3 stages to any business

1
3 stages to any business

• Starting it
• Growing it
• Selling it
• What do all these stages have in common?

2
The 3 things every entrepreneur needs to know
about MONEY

• How to
• make it
• grow it
• give it away

3
HOW TO MAKE IT

• (and tips for starting a company)

4
Do you have what it takes to start a company??

• Q Why are most startup companies started by
  mediocre people?
• A The really smart ones know better!

5
How to recruit really good people

• Take your time
• Network
• Advertise in places where great people NOT
  looking for jobs would be
• Example
• Were hiring software engineers at Propel.

6
Nobodys Perfect

• No perfect CEOs
• No perfect engineers
• The whole trick is getting people to work
  effectively together to complement each other

7
Know your strengths and weaknesses

• Focusing all your time on your strengths is a
  trap (e.g., technology, product)
• Spend at least as much time in filling your
  weaknesses (e.g., marketing)
• People tend to keep making the same mistakes over
  and over again (e.g., under hiring)

8
When recruiting remember Skills are easy to
acquire but simple behavioral change is nearly
impossible

• Example
• The toilet seat down problem
• Solution
• Learn how to compensate
• Ive known excellent management consultants who
  consult for years before they realize this

9
The single biggest mistake you can make when
starting or running a company and how to avoid it

• Hiring the wrong CEO
• (like yourself)

10
People dont always tell the whole truth

• My 4 yr old I didnt do it!
• Our President
• Bill Gates ...

11
Can you imagine Bill saying?

• I switched to Linux on my desktop because I
  wasted too much time rebooting NT.
• Yeah, bundling IE into the OS was a brilliant
  afterthought.
• We could have easily complied with the Sun Java
  contract.

12
How I personally made over 200 million in a year

• 1) Infoseek went from 5 to 100 in little over a
  year
• 2) Having 6M shares didnt hurt either

13
How I made 10 million for my second startup
company as a result of attending a 4 hour free
course taught at a hotel

• Negotiation skills

14
Two courses everyone should take after they
graduate from college

• Presentation skills
• Negotiation skills
• Surveyhow many have taken these?

15
How to sell 30 worth of lemonade in only 20
minutes on the Stanford campus and how it relates
to commerce on the Internet
16
The most important skill for success in the real
world isnt taught at MIT, but thats starting to
change

• Interpersonal skills

17
How to precisely value Internet companies

• Finallyfor the first time...the secret formula
  revealed
• Say someone asks
• Is Yahoo overvalued?
• You say...
• Well If you have to ask, you just dont get it,
  do you?

18
How AOL makes big money...

• The 2 step TOP SECRET strategy revealed here for
  the first time.
• Make it really EASY to sign up
• Make it really HARD to cancel

19
My two biggest mistakes

• Refusing to acquire Yahoo for 20M in 1994
  because I thought it was overvalued
• Telling Michael Robertson to pound sand when he
  wanted me to buy his company for 20M

20
Michael Robertsons top secret business technique
for instant wealth

• If at first you dont succeed, try, try again
• It doesnt hurt to be
• in the right place
• at the right time
• with the right product

21
10 minute instructional video

• How to make really big money using the Internet
• Includes secret techniques used by Gates, Diller,
  Geffen, Spielberg,
• Illustrates step by step techniques Robertson
  used in mp3.com
• NOT AVAILABLE IN STORES

22
HOW TO GROW IT
23
How to legally avoid paying capital gains taxes
forever

• Always sell at a loss
• Donate the stock
• Die
• A complicated technique...

24
How to consistently get a 60 average annual
return in the stock market

• Buy and hold
• 10 stocks max
• Microsoft, Cisco, Dell, EMC,
• AOL, Sun, Intel, Worldcom, Nokia

25
What your stockbroker doesnt want you to know
why trading stocks may be riskier than gambling
in Las Vegas

• Spreads
• Stocks are completely unpredictable over the
  short term
• YOU LOSE

26
Company announces great earnings (above
expectations) but its stock tanks. Why?

• Who the hell knows?
• Market explanations are always done AFTER the fact

27
Why mechanical trading systems dont work

• Because Ive lost money in every proven, tested
  system Ive tried

28
Never invest in one stock

• Never gt 20 of your portfolio preferably under
  10
• I used to think that investing in Microsoft was
  safer than US government T-bills
• Now Im looking at an even better investment

29
The perfect investmentCan you guess what it is?

• Recurring revenue stream
• High margins/High ASP/Low cost producer
• underpaid workforce, overpriced service, zero
  COGs, low overhead
• Large user base
• No competition
• Established, well known brand name
• Service never goes out of style
• No manufacturing or shipping costs
• Doesnt need to worry about customer satisfaction
• They pay nothing in taxes

30
HOW TO GIVE IT
31
Charitable giving agenda

• Why?
• How?
• Where?

