tools available to support you now. And America needs your input./

The Pundits never fail to amaze me. In fact, they amazed me so much that I had to stop watching CNBC; I began to fear being manipulated by some know-nothing commentator’s drivel. They know very little - maybe nothing. Their interpretive skills lie somewhere between non-existant and employing corporation groupthink.  

Anyway, I digress. But there is one person (who is NOT a pundit, he is a real live investement manager) who has been quietly hitting bulls eyes for years. His name is Peter Schiff.  And below is a round table of some Pundits and him… Gosh the Pundits still don’t get it… Anyway, I thought this was worth watching.  Want to better understand where we are, why the Dollar rallies so strangely, and where we’re gonna be in short order?

Vitally important stuff if you are interested in capital formation and the health of our economy.

Greetings - we’re happy to announce the addition of several filters to the NetworkBuilder Tool.  Now you can filter the results by type of firm and type of clients. This is important, since the kind of project you have will imply one or another type of investor. If you are raising $80MM, you wouldn’t want to waste time with Angel Groups, for example. Conversely, were you raising $1MM, you would not want to waste time with multibillion PE Funds. So the filters are a no brainer, and we are glad that they are finally up and running.  Go to the NetworkBuilder Tool and check ‘em out. Few things are as satisfying as instant gratification

Instead of focusing on bailouts and socializing industries whosale, here’s an idea that would make the economy hum, and would not benefit the friends of the powers that be.

Create a fund that is run and controlled by the retired core of CEO’s. Govie should just put cash into it, then let the CEO’s run the thing. They would add and contribute their knowlege and experience as execs in several ways. One- they would conduct DD on all firms/projects seeking financing (this would be done in house so that the fund could ultimately determine best bets). Two - they would contribute their knowlege and expertise as MENTORS to the execs at the potential companies. Three - they would, at their discretion and subject to the objectives and parameters of the fund, make investment decisions.

This way, you would take advantage of a huge experiential database, and support capital formation to small companies in ways never before possible. At a time when credit is tighter than ever. And it woulld likely cost a lot less than 700BL, provide enormous benfits (both in alpha and in the repercussions within local economies), and solve one of the most problematic issues facing capital formation: the cost of performing due diligence.

I cannot take credit for this idea, it is the long time dream of a friend of mine who is not only very successful at investment banking, but also loves this country. If anyone out there thinks this is a great idea as well, let me know. If there is enough interest, we’ll use some of our contacts to try and lobby for this. Unlikely? Yes. Impossible, no. But if the govt is going to hand out pork, might as well put it to use in a productive way - or at least a more productive way than say, Goldman Sachs - who used their bailout bux to fund YEAR END BONUSES - to the tune of nearly $5MM per partner… Is this a just reward for fomenting the largest financial f-up in history?

This was previously posted, but I wanted to post it again because of its relevance 

The power of technology to transform our lives is growing exponentially. We use the latest generation of technology to evolve the next generation. That’s an idea that many planners (and private equity folks) overlook. No matter what happens as a result of the meltdown, keep in mind that the overall environment has changed in fundamental ways from say, yr 2000

• Bandwidth Capacity will triple every three months - for the next 20 years - on existing networks
• US is 20th in the world insofar as Internet Penetration
• 1992: First Text Message Sent. Today: Daily Text Messages exceed the population of the planet.
• Sequencing the HIV Genome: 15yrs. Sequencing SARS: 31 Days
• A Week of the NY Times has more info than the avg 18th Century person was exposed to in a lifetime
• In 2007: Technical Data Doubles Every Two Years - In 2010: Technical Data Doubles Every 72 Hours
• 55% of Teens use Social Networks. 48% update thier page daily
• India’s Middle Class is larger than the entire population of the US
• China will be the largest english speaking country in under 10 years
• English Speaking College Grads, 2006:

  USA: 1.3 Million
  India: 3.1 Million
  China 3.3 Million

 Food For Thought///

This weekend I got an annoyed call from a friend who is a VC. I’ve known him for years, and he is a good guy. But he was pissed off. He had just finally joined the PPX (after talking with me about what a bad idea it was for the past three years). Now that he saw it in operation he was angry. And when he found out that 3000+ Members use it regularly, he lost it. He said “you know you’re ruining an industry. This sort of information doesn’t need to be out there, people shouldn’t have access to it!” I asked him why, knowing the answer full well - I just didn’t expect to hear it from him. Bottom line - the old process, according to him, is perfect. It is not broken. Not even flawed. The old system assures that firms like his get to rule the deals, keep their power base, and charge very high fees, in terms of ownership, control, etc.

