A Place of Ideas: Renaissance Weekend Day One

I’m in Aspen, Colorado for an inspiring gathering over Labor Day Weekend. It’s Friday night at 10pm and the dance floor is calling–but I am driven to write first and dance later.

The gathering is called Renaissance Weekend, started by Ambassador Phillip Lader and Linda Lader in 1981. I first heard of the Weekend on my way to the Orlando airport in 2006 while serendipitiously sharing a taxi with former U.S. Congressman Martin Lancaster, the current President of the NC Community College System.

We were on our way back from the National Association of Community College Entrepreneurship (NACCE) conference. He told me how the weekend gatherings, originally in Charleston, SC over New Year’s and now in Aspen, Tuscon, and Monterey, brought together driven and accomplished people to discuss public policy, science, business, religion, and more.

I took a look at the site and saw past participants included Bill and Hillary Clinton, Alan Greenspan, Gerald Ford, Evan Bayh, Howard Dean, Bill Richardson, Janet Napolitano, Lawrence Summers, Ted Turner, Steve Case, Steve Jurvetson, Steven Colbert, and North Carolinians Terry Sanford and John Sall.

I wanted to go, but had no way in.

I heard nothing more of this gathering for two years, until this June when my friend Stever Robbins gave me a call. He nominated me to attend and wonderfully I’m now here.

Today was the first full day of Renaissance. I must say from the first day that it has been a wonderful experience so far. One of the ways the Weekends are different than any other conference is that every attendee is assigned to present briefly (for 2 minutes to everyone and then for about 10 minutes in numerous breakout panels) on either what they know most about or what they are most passionate about. This practice enables attendees to hear from experts in their field ranging from astronauts to cosmologists to entrepreneurs to neurosurgeons. At this Weekend, there are about 300 attendees.

Today I was assigned to present for 2 minutes to the group on “An Immodest Proposal - If I Could: Serious and humorous proposals on policy, work, religion, and marriage.” I then participated on a panel with six others called “Why Not Change the World? Examples and Visions of Social Entrepreneurship & Community Service.”

At noon, I experienced the most intellectually stimulating hour of my life since the panel on global peace at Fortune Brainstorm with Jeff Bezos last month. My friend and venture capitalist Nick Beim from Matrix Partners moderated a panel called “Putin’s Czarist Plan: Is His Russion a Neo-KGB State” that I hope to post about next.

Tomorrow, Saturday morning, I’m presenting for 2 minutes at 9am on “When I’m 65 - A Red Bull Generation Envisions Their Professional, Personal, & Nation’s Future,” taking the afternoon off to go white water rafting for the first time in my life on the Colorado River, then returning for a 6pm discussion, “Must There Always Be a Bottom Billion: Promise & Pitfalls of Reducing Poverty, Supporting Social Entrepreneurs, and Assisting the World’s Less Developed Nations.”

As a short aside I’ll share a fun story. This visit is my first time in Aspen and the Aspen Institute since July 2006 for Fortune Brainstorm 2006. I recall then sitting next to John McCain for 10 minutes while watching the Germany-Italy World Cup game in the lobby of Aspen Meadows and then seeing him go to the back of the lounge to speak with Vinod Khosla, ostensibly about alternative energy. Thinking she was a passerby and not knowing then who she was, I asked Cindy McCain to take a picture of Senator McCain and I. She somewhat unwillingly oblidged, but alas, the camara battery was dead and no proof exists.

This is a place of ideas and action–action that leads to making a difference in the world. I’m fortunate to be here and look forward to sharing tomorrow night how the day goes.

From their site:

“With equally distinguished participants, all Renaissance Weekends foster lively exchanges which transcend ideological, political, economic and religious differences. This eclectic, non-partisan group - CEOs, venture capitalists and entrepreneurs, Nobel Laureates and Pulitzer Prize-winning authors, artists and scientists, admirals, astronauts and Olympic athletes, judges and journalists, volunteers, diplomats and work-at-home parents, Presidents, Prime Ministers, professors and priests, Republicans, Democrats and lots of Independents, innovators from across America and several nations - has become for many an extended family.”

The dance floor is calling my name…

How to Be a Public Company CEO

I’m out here at the Pacific Crest Technology Leadership Forum in Vail, Colorado this week. The 600 attendees here are a mix of public institutional investors, hedge fund managers, investment bankers, public company analysts, venture capitalists, public company CEOs and CFOs, and private company CEOs and CFOs.

The investors are here to meet the management of the public and soon-to-be public companies and to build relationships with the people that feed them data about these companies–the analysts. The analysts are here so they can publish research on these companies to sell to the investors. The investment bankers are here to build relationships with the management of companies they hope to sell, advise on acquisitions for, take public, or do follow-on offerings for. The CEOs and CFOs are here so they can raise money from the investors and get covered by the analysts. It’s a fascinating dynamic.

I’m learning how to be public company CEO. Here are some of the things I’ve learned.

