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| | 06/07/2004
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| | Scoop
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| | Briefly noted, by Ron May
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| | Briefly noted, by Ron May
* The iParenting/ASTRA/Dr. Toy story is getting quite a bit more interesting. When I wrote about it last week, I was not aware of some key facts involving how ASTRA has apparently not played straight with respect to the iParenting Awards and other awards including Dr. Toy's awards and the Parents' Choice awards. The new incoming president of ASTRA (which stands for the American Specialty Toy Retailer's Association, basically high-end boutique toy stores that compete with the WalMart's of the world) is Jamie Kreisman. At the fair at the Palmer House, he told me that ASTRA was agnostic with respect to all the awards organizations. He flat out said that there was no relationship between ASTRA and iParenting and that ASTRA was not in the business of playing "policeman" when it comes to members who may be competing.
Well, more prophetic words...
First, I now have evidence that what Jamie Kreisman, the incoming president, told me is not true. There are people who are claiming that ASTRA has assisted iParenting in its legal case against Dr. Toy (Steveanne Auerbach).
Here is an excerpt from a letter that I was copied on which was sent from Marshall Gavin to Steveanne Auerbach discussing the situation. To bring you up to date, iParenting demanded an apology from Steveanne, and when she attempted to provide that, from what she is saying, iParenting declined the offer and has stated that it will pursue legal action.
Here is a paragraph from Marshall Gavin's letter, dated Saturday, June 5th. Marshall has an interest in all of this because he and Steveanne share an issue with ASTRA and its lack of even-handedness. Marshall is a toy manufacturer and his company is called b.dazzle. They produced a puzzle which, the story goes, was ripped off by Mindware, another toy manufacturer. Steveanne called Mindware on it and refused to give any of their toys a Dr. Toy award as long as they continued to market the b.dazzle puzzle as their own. Marshall feels that ASTRA has had an indirect hand in this, and again, money seems to talk. At the fair, Mindware had a big booth. But there is plenty of time to get back to that.
Here is the paragraph from Marshall Gavin's letter to Steveanne about Jamie Kreisman.
+++++++++++++
"What is most impressive about his report is Ron May's characterization of ASTRA, WHICH IS EXTREMELY INSIGHTFUL AND CORRECT from our experience, and Ron May apparently does not know that Jamie Kreisman of Beka, Inc., the incoming president of ASTRA fed iParenting and Mindware our correspondence without our permission or knowledge to help each of them with their intimidation lawsuits against you and against us. ASTRA, therefore, is not "passive" and through passivity, seemingly supporting of iParenting's claims of award superiority and having a special relationship with ASTRA. ASTRA appears to be actively and even aggressively colluding, if not conspiring, with iParenting and Mindware through ASTRA's incoming president, Jamie Kreisman <info@bekainc.com>. At the very least, ASTRA has made a clear choice-- a business choice, no doubt-- about with whom it wishes to align itself (it knows that we at b. dazzle, inc. refused to renew our membership more than a year ago, but MindWare is apparently a new ASTRA member, exhibitor and advertiser), and ethical standards, let alone prudence, seem not to be a factor in ASTRA's chosen alignment!"
+++++++++++
May here again. As long as I am on the subject, I may as well give you some of the rest of the story, as I understand it at this point, of course.
Today, I received a letter from Marshall about Alvin All of iParenting and I would like to quote a portion of that letter.
Date: Mon, 07 Jun 2004 09:49:44 -0700
Subject: Re: Not for general distribution. Re: Steveanne Auerbach and
iParenting
From: Marshall Gavin <mpgavin@b-dazzle.com>
To: The May Report <ron@themayreport.com>
CC: Stevanne Auerbach <drtoy@drtoy.com>,
Stevanne Auerbach <drtoy@aol.com>,
"Kathleen A. Gavin" <kgavin@b-dazzle.com>
Thanks for the heads up, Ron....
