Tag: investment genius

Early Shopify Investor Bessemer Turned A $5 Million Bet Into $500 Million. It Could Have Been $22 Billion Today

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Shopify’s soaring stock has one venture capital firm looking at a $22 billion windfall that never was.

Thanks to skyrocketing demand for its online business-building tools, the Ottawa-based e-commerce giant has brought a windfall to its public market investors. Its value peaked at $84 billion last week, briefly making it the most valuable company in Canada, and pushing the net worth of its 39-year-old CEO Tobias Lutke north of $6 billion.

But for one of its earliest investors, San Francisco-based Bessemer Venture Partners, the hype around the company is bittersweet. The firm first invested $5.5 million in the company’s initial funding round, and after additional investments built a 26% stake worth $500 million when it went public in 2015. Though as is the typical modus operandi of venture capital firms — hold onto investments while the company scales and cash out following an IPO — Bessemer had redistributed all its shares back to its partners by the end of 2018, when the company was worth $15 billion.

Today Bessemer’s stake would currently be worth close to $22 billion, the firm says. In the past month, Shopify’s share price has doubled after it generated $470 million in revenue in the first quarter, as demand for its online tools has skyrocketed from brick-and-mortar retailers who have been forced online by the COVID-19 pandemic. Founded in 2006, it now has more than 1 million businesses using its platform, which provides a one-stop shop for companies to create websites with payment processing, order fulfillment and ad management.

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By exiting Shopify two years ago, Bessemer left at least $17 billion on the table. “I couldn’t comprehend that they would have this massive amount of success at that time,” says Alex Ferrara, the Bessemer partner who led Shopify’s initial funding round in 2010.

Even though a global pandemic does not factor into the forecast of most investors, Bessemer’s stake in Shopify stands out as a significant missed opportunity in venture investing because it is rare that a venture capital firm would have built such a large stake in a hot startup, says Will Gornal, a professor at the University of British Columbia’s Sauder Business School. “They’re probably kicking themselves.”

Venture capital funds are typically under pressure to post returns on investments in private startups over a relatively short period of time, between five and 10 years, says Gornal. Once a company goes public, a venture firm will often sell its shares back to its own investors, which include pension funds and university endowments, giving them the option to hold their stake in the company or cash out. This kind of mission isn’t conducive to reaping bigger returns that come years after a public offering, like those generated by other tech giants such as Amazon and Google.

Shopify is among a handful of technology companies that have surged in value as the COVID-19 pandemic has forced society to rely on online tools. The big technology firms  Amazon, Microsoft and Google have floated around the $1 trillion valuation mark. The pandemic boosted the rise of newer arrivals, including Zoom, the video-conferencing firm that is now being used not only to connect office meetings but to hold family gatherings. After going public last year, the San Jose-based firm is now worth $44 billion, almost triple its value at the start of the year. Investors such as Emergence Capital Partners, which took a roughly 12% stake early in the company’s growth and says it still holds some of its shares, have had time to benefit from that public-market boost.

Some of Shopify’s early investors were being minted as billionaires even before the pandemic struck, including its CEO Lutke, his father-in-law Bruce McKean, and a couple who invested $750,000 early-on, as Forbes reported in February. But Bessemer is not alone among early investors in Shopify for exiting the company before the height of its riches were truly clear. Felicis Ventures, which invested alongside Bessemer in 2010, has since redistributed its shares back to its limited partners, the firm says.

While Bessemer’s one-time stake in Shopify might prove a once-in-a-lifetime type tech position, Ferrara says the firm will gladly take its realized returns on the deal: between 80x and 100x its initial investment. Says the venture capitalist: “We didn’t have a crystal ball.”

