gordeeva_o_g_praktikum_po_perevodu_ekonomicheskih_tekstov_s

Small Companies in Japan Receive More Attention

Investors see opportunities in lesser known firms

Frustrated by slow-moving reforms and seemingly endless restructuring problems that need to be worked out, an increasing number of investors are trying something new in Japan: thinking small.

Instead of piling into companies such as Toyota Motor Corp., NTT DoCoMo Inc. and Sony Corp., it may be worthwhile to spend the time sifting through the lesser known of Japan’s 5,358 publicly traded companies, analysts say. That’s because stocks of smaller firms look relatively rosy compared with the country’s battered behemoths.

“There is a richness of opportunity in small companies not available in large capitalization stocks in Japan at the moment,” says Alexander Kinmont, a strategist at brokerage house Nikko Saomon Smith Barney Ltd. “I’m very optimistic about the growth of nontraditional corporate Japan.”

There is an increasing army of investors that has grown weary of Japan’s long-lasting economic problems. Over the past 10 years, recurring recessions, chronically disappointing earnings and abysmal rate of return on investments have driven many money managers to put their cash elsewhere. But others are deciding that Japan still has a bounty of potential money-making businesses, found only by digging deeper into the thousands of names to which most foreigners pay little or no attention.

The Wall Street Journal 2003

82

IPOs are tough for U.S. start-ups

Regulatory reforms and other changes in the U.S. stock market are making it harder for start-up companies to launch initial public offerings of their shares, depriving Wall Street firms and venture-capital firms of lucrative IPO fees and profits.

Last year, 41 start-ups backed by venture-capital investors became publicly traded U.S. companies, down from 67 in 2004 and 250 in the boom year of 1999, according to research firm Venture-One. Overall IPOs of U.S. companies also declined last year, but not as sharply, to 215, from 237 in 2004. The drop in venture-backed IPOs isn’t just a hangover from the technology stock bust early this decade, when bankers became gun-shy about taking small companies public.

A few years ago, Omneon Video Networks, a privately held broadcastvideo company in California, would have been a strong IPO candidate. It’s a profitable, eight-year-old enterprise with prominent investors, 175 employees and big customers, including Time Warner Inc.’s Turner Broadcasting. But Omneon Chief Executive Joe Kennedy says the company can’t yet offer enough shares to attract attention of big-name research analysts to publicize the stock and cash-rich mutual-fund investors to buy it.

Venture-capital firms, which invest in young businesses in hopes of profiting when they go public or are acquired by other companies, are awash in cash for investments these days, but the trend toward fewer IPOs also is crimping their returns.

Experts say the slowdown stems in part from shifts on Wall Street. One big issue is that Wall Street firms employ fewer stock analysts these days. Publicly traded companies thrive on analysts’ attention because their reports trigger buying and selling, creating robust marketplaces for their shares. That makes coverage by analysts crucial for start-ups considering stock offerings.

The Wall Street Journal January 2006

83

The transformation of Visa into a public company is likely to accelerate innovation in the electronic-payments industry, which already is racing to find new ways for customers to pay for goods and services.

At the same time, Visa’s pending initial public offering, announced yesterday, will intensify its rivalry with newly public MasterCard Inc. After years of battling MasterCard at cash register, Visa will now find itself competing against its rival for investors, acquisitions and partners.

“Over the next five to 10 years, there will be a very radical change in the payment-card landscape that will ultimately affect every player in the business,” said David Evans, founder of consulting firm Market Platform Dynamics.

Visa, now owned by more than 20,000 financial institutions around the world, said it will sell a majority stake to the public in an offering that will take place in 12 to 18 months.

Before going public, Visa will have to unravel its unusual structure that has long been considered to be unwieldy. “This is part of an ongoing evolution that will ultimately be a key part of accelerating our growth and in turn, give further reinforcement to our market leadership position,” said William Campbell, chairman of Visa International’s board.

Visa dominates the payments industry and aggressively has pursued new forms of payment, particularly in the fast-growing business of debit cards, which are linked directly to bank checking accounts.

Visa and MasterCard don’t issue cards and don’t directly interact with customers. They operate the networks on which electronic transactions are processed and brand the cards that are issued by financial institutions. Visa and MasterCard also set the fees that bank charge to merchants for accepting and processing the payments.

84

Visa’s strong financial position is expected to result in solid investor demand for its stock. That has certainly been the case for MasterCard. The company went public at $39 in May and has traded as high as $75.85.

EU offers new deal to “foreign “ investors

Investors with shares in companies outside their home country will find it easier to vote, ask questions at general meetings and exercise all other shareholder rights under a new draft European law.

The rules are designed to address growing concerns among the rising number of institutional shareholders over their ability to influence companies in which they have cross-border holdings.

The draft law, proposed by Charlie McCreevy, the European Union internal market commissioner, was approved by the European Commission last week and will be formally presented in Brussels tomorrow.

It seeks to break down many of the barriers faced by cross-border shareholders in the EU by, for example, allowing investors to cast their votes by proxy, by post or by means such as e-mail.