My first inkling into Alvin All's personality and "management" style was
when I read the extremely heavy handed, unusually restrictive "Licensing
Agreement" we were sent to use the iParenting award seal for our marketing
purposes, after our Lewis and Clark Scramble Squares® puzzle was awarded a
"Best Gift" award for 2003. I revised the agreement, which provided for a
2-year license, but required us to check the iParenting website "every six
weeks" to see if the "terms of use" had changed (after we had already paid
for a two year license based upon the terms of use in the Agreement), and I
signed it as revised and sent it back. I heard nothing further, held our
check ($500.00, I think) until Julie Keywell called me or e-mailed me to
inquire about our check. I told Julie that in spite of an e-mail from her
weeks earlier informing me that Alvin All had accepted my revisions to the
Licensing Agreement, I have received the Agreement back with All's
signature, but without his initials acknowledging his acceptance of the
revisions. Julie reassured me not to be concerned and that Alvin All had
agreed to the revisions and that his failure to initial them, as I had, was
simply an oversite. We decided not to step into that potential trap, and
chose not to use the iParenting award seal. Since learning more about
iParenting from Stevanne and from Claire Greene (at Julie Keywell's
suggestion, incidentally), we ceased any further mention of our having won
an iParenting Media award.
The problem with the judicial system, it seems to me, is that it favors the
wealthy, who can wage a "war of attrition" against anyone they wish to
destroy. ... many ... seem to be willing to put their ego
needs ahead of their financial best interests with frightening regularity!
It has been our experience in business over the years that there are enough
honest and concerned citizens (like you) that the truth eventually comes out
and justice is finally done. Alas, sometimes the justice does not occur in
this life, but often it is, if courageous and principled individual take a
stand for what is right, instead of for what is comfortable.
THANKS FOR ALL YOU HAVE DONE AND ARE DOING!
Regards,
Marshall
++++++++++++
May here again. There is obviously a rapidly developing story. I seems like Dr. Toy and company will not be intimidated by Alvin and will take him on.
* The weekend was filled with tons of new information and I really don't have time to give you all the details. I spent a lot of time Saturday writing up some past events. I attended a housewarming/baby shower party on Saturday at my brother's and sister-in-law's new home (not new house) in Orland Park. All in all, there were probably eighty people there throughout the day and evening, including various people from the tech world: Jack Hillon, John Redell, Jeff Unruh's girlfriend Marion (Unruh is a recruiter at Roy Talman & Associates), John Crick who used to be at Comdisco, IBM and Keane, Kyle Barron, Jeff Baron's son, and a few others, including one guy from a group at Deloitte.
-- I had some fascinating conversations, from one with Kyle Barron, Jeff Baron's son, (and there is a reason that the two spell their names differently, Jeff with one "r" and Kyle with two "r"s) about the history of the merger of Terra Starr with the Chicago Tribune. If you recall, Jeff Baron sold Terra Starr to the Trib. and then mysteriously things seemed to go south. All I knew was that suddenly it seemed that Jeff was spending a lot more time in Florida on his personal yacht.
What happened, and Kyle was hearing about the negotiations with the Trib. when all of this was going on, and to his credit, he was quite interested in it, is that the Trib. tried to "corporatize" the whole enterprise. They poured possibly as much as $100MM into the deal along with the Washington Post, and they attempted to combine three job fair companies under one umbrella, Brass Ring, and they brought in a CEO from C-Net. They did not allow each company to grow and operate in its natural local environment in an organic way, but rather tried to superimpose a global methodology and strategy.
(I had observed Terra Starr from the creation because Jeff Baron had rented office space from me and my brother Paul at 730 N. Franklin Street from 1989 through 1992. I saw how home-spun the relationships were and how Jeff grew much of the business through personal relationships. He did things that big corporations would not do, but people had loyalty to him. Recall the organization called the Technical Recruiter's Network, or the TRN, run then by Harvey Daniels who was then at the Federal Reserve and after that at the American Medical Association.
Jeff had "drinking buddy" relationships with all the key TRN members and he had been one of them himself before he took the initiative and started Terra Starr, so he was loyal to them and they to him.)
That "personal touch" side of the business was lost when the Trib. tried to combine all the businesses. Although Kyle did not go into great detail, he did say that the Trib. did not understand this and that they were "idiots" and did some "shoddy things." It was not Jeff in the end who left the Trib., I gathered, so much as it was the TRN members who did not want to have loyalty to the Trib. versus Jeff.