The Process of Going Public

The general process of taking your company public in the United States is:

1. Build your company to at least $40M in annual sales (the sort-of-hard ‘takes 7 years’ part).
2. Reach breakeven or profitability and have solid positive EBITDA in sight.
3. Invite investment bankers to pitch you in what’s called a ‘bake-off’
4. Buy labels and write on them the price of your cakes and cookies
5. Select two of the following ‘bulge-bracket’ investment bankers to ‘bookrun’ your initial offering of shares: Goldman Sachs, Morgan Stanley, Credit Suisse, Deutsche Bank, Merrill Lynch, Lehman Brothers, UBS, Citigroup, and JP Morgan
6. Select two to three ’boutique’ investment bankers to ‘co-lead’ your initial offering of shares such as Pacific Crest, Jeffries, Piper Jaffray, William Blair, Cowan, Needham (there are dozens and dozens)
7. These four or five banks form your ‘underwriting syndicate’ (the people who help you ‘make a market’ for the percentage of your company that you are selling to the public by taking initial orders from institutional investors).
8. Meet with your bankers to write your ‘Form S-1‘ which is a couple hundred page document detailing every part of your business, every product, every management team member, every metric, every material agreement, every options plan, every differentiation, every risk etc.
9. Determine which exchange you wish to list on. The NYSE has higher revenue requirements than the NASDAQ. The NASDAQ is weighted toward technology companies. NYSE ARCA and NYSE Euronext are also options for smaller offerings, as is the AMEX. The London Stock Exchange (AIM) is also sometimes an option, though it requires different filing steps and doesn’t presently provide the branding imprimatur or liquidity that a New York exchange does.
10. Presuming you are going public on an American exchange, file your S-1 with the Securities and Exchange Commission.
11. Publicly announce your registration and your intent to go public.
12. Respond back to the comments and questions that the SEC provides until they tell you you are good to go.
13. Determine with your bankers which metrics and the definition of each metric you will report to ‘the Street’ (the institutional investors that will buy/sell your shares and analysts which will cover your company once it’s public). You will have to report all financials (bookings, revenue, GM, COGS, Cap Ex, R&D, Sales & Marketing, General & Admin, OpEx, Net Profit, EBITDA, assets, liabilities, ARs, APs) and numbers such as customers, growth rate, ARPU, retention/churn, LTV, and CAC.
14. Work with your bankers to craft your story and prepare your slidedeck for the roadshow, emphasizing your strengths, metrics, and opportunity.
15. If the market timing is good then prepare for your roadshow. The market is rather bad right now (August 2008) for IPOs. There have been no venture-backed IPOs to date in 2008, although there will likely be a few in Q4 and many in 2009.
16. Determine your initial price per share target and how much money you wish to raise, and the percentage of the company you wish to sell to the public market.
17. Hold an ‘IPO roadshow’ in which you and your CFO visit the major U.S. cities to present to the institutional investors and mutual fund managers who may wish to purchase your shares.
18. At this point your ‘bookrunners’ will take orders for shares and help build interest among firms that they know have demand for businesses like yours.
19. Based on demand (# of orders) you and your investment bankers make a final determination on price per share, amount of shares to sell, and who to sell shares to (ideally stable investors that won’t trade out of your stock right away) the night before or the morning of the listing.
20. Ring the bell the morning of your offering and celebrate. Watch the wire of funds go into your corporate bank account. Now the work begins to properly manage expectations, overperform, and gain trust with your investors.

The Advantages to Being Public

The advantages to going public are generally greater access to capital to help grow the business, liquidity for pre-IPO shareholders (though not for at least 6 months after the offering), an ability to command a higher revenue multiple than most private companies can, and a greater level of trust and respect among larger customers or vendors.

The Disadvantages of Being Public

The disadvantages of being a publicly traded company include the 3 months of time you as CEO will have to be fully focused on going public and the 6 months your CFO will have to be fully focused on the process of going public–causing you to lose some focus on operations, having to report many of your key metrics and strategies to the public–including your competitors, having to ‘manage to the Street’ or in other words manage your results and report every quarter which sometimes causes short-term thinking, an inability to be fully flexible, the legal reporting requirements of Sarbanes-Oxley that cost around $2 million per year in compliance costs, and a requirement to be profitable or within clear visibility of profitability that sometimes can limit ability to pursue growth.

Some Tips for the Public Company CEO To Be

Here’s a few tips I’ve picked up here at the conference on being a public company CEO.