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David Jeans

David Jeans

I’m a staff reporter at Forbes covering tech companies. I previously reported for The Real Deal, where I covered WeWork, real estate tech startups and commercial real estate. As a freelancer, I’ve also written for The New York Times, Associated Press and other outlets. I’m a graduate of Columbia Journalism School, where I was a Toni Stabile Investigative Fellow. Before arriving in the U.S., I was a police reporter in Australia. Follow me on Twitter at @davidjeans2 and email me at djeans@forbes.com

Source:https://forbes.com

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Why Your Index Fund Is Built To Survive The Coronavirus Outbreak

With The market already down more than 10%, the coronavirus-triggered plunge may turn into one of the fastest bear markets to hit U.S. stocks ever. But, believe it or not, a passive investment in the S&P 500 may be the best way to ride out and ultimately profit from the storm.

As coronavirus spreads, the problems at these companies will worsen and cyclical sectors that track closely with global gross domestic product growth will also suffer. This morning, the industrial and materials sectors went into the red, posting negative returns for the past 12 months. They joined energy, down 30% over the year, as the only sectors to lose money. The S&P 500 is still ahead 7% year-over-year.

Here’s the good news: Your index fund already predicted all of this.

Even before the coronavirus became a global crisis, the S&P 500 was under-weighted in the types of stocks that were most vulnerable to the outbreak and it was heavily over-weighted in the software, internet, online retail and social media companies that are likely to either weather the storm, or thrive.

The Coronavirus Plunge

Coronavirus caused the quickest 10% market correction since the 2008 financial crisis.

                           

Almost a quarter of the S&P 500 index is comprised of the ten biggest companies in America by market capitalization: Microsoft, Apple, Amazon, Facebook, Berkshire Hathaway, Alphabet (Google), JPMorgan Chase, Johnson & Johnson, Visa and Wal-Mart.

These companies have pristine balance sheets and strong long-term growth prospects to manage through the outbreak. Some may also see increased sales as people stockpile food and health safety products, or benefit from people staying at home. About half of the overall S&P 500 is in information technology, healthcare and communications stocks —all unlikely to see major long-term disruptions due to the outbreak.

On the other hand, the types of businesses that are in free-fall, such as energy and retail, hardly make a dent as a weighting in the S&P 500. For instance, the entire energy sector entered 2020 at about the same weight as Apple alone. Thus energy’s 20% plunge over the past month is causing relatively minor pain. Retailers like Macy’s, Gap and Nordstrom that may struggle further are also minor weightings, in addition to small-sized drillers like Cimarex Energy, Helmerich & Payne, Cabot Oil & Gas and Devon Energy.

While holders of the S&P have sidestepped the worst stock implosions since the outbreak, they’re also big holders of potential beneficiaries.

Johnson & Johnson, United Health Group and Procter & Gamble are about 1% index weightings and they could see an uptick in sales as people all the world prepare for the virus’s spread. If more people begin to work from home, companies like Microsoft will benefit as demand spikes for its suite of cloud products including email and remote working services. Wireless carriers like Verizon and cell tower giants SBA Communications and American Tower will benefit from rising smartphone and internet activity.

Any surge in online sales will help ecommerce companies like Amazon and logistics warehouse operator Prologis as well as another S&P 500 member Equinix, one of the largest data center real estate investment trusts. Streaming services like Netflix and internet giants like Google and Facebook will also see a boost in eyeballs from masses of homebound Americans.

You guessed it. Each of these companies has high weightings in the S&P 500.

Your Index Fund Picks Winners

The biggest weights in the S&P 500 are also the largest and most successful companies in America.

                        

The index is well-prepared for the coronavirus because it is designed to track changes in the economy, which may actually be accelerated by the outbreak. The S&P 500 weights companies by market capitalization, meaning it increases exposure to companies with improving business prospects and rising stock prices, and it decreases exposures to those with worsening fates.

Already, people have been avoiding department stores and brick and mortar retailers, and driving more efficient vehicles, cutting back on oil and gas consumption. Movie theaters are being made obsolete by streaming media services. By design, the S&P has done a near-perfect job keeping up with these changing economic trends and consumer habits.

Investors, meanwhile, have spent the past decade bidding up the stock values of cash-generating software and internet companies, and have been abandoning stocks in companies with heavy debts and large pension obligations, or those exposed to economic cycles. Here again, the S&P 500’s algorithm has been trimming holdings in burdensome industrial companies and auto manufacturers. Information technology, the most heavily weighted in the index has fallen about 5% over the past month, but is still up 23%-plus over the past year.

