News
and Newsletters
August 2, 2007
Index Capital Advisors, LLC has announced the formation of Rent Indexed Mortgage Fund, LP. Using
The indexing approach
enables the Fund's investors to efficiently participate in the smaller building
real estate market (currently yielding higher returns than the larger building
market), without property specific risks or costs.
N.R. Gordon & Company, Inc.
served as financial advisor to Index Capital Advisors, LLC in connection with
the formation of the Fund.
June 8, 2007
WebGen Systems,
Inc. has completed the sale of its intellectual
property and other assets to buyers in the
December 7, 2006
Neuro-Hitech,
Inc., a biopharmaceutical company focused on the development and
commercialization of next-generation compounds against proven targets for
neurodegenerative diseases, recently announced its acquisition of Q-RNA,
Inc. N.R. Gordon & Company, Inc.
acted as Purchaser Representative for the non- accredited
investors of Q-RNA.
November 13, 2006
N.R. Gordon & Company, Inc., is pleased to announce its affiliation with Index
Capital Advisors, LLC, and the appointment of Neil R. Gordon as
Using its proprietary methodology and
patented investment structure,
July 16, 2006
Raising capital is a
combination of marketing and finance. Think of investors as customers and
your securities as your product. Don't launch until you are ready.
Q. When am I ready?
A. When you are ready to go to the next step and the next step. Be prepared to deliver your elevator pitch, a one-pager, an executive summary, a business plan and a power point presentation. Be able to defend your value proposition at every stage.
Q.
How much money should I ask for?
A. Define your need with well defined financial
projections. From there, how much capital you raise may depend
on whether there are natural milestones in your plan. It may
also depend on your investor. You may
need to circle back and see how you might do things differently depending on
how much capital is available.
Q. I need to round out my team but I don't have money.
A. Don't expect anyone to work for free. Be creative in compensating people who can help you.
Q.
Are there sources of interim funding?
A. Using your own money is a good way to retain ownership and demonstrate conviction. Family and friends might provide seed capital to get you ready for angels. Don't invest much or raise any capital until you have at least a preliminary business plan developed.
Q.
Do I need an advisory board? What does a
well rounded board look like?
A. Most investors invest in management. A proxy for that can be a group of seasoned advisors. Look for experience that supplements the skills of the management team and advisors that will lend more than their names to your venture.
Q.
What can I do to build my business while I'm preparing?
A. Talk to potential customers and lay the groundwork for sales. Learn about, and document, all you can about your market, competition and the like. The investor shouldn't know more about your market and your competition that you do.
Q.
Do I just stay in capital raising stealth mode until I'm ready?
A.
You should network and let people know what you are working
on. Just don't try to sell pieces of
your dream until you are prepared to deliver something meaningful in
return.
Q. What milestones are investors looking
for?
A. Milestones are times when risk is reassessed. Achieve a milestone that reduces risk and you create value. Reduced risk also makes it more likely that you will create future value, which is what investors are looking for.
Q. What percentage of my company will
investors want?
A. They won't want any percentage of your
company if you don't lay the groundwork first.
In any case, it's not something to worry about. The idea is
to optimize your return, not minimize theirs.
March 27, 2006
Steps to a Better Banking
Relationship
·
Know what you want. Know why you need
to borrow and how large a loan you need. Know in specific business terms how
your cash flow will cover the interest and principal payments. Know what other
services you might buy from your bank. Be as important a customer as you can
be.
·
Tell the truth. The more your bankers
know about your business, the less concerned they will be if it hits a
downturn. Share reasonable prospects and projections with your bank. Discuss
your business risks as well as your opportunities.
·
Negotiate. Your credit agreement
spells out in detail what the bank can do, what you must do and what you can't
do. Worry less about the interest rate and more about terms and conditions.
Negotiate a deal that is fair to both you and the bank.
·
Talk to your banker. If you want to
know how your company can borrow for less or when you can get release of an
asset pledge or personal guarantee, ask your banker. The discussion will
benchmark your banking relationship and may give you an edge in future
negotiations.
·
Repeat the process. As your business
evolves your needs for credit and other banking services evolve as well.
Continue to evaluate your business needs, keep your banker informed and
continue to negotiate.
Feedback: Thanks
Neil, good advice.
It
is so important for us at the bank to know our customer, and to have an open
and frank dialogue.
Our
business does not grow by saying “no”, however we need to have a good
understanding of the circumstances and needs of our clients.
