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Marcus Lemonis, who takes over and turns around struggling small businesses on NBC’s “The Profit,” is having a tough time managing his publicly traded company, Camping World: “Camping World shares have dropped 65 percent since the recreational vehicle and outdoor equipment retailer went public three years ago, while the Standard & Poor’s 500 Index rose 33 percent. Sales at stores open at least a year—a key measure of retail performance—have declined for five straight quarters, and Camping World’s quarterly earnings have missed Wall Street expectations six times in a row. …
“Despite his on-screen persona as a business guru, Lemonis has yet to find a strategy for smoothing out bumps in RV sales. As my colleague Dalton Barker reported in Crain’s this week, Lemonis bought up outdoor equipment retailers, apparently expecting some kind of synergy between selling fishing rods and Winnebagos. Same-store sales fell anyway, and Lemonis is now shedding some of the acquired retailers. What he can’t unload is Camping World’s growing debt burden, which has more than doubled since 2016 to $2.9 billion. Debt service is depressing profits and soaking up cash flows. Maybe Lemonis will find a way to turn things around. But with RV sales heading into another downturn, I wouldn’t blame outside shareholders for wondering if Camping World might do better under new leadership.”
Direct-to-consumer brands are increasingly moving away from venture capital and toward private equity: “DTC brands are taking on private equity because they believe it allows them to grow at a more manageable pace than if they were to take on venture capital money. … While the amount of equity any two private equity firms can take in a company may vary, there are typically a few key differences between private equity funds and venture capital funds. First, while venture capital funds may invest at any time during a company’s lifecycle—some venture capital funds invest at the seed stage, while the company has yet to sell a product, while others typically invest at the late stage when the company has a set timeline to go public—private equity funds only invest during later stages. Additionally, while venture capital funds only inject equity capital into a company, private equity funds may invest a mix of equity and debt. And, private equity funds can take a majority stake in a company, while venture funds typically do not.
“However, private equity investments come with its own set of challenges. According to [Richie Siegel, founder and lead analyst of Loose Threads] while some private equity investors take a longer-term outcome on their investments, there are others that do look to generate more profit in the short-term by ‘putting a lot of debt into companies and use it to pay themselves fees, and kind of pull cash out of the company.’ While venture capitalists may be making investments in companies with the expectation that only one or two will generate the necessary returns for the fund, private equity firms are ‘investing for the vast majority [of their companies] to make money,’ Siegel said.”
Inc. magazine recently ran a list of 50 private equity firms entrepreneurs can trust. Are there really 50? Are there any? That will be one of many topics today on Mind Your Business when Loren’s guest will be Dave Whorton, founder of the Tugboat Institute (more on Dave here). The show airs on SiriusXM 132 at 1:00 PM EST. Got a question for Dave, who walked away from a very successful career as a venture capitalist? Call 844-942-7866 during the show.
A clothing rental startup is buying the Lord & Taylor department store chain: “In an unusual deal, Hudson’s Bay, the chain’s parent company, will continue to own Lord & Taylor’s real estate and cover Le Tote’s rent at those properties for three years. Le Tote will pay $100 million in cash for Lord & Taylor’s brand and inventory and take control of 38 stores and the chain’s digital presence. Five stores will close as part of the transaction, but the company did not say which ones. Lord & Taylor will continue to make regular sales, but the acquisition will add ‘millions of pieces of inventory to our selection,’ Rakesh Tondon, a co-founder and the chief executive of Le Tote, said in an interview. ‘This is going to be the most robust inventory offering of any rental service or any subscription service out there.’”
SmileDirectClub offers orthodontics by mail, but regulators, dentists and consumers are raising concerns: “It’s been a busy two years for SmileDirectClub, the hard-charging startup that promises what many customers undoubtedly consider a win-win: plastic aligners to straighten teeth for a fraction of what they would pay to get treatment through a dentist. Even better, they don’t have to go to the dentist at all. The company became ubiquitous, its ads appearing in social media feeds and on TV, buses, and billboards. Since 2017 it’s opened 342 retail locations—’SmileShops’—across the US and in Canada; that includes more than 94 kiosks in CVS pharmacies. And in the first half of 2019, the company sold close to 232,000 sets of aligners—nearly as many as in all of 2018. On Aug. 16, the company quietly filed for an initial public offering, one that market-watchers say will sell $1 billion worth of shares when it closes this fall. Although not yet profitable, SmileDirect is valued at $3.2 billion. …
“In place of dental visits, a customer goes to a shop for a digital scan or buys a kit to make a mold of her teeth and gums. The results are sent for review to a dentist licensed in the customer’s state. The company seldom requires dental records or X-rays, but the patient must affirm that another dentist has found her to be in good oral health. Once the dentist approves a treatment, SmileDirect makes a series of aligners to wear over several months; the customer periodically takes photos of her teeth for the dentist to review. The cost is $1,895 for a basic set, about 60 percent less than traditional braces. Is it safe? SmileDirect’s consent form acknowledges that its service is not equal to visiting a dentist. ‘Because I am choosing not to engage the in-patient services of a local dental professional,’ patients agree, their teeth will improve but ‘still be compromised.’ Four teaching orthodontists interviewed for this article say it’s dangerous to prescribe aligners without a diagnostic exam or review of X-rays that could detect gum disease or cavities. Plus, they say, patient-taken photos don’t match real-time monitoring.”