Brussels has long supported moves to boost the rights of cross-border shareholders, pointing out that a rapidly growing proportion of European stock is now held by foreign investors.

In a memorandum attached to the draft directive, the Commission states: “Shareholder participation is an essential precondition for effective corporate governance. However, EU citizens holding shares in a listed company situated in another member state often face severe problems when they wish to exercise their voting rights.”

The Financial Times January 2006

85

IPO Market Snaps Back as Taste for Risk Returns

Investor appetite for initial public offerings, which had all but dried up in the wake of the financial crisis, is enjoying a hearty comeback with five companies going public Thursday, marking the biggest week for IPOs in more than 18 months.

Electric-car battery maker A123 Systems Inc. soared more than 50% on its first day of trading as a public company. Demand was so strong that underwriters boosted the number of shares sold by more than 50%.

In addition, underwriters substantially marked up the price at which those shares were initially sold to the public. A123's stock had been expected to come to market somewhere between $8 and $9.50 a share and was instead priced at $13.50, for a total deal value of $380 million. Shares ended the day at $20.29.

A123 was one of five IPOs that began trading Thursday, including two real-estate investment trusts. Two more companies are scheduled to begin trading Friday. Many in the market say the demand for this and other recent IPOs reflects a scramble among money managers who had stayed on the sidelines during much of the recent stock rally. As the third quarter comes to a close and with the end of 2009 fast approaching, they've been buying riskier or more volatile investments in hopes of boosting returns.

So far this week five companies raised a total of $2.97 billion, making it the biggest for IPO money-raising since the week of April 20, 2008. With two more deals scheduled to price Thursday night, it could be the biggest week since March 17, 2008, which saw an all-time high of new cash raised thanks to Visa's $19.65 billion IPO.

The pipeline of companies planning to go public in the U.S. has also been growing over the past two months, with 20 companies filing new registrations with the Securities and Exchange Commission since the beginning of August, compared with a total of 12 in the first seven months of the year, according to data from Dealogic.

Another encouraging sign: This year's few big IPOs have seen their stocks hold well above their initial offering price. For example, 2009's biggest deal, Open Table Inc., is up 37% from its IPO price. But it is down from the $31.89 high hit on the first day of trading. Territorial

86

Bancorp., which went public in July, is up 60% from its IPO and up 6% from its first day of trading.

The raising of the IPO window is a relief to a host of companies, especially private-equity firms that need to cash in on some of their investments. It also reflects a willingness by some investors to take on more risk, with the stock market up nearly 50% from its lows and the economy showing signs of stabilizing.

IPOs, especially those from relatively new companies with short track records, can be especially risky investments. Often, after an initial frenzy on an IPO, the stocks later fall below their initial offering price.

A123, based in Watertown, Mass., has inked deals at with companies that include BMW and Chrysler to develop lithium-ion batteries for hybrid electric vehicles and fully electric vehicles. This is a new and growing segment for the auto industry, but it remains unclear how much market share A123's technology will capture, analysts say.

The company, formed in 2001, made its first sale three years ago; while revenue has been rising, so have net losses. A123 is cash-flow negative, meaning that it's burning through money faster than it can earn it, and will likely need to raise more through future debt or stock deals.

Yet interest appears to be strong. Wednesday, for example, the initial public offering of Julius Baer Holding AG's U.S. fund manager Artio Global Investors Inc. was priced at the top of its expected range, valuing the issue at over $600 million and putting it among the largest U.S. offerings this year. On a day in which most financial stocks fell, Artio shares finished the day up 5%.

In addition, the industries doing so-called follow-on stock offerings this month, in which public companies sell more shares into the market, have ranged from energy to airlines. The prices are far less depressed than earlier in the year; and increasingly, money is being raised not out of desperation, but with business growth in mind. Smartphone maker Palm Inc., for example, raised $370 million earlier this week simply for general corporate purposes and working capital.

The Wall Street Journal September 2009

87

Read the text, look for key sentences in each passage, translate them

How to start a startup

You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.

The Idea

In particular, you don’t need a brilliant idea to start a startup around. The way a startup makes money is to offer people better technology than they have now. But what people have now is often so bad that it doesn’t take brilliance to do better.

An idea for a startup, however, is only a beginning. A lot of would-be startup founders think the key to the whole process is the initial idea, and from that point all you have to do is execute. Venture capitalists know better. If you go with a brilliant idea that you’ll tell them about if they sign a nondisclosure agreement, most will tell you to get lost. That shows how much a mere idea is worth. The market price is less than the inconvenience of signing an NDA.

Another sign of how little the initial idea is worth is the number of startups that change their plan en route. Microsoft’s original plan was to make money selling programming languages, of all things. Their current business model didn’t occur to them until IBM dropped it in their lap five years later.

What matters is not ideas, but people who have them. Good people can fix bad ideas, but good ideas can’t save bad people.

People

What is meant by good people? Could you describe the person as an animal? It might be hard to translate that into another language, but everyone in the U.S. knows what it means. It means someone who takes their work a little too seriously; someone who does what they do so well that they pass right through professional and cross over into obsessive.

