Thursday, June 30, 2016

Liverpool Biennial hit by arson attack on former Cream nightclub

    Liverpool Biennial hit by arson attack on former Cream nightclub

    New home found for artist Mark Leckey's work after blaze at derelict Saw Mill

    Liverpool Biennial was due to use the Saw Mill site in Wolstenholme Square
    Liverpool Biennial bosses have had to find a last minute site for a new artwork after the city’s Saw Mill was badly damaged in a suspicious blaze.
    Birkenhead-born, Turner Prize -winning artist Mark Leckey was due to stage his new video installation at the Wolstenholme Square venue – the entrance to the former Nation club – as part of this year’s Biennial which opens on July 9.
    His work, Dream English Kid, has been inspired by Eric’s, and a Joy Division gig the then 15-year-old attended in 1979.
    Gavin Trafford
    Turner Prize winning artist Mark Leckey is exhibiting at this year's Liverpool Biennial
    However, the derelict building on the corner of Parr Street and Slater Place was engulfed in a fierce blaze on Friday night in a fire police have confirmed was started deliberately .

    Biennial artistic director Sally Tallant said today: “We’re disappointed not to be able to show Mark Leckey’s work at the Saw Mill during this year’s Liverpool Biennial due to a fire at the venue over the weekend.
    “However we are very excited to be presenting Mark’s work at the Blade Factory at Camp and Furnace.”
    The Liverpool Biennial runs from July 9 to October 16 at venues across the city as well as in public spaces.

    Millennial Entrepreneurs Want Their Kids to Inherit Their Businesses, Study Finds


    Millennial Entrepreneurs Want Their Kids to Inherit Their Businesses, Study Finds




    And while they’re hardly keen on debt, they think it’s necessary for growth.

    Millennials are often maligned, fairly or not, for having an over-large sense of entitlement and self-involvement. But a new study released Wednesday by Wells Fargo says that popular conception has it all wrong, at least when it comes to business ownership.
    Millennial entrepreneurs want to grow their businesses for the long haul, and they have plans to leave their businesses to their kids, the study reports. Just as important, they want to feel like their work really matters. And like their older peers, they have an aversion to debt and risk that, in healthy doses, is likely to help their businesses grow.
    “There was some myth-busting that this study really helped uncover,” said Doug Case, small-business segment manager for Wells Fargo.
    Wells conducted an online poll of 1,000 business owners in March and April. The sample was split between millennial and older business owners. Millennials are defined as people born between 1981 and 1997. Older entrepreneurs, for the purposes of the survey, are defined as those aged 36 and older.

    Eighty percent of millennial business owners said they want to develop their businesses over the course of many years, and potentially hand them down to their children someday. That’s more than the 66% of older business owners who said they want the same thing. Surprisingly, only 6% of millennial respondents and 9% of older respondents said they had either inherited or bought the businesses they now run. Most started their businesses from scratch.
    Along those lines, nearly 60% of millennials said they started a business because they want to feel passionate about what they are doing. Slightly more than half of older entrepreneurs noted passion as a key element for starting a business.
    Each age group reported uneasiness about taking on debt, though more millennials said they were willing to use debt to grow their businesses compared to older entrepreneurs. Indeed, 43% of millennial business owners report having taken on some form of personal debt to build their business, mostly in the form of carrying a balance on their credit card.
    Of course, the younger set also has significant student-loan debt: 44% of millennials in the survey had average student loan debt of $25,000 or more, compared to 36% of older business owners.
    And those debt levels will likely have an impact on how much these entrepreneurs are willing to borrow for their businesses.
    “That has to shape your attitude toward debt and borrowing responsibly,” Case said.
    Millennials, however, confessed to knowing less about financial matters that are key to their businesses. Less than half said they were very knowledgeable about their business’s finances and dealing with financial matters, compared to nearly 60% of older business owners. Similarly, 41% described themselves as very successful dealing with the finances of their enterprises, compared to 47% of older business owners.

    Photograph via Getty Images


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    Silicon Valley’s Latest Startup Offering Is a Whole City



    Silicon Valley’s Latest Startup Offering Is a Whole City

    Y Combinator's $100 million research lab will make affordable housing a focus.

