FUND-HOUSE'S 2018 TREND FORECAST

As 2018 unfolds I thought it would valuable to provide our viewers with a peek into the future, so here goes:

Software: the major disruptor to doing business in the traditional way. Think, Uber, they  own no cars yet are the largest taxi company on the planet.  Airbnb is now the biggest hotel company in the world, yet they don't own any real estate or hospitality properties - it's all about software.

AI: will transform whole industries. For example, law school graduates will find it hard to get jobs because IBM's Watson can provide legal advice in seconds with a 90% accuracy compared with 70% accuracy by humans. If you are planning a career in law,  think twice - only legal specialists will remain.

Facebook: has developed pattern recognition software that can recognize faces better than humans.

Autonomous Cars: Time to do other things in your commute

Autonomous Cars: huge disruption. Over time there will be on reason for many people to own a car. They will just call for a car, it will show up, and drive you to your destination. No need to park. Only pay for driven distance. Work or do other things while on trip. Drivers licenses will become obsolete as will car ownership. No need for parking garages. Safer with less traffic fatalities. Auto insurance will not be required and if needed will be much cheaper - the auto insurance business with be transformed.

Healthcare: Tricorder X will shortly appear on the scene. A Tricorder is a medical device that works with your cell phone. You will be able to perform retina scans, take  blood samples, and breath tests.  It will use these to identify over 50 diseases. Eventually, everyone will have access to world class medical analysis - at very low cost.

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3D Printing: The cost of a 3D printer has gone from over $18,000 to $400 in 10 years  Many manufacturers use 3D printing for a variety of products.  For example every shoe manufacturer uses it to produce custom shoes for each customer.  Airplane spare parts, as well as, parts production can be made on-site to accommodate remote areas where service is required.

Food:. The first Petri dish veal has been produced and it is cheaper than calf produced veal.  30% of all agricultural land is devoted to cattle - imagine if cattle were no-longer required.

Longevity: Currently the average life span increases 3 months per year. But the increase is itself increasing so that by 2036 there will be a one year increase per each year. Shortly, the average age will be over 100. This will have massive impact on society.

In a nut shell, every business should be asking "can what we are producing now be used in the future? If the answer is NO its time to change your company's focus and markets.

Just saying,
Jim Lavorato

Fund-House's Branding Services

Brand development and management are cornerstones of  the Fund-House's consulting offerings.

FUND - HOUSE

A foundational business component and one of the most difficult challenges for every business is the design and implementation of a unique brand that addresses customer needs. Brand-building is not communicating a message it's about internally developing and managing your business around your brand.

We view every engagement with a fresh perspective and design an approach that is specific to each client's target market and customer base, with the goal of closing the gap between your brand vision and operational realities - this is your brand's DNA.

Fund-House addresses every Brand consulting project as a challenge and, more importantly, an opportunity to demonstrate our capabilities:

- Conducting Diagnostic Evaluations - The Brand's Compass / Guide
- Developing the Brand Platform - The Brand's Identity and Competitive Positioning
- Brand Architecture - Concept Design and Logo Creation
- Touch-point Wheel Analysis - How The Brand Mates With The Business's Vision
- Engagement Design - Conceiving and Creating The Brand Narrative

Our start point is conducting a Brand Development Survey.  This is where we find out what the Brand means to the management team and how it will be embedded into all facets of the business.  From there we develop a Brand Compass which guides the way to all of the other touch-points in the process of creating a Brand management policy.

Contact us for a complimentary consult on creating a Brand or for taking a good Brand and making it a great Brand.

Fund-House Ventures

jlavorato@fundhouse.us
www.fundhouse.us

Should The Government Regulate The INTERNET ?

Bar none, Government regulation of the internet is the single most important issue of our time. The regulation of the internet will impact everyone and very profoundly. 

ISPs and Edge Providers Need to Keep It Open

Network Neutrality is the cornerstone of the government's involvement and yet few individuals fully understand what it means. Lets simplify it.

Advocates for net neutrality, principally led by social media providers (Facebook, Google, Twitter, etc.) and their advocacy groups are in favor of  rules needed to prevent internet service providers (ISPs) (telecoms and cable companies that provide internet service) from restricting or controlling web access - while those favoring deregulation argue that rules are not required to control the ISPs.