Some businesses are built on personal relationships and charisma. That is hard to understand for a large company like the Trib. Terra Starr is good example of that. It was built on a grass roots, ground-up philosophy and Baron gave the job fair companies the feeling that they shared in the action, that they were special. Yes, Jeff was a wheeler dealer, I can tell you that from personal experience, but he was up-front and straight about it.
If I have this wrong, please correct me, but I think that is the gist of it.
Whatever happened, there was no shortfall of money. Bob Somberg, who worked for Jeff, was also at the housewarming party at my brother's and sister-in-law's home in Oak Lawn, and Bob told me that he is not working now because he made so much money on Terra Starr. Of course, he could have been just saying that to keep me from asking more questions --- a habit that is impossible to break. Bob has a BMW motorcycle and Kyle drove me home while Bob lead us on the highway.
-- Kyle also told me about his time at Boston College, his interest in Babson College, and the fact that there are 156 colleges in the greater Boston area. We talked about his trip to Eastern Europe and he said that the women of Croatia are by far the best, and that Croatia and Switzerland are by far the cleanest countries.
-- I also thought it was interesting to hear about Kyle's current job where he is an account manager. He works for a commercial broad band ISP called Intellispace headquartered in New York City with about 200 employees spread out over five cities. They have clients like the Chicago Board of Trade, Madison Square Garden, Radio City Music Hall, and many others. They have 140 buildings wired in Chicago.
Kyle impressed me as a thoughtful and intelligent young man who has a great combination of "street smarts" like his dad, along with an intellectual and ethical side as well. He ran for office in college, and he seems to have a bright future ahead. Intellispace is located at 600 West Jackson and their site is www.intellispace.net (Kyle's e-mail is kbarron@intellispace.net)
The story about Brass Ring and Terra Starr is even more relevant after my tour of the Dearborn Street Book Fair this weekend which is now owned by none other than The Chicago Tribune. The Trib. bought it from the South Loop Planning Council. I interviewed about twenty booksellers on Sunday as I walked through the fair, and got their views on the Trib. in the deal. That has to wait until tomorrow, but I can tell you it is interesting.
-- One of the people at the party at my brother's was [someone] [Editor's note: Ron May here, 11/13/2009: Name redacted] who told me about his days at Cognitor dating back to 1999-2000. Those were the days before Donna Salvatore and under the regime of Ron Eszak. [That person] told me that the company actually had an offer to be purchased for somewhere in the $15MM to $18MM range, but Eszak, whom I gathered he did not hold in the highest regard, thought the company was going to be worth $100MM, so he decided to turn the offer down!!
(There were a lot of companies like that in those days, my own included. If only I had sold to divine for the "groove point" of $1MM, as Thornton put it, in October 1999, as unbearable as that may have been, for $500K in cash, if that is what I could have gotten, I would not have to worry about money now, and I could have always lived out the non-compete agreement which is standard in these deals. The numbers thrown around by April of 2000 were much higher, but by then we were really nuts.)
Anyway, the company that was talking to Cognitor at the time, if I heard [that person] correctly, was iContact which is out of biz now, I believe.
[The same person] also told me that in working for his current firm, CD Group, I believe, which sells ERP Software like SAP and Peoplesoft, they have recently closed a deal with Cargill Group in Minnesota and they are doing biz in Wisconsin as well. I believe the Cargill deal was for Cognos, and it was $400K in software and $1MM in services.
-- You know the old line, "Old soldiers never die, they just fade away." Well, that seems to be true about recruiters who were at one time soldiers. There is a whole cadres of headhunters in IT who are now in their late 50s, who either went to Nam or wished they had gone to Nam. In fact, they all hang out together and are buddies as well as business associates.
In that group is people like Don Poniatowski (spelling?), Bill Blender, Terry Hauser, and the wanna be crowd like Marshall Hines, and possibly Jack Hillon who is only 51 years old.
Jack and his wife were at the party, and he told me that both Bill Blender and Terry Hauser are now in Iraq (they are really there, not in the way that Dever was doing "reporting" there, or at least that's what he told his landlord to get out of paying the rent --- that's called chutzpah!) as recruiters for the Iraqi Army. They travel with interpreters and two body guards armed to the hilt each. I believe they are currently in Mosul, Iraq and they are there as subcontractors. Blender was a marine. They have had some close calls, Jack told me, and have been very close to some bombs exploding. If you want to know more, contact Jack Hillon at jack@compeoplesource.com.
-- Of the many conversations I had this weekend, one comment that intrigued me most was made by Jim Abeln (pronounced Abe-lynn) who is one of my brother's poker buddies. I was surprised to hear, and I guess I am not really all that familiar with the etiquette of poker, that John had to ask the guys for their last names and addresses when he wanted to invite them to his wedding. He knew their nicknames, but not their real names. That's because, as John explained, there was little or no chit chat in the games --- it was all business. That is now changing somewhat he said, largely due to the influence of Rich Murray who used to be at Technium and was a recruiter. Murray is a very good cook, John told me and he has introduced some pre-poker socializing to the evening. But the game is still all business. Whenever someone would try to tell a joke, the guy who was losing would shout, "Deal the cards." They play a lot of Texas Hold-em. Anyway, the typical evening is now a loss or gain of $100 to $200, but it used to be much higher and John told me about one pot that got to $1,800. John said that whenever things seemed like they were getting out of hand, the guys would police themselves and bring it back to reality. They stopped the carrying of debt from one week to the next, and now they settle up with checks because they don't want to carry too much cash. If they play only with cash, the guy with the most wins and they want to avoid that, John explained.
I mentioned this conversation to my landlord at lunch today and he told me that he only sees his poker buddies at poker games. He does not know about their kids or personal lives much, so I am discovering something about the culture of poker playing. Not like the old neighborhood bridge games.
These days the largest pot is probably about $400 to $500, or even less because I believe they have capped it.
Hey, no guts, no glory, guys.
-- I talked to a woman at the party who is an account manager for Novartis. She told me that the drug and insurance companies do get data on each doctor's prescription habits. They can get info. on what percentage of the total scripts they write are for a particular category of
drug or on what percentage are a particular brand. The insurance firms use
this information, she said, to track if a doctor is over or under
prescribing a type of drug, or they look at what tests were done to
correspond to a particular prescription pattern. The way all this
information comes to the drug and insurance firms is through the pharmacy
chains which report the data based on the doctors' DEA numbers (that's Drug Enforcement Administration).
-- I ran into a few people who work for Century 21 a few weeks ago at Ann
Sather's while I was having breakfast (before my new diet and before going
into the hospital) and one of the women told me that they were reading
Napolean Hill's "Think and Grow Rich"; a book called "The e-Myth" and a
book called "Rich Man, Poor Man." I gathered that after a couple of years
of being somewhat flat, the market has picked up again. There were sixty
Century 21 people at the restaurant for a meeting that day.
-- In talking to Jeff Meredith the other night, I found out that he has a
one bedroom apartment in Harlem with 650 square feet and two bathrooms --- no, they're not "down the hall" -- for $1,160 a month. It's cheaper for him
than living in "the Village," he said.
-- Young Meredith also told me that the conference they are holding in June
will deal with technology tied to what they call "fratricide" --- more
commonly called j"friendly fire." There is something called "Blue Force
Tracking" and it is similar to RFID technology that is being used in many
places now. They have the technology to track at the platoon level and they
can do that with laptops, but if I understood Jeff correctly, they don't
have the technology yet for the individual soldier level yet, although that
is what they are working on. When they get that technology in place, they
would be able to find a Jessica Lynch, for example, right away. I gathered
from Jeff that this may involve a hand-held device and it is being
developed by Northrup Grummen. Dumb question: why not just put a tracking chip on each soldier? The technology for enemy tracking or what they call "Red Force Tracking" is not as far along.
-- I think Meredith's lease expires in November, so if you are in New York
between now and then, look him up. After that, he may get back to his true
love: journalism.
