Morning Report

What you need to know one minute before daylight

A New Digital Marketing Option, A New Flavor of Venture Capital

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DAYLIGHT  

Clint Richardson, a friend of the Oxford Center who literally wrote the book on growth companies and deal structures, challenged the Wall Street Journal story we highlighted yesterday about big investment banks showing greater interest in smaller companies and smaller deals: “My experience is the bigger banks tend to move to smaller deals when they cannot find enough attractive bigger deals and need to keep their bankers busy. All part of the cycle.

“I think I watched this cycle through three or four times over the course of my legal career. There is always some gloss-over explanation included like the one in the first part of your quote. More wishful thinking than reality  ‘small’ deals for $40 million companies do not close faster. The statement about the surge in private equity-backed companies probably has more to do with any willingness of bigger banks to lower their thresholds. My two cents.”

THE ECONOMY

For the first time in eight years, businesses with fewer than 20 employees cut jobs two months in a row: “Smaller firms tend to have more trouble luring workers in a tight labor market than their larger peers, as they have fewer resources and perks to offer: a slowdown in their hiring indicates less slack as the labor market nears full employment. Medium-sized firms aren’t immune either, as they added the fewest workers since October 2017.”

MARKETING

Adobe is partnering with Microsoft and LinkedIn to create a digital advertising product that offers Facebook-like targeting: “Here’s how it works. You create a great looking advertisement using Adobe’s software which includes tools for making videos, editing photos or designing your own art and illustrations. Adobewhich will be using the profiling tools it purchased from Marketo (a business-to-business marketing software acquired last year)will then leverage LinkedIn’s data to target your advertisement to specific people based on their demographics, history, professional titles and interest. When someone raises their hand or wants more information, the data is then moved into the CRM modules of Microsoft Dynamics where your salespeople nurture, follow-up and hopefully close.”

VENTURE CAPITAL

Clearbank is pitching an alternative to traditional venture capital that would let founders keep a larger percentage of the business: “Clearbanc invests $10,000 to $10 million in e-commerce businesses with positive ad spend and positive unit economics after Clearbanc’s algorithm has reviewed the startup’s marketing and revenue data. Clearbanc sends the cash within 48 hours, doesn’t take a board seat or require a personal guarantee and continually invests in the company as it scales, so long as those two key metrics—ad spend and unit economics—remain positive.

“Here’s the catch: Until the company has paid back 106 percent of Clearbanc’s investment, Clearbanc takes a percentage of the company’s revenue every month, depending on the size of the investment. If you have a higher-margin business, like say a digital fitness app, and you’re willing to divert 20 percent of your monthly revenue, Clearbanc will invest a larger sum right off the bat. …

“‘We are essentially a non-dilutive co-investor,’ Romanow said. ‘VC takes time, it’s a lot of nos, you’re really giving up equity that you can never get back. A lot of founders in the early days don’t calculate what their equity could be worth. Like the first $250,000 in Uber is worth $1 billion now.’”

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STARTUPS

At several e-commerce drug sites, you can pretty much prescribe your own medicine: “The sites, Roman and Hers, as well as others now make obtaining lifestyle drugs for sexual health, hair loss and anxiety nearly as easy as ordering dinner online. On the sites, people self-diagnose and select the drug they want, then enter some personal health and credit card information. A doctor then assesses their choice, with no in-person consultation. If approved, the medicine arrives in the mail days or weeks later.

“The sites invert the usual practice of medicine by turning the act of prescribing drugs into a service. Instead of doctors making diagnoses and then suggesting treatments, patients request drugs and physicians serve largely as gatekeepers. … ‘It’s restaurant-menu medicine,’ said Arthur L. Caplan, a medical ethics professor at New York University School of Medicine.”

RETAIL

April is Autism Awareness Month, and Target has released a new line of furniture made for children with sensitivity issues. “Available online now with prices that range from $20 to $100 … like a pineapple rug or an indoor tent built to hold a desk. But with muted hues, soft-yet-tangible textures, and plenty of items meant to move or even be tackled, it’s designed specifically to accommodate the senses … As Julie Guggemos, SVP of product design and brand management explains over email, sensory sensitivities have become a popular topic for parents who are often forced to shop for clothing and furniture in specialty item stores where aesthetics are low and prices are high.”