1. Manage Expectations Well: Become very good at managing expectations. As a public company CEO your job is to consistently hit or outperform your revenues and earnings per share (EPS) guidance every quarter. It takes time to develop trust with institutional investors. And if you go out saying one thing and end up not hitting that plan and doing another, it will cause turnover among your shareholder base, which will cause your share price to go down (bad). To become very good at managing expectations, make sure you have a solid financial model in place that can very accurately model future revenues, bookings, gross margins, and earnings projections. Don’t go out indicating you’ll have 10% net profits and then decide that you’re going to have 3% net profits so you can grow faster.
2. Build Relationships Before You Need Them: Just as with raising venture capital, build the relationships before you need them. Start going to the analyst and investment banker conferences at least 18 months prior to your offering and build relationships with both the ibankers and public investors. Make sure they know who you are and like you and the company story many months prior to the roadshow.
3. Pick Sticky Investors: When you are going out, you’ll decide which institutional investors get to purchase your stock and which do not. Ask in your contract with your investment bank that you significant input if not have final say as CEO. Get to know in advance which firms are long-term investors and which are not. You can use a service like the ‘Business Intelligence’ offering from Thompson Reuters to determine which institutions are looking at your deck and materials. Pick the firms that are going to hold your stock and not have high share turnover. Be wary of hedge funds who have high portfolio turnover.

Hope you enjoyed the post! I’ve still got a lot to learn so please let me know in the comments what I’ve mis-stated or altogether missed. Man I love this stuff.

Seeking Part-Time Writer for The Humanity Campaign

The Humanity Campaign is a start-up non-profit organization based in Durham, North Carolina. Its mission is to reduce poverty and hunger in developing countries by working to increase access to education, healthcare, nutrition, technology, and entrepreneurial opportunity in North Carolina and in developing countries.

The organization wishes to begin to publish content in its web site in order to raise its profile as a contributor within the field of sustainable development. To accomplish this goal, The Humanity Campaign is seeking an individual to research and write content for its web site at www.humanitycampaign.org and build a network of sources and writers in developing countries.

Topics that can be written about include, but are not limited to:

Philosophy

The organization has a philosophy that all humans have equal worth and that equality of opportunity should be encouraged. It believes that economic development does not always lead to greater happiness or prosperity if it causes environmental destruction, dependency, or materialism. It tends to favor development work that is done through local stakeholders and is sustainable. It tends to favor transparency.

The organization chooses to focus partly on North Carolina as one can often make the largest impact locally. It chooses to focus partly on the developing world as there the need is often greatest. While it is interested in writing about any country or group in the developing world, it’s area of greatest focus is Africa.

The organization believes that we have the ability to end extreme poverty in our lifetimes while ensuring we leave a world that is environmentally sound and ecologically rich.

Through the writing, the organization wishes to explore the overarching question of “what are the factors that contribute to a happier, more prosperous society” and start to build a global network of individuals who are working toward creating better and stronger communities and societies.

The eight core beliefs of the organization are:

1. All humans are created equal and have equal value
2. We should strive to create a society in which there is equal access to opportunity for all humans
3. We should strive to live in a sustainable world
4. We should respect each other and treat others as we would treat ourselves
5. There is value in education
6. We should love, not kill each other
7. We should work to eliminate extreme poverty
8. There is great power in entrepreneurship and social entrepreneurship to address the critical challenges of our time

Responsibilities

The individual hired for this position is responsible for:

Researching, writing, editing, fact-checking, and publishing content to the web site.

Working to build a network of sources in developing countries who can provide quality story ideas, photo and video content, and primary research data. We wish for the site to be a source of primary news and reporting whenever possible and over time be cited by others as a trusted source.

Working to build a network of writers in developing countries who are willing to contribute topically-relevant quality content that can be posted to the site.

Style Guidelines

Content should be written in a conversational style that engages the reader.

All facts and data should be fact checked and footnoted.

Sources should be listed unless information was provided on the condition on anonymity.

Biases or conflicts should be disclosed. Ownership of stock in any publicly traded company that is discussed should be disclosed.

All articles should have at least one picture within them.

Use of videos within posts is encouraged when possible.

Individual posts should be between 200 and 750 words.

Draft posts for story ideas can be written as drafts and saved until completed

The author of each post should be disclosed

The language that the posts should be in is English

We would like for a number of the posts to highlight people, programs, or companies that are doing exceptionally positive work in developing countries, especially those in the start-up, technology, or entrepreneurial sectors.

Examples of posts that generally fit the topical, style, and guidelines to be used on the site include:

http://www.ryanallis.com/the-opportunity-of-our-lifetimes/

http://www.ryanallis.com/1m-prize-for-best-developing-country-technology-innovation/

http://www.ryanallis.com/sustainable-capitalism/

http://www.ryanallis.com/the-superficial-luxurious-degeneration-of-america/

Requirements include

• B.S or B.A. degree from a four year accredited university
• Significant experience traveling or living in a developing country
• General alignment with the beliefs of the organization
• Excellent writing skills
• A high level of character and personal integrity
• A passion for helping others and making a difference in the world

Remuneration

Work can be paid hourly or by approved post. Compensation is market-based, negotiable, and based on experience. Hours and work is negotiable. Schedule is flexible.

For More Information

If you are interested and/or would like more information, please send resume, cover letter, writing sample, and work history to ryan[at]icontact.com. Additional information on The Humanity Campaign, Inc. can be found at www.humanitycampaign.org.