Thursday, July 30, 2009

The pros and cons of syndicating a venture investment

I wrote this small piece about the costs and benefits of syndication awhile back for something else, but never posted it. I thought it might be useful to some entreprenuers thinking about syndication. I've been working on a project to raise some funding for a health care IT startup and we're looking at syndicating it. Syndication is when a group of venture capitalists or other investors each put in a portion of the money required to fund a business.

What are the advantages and disadvantages of syndicating a venture investment?

Advantages of Syndication
  • Gives entrepreneur more leverage and access to capital in event of another round needing to be raised (for example, a bridge round can now easily be shopped to different members of the syndicate) and more stakeholders whose interests lie in the continuation of the company.
  • It is much easier to do another series (in this case it would be C or a bridge) with an investor that is already involved. The due diligence is less as the investor is already familiar with the inner workings of the company.
  • Multiple good VC brands behind your company helps affirm your positioning in the eyes of the customer
  • Each of the different VCs can open doors to customer acquisition
  • Multiple resources such as people, advice, counsel and guidance
  • For VCs, shares risks and allows spreading money over more companies; For entrepreneur may diversify future funding streams if another round needs to be raised

Disadvantages of Syndication

  • Multiple resources as advice, counsel and guidance can mean too many voices in management’s ear
  • Different members of the syndicate may want control or seats on the board, which may be difficult for the CEO to manage. We saw this in one of the VC vignettes where VCs each wanted to be on the board and the value they added varied. Yet it is hard for the entrepreneur to handle such delicate matters as they do not want to offend major investors.
  • If they both have enough cash, you might want to see them compete for the deal rather than collaborate and pin you down on a valuation.
  • In down times, the different VCs influence one another – A recent speaker at Sloan talked about a situation where a syndicate of VCs had to decide whether or not add money to a company that had run out of cash. One VC refused, and the others fell into line even though they had been positive before.

Tuesday, July 21, 2009

Two tele-health quotes

Here are two quotes from my trip to the Batanes, and why I believe making access to specialist care in rural areas should be a priority:

“Last year, my father had chest pains and needed to see a specialist in Manila.  We sold our cows and our land so he could go.  I had to take leave from my job to accompany him.  It turned out to be pneumonia, which could have been diagnosed here.”

– Basco, Batanes

“Our daughter was born with congenital hernia. Surgery was required, but the doctor was able to do the pre-op session use tele-health.  This saved us an additional trip to Manila or a much longer stay. Our daughter is doing very well now!” 

–Ivana, Batanes

Sunday, July 19, 2009

Calculating Apple's Gross Margins

Good article here on Apple's ridiculously high gross margins.

Social health insurance schemes in the Philippines

The Batanes, the northernmost district of the Philippines has a very interesting form of social health care insurance. It is run by the provincial health organization as a supplemental scheme to the national PhilHealth insurance. Not everyone is mandated to pay as it is an opt-in scheme. Approximately 1,000 out of 3,000 households is enrolled. 92 pesos covers your whole household, including all people who live with you, even if they are say nieces or uncles. PhilHealth only covers the direct relatives.  

That was the price they decided on after a survey found that it would cost 50 pesos a month. Once paid in, the insurance covers up to 5,000 pesos for hospitalization for the whole family. It covers 500 for in-patient care.  

Interestingly, the insurance is largely sold by the Barangay Health Workers (a barangay is a small unit of government, think perhaps a village of a few hundred people.) There are 129 health workers (not bad in a population of 16,000).  

PhilHealth is automatic for those who are formally employed in tax-paying companies and the government, and costs 100 pesos per month. In the informal sector it is opt-in, though in many cases it has been extended by the government as a care-for-indigent people package.
In the Philippines, since PhilHealth is often insufficient, health care for those cannot pay is also covered out of the budgets of the Congressman, the governor and the municipalities.

Thursday, July 9, 2009

A Democrat for Charlie Baker? I'm thinking about it.

I met Charlie Baker, currently CEO of Harvard Pilgrim, and now gubernatorial candidate in Massachusetts last year.  Baker came to speak in Ernest Berndt’s Economics of Health Care class when I was at the MIT Sloan School of Management.  I came away extremely impressed.  

Baker is articulate, intelligent, confident and fully looks the part of governor.  He has an assertiveness to him that Deval Patrick has sorry lacked in the governor’s office.  I was extremely impressed by his understanding of the health care industry, operational insight and financial savvy.  He’s done well running a profitable business in a union controlled industry.  It seems that he’s done a good job working with them to ensure they are creating value.  

I can’t say for sure how these will translate on the campaign trail.  Baker has experience in government, but also understands the needs of private businesses.  More importantly, he knows how to run them, and that might be just what we need in these tough times.

