Opportunity Zones, Paying Employees to Take Vacations, and Does Every Company Have to Be a Tech Company?

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DAYLIGHT  

The Trump administration released regulations Wednesday that could help entrepreneurs benefit from a new tax incentive, known as Opportunity Zones, when investing in job-creating startups in struggling communities: “Under the 169-page proposed regulation, the second in a series of rules meant to clarify the 2017 tax law that created the zones, investors can take advantage of the tax breaks in several ways. The new methods are particularly important for investors who hope to fund new coffee shops, grocery stores or possibly, as administration officials conceded on Wednesday, marijuana dispensaries in states that have legalized the drug.”

TAXES

April 15 has just passed, but it’s not too early to think about ways to reduce your 2019 taxes. For example: “Most small and medium-size companies can deduct up to a million dollars of purchases for capital equipment, certain autos, computers, off-the-shelf software, and other business property using the Section 179 accelerated depreciation rules. But the secret here is that you don’t actually have to buy it all with your cash. Even if you finance a capital equipment investment (and interest rates are still attractively low) it’s still deductible. You just need to make sure the item is put into service by the end of the year.”

HUMAN RESOURCES

Robert Glazer explains why his company, Acceleration Partners, pays employees up to $750 to take vacations and stay offline: “Harvard Business Review found that employees who took more than 11 vacation days per year had a 30 percent higher chance of earning a raise or promotion. High performers take more vacation time. They can get their work done in less time, and they know that taking time to recharge is vital to being an A player.

“Taking vacation time also makes employees more engaged and satisfied with their jobs. Managers recognize this. A survey from the Society of Human Resource Managers found that 81 percent of managers notice that vacation time alleviates burnout. … ‘In reality, people who refuse to take time off aren’t saving their colleagues, they are often just avoiding delegation. Delegating is a tough skill to learn, but it is especially vital for people who lead teams. By encouraging your team to delegate important work during a vacation, you create a culture of trust and high expectations. And in the best-case scenario, you may discover untapped capacity in your colleagues that you didn’t notice before.’”

TECHNOLOGY

German drone startup Liliumis is seeking regulatory approval for the world’s first all-electric vertical takeoff and landing passenger jet: “Lilium aims to have a fleet of craft operating in cities across the globe by 2025, providing a pay-per-ride service that will be emission-free, five times faster than a car and produce less noise than a motorbike. The model, which achieved a first for a jet in 2017 when a prototype successfully transitioned between hover mode and horizontal flight, will have a 300-kilometer (186-mile) range, allowing it to travel between New York and Boston in just an hour.”

Brendan Eich has built a new browser, Brave, that is designed with privacy in mind: “The point of Brave is to look, feel, and act much like Google’s market-leading Chrome browser while still aggressively protecting the security and privacy of the user’s personal data. The developers obviously went to a lot of trouble to remove as many friction points and trade-offs as possible for people coming over from Chrome, while keeping users safe from risky sites, ads, malware, and cookies that track you around the web.”

Does every company have to be a tech company? “In the world of chain restaurants, fast-growing cult brands generally serve their investors one thing: an IPO. Until last November, most everyone expected Sweetgreen to go public andlike Starbucks in the ’90s, Chipotle in the aughts, and Shake Shack in 2015become the food industry’s most coveted stock.

“Instead Neman, Jammet, and Ru made an announcement so Sweetlife-y that even some of their own executives wondered if the three friends had finally gone too far. Sweetgreen could no longer be a mere salad chain, they declaredit had to be a tech company. This was the only way the company could not only serve customers, its community, and itselfto achieve the win, win, winbut also fix the entire restaurant industry and improve the health of the world. …

“In media appearances, they sounded like men possessed by Silicon Valley ghosts: Sweetgreen was a ‘platform’ and its food, ‘content.’ They said the company was at work on an AI-powered mobile app and kitchens in the cloud, all in the name of ‘frictionless experiences.’ They even planned to leverage the blockchain. Not everyone has been able to stomach the shiftalready several nervous executives and a board member have left the company, at least partly because of their concerns.”

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RETAIL

Are direct-to-consumer brands risking category creep? “Casper, a mattress brand that now makes a nightlight, pillow and dog beds, wants to be a sleep company. Bombas, which sells socks, now also makes cotton T-shirts, and wants to be a “comfort” company. Lola started by selling tampons with fewer ingredients; after launching its sexual wellness category last year, it considers itself a feminine hygiene and wellness brand.

“What’s different for DTC brands is the data-based DNA. To avoid product bloat and overstepping, modern companies are keeping customers involved in the expansion process to ensure that, while more products will ostensibly drive more revenue, they’re only reaching for customer dollars where they’ve received permission to do so.

“‘Brands that we invested in are looking to be category winners, and not product manufacturers,’ said Andrea Hippeau, principal investor at Lerer Hippeau, which has invested in companies like Allbirds, Casper and Lola. ‘Unlike traditional retailers, DTC brands have a direct line to their customers. So decisions are very calculated.’”

LITIGATION

A tech startup that developed a sleazy app to identify Facebook photos of users’ friends in bikinis is suing Facebook for strangling its competitors by withholding valuable user data: “Six4Three sued Facebook in 2015 in state court in San Mateo County after Facebook restricted its access to the user data that its app, called Pikinis, and thousands of other apps, relied on to function. Over the course of the case, the social media giant was forced to turn over thousands of pages of internal documents, which show Facebook’s years-long efforts to control its competitors by sharing or withholding Facebook user data. The documents … show how Facebook publicly described its decisions as driven by user privacy concerns, while the company was actually focused on threats from competitors.”

ZACK AND GRANT’S DEAL OF THE DAY

Smart & Final, a chain of warehouse-style food and supply stores, has been acquired by Apollo Global Management for $1.1 billion. “Smart & Final has struggled in the increasingly competitive environment for food retailers. The company operates 257 value-oriented grocery stores under its namesake and Smart & Final Extra! banners and 67 stores under its Smart Foodservice banner, which sells foodservice offerings in a warehouse format mostly to food business customers. Apollo plans to split Smart & Final into two operationally separate units based on their different business model, according to Reuters.”

GOING PUBLIC

Zoom Video Communications is set for a Thursday debut on the NASDAQ in an IPO that could give the video conferencing platform a market cap of $8.7 billionalmost nine times more than its private market valuation in 2017. One of the few profitable tech companies going public in 2019, Zoom has seen explosive growth, doubling its 2017 revenue and increasing monthly meeting minutes on its platform by roughly 10 times in the last three years.

MANAGEMENT

You think you’re having a challenging year? “Even by the nightmarish standards of the empire she oversees, Susan Wojcicki, the chief executive officer of YouTube, has had a dreadful start to 2019. During a single week in February, BuzzFeed reported that her company was running advertisements alongside anti-vaccine content; there was a nationwide panic over the platform abetting child suicide; and a viral video showed how pedophiles were flourishing on the site. And then there was the bestiality. Thumbnail images implying human-animal sex were discovered next to children’s videos, and after an uproar, Ms. Wojcicki was obliged to call a staff meeting to address it. The topic, she allowed during a recent interview, was one ‘I never thought I would be handling.’”

SPOTLIGHT

Loren’s guests on Mind Your Business today will be Lou Mosca of American Management Services and Lance Tyson of the Tyson Group. Among other things, they will be talking sales: Can anyone sell as well as the founder? How do you find a good sales manager? Is cold-calling dead? Do you pay salary or commission? Call us with questions or comments at 844-942-7866 when the show airs on SiriusXM 132 at 1:00 p.m. ET.

And that’s what’s ahead.

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

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