Startups are selling customer relations software to help people manage their friendships: “There’s also a number of web and mobile apps for this, including Dex, one of the companies that just finished Y Combinator’s program, which bills itself as a tool to ‘turn acquaintances into allies.’ It lets users keeps records of acquaintances and get reminders to contact them. … The founders of Irish startup Monaru, a recent graduate of Y Combinator whose service is for managing users’ relationships with loved ones, say using such apps is a sign of deep care for these relationships. Monaru focuses on the user’s closest 10 to 15 relationships, like family and best friends, and provides suggestions like gifts and restaurant selections based on those loved ones’ tastes.”
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Where does China go when it needs to hire a US spy? To LinkedIn, of course: “Foreign agents are exploiting social media to try to recruit assets, with LinkedIn as a prime hunting ground, Western counterintelligence officials say. Intelligence agencies in the United States, Britain, Germany and France have issued warnings about foreign agents approaching thousands of users on the site. Chinese spies are the most active, officials say.
“‘We’ve seen China’s intelligence services doing this on a mass scale,’ said William R. Evanina, the director of the National Counterintelligence and Security Center, a government agency that tracks foreign spying and alerts companies to possible infiltration. ‘Instead of dispatching spies to the US to recruit a single target, it’s more efficient to sit behind a computer in China and send out friend requests to thousands of targets using fake profiles.’”
A black Google engineer says the big tech firms only hire “the whitest black candidates”: “Bria Sullivan first entered the tech world when there was just one Droid and one iPhone. She knew tech was on the brink of taking over the world and wanted to ensure a secure future for herself professionally. Now, as one of the small percentage of Black women working in tech and even fewer working at Google, Sullivan is speaking out about her experience at the company she currently works for and other tech giants she’s worked for in the past. ‘This is my problem. I feel like they hire the whitest black candidate,’ the Chino Hills, California, native told Moguldum in a recent podcast. ‘They hire someone who’s exactly like them, but Black.”
The Italian town of Ivrea was heralded as a grand experiment in workers’ rights and humane living conditions in the 1950s: “[Olivetti employees] were given the opportunity to take classes at an on-site sale and trade school; their lunchtime hours would be filled with speeches or performances from visiting dignitaries (actors, musicians, poets); and they would receive a substantial pension upon retirement. They would be housed, if they liked, in Olivetti-constructed modern homes and apartments. Their children would receive free daycare, and expecting mothers would be granted 10 months maternity leave. … for a time, it was likely the most progressive and successful company town anywhere in the world, existing not for the sake of control or convenience but rather representing a new and short-lived kind of corporate idealism, in which business, politics, architecture and the daily life of the company’s employees all informed one another. …
“By the 1980s, Olivetti had become subject to the same global headwinds as many manufacturers [it made typewriters!], and the company foundered. In the early 2000s, it was merged with a telecom giant. … At its peak in the 1970s, the company had 73,283 workers worldwide; today, it has around 400. But it’s the surrounding town that has been affected most deeply. Ivrea today has a population of 24,000, having lost a quarter of its residents since the 1980s. The average age is 48. … An eerie spellbound nothingness prevails.”
Ring, the Amazon-owned Internet of Things doorbell company, has video-sharing partnerships with more than 400 police forces across the United States: “The partnerships let police request the video recorded by homeowners’ cameras within a specific time and area, helping officers see footage from the company’s millions of Internet-connected cameras installed nationwide, the company said. Officers don’t receive ongoing or live-video access, and homeowners can decline the requests, which Ring sends via email thanking them for ‘making your neighborhood a safer place.’ The number of police deals, which has not previously been reported, is likely to fuel broader questions about privacy, surveillance and the expanding reach of tech giants and local police. The rapid growth of the program, which began in spring 2018, surprised some civil liberties advocates, who thought that fewer than 300 agencies had signed on.”
The Fairphone 3 is a sustainable smartphone consisting of recycled parts: “The Fairphone 3 attempts to deliver on this promise by being easy to repair and by being constructed out of responsibly-sourced, conflict-free, and recycled materials where possible. Fairphone’s betting on a world full of long-lasting repairable phones that would significantly reduce CO2 emissions—a goal shared by iFixit and others in the right-to-repair movement. … Fairphone is also working to improve its sourcing of cobalt, an ingredient in lithium-ion batteries often mined under conditions that violate human rights. Recycling initiatives will reward buyers for recycling their previous phones when they buy the Fairphone 3 in certain countries, and the company is also working to improve health, safety, and pay for the factory workers assembling the phones.”
Bestmile, a developer of a mobility services platform that manages autonomous and human-driven fleet, raised $16.5 million in a Series B round.
CodeCombat, a developer of a multiplayer programming game that helps children learn computer science through games, raised $6 million in a Series A round.
Richard Booth, 80, turned the struggling Welsh town of Hay-on-Wye into a premier location for literary tourists looking for a paperback at one of his secondhand bookstores: “Mr. Booth was what The Guardian described approvingly as ‘a British eccentric of the best kind’: an Oxford-educated Barnum of books … Tapping inherited wealth and capitalizing on fire-sale bargains offered by cash-hungry colleges, monasteries, bankrupt distributors and crumbling country estates, Mr. Booth in the early 1960s embarked on a quixotic wholesale buying spree that spoke volumes. He imported hundreds of thousands of secondhand books to his adopted hometown, filling six of his own stores, spawning nearly 30 others and in 1988 inspiring Hay’s first annual literary festival, which drew tens of thousands of visitors.”
And that’s what’s ahead.