Originate More Deals

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Here’s a List of Every Major Industry Conference for 2019

I want to share a really handy resource that will help all of us originate and close more deals in 2019.  As you know, the best business development requires direct interaction with people sharing similar interests.  And there’s no better place to meet hundreds or thousands of people with shared interest than at industry conferences.

The good people at GLG just released a 22 page report which lists hundreds of upcoming industry conferences.  These events provide an invaluable way to meet business owners that are seeking capital partners.  They shared it with me, and I want to share it with you.  Click the link below to access.

2019 Conference Calendar

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Opportunity is knocking to avoid paying capital gains taxes … what you need to know about OppZones.

Lost amid the federal government’s 2017 revision of the tax code was a provision for something known as qualified opportunity zones (QOZs).

What once was lost now is found. Or soon will be, anyway.

Opportunity zones are, as defined by the IRS, economically distressed communities in which new investment is encouraged, under certain conditions.

In other words, QOZs represent an opportunity for the economic development of traditionally underfunded areas, and an opportunity for investors. And precious few people are discussing it, beyond the real estate and venture capital space.

That could and should change as we draw nearer to January 2019, when the mutual benefits of QOZs become a reality. If at that point an investor sells an existing, appreciated asset like stocks or real estate, they can then invest the capital gains in an OZ fund — and taxes on those cap gains can be deferred until December 31, 2026.

Additionally, the cap gains basis increases by 10 percent if the taxpayer maintains the investment for a minimum of five years, and an additional five percent if he or she holds it for at least seven.

Finally, cap gains accrued after an investment in a QOZ will not be taxed at all if the investment is held for at least 10 years.

In short, this is a bargain for investors. But the genius of this structure is that it both seeks investments to shore up low-income communities and, through an OZ fund, reallocates capital to these investments from those outside the zone. By tying an OZ fund to a QOZ, authorities basically redistribute capital earned in higher-income areas to those areas more in need.

As mandated by law, such places may include manufacturing towns in which jobs were lost to outsourcing and automation, or areas recovering from particularly devastating natural disasters.

It is left to state governors to determine those regions within their jurisdictions that may qualify to be QOZs, and nominate them to the Secretary of the Treasury and the IRS for evaluation. Upon final approval, QOZs are added to the Department of the Treasury’s Community Development Financial Institutions Fund (CDFI); note that they aren’t labeled by zip code, but by census tract number.

To date, every state has at least one QOZ, as does each major city. A report from international law firm Skadden estimates that QOZs encompass some 12 percent of the nation’s landmass (as well as all of Puerto Rico).

Certainly there was a need for such legislation, given the fact that larger metropolitan areas tended to recover more quickly from the 2008 economic crisis than smaller cities — and the fact that even within those large cities, there remain pockets untouched by the recovery.

So this should help, while at the same time giving investors a nice little bump. The caveats are that there is a ceiling on tax exemptions for any OZ funds, and that taxpayers are required to sell an existing, appreciated asset rather than putting said asset into an OZ fund.

But all in all, it is a win-win. And to date, not nearly enough investors are aware of that.

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What if AI could do your market research (and outreach) for you?

AI is everywhere, but as I’ve written before, it won’t replace jobs in business development. Instead, it’ll simply augment existing human capabilities, allowing us to do more with less, closing more leads, finding more relevant projects, and building more win-win situations for everyone. Perhaps we can even achieve that three-hour workday so famously imagined by economist John Maynard Keynes–but has proven elusive so far.

Whether or not we drastically shorten our workweeks, however, one thing is clear. The effective, strategic use of AI promises that overstressed, harried BD professionals will be able to free themselves from the rote tasks of the job, and instead concentrate on doing what AI cannot: building relationships.

In particular, AI excels at crunching reams of data and delivering custom analyses and reports. For this reason, AI will be particularly valuable in an area like market research. While this may seem obvious, humans must rest and take breaks to carry out vital functions like eating and restoring concentration. Machines have no such limitations: not only can they always maintain a razor-sharp focus, but they can also scan and analyze documents far more quickly than humans.

In many ways, AI is a natural fit, as much of market research is very repetitive work. Fred Barber, a managing director of AI firm response:now, estimates that writing reports comprises some 75-80 percent of market research. With the help of AI, Barber believes that a company that provide research at one-third of the cost and three times as fast as a team composed solely of human analysts.