Peter
O’Neil, Business Banking Officer, Citizens Bank email: peter.oneil@citizensbank.com
January
23, 2006 – (As published in the 128 Innovation Capital Newsletter)
Networking 101
As a regular at the 128 Innovation Capital
Group, I’ve seen hundreds of entrepreneurial hopefuls, in a quest
for capital, come to learn, network and briefly explain their dream. Most of
them learn, some of them network but many of them fail to achieve their capital
raising objective. In part, they don’t optimize the networking
opportunity that 128 ICG and similar events present.
If you’re not familiar
with the format of the 128 ICG breakfast, here’s the essential flow:
Registration starts at
about 7:15 AM, with ample time for networking before you find a table.
Once seated, there’s half a minute or so each for your so-called “elevator
pitch.” After introductions, there’s a presentation on a topic of
interest. Then there’s a final opportunity to network. A list of
attendees and their contact information is available by the end of the meeting.
So how do you best use
this meeting?
1. Know
why you’re there. If it’s for the presentation, fine. Relax, sip
some coffee, chit chat with whomever and enjoy the show. If you’re there
to raise capital, keep reading.
2. Attend
some meetings in advance of making your pitch. Introduce yourself and
your idea, but don’t jump the gun on capital raising.
3. Reduce
your idea, your plan, your technology and everything else that’s important to
just a few sentences that will leave an investor wanting to know more.
4. Practice
your 30 second pitch more than once.
5. Be
more than an idea. Organize as an LLC or as a corporation, invest in a domain
name and invest in business cards.
6. Network!
Seek out the capital providers (although most won’t dabble in your space) and
the service providers (who know a lot of capital providers).
7. Don’t
flood the meeting with attendees. Two founders might be okay. Three or
more members of the management team and I wonder who’s running the company. If
you’re not alone, coordinate your 30 second introductions.
8. Sit
with people you don’t know. (Don’t sit with your co-founder.)
9. Get
the contact list and follow up. Extend the networking opportunity beyond just
the meeting. (Look to the capital sources, the service providers,
management candidates and other entrepreneurs, in other words, everyone at the
meeting.) It’s all about expanding your network.
10.
Be prepared. Have an executive
summary (3-5 pages) that you can send out on request.
11.
Remember that you’re competing for
capital with every entrepreneur in the room.
January
6, 2006
Official Software, Inc., has acquired the
Official Copyrighttm and Official Trademarktm products and software and certain
other related assets, from ICLUBcentral Inc.
N.R. Gordon & Company, Inc., initiated
this transaction and served as financial advisor to Official Software, Inc.
Official Copyright (tm)
Software and Official Trademark (tm) software solutions are designed to meet
the needs of individual creators such as musicians, writers, filmmakers,
software developers and photographers, as well as the professional needs of law
firms, publishers and Internet businesses, to protect intellectual property
rights to the full extent of the law.
Official Software, Inc., is an acquisition
entity funded by Robert Sama, the company's president and chief executive
officer, and Neil R. Gordon.
ICLUBcentral,
based in
December
21, 2005
N.R. Gordon & Company, Inc. is pleased
to announce its affiliation with Decent Energy, Inc., operator of DE's Cambridge Clean Energy Incubator, and the appointment
of Neil R. Gordon as Decent Energy's chief financial officer.
Headquartered in
The incubator is ready to
help entrepreneurs, early stage companies and others, by assisting with
developing opportunities involving clean energy, renewable energy and
conservation products and services.
The incubator provides industry-focused
assistance with:
·
Business plans and business model
development
·
Financial and marketing strategy
·
Team building
·
Mentoring
·
Networking
·
Incubator presentations and meetings
·
Program partner offerings
The incubator also
provides clean energy entrepreneurs with infrastructure that includes office
space and related services.
September 20, 2005
Datameg Names Neil R. Gordon to Board of Directors
July 15, 2005
The
Monitor Group recently announced its acquisition of Strategic Pricing Group,
Inc. N.R. Gordon & Company, Inc. acted as Purchaser
Representative for the non- accredited investors of SPG.
Strategic
Pricing Group, Inc., is the market leader and innovator for management consulting
services focused on pricing strategy and implementation. Founded in 1987, the
firm operates from offices in
Monitor
Group is one of the world's leading professional advisory firms, with
headquarters in
April 27, 2005
If
there's a difference between the finance department of a large company and the
finance department of a smaller one, it's that the large company actually has a
finance department.