32
I worked really hard to make it

• were talking REALLY hard
• nightsweekendsholidays gave up sex for 2
  years
• Now you are asking me to give it away?!?
• Are you nuts?

33
Where do you want your estate to go tomorrow?

• CHOOSE ANY TWO
• Family
• Taxes
• Philanthropy
• Who gets to spend your dough?
• You? Or the government?

34
Giving statistics in Silicon Valley

• One of the richest areas on the planet, yet for
  high net worth households (assets gt1M not
  including their home)
• 45 give lt 2,000/yr
• 6 give 0
• Source Community Foundation Silicon Valley

35
The best things in life arent all that expensive

• House
• Car
• Vacations
• Subscription to Fortune
• Replay/Tivo box
• Private jet
• Assets for guaranteed income for rest of your
  life
• So now what?

36
So we had a choice...

• Sit on our assets
• or
• Put those assets to work in a way that will
  benefit
• ourselves
• our kids
• future generations of our family
• our friends and community

37
Why it is better to donate to charity sooner than
later

• No tax advantages to giving after you are dead
• No personal satisfaction to giving after you are
  dead
• Giving can ultimately benefit you or your family

• presbyopiahair losssleep apnea/snoringlactose
  intolerancepsoriasisreceding gumsnear
  sightedtorn ACLtype I diabetes
  susceptiblemacular degenerationringing in my
  ears

38
Example

• Ten years from now, you might be diagnosed with
• Heart disease/stroke
• Cancer
• ALS, Parkinsons disease,
• At that time, starting a giving plan will be too
  late to have an impact on your health
• In hindsight, would you think keeping your assets
  sitting in stocks was the right move?

39
Life changing advice

• SK How do you get people to donate large sums?
• LE You know, there are some people in this
  world who are looking for places to give money
  away
• SK Say what? What have you been smoking?

40
Was he right? Lets find out...

• What kind of person do you want to be? In A
  Christmas Carol, did you like Scrooge better
• BEFORE
• or
• AFTER
• ?

41
Virtually all who try philanthropy stick with it

• 100 donor satisfaction at CFSV
• No donor advised endowment funds have closed
  (except if the donors move)

42
Giving need not be altruistic

• Can be totally pragmatic
• Example
• We give because we get a higher return on our
  assets
• Our one-time 80M donation may cure cancer,
  diabetes, or arthritis save the world help
  reduce pollution
• Was that a good use of 80M? Or should I have
  invested it in stocks? For whose benefit?

43
Giving need not be altruistic

• Or giving can be in your self-interest
• Example donate to causes that affect or may
  affect you or your immediate family
• aging research
• heart disease
• asteroids

44
Giving may actually make you money!

• Example
• You donate to a CRT when your stock is locked up
  at 50
• Trust can short other shares (of the same stock)
  to lock in the gain
• Trust pays you back your donation over time
• Result
• You can actually end up with more money in your
  pocket than if you sold that stock at 25 in a
  selling window

45
Why Give? Summary

• We DO give to make a positive difference in our
  own lives and the lives of people we care about.
• We DO NOT give not out of a sense of obligation
  or payback or civic duty or because it is the
  right thing to do or to create a legacy

46
Why give

• Your wealth gives you an opportunity to make a
  difference
• If you dont take advantage of it, who are you
  trusting to look out for your interests?
• We are the leaders weve been waiting for
• One person CAN make a difference

47
You can make a difference

• Progress a little at a time
• Funding NEOS discovery
• Funding nuclear disarmament
• Funding medical researchers
• Funding campaign finance reform

• Immediate gratification
• Cured cancer in rabbits
• Helped clean up the air
• Passed AB71 and designed the sticker
• Got top government support for SB1726
• Funded smog check measurements in California
• Helped education
• Funded buildings at MIT and DeAnza
• Raised millions for Tech Museum

48
Agenda

• Why?
• How?
• Where?