    1467040310_Adora-Cheung_AP_883136506103
    Y Combinator partner Adora Cheung.
    Photographer: Jan Haas/Picture-Alliance/DPA via AP



    Y Combinator, the startup accelerator and investment firm that helped produce Airbnb, Dropbox, and Instacart, is embarking on a creation project arguably more ambitious than any company.
    "We want to build cities," wrote Y Combinator partner Adora Cheung and President Sam Altman in an announcement slated for release Monday. YC Research, Y Combinator’s nonprofit arm, plans to solicit proposals for research into new construction methods, power sources, driverless cars, even notions of zoning and property rights. Among other things, the project aims to develop ways to reduce housing expenses by 90 percent and to develop a city code of laws simple enough to fit on 100 pages of text. Eventually the plan is to actually produce a prototype city. "We’re not trying to build a utopia for techies," says Cheung, the project’s director and the former CEO of failed housecleaning startup Homejoy. "This is a city for humans."
    Initial applications are due July 30. Cheung says she'll start hiring researchers this year and is already thinking about possible locations. If all goes well, the project would be a showcase for new urban policy ideas—and for the expanding ambitions of Y Combinator, which was dismissed as unserious by rival venture firms when it was founded in 2005. Early on, YC, as it’s known in Silicon Valley, was best known for making investments as low as $6,000, so small that its portfolio companies were told to aim for "ramen profitability," or to generate enough profit so that the founders could afford instant ramen.
    YC has since seeded more than 1,000 startups and today competes in later-stage deals with the likes of Sequoia Capital and Andreessen Horowitz through a $700 million venture fund managed by former Twitter Chief Operating Officer Ali Rowghani. Altman formed YC Research last year with a $10 million personal donation and a contention that "research institutions can be better than they are today." He now says the lab will eventually have an annual budget of $100 million. "The central theme is to work on things that we need for the successful evolution of humanity," says Altman.



    Last December, Altman and Elon Musk, the Tesla and SpaceX CEO, announced the formation of OpenAI, a research effort aimed at ensuring that advances in artificial intelligence don’t lead to killer robots that destroy human civilization. (Musk has suggested that artificial intelligence could be "more dangerous than nukes.") The following month, Altman announced a long-term study into "basic income," the concept of giving citizens a cash allowance to spend as they wish. (A pilot program is now in the works in Oakland.) In May, Altman and computer scientist Alan Kay formed the Human Advancement Research Community, a research lab focused on education, among other things.The city project inserts YC into a long-running debate over housing affordability. For years, activists in San Francisco have blamed tech startups—especially Airbnb, Y Combinator’s most valuable portfolio company—for record-setting rents and home prices.
    Altman denies that YC’s new research efforts represent a response to the backlash against tech investors, characterizing them as an an effort to apply the firm's innovation model to society’s most intractable problems. "I believe that we should view it as a basic human right to have enough money to afford food and shelter," says Altman, referring to the basic income study. "It’s an idea that’s makes sense to most children."
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    Which MBAs Make More: Consultants or Small-Business Owners?

    Which MBAs Make More: Consultants or Small-Business Owners?

    June 28, 2016
    Which MBAs Make More: Consultants or Small-Business Owners?

