IPO Advice

Online Angels

Private But Public

Job Hunters: Follow Golden Rule

Cyber Pollution Alert

Sell to Schools

Computers to Schools

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.

Survival Guide

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IPO Advice

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."

Top Of Page
Online Angels

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

at $250,000.

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."

Top Of Page
Private But Public

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

about them."

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.

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

intelligence.

Once you’re sure the company you are inquiring about is private, here

are some tricks of Kight’s trade:

Get company literature.

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.

Find out where the company’s

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.

Get financial information from the local tax assessor.

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.

Contact the state labor office or other state government

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.

Tap into the "information underbelly" of any benefits

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

that company."

To find information about a company’s executives or key employees,

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

with it."

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."

Top Of Page
Job Hunters: Follow Golden Rule

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.

(http://www.mcgrathassociates.com.)

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

as well."

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."

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Cyber Pollution Alert

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

maps.)

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.

Top Of Page
Sell to Schools

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

agents.

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.

Top Of Page
Computers to Schools

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

environment."

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.


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