In 2007, at the outset of the financial crisis, Berkshire Hathaway’s Warren Buffett famously predicted an ordinary investor in an S&P 500 index fund would beat just about any hedge fund on Wall Street. Buffett offered a $1 million bet—payable to charity—to anyone who thought they could pick hedge funds that would beat the index over the ensuing decade.

A hedge fund investor named Ted Seides took up Buffett’s wager. It wasn’t even close. Seides conceded a loss in 2015, waving a white flag of defeat before the decade was over. The S&P returned 8.5% annually over that ten-year stretch, while the average hedge fund failed to deliver half that return.

The reality is as follows: Market corrections like the current one are frightening. But sometimes, the smartest play is also the easiest. With an investment in the S&P 500, the house is on your side.

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Antoine Gara

I’m a staff writer at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, M&A and banks. I’m a graduate of Middlebury College and the Columbia University Graduate School of Journalism, and I’ve worked at TheStreet and Businessweek. Before becoming a financial scribe, I was a part of the fateful 2008 analyst class at Lehman Brothers. Email thoughts and tips to agara@forbes.com. Follow me on Twitter at @antoinegara

Source: Why Your Index Fund Is Built To Survive The Coronavirus Outbreak

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Toxic Signs Of A Multifamily Investment

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When investing in multifamily properties, there are other factors outside the cap rate, P&L, rent rolls and cash on cash that you should consider. In fact, the numbers, although highly critical in your analysis, are only a portion of what should dictate the decision to proceed. As you begin your due diligence period, you may want to consider these other potential pitfalls before you seal the deal.

What To Look For

The pulse of a multifamily investment doesn’t always come from what the books are saying. In fact, if you fail to investigate the day-to-day culture of tenants and demeanor of the current property, you could be in for a big surprise.

Unless you have the privilege of being one of the few investors that can walk into a new property and completely clean house and not worry about cash flow, these indicators may be warning signs of a much deeper-rooted problem that may not be worth the investment.

• Excessive wear of interior of units: Normal wear and tear is one thing, but severe deferred maintenance found amongst a higher percentage of units could be a telling sign of trouble. Outside issues found in inspections, walking each unit is by far one of the most effective ways to determine if this is an issue.

• Consistent negative feedback from tenants: The key here is listing any repetitive, serious issues that keep coming up and being able to discern from the minor issues. Talking to tenants is a great resource for information, and you should capitalize on the opportunity while you are walking each unit. Understanding that tenants have no real incentive to speak anything but the truth typically makes the feedback more reliable and genuine.

• High traffic at night: How a property operates at night is another piece of the puzzle you may want to consider when analyzing a multifamily investment. Typically, during the day, people are at work and there is not much activity. A visit at night can give you the insight you may need to see if the safety of the property is adequate or not. Extremely high traffic at night could be a potential indicator of crime, but, more importantly, it can be a deterrent for future tenants.

• The unhappiness of tenants: Are the tenants unhappy or happy? It might seem like a silly question at first; however, the crux of the sustainability and future of the investment can lie within the answer. Do you see more positive feedback than negative? If this answer is no, you may want to find out why and see if the solutions are in line with the budget and the vision of the investment. Solutions to these issues could be as simple as a more secure entry room door or better lighting outside the walkways. However, if it’s due to criminal behavior or domestic issues in the complex, this can help open your eyes to the entire picture and consider factors the numbers fail to disclose.

As investors scream through the numbers, it’s easy to bypass the human side of the transaction. Where the human component of multifamily should be considered just as crucial to the decision, it’s not uncommon to be an afterthought or one of the lower priorities of the analysis. Focusing solely on the bottom line and not taking this factor into consideration is a recipe for disaster.

The damage that a toxic culture in a property can do is much more impactful because it not only affects the individual, it can spread to the entire community. You can fix a leaky sink, a broken heater or clean up the landscaping, but not addressing these issues can take a major strain on the investment if you’re not prepared.

Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?
Alex Vasquez Alex Vasquez

Owner and Qualifying Broker at Rhino Realty Property Management and Rhino Realty B&B, entrepreneur, investor, advisor, author and speaker. Read Alex Vasquez’ full executive profile here.

Source: Council Post: Toxic Signs Of A Multifamily Investment

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http://www.biggerpockets.com – The 50% Rule is a great tool for quickly estimating the potential cash flow from a real estate investment. This video will walk you step by step through the math and show you how quickly and easily a cash flow estimate can be – for any size real estate investment.

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Education

3 Purchases or Investments You Can Make to Save Money on Your Business Taxes

With a little over one month to go in 2019, small business owners should think about purchases or investments that make good business sense and will give them a break on their taxes.

Owners with available cash and a wish list should consider what equipment they need. Or, do they want to create a retirement plan or make a big contribution to an existing one? If they have home offices, are there repairs or improvements that can be done by Dec. 31? But owners should also remember the advice from tax professionals: Don’t make a decision based on saving on taxes. Any big expenditure should be made because it fits with your ongoing business strategy.

A look at some possible purchases or investments:

Need a PC or SUV?

Small businesses can deduct up-front as much as $1,020,000 in equipment, vehicles and many other types of property under what’s known as the Section 179 deduction. Named for part of the federal tax code, it’s aimed at helping small companies expand by accelerating their tax breaks. Larger businesses have to deduct property expenses under depreciation rules.

There is a wide range of property that can be deducted under Section 179 including computers, furniture, machinery, vehicles and building improvements like roofs and heating, air conditioning and ventilation systems. But to be deducted, the equipment has to be operational, or what the IRS calls in service, by Dec. 31. So a PC that’s up and running or an SUV that’s already in use can be deducted, but if that HVAC system has been ordered but not yet delivered or set up, it can’t be deducted.

It’s OK to buy the equipment and use it but not pay for it by year-end — even if a business buys the property on credit, the full purchase price can be deducted.

You can learn more on the IRS website, www.irs.gov. Search for Form 4562, Depreciation and Amortization, and the instructions for the form.

Home Office Repairs

Owners who run their businesses out of their homes and want to do some repairs, painting or redecorating may be able to get a deduction for the work. If the home office or work space itself is getting a makeover, those costs may be completely deductible. If the whole house is getting a new roof or furnace, then part of the costs can be deducted.

To claim the deduction, an owner can use a formula set by the IRS. The owner determines the percentage of a residence that is exclusively and regularly used for business. That percentage is applied to actual expenses on the home including repairs and renovation and costs such as mortgage or rent, taxes, insurance and maintenance.

There’s an alternate way to claim the deduction — the owner computes the number of square feet dedicated to the business, up to 300 square feet, and multiplies that number by $5 to arrive at the deductible amount. However, repairs or renovations cannot be included in this calculation.

Owners should remember that the home office deduction can only be taken if the office or work area is exclusively used for the business — setting up a desk in a corner of the family room doesn’t quality. And it must be your principal place of business. More information is available on www.irs.gov; search for Publication 587, Business Use of Your Home.

Retirement Plans

Owners actually have more than a month to set up or contribute to an employee retirement plans — while some can still be set up by Dec. 31, plans known as Simplified Employee Pensions, or SEPs, can be set up as late as the filing deadline for the owner’s return. If the owner gets a six-month extension of the April 15 filing deadline, a SEP can be set up as late as Oct. 15, 2020, and still qualify as a deduction for the 2019 tax year.

Similarly, contributions to any employee retirement plan can be made as late as Oct. 15, 2020, as long as the owner obtained an extension. This means owners can decide well into next year how much money they want to contribute, and in turn, how big a deduction they can take for the contribution.

You can learn more at www.irs.gov. Search for Publication 560, Retirement Plans for Small Business.