    Recommended

    jun16-28-hbr-income
    HBR STAFF
    Compensation is, of course, more than money. It includes other aspects such as: how much you enjoy your career, whether it provides fulfillment, how much flexibility you get and how much influence you have over what you do and when you do it.
    In our work studying entrepreneurship-through-acquisition (EtA) — in which individuals purchase an existing small business to own and run themselves — we’ve found that most graduating MBA students agree that being the CEO of a small firm dominates traditional post-MBA careers like consulting, investment banking, private equity, and the like on these non-pecuniary dimensions. Owners of small businesses can set their own hours, make their own management decisions, and take pride in the ownership of their work.
    Also, as we explained in an earlier article, we believe that being an established CEO of a small firm involves much less angst than being a senior member of a consulting, investment banking, or private equity firm.
    So, the remaining question about being a small firm CEO is the monetary reward; if the money is nearly the same, then the compensation as a small business CEO dominates other careers.
    To ground our analysis, let’s assume that the alternative to being a small firm CEO is to follow a traditional post-MBA career and recognize that, at best, we can only compare expected paths because everyone’s experience will be different. So, we begin by assuming that the traditional path offers cash compensation equal to the average starting salary. (It might be tempting to turn to the highest starting salary paid, which typically goes to the graduate with the most experience in the most competitive market, who often earns crazy money their first year. But these are rare occurrences, and we believe that using the average yields a more accurate outcome.)
    That average is actually hard to nail down, however. Some large sample surveys report that MBAs nationwide have an average starting salary of about $100K. Graduates from so-called elite schools make more, with some estimates of elite school average starting salaries in the $150K range.  The relative compensation of a traditional career and entrepreneurship through acquisition hinges on salaries in the next 10 years and the carry from deals with investors who provided money to acquire the business. These are of course unknown and highly dependent on the job and the success of the small business itself.  But here is a sketch based on the information we have at hand.
    We’ll assume the salary in a traditional post-MBA job grows at a 12% compound annual growth rate (CAGR) so that it more than triples in the first 10 years, which is in line with post-MBA salary surveys we’ve done here at the Harvard Business School.  We’ll also assume the cash compensation for a new CEO of a small business starts off at the average post-MBA salary, and its growth is generally tied to the performance of the company — both of which are typical from our experience as board members of these types of companies.  Because we generally argue that those searching for a small business to buy should target slow-growing dull businesses, we’ve put this at 5% per year.  The chart below shows that over the first 10 years of employment, the cash compensation from the traditional job dominates.
    W160520_RUBACK_ESTIMATEDANNUALIZED

    But the annual cash compensation only provides part of the pecuniary payoffs of the purchase of a small business because the entrepreneur also has a significant ownership interest in the company.  The size of that ownership interest varies on how they structured their funding throughout the process, but for now let’s assume the entrepreneur has a 20% carried interest in the acquired company. (That means that the CEO keeps 20% of any cash distribution after the investors’ investment is returned and they are paid a preferred dividend.)  The value of that carried interest, of course, depends on the performance of the business, its size, amount of debt used to finance the acquisition and the eventual pricing of a subsequent sale.
    To make the analysis tractable, we’ll make some simplifying conservative assumptions: we’ll assume no growth in the business and, because there is no growth, we’ll assume that the selling multiple exactly equals the purchase multiple. We’ll also assume the entrepreneur acquired a $1.5 million EBITDA company for 4x paying $6 million and using 50% debt financing.
    To keep things simple, we’ll take advantage of our assumptions of no growth and a constant multiple and ignore the actual timing of the cash flows. That means that, in this example, the purchase price and the eventual selling price will be the same so that the debt and the equity investment can be assumed to be repaid at the sale. This leaves us only with the cash flows that occur between the purchase and the eventual sale.
    In this example, the annual cash flow is $1.5 million; the debt is half of the purchase price, or $3 million; and the interest on that debt (assuming a 5% interest rate) is $150,000 annually. This leaves $1,350,000 to be split 80%/20% between the investors and the CEO. The CEO’s implicit annual cash flow from the carried interest is therefore 20% of $1,350,000, or $270,000.
    Add this to the cash salary and the entrepreneurship through acquisition path dominates the traditional post-MBA career path, as shown in the chart below.
    W160520_RUBACK_ESTIMATEDCASH

    What happens if we take into account the timing of the cash flows? The usual timing of cash flows is that the debt gets repaid first, then the equity investors get their investment plus preferred return second, next the entrepreneur gets paid 20% of the preferred return, and lastly, the remaining cash flows are split 80% for the investor and 20% for the CEO.  The bank and investors get paid off before the CEO gets any cash for the carried interest. But the advantage to the traditional path in the early years is very much offset by the impressive EtA cash flows that occur once the carry starts getting paid and even more so upon exit (which we’ve assumed in year 10 in this example).  Here is the revised comparison:
    W160520_RUBACK_ESTIMATEDINTEREST

    Analytical readers may think this is a great opportunity to compute the present values of the two paths, perhaps using different discount rates the reflect the perceived risks of the two paths (the present values are close at 15% for the traditional path and 25% for the EtA path) in hopes of determining which path offers the highest compensation. (We recognize that some believe that the EtA path is more risky and thus would assign a higher discount rate. We are not so sure of that.) We don’t advise that approach. Instead, we think you should recognize that there are a lot of differences that we haven’t fully modelled. On one side of the coin, there are likely tax advantages from the EtA payouts and increases from growing the acquired business. On the traditional path side of the coin, there might be pensions or bonuses that we’ve not captured.
    Overall, we think that this financial analysis shouldn’t be used to show that one path dominates another. To us, it shows that the compensation is reasonably similar across the two paths; certainly individual variations in experiences will dominate any systematic differences. With money out of the calculus, and the general assessment from MBA graduates that the non-pecuniary aspects of being a small business CEO dominate those of more traditional careers, we imagine that more graduating MBA students will choose the EtA path.
    Of course, being a small firm CEO doesn’t appeal to everyone so the decision turns, as we think it should, on whether you appreciate and will thrive in a small business environment.