ZACK ELLER’S DEALS OF THE DAY

Boston Dynamics, a robotic design company, has acquired Kinema Systems, a company that gives robotic arms 3D vision to help them locate and move boxes. “‘Bringing the Kinema team into Boston Dynamics expands our perception and learning capabilities while the Pick product accelerates our entry into the logistics market. Beyond being a powerful tool for industrial robotic arms, Kinema technology will help our mobile manipulation robots tackle a wide variety of complex real-world tasks,’ Boston Dynamics founder and CEO Marc Raibert said in a press release.”

Grammer Industries has acquired Sterling Transport. Both companies specialize in hauling hazardous and specialty chemicals as well as other bulk commodities. “The companies also will work to combine operations over the next several months, according to Grammer Industries vice president John Whittington … The combination of the companies will create a business with 22 terminals, 350 company-owned tractors, more than 200 owner-operator tractors and 850 trailers serving more than 500 customers, company officials noted.”

RETAIL

The Commerce Department reports that online retail in February posted higher sales than brick-and-mortar for the first time ever. “In February, online sales narrowly beat general merchandise stores, including department stores, warehouse clubs and super-centers. Non-store retail sales last month accounted for 11.813 percent of the total, compared with 11.807 percent for general merchandise. To be sure, brick-and-mortar sales are higher when including other categories such as auto and restaurant sales.”

REAL ESTATE

Common, a New York-based co-living provider targeting Millennials, is expanding to areas like Philadelphia and Atlanta with $300 million in new properties. The company also looks to solve an issue plaguing co-living spaces: “…the co-living model seeks to refine what’s long been a way of life for people living in cities. [Founder Brad Hargreaves says,] ‘What we noticed in the early days is that there aren’t a lot of homes built with roommates in mind, yet a huge chunk of inventory in urban centers were being taken up by people with roommates,’ says Hargreaves, who notes that one-quarter of households in New York City are ‘roommate households.’”

HUMAN RESOURCES

Rita Kakati Shah wanted to return to work after raising two children. But despite her qualifications, companies focused on the gap in her resume. She started a company tailored to mothers returning to the workforce to combat the “mommy tax”: “When I started Uma, I met so many incredible moms who were in the same boat as me. They came from professional backgrounds, and they all found it hard to return to work. One woman, an experienced journalist, met with a recruiter when she was coming back to the workforce. The recruiter told her, ‘Look, no one is going to hire you because you’re a mom.’ …

POLICY

Boston is close to the grand opening of the Encore casino, but first, the Massachusetts Gaming Commission needs to determine if Wynn resorts can still hold its casino license: “Massachusetts gaming commissioners will this week consider if Wynn Resorts remains suitable to hold the casino license for the Boston area. The question of suitability comes less than three months before Wynn is set to open its $2.5 billion Encore Boston Harbor casino complex in Everett—and more than a year after Wynn founder and former CEO Steve Wynn resigned amid sexual misconduct allegations. One case led to a $7.5 million settlement. … [The Gaming Commission] wants to learn why Wynn Resorts did not let the commission know about the settlement of those sexual assault allegations against Steve Wynn back in 2013.”

MANAGEMENT

Two former employees who blew the whistle on Theranos are starting a nonprofit called Ethics in Entrepreneurship: “It plans to help connect early-stage entrepreneurs to ethicists, seasoned entrepreneurs, and other relevant industry experts to guide on how to make ethical decisions when building a company. It also plans to make available tools and frameworks for ethical decisions that benefit businesses, employees and consumers.

“‘There were so many instances, even for someone like Elizabeth Holmes, to turn back and say, I’m taking things a little too far here,’  Cheung told CNN Business. ‘She had many opportunities toeven at the very end, she could have said, OK, I’m sorry. I messed up. I’ll stop processing patient samples and I’m going to get my team together, we’re going to work on this and we’re going to make a good product. I don’t think she’s ever said that, until she had to go to court and say those things.’”

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

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