Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Wednesday, May 17, 2006: Two
themes today. First, time. You have precious little of it. You need to
develop fast-track techniques for doing key things, like due diligence. See
below. Second, Opportunities. There are plenty of them. Saying NO
is good, though hard. When God closes a door on you (because you said No), she
immediately opens a window. A better deal always comes along -- often
the same day.
Doing a little due diligence: My nephew,
Andrew Whitten, eyed an Australian startup biotech firm for me. The firm is
raising $17 million. Andrew's prescient analysis:
1. In a nutshell, too much value is going to everyone but the scientists. This
includes $1.96 million (cost of the offer), $3.45 million (salaries and wages)
and $4.1 million in corporate costs (admin and overhead). Of the share structure,
20% of the company -- or 8.75 million is "going to do the stockmarket listing
which could be done in Australia for $250,000."
2. The CEO, emails Andrew, has a checkered corporate career. "I have asked
around and I got comments that were not polite." The CEO's history with
public companies has not been good, with several listed companies out of cash
Andrew is right. When doing your due diligence, check three areas:
The management, especially the CEO. What's been his history?
in doubt, stay out.
2. What are they spending the money they're raising on? The business
3. What's the total market cap of the company after raising all the money?
And who'll own what percentage? In particular, how will your shares (should
you invest) be watered down?
Free phone calling on Skype: Reader Rayan
is letting its users to call any number in the US and Canada for free
till the end of the year. I have been calling friends and colleagues all over
the country...they tell me the clarity is amazing. I already use Skype to
call internationally (good rates). But now to call any number in the US and
Canada for free.....very cool!
Until recently Skype
only offered free calling between Skype users. Skype is free software you load
on your PC or laptop. eBay bought Skype for $4.1 billion. I have no idea how you
make money on "free." eBay has been a screaming short for some time.
It still looks a little overpriced, with a P/E of nearly 40 and flat, ebbing earnings.
telecom industry, at its best (or worst): My friend Michael Marcus
has been selling phones and phone systems for eons. (Click
here.) To amuse himself in his old age, he writes a blog called DialZero,
which looks at the "the funny, stupid and surprising things done in telecommunications."
The phone industry has never attracted the brightest and best and has done some
really stupid things. Click here.
Michael Marcus at a very early age, when phones were phones.
My wife hates these shoes. She says I look
like an old man. But they are the most comfortable sneakers I've ever
owned. They're actually lightweight running shoes. They're New Balance 766.
They come in two colors and many widths, including narrow. They cost $89. I
got mine from Zappos,
which has free shipping and no tax.
The left one is 766 NY (as in Navy/Yellow). The right one is 766 NG
(as in Navy/Grey).
the walk-through eons before the closing happens: And
do multiple walk-throughs. There is no way your builder will correct your entire
Punch List (list of things to be fixed) in one go. My daughter is buying a new
apartment. She did her walk-through, found oodles of things and is now doing
another walk-through and another. You must have your Punch List completely solved
before you do the Closing.
The coming energy bubble. This is an excerpt
from a blog which Bob Metcalfe,
old-time venture capitalist and technology entrepreneur, wrote this week.
Technologies announced last month that it had received a $6.8 million
investment from Polaris Venture Partners.
GreenFuel went on to brag that I, a has-been Internet engineer-entrepreneur
and apprentice general partner, joined GreenFuel's board. Handling the surprising
number of inquiries sparked by GreenFuel's announcement, I admitted to reporters
that GreenFuel was Polaris' FIRST energy investment. I realize now that admitting
this was a mistake, in fact several mistakes rolled into one.
First off, several
reporters turned hostile after not listening carefully and thinking I said
Polaris is a pioneer in energy investing. No. Ahead of us are many investors
who have been specializing in energy for decades. And there are even my Silicon
Valley friends, for example venture capitalists Vinod
Khosla and Tim Draper, who are ahead
of Polaris and me in energy investing. Draper Fisher Jurvetson in fact led
the GreenFuel financing round that Polaris joined in April. So, please, I
did not say that Polaris is the first venture capitalist to invest in energy.
What I said was that GreenFuel is Polaris' first energy investment.
GreenFuel, by the way, is cool. The MIT spin-off is deploying solar bioreactors
that remove global-warming carbon dioxide from power plant flue gases by bubbling
them through sun-drenched algae slurries that are harvested daily to produce
biodiesel and ethanol, thereby helping save the world with cheap and clean
Well, not OK.
Clarifying my first mistake led to a second. A couple of reporters followed
up by asking whether Polaris and I are turning to cool energy start-ups because,
now that the Internet Bubble has burst, there are no more good investment
opportunities in infotech. No. Polaris is a diversified venture investing
partnership. We just raised $1 billion into our 5th venture fund and plan
to continue investing in infotech, biotech, nanotech,
and now also,
starting with GreenFuel, in what I call enertech. OK?
Well, not OK.
It turns out, as I learned at our first partners meeting after the GreenFuel
coverage, Polaris made enertech investments before GreenFuel. The best example
is another cool company called Athenix,
which provides genes and enzymes for the bioconversion of biomass, like corn
stover, straw, and dried grains, into biofuels.And then I looked at the ENERGY
relevance of the five other Polaris-backed start-ups on whose boards I serve:
Ember, SiCortex, Paratek, Narad, and Mintera.
provides milliwatt semiconductor radios and networking software for embedded
microcontrollers, many of which are used in residential, commercial, and industrial
energy (HVAC and lighting) management systems.SiCortex
is developing Linux superclusters that will improve the energy efficiency
of scientific computing by a factor of 100 two orders of magnitude.