I’m a registered Democrat, but I would consider voting for Charlie Baker in a general election.  I was a very big Mitt Romney fan for his fiscal discipline and the way he provided a balanced and competent voice (a voice of reason is needed in sometimes in what is essentially a one-party state.  I’m really a Massachusetts moderate, but national Democrat.  But I think Massachusetts may need something different.  

Right now I’m rather down on Deval Patrick after supporting him strongly a few years ago.  Even when he spoke at MIT’s graduation, he seemed very out of touch with the needs of the common people. He told one story about his daughter doing a school project about the four seasons about the Four Seasons Hotel.  In another case, he talked about “looking down upon a sea of people” at Barack Obama’s inauguration.  A few of his actions (pay raises for cronies, re-decorating his office) combined with some of the things Patrick says just give me an intuition that he doesn't really get "it", as smart a guy as he is..  

There has been almost no business innovation in solving many our state’s business problems.  For instance, the MBTA.  When I walk into Government Center, I see a Dunkin’ Donuts and a lousy hot dog stand that sells fake Louis Vuitton bags.  In Hong Kong, if you wanted to, you would never have to leave the subway station.  Their stations are full of value-adding business paying rent.  These people watch the station like hawks to make sure it is safe, increasing security without paying for security guards.  Sell advertising on the Mass Pike.

How did Baker do running Harvard Pilgrim?  When he took the company over in 1998, it was coming off a year where it lost $94 million.  Since then, Harvard Pilgrim has had turned into a profitable coming with one of the highest customer satisfaction rates in the country (it's one the US News and World Report award for this 4 years running).

So count me in as someone who will strongly consider Charlie Baker’s candidacy for governor of Massachusetts.  Time will tell how he does on the campaign trail and whether like Bill Weld and Mitt Romney, he can get moderates to break ranks.  If it's innovation, business savvy and job creation that end up being the key points of debate as I suspect, I believe Baker will do very well.  

Sunday, July 5, 2009

Verizon's LTE 4G build and LTE innovation center

Verizon is going with Alcatel-Lucent to build their LTE/4G network.  Also interesting in there is that they are setting up an LTE Innovation Center in Waltham.  For the MIT readers of this blog, there could be some interesting things going on there...I'll try to dig more when I'm back in the US as I have some connections at both companies.

Woohoo! iPhone Project Management Training App Approved!

It took almost two weeks for approval of PMConcepts by the app store, which surprised me, since project management training doesn't exactly seem controversial.  I'm working on an application spec sheet for the PMP/Project Management training app here.  It's been a fun project - I like my developers in Vietnam (going to visit them in a couple weeks in Ho Chi Minh City), and the writers I hired from various sources.  

I'm working a few more projects in this space (risk management, business continuity, interview training, sciences), with the goal of making some of the content eventually available on phones in the developing world to help managers their improve their skills.  We'll see how it goes.  

Here's the message we all wait for:

Dear Double Bottom Line Partners,

The status for the following application has changed to Ready for Sale.

Application Name: PMConcepts - PMP Prep

Application Version Number: 1.0

Application SKU: 200901

Application Apple ID:320539376 PMConcepts - PMP Prep

To make changes to this application or any of its metadata, log in to iTunes Connect and click the Manage Your Applications module.

If you have any questions regarding your application, click Contact Us.


The iTunes Store Team

Friday, July 3, 2009

Price discrimination to preserve pristine environments and diving in the Batanes

One thing I've noticed about the developing world is that the public doesn't price discriminate enough.

In the Batanes, the airport terminal fee was 20 pesos (about 40 cents) and the environmental preservation fee was 15 pesos (or about 30 cents). Those were the only tourism fees collected by the Batanes, which is a miraculous landscape that absolutely deserve to be preserved.

I had been diving with with Chico Domingo, who is not only the dive instructor, but also the primary tour guide on the island and the director of environmental affairs on the island.

I suggested he price discriminate and raise the fee for non-island residents to at least 200 pesos ($4). That still seems small, given the trash and other environmental harm brought by any tourist (even a responsible eco-tourist). Developing world marine and wildlife sanctuaries are justified in maximizing their revenue to preserve these important habitats.

By the way, diving in the Batanes is great.  Chico is an excellent guide, and there are a lot interesting rock and coral foundations.  Chico took us through some of the caves at the end of our last dive and that was pretty neat.  I saw a giant blue/gray sea snake, a couple giant lobsters, some giant clams at least a meter by a meter in size, a moray eel with a cleaner shrimp in its mouth, two huge manta rays and a pufferfish.  It was also very reasonable in price, substantially less than other dives I've done.  Chico also caught me a gorgeous red snapper with purple dots that turned into a delicious sinigang na isda.

I'll post some pictures of the landscapes shortly as well.