The data seems to bear Barber out. While it is the case that in most cases, humans can learn more quickly than AI (there are some exceptions, like Google’s AlphaGo Zero) for now, AI is peerless when it comes to crunching numbers. Be it heart scans or dense law contracts, this sort of analysis really comes down to brute force: throwing more processing power at the problem will speed things up. Even if you increase the number of humans on your team, there’s simply no way to go through all that data. Some experts estimate that every two days, humanity collectively creates as much information as we did from the dawn of civilization until 2003.

Consider a hypothetical BD professional who specializes in finding telecom technology companies that will benefit from the wave of 5G communications network upgrades soon to take place. While this field may seem narrow, in reality, it is anything but: this person’s field of responsibility could include anything from companies that produce the latest composite materials (fiber-optic cables or even graphene wires) to services companies, to software companies that help make it all happen.

As a result, this person likely would have little time to stay abreast of the exciting new companies and developments in this field. Sure, they could set a Google Alert–if they want their mailbox to be inundated with tangentially relevant information and leads. Alternatively, they could turn to AI. Using pre-programmed parameters, a sophisticated algorithm could browse hundreds of databases, countless news articles, and seek out the most profitable leads.

Equally important, the creation of such features like Natural Language Processing and Natural Language Generation promise to upend our society’s perceptions of what machines can (and cannot) do. Rather than spending hours over Powerpoint presentations, BD specialists can even task AIs to analyze the tone of materials on a company’s website and external-facing materials (brochures, shareholder letters, articles, and the like), and to generate information in a similar tone, customizing their work to the client in question.

But the potential of natural language abilities doesn’t stop there. One tactic that BD pros (as well as salespeople and recruiters) might use is an email blast. Of course, the downside with this approach is the lack of personalization: no one likes being solicited in a group message, and for that reason, these emails tend to have low response rates.

Using AI with natural language capabilities, however, can widen the sales funnel and reduce attrition rates. Not only can such algorithms pass the Turing test, tricking would-be clients into thinking that they’re written painstakingly and with care by a human, but they can tailor such communications to the party in question. In fact, natural language processing and generation has grown to such a degree that computers can identify emotions with a high degree of precision. From there, it’s only a short step towards evoking such emotions in your potential clients–a critical skill that any BD pro understands.

In fact, I’m going to invest in my first AI BD software tomorrow (CyberMonday 2018).  It’s called x.ai – and their tagline “scheduling sucks” pretty much sums up what most BD professionals agree is one of the more painful aspects of the BD role.  Up to this point I have been a very happy user Calendly which everyone should also check out if you’re looking to dip your toe into the BD tech water.  I have been a Calendly user for years, and that software has saved me an incredible amount of time and hassle.  I will report back on my experience with x.ai.

The AI revolution has left no stone unturned and no field untouched. Business development, especially in the areas of market research and client outreach, is no exception. No, an AI cannot replace you, nor can it build relationships and create a winning strategy as effectively as you can. But an algorithm can take the devil out of the details, crunching numbers, writing reports and pitch decks, and even establishing initial contact with a lead.

Thankfully, for most everything else, business development requires humans.

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Best Productivity Software for Business Development Professionals

My blog OriginateMoreDeals.com went live at the beginning of 2017 and I want to thank the small hoard of you that encourage me to continue sharing the lessons I’ve learned working in the private investment industry for the past 15 years.

One of the most popular OMD posts over the past 18 months is I couldn’t function as a deal professional without these 4 software platforms. It was a fun piece for me to write because I realized how much software helps me originate more deals and how disbelievers who deny the promise of good technology will be left behind. And in case you’re wondering how my top 4 are still holding up, you’ll be pleased to know that I use all 4 of them (Podio, Evernote, Copy2Contact, Axial) on an “all-day, everyday” basis.

This year I thought I would focus more specifically on software that specifically improves my productivity. If there is anything this year has taught it is that there are never enough hours in a day. The good news is that there is more software than ever to help you automate mundane tasks. By condensing the time it takes to manage each of our core daily activities, we can cumulatively save ourselves hours over the week and days over the year. That translates into more time spent on the parts of our jobs that we consider the highest and best use of our time.