Paratek is developing tunable ceramic
radio frequency components for cellphones that will increase their range and
energy efficiency, and might as much as double their battery life.The last
two of my "energy" investments, Narad and Mintera, are helping build
the future broadband Internet, enabling substitutions of cheap and clean communication
for expensive and environmentally damaging transportation.
provides equipment to cable television operators so they can offer gigabit
switched Ethernet services for broadband Internet access.Mintera
provides equipment to telephone, television, and Internet carriers
for 40-gigabit-per-second (40Gbps) ultra-long-haul DWDM optical transport.What
better way to ease the world's looming energy crisis than reducing demand
for fossil guzzling and carbon emitting commuting and other unpleasant forms
So, no, GreenFuel
is not the first energy investment made by Polaris and me.
to fixing yet another mistake. After the GreenFuel announcement, I was buried
in business plans from companies developing new energy reserves or power generating
plants of various kinds around the world. While many of these are promising
energy investments, they are mostly not right for Polaris and especially me.
Saying we invest in "energy" is a problem.
So, after consultation
with experts, I say I am not looking for "energy" investments or
"renewables" investments or "cleantech" investments, but
for Boston-based early-stage ENERTECH investments, like GreenFuel. Short for
energy technology, "enertech" also poetically extends the familiar
family of investment categories: infotech, biotech, nanotech, and now
My recent interest
in enertech was provoked by Susan Hockfield, MIT's new president. She announced
last year that energy would be a major focus of MIT's formidable innovation
machine. The MIT Energy Research Council that President Hockfield established
last year just issued its first report:
Last week was
Energy Week at MIT. ... Fresh back from MIT's Energy Week, I'd like to say
that MIT will soon save the world with cheap and clean energy. But, success
is not assured.
Oil and gas
seem to be running out, but if not running out, they sure are expensive these
days. They mostly come from ungrateful regions of the world. Their burning
releases pollutants including especially carbon dioxide (CO2), which is widely
reported to cause global warming, more dangerous hurricanes, and rising oceans
that will eventually turn Boston into Atlantis.
Coal is cheap
and plentiful, but also dirtier, including much more CO2, and not ideal for
cars and jets. Some folks think that coal needs urgently to be gasified.
Since all fossil
fuels oil, gas, coal dump global-warming CO2 into our atmosphere,
there is a lot of talk about "carbon sequestration," including pumping
CO2 back into the ground to help get the oil out. This sounds to me a lot
like burying nuclear wastes. Excuse me for mentioning that GreenFuel promises
not to expensively sequester CO2, but to recycle it productively into biofuels.
be cheap and clean, but they also release CO2 when burned. On the other hand,
they capture CO2 when grown. Ethanol is a coming thing.
Water and wind
power are free of CO2, but among their other problems are despicable Democrats
protecting family compound views across Nantucket Sound. OK, MIT is proposing
to move wind farms into deeper water offshore over the horizon.
The United States
has 104 nuclear reactors safely, cheaply, and cleanly (no CO2) producing 20%
of our electricity. But, NO-NUKES Luddites have made it impossible to build
new US reactors since 1975. This is an outrage. China and France, of all places,
are moving ahead with nuclear. So should we. It's fascinating that so many
global warming alarmists are also anti-nuke. It will be interesting to see
how they work this out.
solar power. Our Sun's nuclear fusion reactor which daily taunts fusion
researchers by flying across the sky currently transmits to Earth enough
energy in an hour to power the human race for a year. Solar power converters
are now about 1% efficient, and there aren't very many, but promised breakthroughs
abound. This explains why there is something of an investment bubble in solar,
including GreenFuel, which uses photosynthesis to convert transmitted solar
energy and recycled CO2 into biofuels.
investment bubbles, a young woman at last Saturday's energy conference at
MIT worried about investment bubbles in energy. She looked old enough to remember
the bursting of the Internet Bubble, but not old enough to remember the sad
state of computing / communications in 1976. Remembering those days, I have
to say that energy today feels just like pre-Internet computing / communications
So, I estimate
it will take about three decades to get to THE energy bubble, which will make
the last Internet Bubble look like a speed bump. We should look forward to
A lot of the
people speaking at today's energy conferences are in for some big surprises,
just like the people who worked at AT&T, IBM, and the FCC in 1976. If
the world is to be saved by cheap and clean energy, many of these people,
their rapacious monopolies, their politicians, their co-dependent activists,
their captured regulators, their professors, and their conventional wisdoms
will have to be cruelly swept aside by today's young scientists, engineers,
entrepreneurs, and yes, enertech venture capitalists.
There was a man who had worked all of his life, had saved all of his
money,and was a real miser when it came to his money. Just before he died, he
said to his wife, "When I die, I want you to take all my money and put it
in the casket with me. I want to take my money to the afterlife with me."
And so he got his wife to promise him with all of her heart that when he died,
she would put all of the money in the casket with him. Well, he died.
He was stretched
out in the casket, his wife was sitting there in black, and her friend was sitting
next to her. When they finished the ceremony, just before the undertakers got
ready to close the casket, the wife said, "Wait just a minute!"
She had a box
with her; she came over with the box and put it in the casket. Then the undertakers
locked the casket down, and they rolled it away. Her friend said, "Girl,
I know you weren't fool enough to put all that money in there with your husband."
The loyal wife
replied," Listen, I'm an obedient and honest woman. I can't go back on
my word. I promised him that I was going to put that money in that casket with
"You mean to tell me you put that money in the casket with him!"
"I sure did," said the wife. "I got all the cash, put it into
my bank account and wrote him a check for the entire amount. If he can cash
it, he can spend it."
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
concerns and experiences. That way we can all learn together. My email address
is . You can't
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