He can’t accept the idea that an entrepreneur might believe he would have access to capital in the future without his say so.  And so bargain harder. Or even refuse to give exclusives on potential further rounds. Access, according to him, should not be easy, or even available to entrepreneurs without his consent, or that of his network.

The bottom line, of course, was fear. Fear that in an environment of access, he would not be able to make the same kind of deals. Competition would drive down his profits. His competitors would start eating away at him, one bite at a time.

Well, I’m not the very most politic guy in the world. In fact, it is perhaps a character flaw that I tend to say what I mean - directly and without terrible much sugar coating.  First of all, the industry has changed. Firms everywhere are ratching down risk parameters — including his - so maybe in the old days of yore his position was justified, but NOT TODAY. Not when liquidity is scarcer than it ever was. And of course, he wants to cherry pick deals and go for 30 bangers on his money. Great! He can still do so! But realistically, in an environment where managers can’t beat the S&P he’s unrealistic. And in a time of accelerated returns, and when we are facing the biggest potential economic slowdown in history he’s just WRONG. Hey- maybe his fees will get cut down a bit - but that is not the fault of the PPX! That is a reflection of the times we live in.

Electronic access is ubiquitous in every market - and it should be in private capital formation too.

In fact, instead of winging that he may not be able to pull in 30 bangers, he should consider that maybe, just maybe, by spreading the risk, he can do a consistently more profitable flow - and maybe, just maybe, it is his duty as a participant in the capital formation system, that he make the process as transparent and efficient as possible, given the real national necessity.

His whining - yes, whining - reminds me of NASDAQ Market Makers during the mid nineties, bitching about how soes bandits and daytraders were ruining their business. Well? Markets EVOLVE. Market Making, as it had existed in the pre-internet era, was dead. Still walking, but dead as a dinosaur.

So I will repeat, my friend, and I hope you will not be too offended - you and your company are speaking Dinosaur!! Your AGE is over, and like it or not, there is a new environment.

Either you will adapt and overcome (as I have full faith you will) or you too will go the way of the dinosaur.

Like i said on the phone, I suggest you and your firm sign up every one of your reps to the PPX as quiockly as possible; the cat is out of the bag. By denying yourself and your firm access, all you do is harm yourself. Get real. Wake up and smell the market structure! And quit blaming the messenger!

I

Alexa says our activity is up nearly 300%. We think this is accurate, with the added note that activity within particular parts of the site is up orders of magnitude more. The NetworkBuilder Tool is starting to get heavy activity, which is a good thing. Why? Far as we can tell, firms are spreading investment risk by creating placement agent networks on an increasing basis. It is also a sign of the times that firms are beginning to use these tools rather than simply sit by passively. Which is also good news - it means that firms are “getting it”. Why sit there and wait for a call when you can actively search out every funding source with cash ready to go for the specific type of deal RIGHT NOW?  There is nothing like instant gratification.

This goes out to all users - especially frequent ones. If your email has changed and you haven’t updated it, keep in mind that someone may try to contact you, find that your email is invalid, and then attach negative feedback to your profile!

Always keep your info updated and avoid unecessary poor feedback.   login and then go to “My Account” to make sure everything is current.

This is one of those perennial questions that keeps coming up: “I have a great idea, so why can’t I get funding” .

There could be any combination of a thousand different answers. But the one this topic is about concerns the people behind the idea. And I’m not going to sugarcoat this issue - because it is fundamental to executing a sucessful raise.

If you get a great team of people together, they are capable of conquering almost any goal. If they have a mediocre business idea, they can identify what isn’t working, and turn the mediocre into something better. If they have a great idea, there is no telling how far they will take it.

But take the converse example - a poor team with zero management skills and great idea. It is questionable whether they will be able to perform at all! Let alone if their idea was bad at first.

Ideas are like A*******. Everybody’s got one. But the ability to execute effectively is not so easily found. And everything, everything ultimately comes down to the execution.

So - if you have a great idea, invest time and energy in bringing folks to the table who are excellent leaders and can create a “foco” of leadership that can execute. If you go it alone (and you do not have that excellent management track record) it is likely that you will never see the kind of results that you otherwise might.

Build a solid core of management experts advisors, and mentors. This will pay dividends far in excess of the work required to put together such a team. Just my thoughts on a Saturday morning.

We’ve had a bunch of questions re documentation for the new features. Yes, it is coming. We should have documentation of the features on line by Monday. I realize it is a bit wierd to launch the functionality with no explanation, but please bear with us - remember these were all user requested additions, and we felt it was better to just go with them first, launch ‘em as soon as we had them operational - and then provide instructions, etc as soon as possible. Remember - everything still works as it did - there are just some additional features that you may or may not want to utilize