So until they figure out the whole cloning thing, busy BD professionals should consider leveraging software do their jobs smarter. Below is a catalog of my favorite software/websites for the severely time-constrained.

appear.in: For effortless video collaboration, this software allows you to work with up to 12 people at once via video conference. Presenters can share their screen while keeping video streams active so that meetings can truly take place face-to-face without the expense and time commitment of travel. A great way to speed to team sales calls and conduct due diligence.

Calendly: This user-friendly solution integrates with your email, enabling you to efficiently schedule internal or external meetings without the back-and-forth email chains that can infest inboxes. By sharing a link with your availability, you allow invitees to easily choose a time that works best for everyone, without risking time zone mishaps, delays and frustration. Booked meetings are automatically added to your calendar, and automatically populate your CRM system. Calendly can even be added to sales and marketing campaigns to truly automate business development.

Constant Contact/Mailchimp: If you’re doing any form of email marketing, you need a service to help you manage subscriptions, grow your list and extend your reach. If you’re still sending blast emails from Outlook . . . STOP! These tools make it easy to send professional-looking emails and also integrate with CRM systems to help manage your target lists and campaigns.

Google Analytics: When combined with the software used for email campaigns, this web analytics service tracks and reports website traffic helping business development professionals to know what potential clients are interested in learning more about. It also helps marketing professionals improve their websites, track online campaigns, lead generation and more.

RescueTime: This tool helps you better understand your daily habits so you can become more productive. By running securely in the background on your computer and mobile devices, RescueTime tracks the time you spend on various applications and websites, giving you a clear picture of your days and weeks. Alerts can help you limit your time spent on certain activities and you can even block distracting websites during work hours.

SourceScrub: This tool automates prospecting investment opportunities by building out timely and accurate target lists that incorporate thousands of online sources, including trade show exhibitor lists, industry buyer guides, awards lists, and more. Sourcing data and prospecting tools from SourceScrub are designed to save time and increase deal flow for private equity, venture capital, investment banking and corporate development professionals.

UberConference: For setting up conference calls simply, without the use of pins. UberConference calls you when it’s time to get on the phone. It also addresses other common conference call inconveniences: using UberConference you will always know who is speaking and can easily share your screen, mute calls, record calls, bring in other callers, and other functions that were either unavailable or too mysterious to perform in the past.

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How to Gracefully Decline a Deal

The most significant and lasting cultural fingerprint I left on my father is his love of Seinfeld.  Whenever we’re together, the topic of one favorite episode or another pops up in our conversation.  It just happened when we were together recently.

My dad was asking about my job and how things were going.

“Let me get this straight,” he began. “You guys look at 800 to 1,000 deals a year to only make 15 to 20 investments??”

“Yes,” I nodded.

“Wow, that’s under a 2% close rate.  You must be an expert at not telling people their baby’s ugly!  Ha! Do you remember that one Seinfeld episode . . . “

Cue the tape!

“A little too much chlorine in that gene pool.”  The best.

OK – back to work.

Yes, my dad raises an excellent point.  As most Business Development professionals will tell you, one of the most uncomfortable things to do is turn down a deal, especially when it’s with a close relationship or big name private equity sponsor that you’d love to do business with.  This problem especially plagued me when I got my start in the business.

I hope to provide some of the best techniques I’ve developed to make sure that when you need to say ‘no’ the person receiving the decline should want to do business with you again.

First.  No Happens.  That’s this business.  You need to get really good at giving and taking rejection when you’re a private equity professional.  This industry is filled with many direct people.  At first, I hated it.  I was a nice Midwestern kid who didn’t like making others upset.

Second, don’t waste people’s time.  I’ve worked with people that will do an hour call with an investment banker just to tell them at minute 57 that this won’t fit our mandate because [ insert reason below  ]

. . . too little revenue.

. . . check size too small.

. . . we don’t touch the industry.

. . . we don’t invest in that part of the country.

. . . I hate the company’s logo.

. . . I used to date the CEO’s wife. (Well, that one may require a management meeting to confirm.)

See a pattern?  Yes, these are facts that 95% of the time should appear in the deal teaser and 100% of the time will be in the Confidential Information Memorandum (CIM).