49
Giving survey

• Would you rather donate
• your own money
• someone elses money

50
Giving options

• Charitable Lead Trust (income to charity now,
  later assets pass to heirs)
• Charitable Remainder Trust (income to you now,
  later assets pass to charity)
• Donor advised fund
• Supporting organization to a community foundation
• Private foundation

51
Which option?

• Smart estate uses a combination
• CRT Secure income stream for you
• CLT Pass money to your heirs
• Donor advised fund Under 1M assets minimizes
  tax bite and maximizes charitable giving
• Supporting org gt5M in assets you can influence
  investments and donations

52
Easiest way to donate

• Gift appreciated stock to a donor advised fund at
  local Community Foundation (typically 25K
  minimum)
• E-mail them whenever you want to make a grant
• After you make the donation, you spend the rest
  of your life giving away someone elses money!
• For any progressive community foundation

53
Charitable fund advantages

• You can add stock (and liquidate) when your stock
  is locked up
• Can donate to fund when stock peaks decide on
  recipient later
• Gift to charities at anytime from the fund
• Less hassle (no personal recordkeeping, no
  periodic stock transfers, e-mail donations)

54
Advantages of charitable fund

• Endowment compounds tax free forever
• You get to give away an infinite amount of OPM
  and your annual grants will typically increase
  each year
• All this from a ONE-TIME donation!

55
Carnegie Foundation

• Donated 5.2M 100 years ago
• Built 65 public libraries
• Still in operation today
• Moral A small one time donation can have a bit
  impact

56
How to donate to charities when your stock is
locked up

• Your stock seems to always peak when you are
  locked up but...
• You donate the stock the charity shorts other
  shares
• Allows you to give charity lots more money AND
  gives you a bigger writeoff
• Typically done through a community foundation

57
Hypothetical example

• You start an Internet music company
• At IPO, you are worth 2.5B, but you cant sell
  any shares
• So you donate 1 (25M) to a charitable fund
• You get a nice writeoff and can make donations to
  your favorite causes for the rest of your life
  without an additional investment

58
A tale of two Larrys

• Larry 1
• Worth 2B at IPO
• Too focused on his business to make a gift to
  charity
• Business doing fine. Hes now worth 200M.
• Larry 2
• Also a billionaire
• Gave 100M to top scientist in aging to donate
  over 5 years
• 2nd largest funder of aging research in the US
• Business doing fine. Hes now one of richest
  people in the world

59
Giving strategy

• Make periodic small donations as your stock rises
  
• Many notable philanthropists regret not having
  taken advantage of this strategy. Dont make the
  same mistake.

60
Kirsch Foundation

• Identified areas we thought were important for
  ourselves, our kids, our friends environment,
  education, medicine, ...
• Started with a donor advised fund at the local
  community foundation
• Added to it over the years
• Switched to a supporting organization so we could
  invest assets more aggressively, hire a staff,
  and lobby

61
Kirsch Foundation

• Hired CEO
• Recruited world-class medical advisory board
  (including Gordon Gill from UCSD)
• Currently
• 80 M in assets
• Donate 6M per year
• Total staff of 5, including program officers in
  medical and environmental areas

62
My recommendation

• Start NOW with a small donor advised fund
• Add to it as you become comfortable with the
  results and as your estate grows
• 10 of your net worth after taxes is a good
  starting amount
• Supporting organizations beat private foundations
  on every single metric

63
Agenda

• Why?
• How?
• Where?

64
Traditional philanthropy

• Donate to American Cancer Society, United Way,
  public TV, etc.

65
How to give intelligently

• Figure out the areas important to you
• Create your own criteria (I have 20)
• Make a long term commitment
• Realize that results are often hard to quantify
• See my website for details
• www.skirsch.com

66
Kirsch Foundation

• We both have full time jobs
• Needed a few easy goals we could accomplish in
  our spare time. Root causes.
• Saving the world
• Curing major diseases
• Restoring the environment
• Improving education
• Reforming politics
• Funding worthwhile projects that others wont
  fund
• Helping out our local community
• Encouraging philanthropy

67
Summary

• While your reasons for giving may vary, it makes
  sense to start a giving program now
• Easiest way to get started is set up a donor
  advised fund at a community foundation
• Its as easy as opening a bank account, a lot
  more fun and satisfying than doing the rest of
  your estate planning

68
Summary

• The time to give to many causes is NOW, before
  they create a problem for you or a family member
  or your community

69
Survey

• How many of you have I convinced to setup a donor
  advised fund or to begin/expand your own
  charitable giving?
• If I havent, why not?

70
For more info

• and a copy of this talk, please see my website
• www.skirsch.com

71