Smaller companies, with limited resources,
appropriately build accounting - centric departments that focus on the day to
day needs for accounting, reporting, systems and controls. But when faced with
a transaction that requires deal experience rather than accounting skill, how does
the accounting - centric CFO or controller fare?
Ten years ago, while
negotiating a $75 million revolving credit line with a Boston bank, I asked the
loan officer a simple question: "How do smaller companies do a deal like
this?"
Large deal or small, the bankers, lawyers,
documents and process are essentially the same. The only real differences are
the sizes of the loans and the level of deal experience and expertise that the
companies bring to the table. So, I asked, "How do they do it?"
It was a straightforward question and I got
a straightforward reply. "Oh," the loan officer answered, "We
eat their lunch."
March 31, 2005
Twelve years ago, when my daughter, Becca,
was 15 years old, I took her with me to the car dealer. She sat and watched as
I talked, cajoled, sparred and negotiated with the dealer, finally reaching
agreement. When we returned home, her comment to her mom was that she was
surprised at how "rude" I was. She didn't think I had done anything
wrong, exactly. It was just that the way I behaved in sitting across from the
salesman wasn't something she had ever experienced before.
Becca grew up, went to Tufts, majored in
economics, moved to
She narrowed her search over the internet
and set off alone to buy a car. Finding one she liked, she started to
negotiate.
Turning the "I just have to check with
the manager" ploy on end, she said, "Let me take another look at it
in the lot," and called me on the cell phone, just to check in and report
her progress, really. She was doing quite nicely on her own.
I won't go into the details. Just the end,
when they were $500 apart and the dealer was insisting that it was a "good
deal." Becca decided it was time to leave and the dealer challenged her.
"You mean you're going to walk out of here for five hundred dollars? She
looked him squarely in the eye (I suppose) and said to him, "You mean
you're going to let me walk out of here for five hundred dollars? She went to
another dealer, where she bought the nearly identical car for $1,000 less.
Like daughters, CEO's, CFO's and others
aren't born with deal experience. Those in large companies often learn by
watching those more senior. Those in smaller companies too often fend for
themselves and don't learn except through costly error. Letting CEO's and CFO's
learn, while avoiding costly errors, is one way we add value.
February 20, 2005
"Accrual accounting can be
costly."
That was the headline of a Wall Street
Journal article that went on to state that "companies that are most
aggressive when booking non-cash earnings are four times more likely to be sued
by shareholders as less aggressive peers."
There can be a huge difference between
accounting earnings (i.e., "net income") and financial earnings
(i.e., "money"). Net income, honestly calculated, may be a measure of
performance. Money, on the other hand, can be used to buy things and pay
people.
It's not just the risk of being sued.
Liquidity matters and without it, no amount of creative accounting will stop
the checks from bouncing.
January 25, 2005 (Reprinted by Capital Venue
in its March 2005 newsletter)
Managing
Interest Rate Risk.
Managers
often choose between fixed and floating rate debt. Which option they select,
and how they manage their company's potential exposure to fluctuating rates,
should depend on both the company's liquidity and its tolerance for risk. To a
much lesser extent, it should depend on management's expectations of future
interest rates.
Most often, managers make interest rate
decisions only when the company incurs new debt. They negotiate a line of
credit, the lender offers a fixed or floating rate, and the company chooses one
option or the other. Or, when deciding between short- and long-term debt,
management may not be able to choose, as short-term debt is generally offered
on a floating rate basis, while long-term debt is more often offered with a
fixed "coupon." In any case, once a decision is made and the deal is
closed, management typically ceases to consider or further manage the company's
interest rate risk. This passive approach fails to recognize that a company's
risk profile changes over times that may not coincide with the closing dates
for debt. Consider the following:
To finance an
acquisition, Case Company will incur $10 million in debt. The company already
has $10 million in floating rate (currently 5%) bank debt and $20 million in
stockholders' equity. Management is comfortable with the risk associated with
the existing floating debt. They opt for 8%, fixed rate, long-term notes for
the new loan.
After two successful years, the floating
rate bank debt has been paid in full and stockholders' equity has increased to
$30 million. Good news, for sure. But what has happened to the company's
exposure to interest rate changes? It doesn't have any exposure. Stockholders'
equity has increased 50% and the company's tolerance for risk is probably
higher. But instead of more risk, the company has no risk.
What can management do differently?