    Richard S. Ruback is the Willard Prescott Smith Professor of Corporate Finance at the Harvard Business School. He has taught a variety of corporate finance courses throughout his career and has served as an expert witness on valuation and security issues. Over the last few years, he and his colleague Royce Yudkoff have been developing and teaching courses on the entrepreneurial acquisition of smaller firms. They are the authors of the HBR Guide to Buying a Small Business (HBR Press, 2016).

    Royce Yudkoff is a Professor of Management Practice at the Harvard Business School; he co-founded and served for over 20 years as Managing Partner of ABRY Partners, a leading private equity investment firm. Over the last few years, he and his colleague Richard Ruback have been developing and teaching courses on the entrepreneurial acquisition of smaller firms. They are the authors of the HBR Guide to Buying a Small Business (HBR Press, 2016).

    This article is about ENTREPRENEURSHIP
    Related Topics:
    June 28, 2016
    Which MBAs Make More: Consultants or Small-Business Owners?

    Recommended

    jun16-28-hbr-income
    HBR STAFF
    Compensation is, of course, more than money. It includes other aspects such as: how much you enjoy your career, whether it provides fulfillment, how much flexibility you get and how much influence you have over what you do and when you do it.
    In our work studying entrepreneurship-through-acquisition (EtA) — in which individuals purchase an existing small business to own and run themselves — we’ve found that most graduating MBA students agree that being the CEO of a small firm dominates traditional post-MBA careers like consulting, investment banking, private equity, and the like on these non-pecuniary dimensions. Owners of small businesses can set their own hours, make their own management decisions, and take pride in the ownership of their work.
    Also, as we explained in an earlier article, we believe that being an established CEO of a small firm involves much less angst than being a senior member of a consulting, investment banking, or private equity firm.
    So, the remaining question about being a small firm CEO is the monetary reward; if the money is nearly the same, then the compensation as a small business CEO dominates other careers.
    To ground our analysis, let’s assume that the alternative to being a small firm CEO is to follow a traditional post-MBA career and recognize that, at best, we can only compare expected paths because everyone’s experience will be different. So, we begin by assuming that the traditional path offers cash compensation equal to the average starting salary. (It might be tempting to turn to the highest starting salary paid, which typically goes to the graduate with the most experience in the most competitive market, who often earns crazy money their first year. But these are rare occurrences, and we believe that using the average yields a more accurate outcome.)
    That average is actually hard to nail down, however. Some large sample surveys report that MBAs nationwide have an average starting salary of about $100K. Graduates from so-called elite schools make more, with some estimates of elite school average starting salaries in the $150K range.  The relative compensation of a traditional career and entrepreneurship through acquisition hinges on salaries in the next 10 years and the carry from deals with investors who provided money to acquire the business. These are of course unknown and highly dependent on the job and the success of the small business itself.  But here is a sketch based on the information we have at hand.
    We’ll assume the salary in a traditional post-MBA job grows at a 12% compound annual growth rate (CAGR) so that it more than triples in the first 10 years, which is in line with post-MBA salary surveys we’ve done here at the Harvard Business School.  We’ll also assume the cash compensation for a new CEO of a small business starts off at the average post-MBA salary, and its growth is generally tied to the performance of the company — both of which are typical from our experience as board members of these types of companies.  Because we generally argue that those searching for a small business to buy should target slow-growing dull businesses, we’ve put this at 5% per year.  The chart below shows that over the first 10 years of employment, the cash compensation from the traditional job dominates.
    W160520_RUBACK_ESTIMATEDANNUALIZED