–The Associated Press

By Joyce M. Rosenberg AP Business Writer

Source: 3 Purchases or Investments You Can Make to Save Money on Your Business Taxes

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Education

 

Measuring The Total Economic Impact Of Unified Endpoint Management

Today, the average IT organization is spending at least 5% of their organization’s annual revenue on IT investments – and the cost of each investment spans far beyond its price tag. Each one needs to be deployed and maintained by IT staff that is grappling with more tools and software products than ever before. Of course, supporting an IT staff comes with its own set of costs and challenges. CIOs, CTOs, and their teams are human resource scarce and spread extremely thin, so the opportunity cost of focusing on one tool versus another has never been greater.

This complexity comes at a time where clearly defined IT strategies that bring about positive impact to the business are non-negotiable. According to IDG’s 2019 State of the CIO report, “62% of CIOs say that the creation of new revenue generating initiatives is among their job responsibilities.” 88% claim to be “more involved in leading digital transformation initiatives compared to their business counterparts.” Net-net, the onus is on IT leaders to streamline efficiencies, reduce total cost of ownership (TCO), and net a return on investment (ROI) for the business.

IT investment decisions driven by real customer data

Forrester has been instrumental in helping business decision-makers overcome their resource, budget, and investment challenges by introducing a Total Economic Impact™ (TEI) methodology. Not only does the TEI take costs and benefits into account, but also the time saved and economic impact of strategic decisions made. Forrester’s TEI assessments are drawn from real client experiences with vendor products and services. The team diligently documents customer outcomes to better understand their positive or negative business impact. Consulting this unique research methodology helps business decision makers justify and future-proof their investments.

Making the transition to unified endpoint management

If your organization is like most, it has a mix of devices that employees use to get work done – whether they’re corporate-liable or supported under a bring your own device (BYOD) program. With 464 custom apps deployed across the average enterprise, procuring a means to manage devices and everything on them (not just apps, but also content and data) has become mission-critical for businesses.

Traditionally, mobile device management (MDM), enterprise mobility management (EMM), and client management tools (CMTs) have been relied upon to get the job done. However, business use cases for devices have become more complex and wide ranging. These shifts are necessitating a tool that makes it possible to manage everything from one place. This is unified endpoint management (UEM).

Commissioned by IBM, Forrester Consulting recently conducted a TEI analysis of IBM Security MaaS360 UEM customers to determine whether they are reducing TCO and netting a quick break-even on their investment. The Forrester team took the time to glean feedback from 19 MaaS360 UEM clients representing financial services, nonprofit, utilities, manufacturing, and professional services industries. These individuals are responsible for managing anywhere from 500 to 100,000 devices for their respective businesses each day.

How UEM from IBM resulted in significant ROI1

Across the 19 clients that were interviewed, Forrester identified the following key benefits. These amount to a three-year 160% ROI and payback in less than 3 months:

  • Endpoint configuration: a 96% reduction in time spend provisioning devices
  • End-user setup: a 47% reduction in time spent getting employees up and running
  • Modern management: $22,960 saved from simplifying their management approach
  • Support ticket remediation: 50% fewer tickets and 55% less time taken to resolve them
  • Security breach remediation: 80% reduction in number of incidents experienced

Of course, these benefits were experienced by a composite organization used to represent the 19 customers surveyed by Forrester. Organizations considering UEM that are actively seeking their own customized TEI assessment can now work with IBMers to do just that. Request your own complementary assessment today to understand whether you can expect a return on your UEM investment, and if so, how quickly you can expect your payback period to arrive.

Request a custom Forrester TEI assessment now

1 The Total Economic Impact™ Of IBM MaaS360 With Watson, a commissioned study conducted by Forrester Consulting, April 2019

John Harrington John Harrington

John Harrington is a Program Director at IBM Security, overseeing product marketing for data security and unified endpoint management (UEM). In this capacity, he works with product managers, product marketers, and account managers to provide guidance for businesses encountering modern cybersecurity challenges. He’s focused on helping clients learn how to establish digital trust and the various ways Guardium and MaaS360 can help them keep their data and endpoints protected. John is also working towards an MBA graduate degree at Villanova School of Business, and spends his spare time exploring the city of Philadelphia with his wife and their two beagles.

Source: IBM Security BrandVoice: Measuring The Total Economic Impact Of Unified Endpoint Management

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