It’s not a coincidence that startups start around universities, because that’s where smart people meet. It’s not what people learn in classes at MIT and Stanford that has made technology companies spring around them.

If you start a startup, you want between two and four founders. It would be hard to start with just one. One person would find the moral

88

weight of starting a company hard to bear. Even Bill Gates, who seems to be able to bear a good deal of moral weight, had to have a co-founder. But you don’t want so many founders that the company starts to look like a group photo. Partly because you don’t need a lot of people at first, but mainly because the more founders you have, the worse disagreements you’ll have. When there are just two or three founders, you know you have to resolve disputes immediately or perish. If there are seven or eight, disagreements can linger and harden into factions. You don’t want mere voting; you need unanimity.

In a technology startup, which most startups are, the founders should include technical people. During the Internet Bubble there were a number of startups founded by business people who then went looking for hackers to create their products for them. This doesn’t work well. Business people are bad at deciding what to do with technology, because they don’t know what the options are, or which kinds of problems are hard and which are easy.

There is one reason you might want to include business people in a startup: because you have to have at least one person willing and able to focus on what customers want. If you can’t understand users, you should either learn how or find a co-founder who can. That is the single most important issue for technology startups, and the rock that sinks more of them than anything else.

What customers want

It’s not just startups that have to worry about this. Most businesses that fail do it because they don’t give customers what they want. Look at restaurants. A large percentage fail, about a quarter in the first year. But can you think of one restaurant that had really good food and went out of business?

It is the same with technology. You hear all kinds of reasons why startups fail. But can you think of one that had a massively popular product and still failed?

In nearly every failed startup, the real problem was that customers didn’t want the product. For most, the cause of death is listed as “ran out of funding”, but that’s only the immediate cause. Why couldn’t they get more funding? Probably because the product was a dog, or never seemed likely to be done, or both.

How do you figure out what customers want? Watch them. One of the best places to do this was at trade shows. Trade shows didn’t pay as a way of getting new customers, but they were worth it as market research. We didn’t just give canned presentations at trade shows. We

89

used to show people how to build real, working stores. Which meant we got to watch as they used our software, and talk to them about what they needed.

When most people think of startups, they think of companies like Apple or Google. Everyone knows these, because they are big consumer brands. But for every startup like that, there are twenty more that operate in niche markets or live quietly down in the infrastructure. So if you start a successful startup, odds are you’ll start one of those.

Raising Money

To make all this happen, you’re going to need money. Some startups have been self-funding – Microsoft for example – but most aren’t. It is wise to take money from investors. To be self-funding, you have to start as a consulting company, and it’s hard to switch from that to a product company.

The first thing you’ll need is a few tens of thousands of dollars to pay your expenses while you develop a prototype. This is called seed capital. Because so little money is involved, raising seed capital is comparatively easy – at least in the sense of getting a quick yes or no.

Usually you get seed money from individual rich people called “angels”. Often they’re people who themselves got rich from technology. At the seed stage, investors don’t expect you to have an elaborated business plan. Most know that they’re supposed to decide quickly. It’s not unusual to get a check within a week based on a halfpage agreement.

For the angel to have someone to make the check out to, you’re going to have some kind of company. Merely incorporating yourselves isn’t hard. The problem is, for the company to exist, you have to decide who the founders are, and how much stock they each have. There is more to setting up a company than incorporating it, of course: insurance, business license, unemployment compensation, various things with the IRS.

The next round of funding is the one in which you might deal with actual venture capital firms. But don’t wait till you’ve burned through your last round of funding to start approaching them. VCs are slow to make up their minds. They can take months. You don’t want to be running out of money while you’re trying to negotiate with them.

Getting money from an actual VC firm is a bigger deal than getting money from angels. The amounts of money involved are larger, millions usually. So the deals take longer, dilute you more, and impose more onerous conditions.

90

Not Spending It

When and if you get an infusion of real money from investors, what should you do with it? Not spend it, that’s what. In nearly every startup that fails, the proximate cause is running out of money. Usually there is something deeper wrong. But even a proximate cause of death is worth trying to avoid.

During the Bubble many startups tried to “get big fast.” Ideally this meant getting a lot of customers fast. But it was easy for the meaning to slide over into hiring a lot of people fast.

The most important way to not spend money is by not hiring people. Hiring people is the worst thing a company can do. To start with, people are a recurring expense, which is the worst kind. They tend to cause you grow out of your space, they slow you down: instead of sticking your head in someone’s office and checking out an idea with them, eight people have to have a meeting about it. So the fewer people you can hire, the better.

When you get a couple million dollars fro a VC firm, you tend to feel rich. It’s important to realize you’re not. A rich company is one with large revenues. This money isn’t revenue. It’s money investors have given you in the hope you’ll be able to generate revenues. So despite those millions in the bank, you’re still poor.

But should you start a company? Are you the right sort of person to do it? If you are, is it worth it?

If you want to do it, do it. Starting a startup is not the great mystery it seems from outside. It’s not something you have to know about “business” to do. Build something users love, and spend less than you make. How hard is that?

This essay (abridged) is derived from a talk at the Harvard Computer Society. March 2005

91