Meaning that the person reviewing the deal should know within 5 or 10 minutes whether the deal is Dead on Arrival (DOA).  I get it, I’m a CIM junky.  I love learning about new and interesting companies.  That’s what attracted me to this profession.  But don’t waste the banker / lender / buyer‘s time just because you want to learn for learnings sake.  If a deal is not within your firm’s basic investment mandate, kill it quickly!  You’re more likely to see the next deal if you do!

“A fast no is a good no,” meaning that people appreciate a thoughtful and rapid decline because that person does not need to circle back and worry that they might be missing people that actually are interested.

Respecting someone else’s time also means never asking for additional materials when the rejection was self-evident from the outset. Take the time to review the teaser thoroughly before requesting an NDA. If something basic isn’t right – the industry, size, business stage or geographic location – that should be obvious right away. Establishing an NDA is a time-consuming prospect for everyone involved, and if it’s evident that the deal should be declined after reviewing the teaser, it’s completely unnecessary.

So how do you know which deals you should spend time with?

First and foremost, it’s wise to have a very clear sense of what type of deals you’re looking for. Define what your ideal opportunity looks like and, understanding that most investments won’t meet the criteria exactly, use that ‘perfect deal’ as a lens to analyze the ‘interest level’ of new deals. This allows you to act quickly and avoid the protracted world of ‘maybe.’  Focus on bringing in the best deals first.

People not only appreciate speed, they appreciate a definitive answer. A quick and absolute no, while disappointing, is nowhere near as dreaded as never-ending uncertainty. Whenever possible, avoid telling someone maybe, and if you must, try to ensure that it’s a short-term answer that can be tipped one way or the other swiftly. Giving people insight on how your view of the deal will be swayed will also help them guide you to the likelihood that ‘you’re going to get there.’

A business development best practice should include providing an honest explanation for why the deal isn’t a good fit. Never let silence serve as a stand-in for a response, and try to avoid using vague and meaningless language, explanations like: “it’s not a good fit for us at this time.” Entrepreneurs can learn a lot from rejection, so be sure to give them the opportunity to cull actionable data from the exercise that they can leverage to make future pitches stronger. They may need to better research their target investors, address a flawed business model, or make changes to their team. Whatever it is, give them the gift of your feedback and the opportunity to learn from their mistakes. And someone who isn’t enthusiastic about constructive feedback usually isn’t the kind of person you’d want to partner with, now or in the future. Follow the famous adage ‘give to get.’

I frequently will offer suggestions on other investment firms that may have an interest in the deal. Firms are varied, and as long as the opportunity isn’t fundamentally flawed, there’s likely someone else out there that’s filling that particular capital niche. One firm’s trash can be another’s treasure. Providing suggestions of alternate targets is one of the best ways to decline. Closing one door by opening another creates goodwill and ensures that there are no hard feelings. And wherever possible, offer referrals. If the other firm(s) are legitimate suggestions, you may have more than one person thanking you for it later.

And those aren’t the only ways to help companies who seek your financial support. For example, if you pass on investing in a great software company because they’re based overseas and you don’t invest internationally, that doesn’t mean that you can’t recommend the company’s product to your own IT department, your portfolio companies, or other business contacts. There’s no shortage of ways to pivot a rejection into a helpful and positive experience for everyone involved, so try to think of them as the first step in the formation of a strong new relationship, or the deepening of an existing one.

Let’s wrap this up so I can get back to watching more Seinfeld.

Here’s what we learned.  A key to successful investment (and perhaps life in general) is turning down opportunities that aren’t the right fit. Every investor is familiar with the scenario: we can only accept a very small percentage of the opportunities that cross our desks, and sometimes that involves passing on solid companies for reasons that can feel arbitrary. Because so much of what we do involves saying no, one of the most important skills to cultivate is the ability to tactfully pass on deals that don’t fit the bill. With practice and effort, it’s possible to deliver rejections in a manner that not only preserves key business relationships, but grooms them to become more fruitful down the line.

Relationships are paramount to our success, meaning all referral sources and business owners must be treated with deference and respect. By being upfront, honest, and considerate, you can ensure that your contacts will continue to send deals your way, that those deals will become better over time, and that business owners who are grooming your next star investment don’t write you off because of the inconsiderate way you treated them or a friend previously. By delivering your rejections with compassionate honesty and useful insights, you’ll be setting up yourself, your firm, and your contacts for greater success.