What the government is attempting to do is decide on how to approach a transformative technology that reaches into every corner of our lives and to do so based on rules that were originally written in the days of the telegraph!

This Thursday (12/14/17) the FCC will be voting to deregulate the ISPs. This action will prompt massive lawsuits and a huge ad campaign by the so-called "Edge Providers" - websites such as Google, Facebook, Twitter, or  Netflix, which need the ISPs to reach their customers.

What I believe is that the internet has become so central to everyone's life that it should not be the victim of a battle between ISPs and the Edge Providers forcing the government to intervene (which will only bring confusion, disarray, and dreaded over-reach in regulation).

It would be very difficult for the government to apply rules against the ISPs while letting Google and Facebook continue to operate with relatively little oversight or restriction. For that reason, many believe the FCC ruling on Thursday will deregulate the ISPs, placing them on the same regulatory basis as the Edge Providers. They may have started in garages or dormitories but the market capitalization of the Edge Providers dwarfs that of the ISPs. If you look at who makes the most money from the internet ecosystem, it is obviously the Edge Providers.

On the flip side, no consumer pays a monthly subscription to Facebook. Facebook also only has a window on a user's online activity, while an ISP has a window into all of a subscriber's apps and services.

My thought, let the ISPs experiment with new business models and development products that benefit them and their internet users, in the meantime, the Edge Providers are and will continue to do the same - all under the watchful eye of the FCC, FTC, and Dept. of Justice.

Just saying,

Jim Lavorato

Fund-House Case Study #1 - THE ANSWER

Well, have you got the answer?  What does American Wealth have to do to extricate itself from Banco del Rio's very shrew proposition? 

Answer: Bring another party into the deal. The only way for American Wealth to get out of its dilemma was to bring in another investor who would be willing to take half of American Wealth's investment in Banco del Rio. 

In this case, the new investor was a Middle Easterner with large oil interests, lets call him Sheik Bin Real.  The proposal to Bin Real was that American Wealth would invest an additional $100 million in Banco del Rio, then, in a tandem transaction, sell one-half on its 25% position in Rio to Bin Real for $100 million. Ergo, there would be no dilutive impact and American would not have to write-down its investment.  And yes, as you've already guessed, American Wealth lent the $100 million to Bin Real. A win, win, win. 

Many times situations may seen, on their face, to be insurmountable but examining every angle and brainstorming will often spawn a solution to the problem.

Stay in touch,
Jim Lavorato

Fund - House Case Study #1 - An Investment Conundrum

Every so-often I will be presenting a management problem taken from a real-life situation I was personally involved with. This first F-H Case Study, entitled "An Investment Conundrum", centers around an investment problem that on its face appears to have no easy, if any, solution.

Rio

The Background:

Banco del Rio is a Brazilian Merchant Bank that is managed by Rinaldo Bosa, who is CEO and Chairman and who also owns 25% of the Bank.  BR is capitalized at $400 million with each of three other partners owning 25% of BR. These investors consist of a large U.S. multinational bank (American Wealth), a Japanese merchant bank (Edo Trust), and a Swiss investment company (Geneve Partners). 

Banco del Rio is five years old. Since inception it has made little profit and the return on investment has been negligible. However, Bosa believes that if BR were capitalized at a higher level he would be able to fund better and more lucrative projects in both Rio and Sao Paulo.  To this end, Bosa contacted the three other owners of BR requesting that each invest an additional $100 million; thereby, capitalizing BR at $800 million.

Bosa further stated that he was putting up a building located in the financial district of Rio, and appraised at $100 million, as his share of the additional capitalization. Each of the partners were told they had 60 days in which to decide if they were going to make their additional $100 million  investment. Any shortfalls through non-participation would be offered to the remaining investors.

The Conundrum:

Within 30 days, both Edo Trust and Geneve Partners had notified all parties that they were going to participate and would be investing an additional $100 million each in Banco del Rio.  American Wealth, had decided that an additional $100 million investment in Banco del Rio was not prudent and would not be made. 

The team working on this project at American Wealth consisted of the EVP and Head of the International Department, the SVP of Latin American Banking, and myself, VP of International Finance and Operations. Our consensus was that the primary reason for American Wealth's initial investment in BR was to gain more access to Brazilian corporations by using BR as a networking conduit for our Rio-based business development and lending staff - which it did. However, given BR's lackluster performance ponying-up another $100 million was not going to happen. 

The conundrum was that if American Wealth did not make the investment its original $100 million would now be diluted - as the original 25% ownership would now be only 12.5% which would trigger a 50% or $50 million write-down of the International Department's earnings - and time was running out! 

What To Do? 

Obviously, the Head of American Wealth's International Department, was not going to accept a $50 million hit and so it was necessary to come up with a solution to this problem and fast. 

Tomorrow I will present the outcome of this case. In the meantime think about the issues presented and try to come to a conclusion.  Did in fact American take the $50 million write-down? And make up for it by making more loans. Did American pony-up the additional $100 million investment? And justify it by increasing business in Latin America generally. Was there no viable solution which would satisfy all parties concerned?

EAT Or Be EATEN

For Disney - It's EAT or be EATEN

There has been a take-no-prisoners war raging between content providers and distribution providers for over ten years.  The battles being pitched between Hollywood and digital domain stalwarts.

The Hollywood studios have, by and large, been the victims - being gobbled-up by the likes of Comcast (Universal), Sony (Columbia), Fox (20th Century Fox), Paramount (Viacom), Time Warner (Warner Bros. cum Viacom).  Only Disney and MGM (privately owned) remain old-school studios. On the other side, Amazon and Netflix have won the digital streaming battle - not only distributing Hollywood's content but producing their own high-quality content.

Given this, Disney's only play was to eat or be eaten and it decided to 'eat', and what it wants to consume is a big hunk of Fox.  Rumor has it that Disney is going to offer Fox $74 billion for the 20th Century Fox film and TV studio, the FX Networks, National Geographic Channels, and 22 regional sports networks.  Fox, if seems, wants out and views its media assets as at their peak value. Disney is willing to bet big that becoming significantly larger will, one: prevent itself from being purchased, and two: become a much larger player in the content production and distribution areas  -  the buzz word being 'scale', which would give it the muscle to battle the social media behemoths going forward.

Stay on touch,
Jim Lavorato

TOP 5 REASONS NEW BUSINESSES FAIL !

Each year thousands of businesses are launched and approximately 80% of them fail in the first year of operation. Why? Why do so many businesses fail. It's certainly not do for lack of effort but there are certain issues that repeat over and over as the reasons for start-up failures.

CASH FLOW (or lack of)

Every start-up should have at least 2-3x operating capital or have access to funding BEFORE starting the business.  This includes all fixed and variable expenses (including salaries).  For example, if you forecast revenue of $50k for the first year of operation and expenses are budgeted for $75k there should be from $150-225k in funding at the ready.

Only in this way can a new venture weather the storm of mis-steps and mis-calculations, that always arise and be able to reassess and redirect the business's vision.

LACK OF DEMAND

So unique. So specialized is the product or service that the market is too small to sustain a thriving business.  A lot of market research needs to go into making sure the product has a demand the drive sales.  Many times proper market research is poorly conceived or lacking as the founders get caught-up in the excitement of their idea.

STAFFING

Proper staffing can be a killer no matter where the company is in its life cycle. Great care must be taken in hiring the right people, developing them, supporting them, listening to them, and incenting them.

NO USP

The business has no Unique Selling Proposition. No differentiation. No uniqueness. For example, every time I attend any networking meetings or socials, at least, 25% of the attendees will be SEO/Web developers.  What sets any of them apart? A business must have a USP and target the right market.

POOR MANAGEMENT

Last, but not least.  The entrepreneur needs to become a manager/leader.  To run a business successfully you need to focus and stay focused on the original vision and build off of that.  And, at all costs, as the manager/leader make certain you are fully informed as to the financial posture of the business.

So, keep these issues in mind:

• Have adequate capital to see you through the first year of operation.
• Delve deep into the market research required.
• Staff properly and diligently.
• Find your USP
• Become a Manager/Leader

Stay in touch,

Jim Lavorato