    But the annual cash compensation only provides part of the pecuniary payoffs of the purchase of a small business because the entrepreneur also has a significant ownership interest in the company.  The size of that ownership interest varies on how they structured their funding throughout the process, but for now let’s assume the entrepreneur has a 20% carried interest in the acquired company. (That means that the CEO keeps 20% of any cash distribution after the investors’ investment is returned and they are paid a preferred dividend.)  The value of that carried interest, of course, depends on the performance of the business, its size, amount of debt used to finance the acquisition and the eventual pricing of a subsequent sale.
    To make the analysis tractable, we’ll make some simplifying conservative assumptions: we’ll assume no growth in the business and, because there is no growth, we’ll assume that the selling multiple exactly equals the purchase multiple. We’ll also assume the entrepreneur acquired a $1.5 million EBITDA company for 4x paying $6 million and using 50% debt financing.
    To keep things simple, we’ll take advantage of our assumptions of no growth and a constant multiple and ignore the actual timing of the cash flows. That means that, in this example, the purchase price and the eventual selling price will be the same so that the debt and the equity investment can be assumed to be repaid at the sale. This leaves us only with the cash flows that occur between the purchase and the eventual sale.
    In this example, the annual cash flow is $1.5 million; the debt is half of the purchase price, or $3 million; and the interest on that debt (assuming a 5% interest rate) is $150,000 annually. This leaves $1,350,000 to be split 80%/20% between the investors and the CEO. The CEO’s implicit annual cash flow from the carried interest is therefore 20% of $1,350,000, or $270,000.
    Add this to the cash salary and the entrepreneurship through acquisition path dominates the traditional post-MBA career path, as shown in the chart below.
    W160520_RUBACK_ESTIMATEDCASH

    What happens if we take into account the timing of the cash flows? The usual timing of cash flows is that the debt gets repaid first, then the equity investors get their investment plus preferred return second, next the entrepreneur gets paid 20% of the preferred return, and lastly, the remaining cash flows are split 80% for the investor and 20% for the CEO.  The bank and investors get paid off before the CEO gets any cash for the carried interest. But the advantage to the traditional path in the early years is very much offset by the impressive EtA cash flows that occur once the carry starts getting paid and even more so upon exit (which we’ve assumed in year 10 in this example).  Here is the revised comparison:
    W160520_RUBACK_ESTIMATEDINTEREST

    Analytical readers may think this is a great opportunity to compute the present values of the two paths, perhaps using different discount rates the reflect the perceived risks of the two paths (the present values are close at 15% for the traditional path and 25% for the EtA path) in hopes of determining which path offers the highest compensation. (We recognize that some believe that the EtA path is more risky and thus would assign a higher discount rate. We are not so sure of that.) We don’t advise that approach. Instead, we think you should recognize that there are a lot of differences that we haven’t fully modelled. On one side of the coin, there are likely tax advantages from the EtA payouts and increases from growing the acquired business. On the traditional path side of the coin, there might be pensions or bonuses that we’ve not captured.
    Overall, we think that this financial analysis shouldn’t be used to show that one path dominates another. To us, it shows that the compensation is reasonably similar across the two paths; certainly individual variations in experiences will dominate any systematic differences. With money out of the calculus, and the general assessment from MBA graduates that the non-pecuniary aspects of being a small business CEO dominate those of more traditional careers, we imagine that more graduating MBA students will choose the EtA path.
    Of course, being a small firm CEO doesn’t appeal to everyone so the decision turns, as we think it should, on whether you appreciate and will thrive in a small business environment.

    Richard S. Ruback is the Willard Prescott Smith Professor of Corporate Finance at the Harvard Business School. He has taught a variety of corporate finance courses throughout his career and has served as an expert witness on valuation and security issues. Over the last few years, he and his colleague Royce Yudkoff have been developing and teaching courses on the entrepreneurial acquisition of smaller firms. They are the authors of the HBR Guide to Buying a Small Business (HBR Press, 2016).

    Royce Yudkoff is a Professor of Management Practice at the Harvard Business School; he co-founded and served for over 20 years as Managing Partner of ABRY Partners, a leading private equity investment firm. Over the last few years, he and his colleague Richard Ruback have been developing and teaching courses on the entrepreneurial acquisition of smaller firms. They are the authors of the HBR Guide to Buying a Small Business (HBR Press, 2016).

    This article is about ENTREPRENEURSHIP
    Related Topics: