Corrections or additions?
These stories by Peter J. Mladineo and Barbara Fox were published in U.S. 1 Newspaper
on April 29, 1998. All rights reserved.
The big story about IPOs and the public markets in 1998
could be the benefits that Web-based trading offer to individual investors.
Earlier this month, Wit Capital, the Silicon Valley-based investment
bank, sent ripples through the investment banking world when it hired
Robert Lessin, a preeminent figure in the investment banking
world, who quit his job as vice chair at Smith Barney.
Wit Capital boasts one of the first Web-based automated brokerage
technologies that will open the IPO and venture capital markets to
individual investors, many of whom have not been privy to those markets
before. Wit Capital is also credited with developing the first Web-based
digital stock market that allows investors to trade NASDAQ and listed
shares directly with other investors, thus avoiding spreads.
This is making investment banking experts like Graeme Howard Jr.,
bristle with enthusiasm. "The Internet is having and will have
a terrific effect on the distribution of IPOs," says Howard.
A former investment banker with extensive experience handling IPOs,
Howard speaks on taking companies public at the New Jersey Entrepreneurial
Network on Wednesday, May 6, noon, at the Forrestal. Call 609-279-0010
for information (http://www.taltec.com/njen).
The ‘Net could have a huge impact on the cost of going public. "If
Wit wanted to it could underwrite companies for less than seven percent,"
Howard says. "If Wit became socially acceptable, then you could
see a terrific erosion of the investment bankers’ discount at which
they buy the shares. It will also allow non-institutional investors
to participate in the process."
For individual investors, systems like Wit Capital’s digital stock
market and ACE-Net (profiled in the following article) are one step
beyond the EDGAR database, found at the Securities and Exchange Commission’s
website, http://www.sec.gov. Created in 1995, this comprehensive
database lists just about all the filings made with the SEC, but it
is highly technical and, in some cases, slow. "It’s more important
for people who call themselves professionals than amateur investors,"
says Howard. "It’s still a little difficult to use, and still
a little difficult to print out. It’s not an end-all."
But EDGAR has some distinct benefits. "As far as the registration
process is concerned, it’s faster," Howard adds. "People don’t
have to get on the train to go to Washington to file. Has it changed
the substance? I don’t think it has changed the substance — only
the medium, not the message."
Howard, 66, is president of the Corporate Finance Institute, a privately
held publisher of directories and handbooks on IPOs, and a financial
adviser with Datatec Systems Inc, a revenues network systems integrator.
An attorney with an LLB from Yale Law School (Class of ’60), Howard
was a founding partner of Howard, Lawson & Co., an investment bank
in Philadelphia, and recently stepped down as vice chairman of TMP
Worldwide, the world’s largest yellow page and recruitment advertising
agency that went public in 1996.
"Most companies should not go public," says Howard, who often
counsels business owners on ways to grow a business. "If they
want to get wealthy and they have a tough enough ego to withstand
criticism without running away, then going public is a wonderful experience."
But if you’re an average business owner, you’re probably not in business
because of a desire to get Gates-rich. You’re probably in business
to have the opportunity to steer your own ship — and going public
erodes that control, Howard maintains.
Current economic conditions, Howard adds, make it difficult for most
companies to thrive in public markets. "If you are managing a
company that is actually going to grow fast then you have an extraordinarily
good chance at being able to go public, but that doesn’t mean growing
at five or ten percent a year," he says. "And if you are going
to be growing at 20 or 30 or 100 percent a year, you are going to
be at risk. Most of the pros would say that it’s very difficult to
find good stocks — especially during a market like the one we’ve
had for the last few years."
Also sure to trouble many entrepreneurs is the prospect of having
their performance graded regularly. "They are going to be measured
on a year-to-year or a quarterly basis," says Howard. "That’s
not the way most entrepreneurs run their businesses."
Instead, most entrepreneurs try to grow the revenues "to keep
the bank lending them money, which doesn’t take too much these days,"
he says. "I’d say that’s one of the big changes: Entrepreneurial
companies have only had to fool their bank so the bank would continue
to fund their losses as they grow, but if they’re going to be a public
company they’re going to have to show a profit at some point."
However, the increased loan-friendliness of banks has probably dissuaded
a lot of companies from going public — and the numbers reflect
this. Since 1996, a stellar year for the IPO market, the number of
IPOs has decreased significantly, although Howard doesn’t think the
market is anywhere near dried up. "In October of 1996, 119 companies
went public and 20 went public in December of 1997," he says.
"If you drew a line from October of ’96 to January ’98 you would
think the IPO world had come to an end, but that’s just not true."
If you ran a dating service one of your critical objectives
would be to maintain an equal ratio of men and women. The same goes
for the world of angel investment. Often the ratio of entrepreneurs
to angels (individuals of high net worth with significant business
experience) is lopsided.
This is illuminated in the experience of the Angel Capital Electronic
Network (ACE-Net). The Internet-based system that matches entrepreneurs
with angel investors is "very much like a dating service,"
says Stash R. Lisowski, director of the NJIT Enterprise Development
Center, the incubator that is acting as a regional host for the New
Jersey/New York area. In this area ACE-Net is expected to be online
in mid May.
Other ACE-Net locations across the country have had problems finding
enough investment opportunities for an overloaded pool of angel investors,
Lisowski reports. "We have precisely the opposite problem. We
have no trouble getting entrepreneurs but identification or attraction
of investors has lagged behind," he says.
However, Lisowski maintains, disparities can be evened out. Shortages
of investors in New Jersey can be matched by gluts of investors in
other areas of the country.
Lisowski speaks at an ACE-Net conference on Thursday, April 30, at
1:30 p.m. at the NJIT Alumni Center, 323 Martin Luther King Jr. Boulevard
in Newark. Also speaking: Jere Glover and Marvin K. Blount
of the U.S. Small Business Association Office of Advocacy. Call 973-643-5740
for more information.
Created by the Small Business Administration’s office of advocacy
in 1996 after a recommendation at the 1995 White House Conference
on Small Business, ACE-Net was developed to fill the lending gap between
small loans and large venture capital investments. While the average
venture capital deal these days is around $6.5 million and asks for
heavy equity in the firm, the low end of business financing —
loans from, SBAs, banks, family, and friends — usually maxes out
ACE-Net investments run between $250,000 and $5 million, Lisowski
says. "We try to fill that gap," he says. "We insist on
getting both parties on to the Internet. Angels don’t go walking around
wearing halos. This will help formalize the process and help make
gaining access to them much easier."
The system also costs a lot less for entrepreneurs. While registering
a stock offering in more than one state can cost from 10 to 20 percent
of the amount of money a company wants to raise, the fee for ACE-Net
is $450 for both investor and entrepreneur.
The angel investors have to meet certain criteria — an income
of at least $200,000 a year or a net worth of at least $1 million.
"These individuals tend to be corporate investors, savvy investors,
entrepreneurs themselves who know how to deal with small firms,"
says Lisowski. "The idea also is that eventually ACE-Net will
become attractive to the large pension houses so that we’ll start
pulling some dollars out of the stock markets as well. The risk is
not as high as perceived and therefore rates of return on pension
dollars can be increased also."
ACE-Net investors can also take advantage of tax breaks offered in
last year’s federal tax relief legislation. They can now make tax-free
rollover investments in small companies as long as the money is reinvested
in 60 days.
Entrepreneurs can get on ACE-Net by completing a standardized form
to enter a prospectus. The system is on the Internet, and the deal
listings can only be perused by obtaining a password (for the $450
fee). General information on ACE-Net can also be found at its website,
http://www.sba.gov/advo. Investors can sign in from
home, and the system can be set up to E-mail the investor information
on pertinent companies from pre-selected criteria.
Lisowski, 33, was an auditor at Coopers & Lybrand for five years and
a corporate controller at Accurate Information Systems in South Plainfield
prior to taking the helm at the Enterprise Development Center three
years ago. "This is a phenomenal system," he says. "If
properly taken care of and nurtured, this stands to be a major capital
market, the grass roots to a New York Stock Exchange or an AMEX."
Here’s a paradox: A privately held company is probably
not as private as one would think, nor is a public company as open.
While public companies must report certain things to state or federal
securities regulators, private companies have to disclose plenty of
facts about themselves to other bodies.
In truth, there are reams and reams of information about private companies,
says Leila K. Kight, founder of Washington Researchers Ltd.,
a Rockville, Maryland-based firm that trains companies on how to gather
competitive intelligence and publishes several books and training
materials on the subject.
In some cases, Kight reports, getting the dope on a private company
might even be easier than acquiring certain facts about public entities.
"Most companies find it easy enough to get information about public
entities in their entirety, but if I want to know about a tiny business
unit it may not even be mentioned in an SEC filing," she says.
"You have to dig. You have to sleuth. It certainly is easy for
a public company to keep you from knowing what you’d like to know
It’s also easy for small public companies to hide behind state lines.
For instance, if a public company does business only in its home state,
it’s not going to show up in the EDGAR database at http://www.sec.gov.
It’s probably only listed with its respective state’s securities overseer.
"One of the first things that I tell people is make sure that
the private company that they are researching is private," says
Kight is one of several lecturers at the Society of Competitive Intelligence
Professionals’ competitive intelligence education day on Tuesday,
May 5, at 9 a.m. at the Somerset Marriott. Call 609-520-4396.
The others are Matt Coburn of the Fusfeld Group, who speaks
about patent analysis and business strategy; Steve Adolt of
BOC Gases, who discusses competitive intelligence and sales, Diane
Borska of Fuld & Company, who discusses financial signals in competitive
intelligence; Kathryn Greengrove of Ernst & Young who gives
a lectures on the basics of competitive intelligence; Ken Sawka
of the Futures Group, who talks about early warning intelligence;
and Alain Moureaux of Becker Research, who speaks about European
Once you’re sure the company you are inquiring about is private, here
are some tricks of Kight’s trade:
Some private companies
issue "quasi-annual reports" for their customers or the community,
or perhaps for job candidates. "These reports are designed not
for stockholders, but for other people with whom they have to communicate,
or to satisfy, or impress," says Kight.
officials sell themselves.
"Every company looks to promote themselves in one venue or other,"
says Kight. Does the company executive speak at the local Junior League,
or Kiwanis Club, or Chamber? If so, go listen to them speak or get
information directly from that venue.
Tax assessors will have information about the company’s real estate,
and will be able to tell you the size of its various facilities. Other
tax information can be useful too, and it is probably plentiful. "The
fact that a company is private doesn’t really change its filing requirements,
except with the securities offices," says Kight.
entities. "You might be interested in how many people are employed
at a manufacturing site and what kinds of jobs those are," says
Kight. "The state labor department is the ideal source for that
information. It doesn’t matter to them whether that plant is owned
by private company or a public company." For other specific facilities
information, call the state’s environmental protection agency. Chances
are, if the company manufactures something at a site, it had to apply
for permission first.
the company received from the state or local government. "Any
benefit that a company gets from a state or local government —
job training, a new road to their facility, tax benefit, anything
like that — is likely to result in a lot of paperwork to prove
that it’s worth the taxpayer’s money," says Kight. "A lot
of times you will unearth wonderful information about a privately
held company if a bond has been passed that benefits some aspect of
Kight advises talking to the local chamber or to newspaper reporters.
"Another would be someone in the local office of the union,"
she says. "I would look to people in the trade press and trade
associations in the particular niche that this company works."
Kight also advocates using what she calls "the small pond strategy."
Any company is a fish in some pond somewhere. The pond can be a town,
or a small industry niche. Once you have identified the pond, then
look for other inhabitants. Calling the company’s competitors is "almost
a required step," she says. "What you want to do when looking
at a private company is get a circle of estimates. You need people
who see it from all angles, because there’s a lot of misinformation
that exists, so you want to be sure you’re getting an accurate picture,
and the competitive viewpoints would be very important."
The bottom line in all of this is investing the time. To get any kind
of detailed profile of a private company will require a pretty sizable
investment. "But it may be I may only need to know how profitable
that company is," says Kight. "So if that’s all I need to
get I can probably get that with a few phone calls and feel secure
Kight, 51, is from a small town in Georgia and attended Chapman University
in Orange, California, which she found after spending three semesters
at sea, through a program at the University of Pittsburgh. "I
sailed around the world three times," she says. "It changes
your whole perspective on the world, how you want to function in the
world. It broadens your horizons, makes you see that world problems
are as important as are the problems in your town. That’s continued
into my business life. My leisure activity is travel."
She founded Washington Researchers (http://www.researchers.com)
in January, 1974, while she was completing her MBA from George Washington
University. "I’ve spent almost my entire working life in this
company," she says. "I really learned in the trenches. The
techniques are very much a part of the marrow of my bones."
To get favorable treatment from a headhunter — show
a lot of initiative and follow up on a routine basis, says Steven
L. McGrath: "Good ways to followup would be to initiate breakfast
meetings or meetings after hours, call or E-mail every couple or three
weeks, and introduce us to other interesting candidates." And
follow the Golden rule.
After being a principal in Alexander & McGrath at this address, McGrath
has formed his own firm for retainer-based executive recruiting and
management consulting, and has a new phone and fax. (993 Lenox Drive,
Suite 200, Lawrenceville 08648, 609-844-7592; fax, 609-844-7534.
McGrath went to Worcester Polytechnic Institute in Massachusetts,
Class of 1974, and majored in marketing research for his Wharton MBA.
After working with Booz Allen he worked at American Optical Corp and
then moved to the Princeton area to work with PA Consulting on Princeton
Hightstown Road from 1982 to 1996.
His associates, Peter Lins and Kenneth Hirshman, are vice presidents
for search and consulting respectively. "We position ourselves
as a boutique firm with select clients, and we have long-term relationships
because of the speed with which we conduct the search and the personalized
touch," says Lins. "Our clients also like that we are consultants
In executive search the firm focuses on telecommunications
and healthcare or on functional categories such as information technology,
sales & marketing, financial planning, and general consultants. Salaries
start at an $80,000 base, and one-half of the people they place are
technical, one-fourth are in marketing and sales, and the balance
are in the financial industry.
"We treat every search engagement like a consulting project,"
says Lins, "to understand the culture in the client organization,
understand what attributes are required for a client to excel in that
environment, develop a research strategy, and understand the process
by which the candidate will be hired. Then we put together a position
description which will satisfy the client but can be used with a candidate.
We view ourselves as an adjunct to the client’s own marketing organization,
and we need to have an approved selling story."
McGrath and Lins refer to themselves as expectation managers. If the
matching process is going to go off the track, says McGrath, "it
has usually been due to a mismatch of expectations, usually on compensation.
We get that one on the table real early."
Another important part of finding the right match is knowing the culture
— whether the client has a highly technical research organization
or perhaps is in a go-go kind of explosive growth mode. "We have
clients that we know so well that, even in cases where we don’t have
a position open, if we see someone with a good set of skills who fits
the culture, we present the candidate, and they get hired."
McGrath typically spends one day a week meeting with job hunters,
most of whom will never be candidates for one of his clients. What
does he do to size a candidate up? "In the first five minutes
I am only trying to determine one thing, are they being truthful,"
says McGrath. "We have told people `you are overrepresenting yourself.’
A lot of times they are just too confident. Some people who feel they
are qualified, in fact, are not qualified. They are missing some ingredient
that the client wants to see."
As for the Golden Rule? "I found out that the quality of the relationship
from an earlier affiliation said a lot about the relationship now,"
says McGrath. "People who had worked for me in the past, whom
I had taken care of, were very willing to meet with us."
To follow the Golden Rule as a job seeker, network, and refer those
you encounter. Says McGrath: "The more great candidates we know,
the better off we are as a firm."
What do Trane, Webtech, FMC, Switlik, and the John C.
Dolph Co. have in common? They’ve all been identified as Princeton
area polluters at a new website for the Environmental Defense Fund,
the EDF Chemical Scorecard (http://www.scorecard.org).
The site uses information from the 1995 U.S. Toxics Release Inventory
and a system of pull-down menus and databases that gives users a chance
to see where their community stacks up in terms of pollution. (For
best results, click on the polluter locator button, then click on
According to this site, New Jersey is not as mega-polluted as the
recent TV commercials say. In terms of overall chemicals released
into the environment, the Garden State ranks 33rd (the worst is Texas).
Slightly more disturbing is the fact New Jersey ranks 13th on the
cancer hazards list (Illinois is worst; Vermont is best).
The site also explains what effects (if any) the chemicals released
by polluters have. Many may have little or no known harmful effects.
And — good news for central New Jersey — none of the chemicals
released by the companies listed above are known carcinogens.
Should your business want to sell computers or other
equipment to public schools, you may wish to advertise in the New
Jersey Public School Administrators Business Directory. It costs $245
plus tax to be included in the Central edition (for Burlington, Mercer,
Middlesex, Monmouth, and Ocean counties) and other volumes are available
for north and south Jersey.
The directories provide "a permanent workable business/vendor
reference source and facilitate free competitive bidding and day to
day quotation buying," says Margaret T. Scalza, director
of publications. It also lists the names, addresses, and phone numbers
of county and district superintendents and board secretaries and purchasing
Compiled by Kinsley Associates, the directory is in its 27th edition,
which will have about 5,000 copies. All of the administrators, schools,
and advertisers receive one. CAll 800-526-0663 for an application.
Schools need computers, but they also need expertise.
KPMG Peat Marwick LLP and the
Prudential Foundation have
each given $25,000 to Tech Corps New Jersey, a non-profit dedicated
to providing volunteer technical assistants to schools from elementary
through high school. The money will help integrate computer technology
into the classroom.
"New Jersey is a major player in the technology industry,"
says Donna Custard, manager of Tech Corps New Jersey. "Our students
need to be prepared not only to enter, but also to excel in a technological
Tech Corps is a national organization designed to bring business volunteers
into schools in support of educational technology initiatives (http://www.tcnj.org).
It is housed at the state chamber; call 609-989-7888.
In just over one year since the New Jersey chapter was founded, state
volunteers provided more than 900 hours of service to 278 school districts
— everything from completing technology inventories and writing
grants to troubleshooting computers and downloading software onto
networks. It presented workshops to school officials on preparing
for Year 2000 compliance and applying for discounts to the Telecommunications
Act Universal Service Fund.
"KPMG realizes the financial strain encountered by schools and
is proud to support the vital volunteer connections Tech Corps New
Jersey provides between business and education," says Henry
Keizer of KPMG. His firm has developed a virtual help desk program
accessible to teachers via fax, phone, and E-mail. The first such
program will be available as a pilot in September.
Corrections or additions?
This page is published by PrincetonInfo.com
— the web site for U.S. 1 Newspaper in Princeton, New Jersey.