Management of Case Company should think about refinancing the long-term debt or
should consider synthetic alternatives (e.g., a swap), in order to restore an
appropriate level of risk. A floating rate loan might still cost Case Company
only 5%. Why should Case Company continue paying 8% on their long term debt if
they can tolerate the interest rate risk? By exchanging the higher fixed rate
for a lower floating rate (even if it is done synthetically through a swap),
Case Company is rewarded for incurring a risk that management has already
decided is acceptable.
December 10, 2004
“Put Your SOX On!"
The impact of Sarbanes-Oxley on early-stage companies
We
had the opportunity recently to participate in a panel discussion sponsored by
the Massachusetts Biotechnology Council's Finance Committee and Deloitte &
Touche. The panel focused specifically
on why private (or perhaps the better term is "not yet public")
companies should bother to comply with the provisions of Sarbanes-Oxley, since
they apply only to public companies."
Some observations and
conclusions:
It is never too early to
seriously think about Sarbanes-Oxley compliance. Building compliance into systems and
procedures as they are developed can be significantly more cost effective than
modifying systems and procedures later on.
While Sarbanes-Oxley
applies to public companies, lenders, investors, acquirers and others are
already applying the standards established by Sarbanes- Oxley to private
companies. Expect the trend of third parties to require Sarbanes-Oxley-like
compliance to continue.
Think about the building
of boards of directors and, in particular, audit committees. Recognize that the
majority of directors on a public company's board must be independent
directors. By definition, "independent" excludes management,
significant stockholders, lenders, consultants and the like.
Don't conflict your accounting firm. There
is a long list of non-audit services that can prevent a firm from serving as
independent auditor to a public company.
April 26, 2004
Coppertoppe
Development, LLC has completed the purchase of the property now known as Coppertoppe Lodge and Retreat Center.
N.R. Gordon & Company, Inc. served as
financial advisor to Coppertoppe Development, LLC, in
connection with this transaction and the related financing.
Coppertoppe Lodge and Retreat Center
is set on 15 acres in the foothills of the White Mountains, at the north end of
April 8, 2004
I've
done my share of financings; recently I've been thinking about some things that
have changed since my first one.
I
vaguely remember my first deal. It was for a dollar or two; succinctly
documented on a scrap of notebook paper that read, simply, "I.O.U." I
honestly don't remember if I was the lender or the borrower. A more recent
financing, albeit for a bit more money, amassed a thick seven inches of
assorted documents bound into two very heavy volumes. Why the difference?
The
borrower might be equally protected by either the I.O.U. or the twelve pound
credit agreement. (The borrower has the money, after all, but if you're an
actual borrower, you might want to check with counsel on this!) What's really
happened as I've grown up is that lenders have gotten better at defining their
rights. It's barely about the money at all (the part where you get the money
and pay it back with interest would nearly fit on the I.O.U.); ninety-nine
percent of the deal is now about the terms. That said:
Term
of the month - "Generally Accepted Accounting Principals" (aka,
"GAAP")
Credit
agreements make you keep your books in accordance with GAAP. Fair enough I
suppose, that financial statements are prepared based on standardized rules.
The agreements also require that you comply with various ratios derived from
the financial statements. Generally, that's not a problem. But for a number of
reasons, accountants will, from time to time, change the rules.
When
GAAP changes, financial statements change and the ratios derived from them
change. What doesn't change are the rules of your credit agreement. Dictated changes
in GAAP could put you in default. (Changes might also put you in compliance,
but don't count on it.) If you think this is hypothetical, you've never been a
troubled but otherwise reasonably compliant borrower.
Hint
of the month - Negotiate a provision that requires reasonable restatement of
any ratio that's affected by a future change in GAAP. Email me if you'd like a
copy of language that's worked for me in the past.
March 16, 2004
WebGen Systems, Inc.
has completed the sale of $5 million of its common stock to an institutional
investor and the simultaneous exchange by the company's shareholders and
noteholders of the company's preferred stock and convertible notes for its
common stock. Terms of the recapitalization transactions were not disclosed.
N.R. Gordon & Company, Inc. served as
financial advisor to WebGen Systems in connection with these transactions.
WebGen Systems provides advanced software
for energy conservation and control in commercial buildings. They combine the
highest level of industry expertise with a reliable suite of open-protocol
software tools, called IUET (for Intelligent Use of Energy), to provide
real-time command of energy use to generate savings. Their system connects all
aspects of building energy management to automatically measure, monitor, and
control energy consumption-building by building, system by system, meter by
meter, and device by device.