-- Jack Hillon's wife is a very attractive woman named Ania Hillon, who came from Poland when she was 19, and is now 36, talked to me about thoughts about going to Poland to find a wife. I was explaining to Ania that what attracted me to Julia was her brutal honesty and Ania said that this a Polish cultural thing: "down and dirty," she said. "Complete honesty," she added. The hardest part of being in America she told me is that people will say one thing to your face and another thing behind your
back. Ania hit the nail on the head. That is what I liked about Julia. And
Julia's whole family is like that. Mira, her mother, will say to me, "Ron you lazy man; Ron you not clean; Ron you messy. Ron, you should shave." By the way, Jack proposed to Ania after dating her for two weeks.
* There are many of you are probably beginning to doubt that I am writing up events. I have decided that half a loaf each day is better than none ever. So, here is the first three pages of notes I took at the MIT-EF panel out of eight pages total.
Here is my write-up from the MIT-EF meeting on May xxx. The panelists
were Bob Geras, Dan Rosenberg, and Mitchell Saranow; the moderator was
Michael Feldman, now of Seyfarth Shaw which took over D'Ancona Flaum. The
marketing guy from D'Ancona who attends MIT meetings told me that the
mid-sized firms like D'Ancona have a harder time making it these days.
Let's get right to it, shall we?
The first panelist to speak was Bob Geras who gave his usual spiel about
how there was a dearth of restaurants in Evanston when he was a student at
NU, so he opened a pizza parlor which he had for one and a half years
before he sold it; the mentioned that he had four jobs in two years and was
fired at two of them. He got hooked on investing when in 1963 he was hired
as a muni-bond salesman and he saw how companies IPO'd at 10 times what the
investors had paid. Bob has been an investor and deal junkie ever since.
Bob did not give a recitation of every deal he's done, but he did mention
MedX in Rolling Meadows which he sold for 26 times what he paid for it.
Then he said that he's been "lucky enough to have a few liquidity events
lately."
"Good deals are getting funded," Bob said and a lot of deal activity is
going on under the radar. I am a good example of how Bob has escaped the
limelight. I had no idea that Bob has done more deals in the last 18 months
than he had done in years. He has done four new deals, committed to three
more, and has done follow-on investing in two more, for a total of eight or
nine, depending on how you count. The number that really counts is that the total is more than "eight figures," Bob said.
A few pieces of the many pieces of advice Bob gave: Have a good deal, have a proper introduction, and take the risk out of the early stage. Money for product development is not attractive to investors, Bob feels, and raising
money for expansion and marketing is easier than for product development.
Bob did say that the sales cycle always takes longer than expected.
Dan Rosenberg of Sterling Capital, the firm that invested in Cognitive
Concepts, said that they have a total of $700MM under management and that includes a $135MM venture fund, a $300MM bio fund, a $150MM real estate fund, and they also have a new fund for $200MM.
Dan said that one should not go to the VCs just for contacts --- it is a
waste of time. And he stressed that if you and your team don't have the
ability to take the company to the next level, get someone who will. Be
realistic about funding projections and know your true value proposition.
Mitchell Saranow was the third panelist and he's been a lawyer at Mayer
Brown, a Harvard professor, a CFO at CF Industries and an entrepreneur. He has founded a cable company, which, as I said a few weeks ago, is why I suspect Jeff Gilbert went to the meeting; and he was with CFS Continental
as the CFO. He also mentioned Henry Crown. When he decided to become an entrepreneur the firm he ran in the tinted paint industry (then a $25MM to $30MM industry, now probably a $250MM industry) controlled 80% of the market, albeit a small market.
When looking for investors, Mitchell suggested really taping into your own
network which you may not be fully cognizant of. Go for middle aged guys;
ask who your relatives know.
Mitch emphasized the people part of the equation: the importance of people in the negotiation. Investors, he stressed are investing in you and your team. People of high repute are critical. Mitch also said that he will not even read a biz plan from people who are not in business. He said it is hard to convey how important the people factor is: he added that a sense of excitement and a sense of what is commonly called passion is critical and that enthusiasm is infectious. Here is a piece of advice that some entrepreneurs will wince at: Mitch said that an entrepreneur should offer too much to the investors. As an investor, you have to be willing to walk away from the negotiation if the entrepreneur is not striving to be fair. My sense was that if the investors are happy, the entrepreneur will be able to function and will be happy too.
OK, let's cut it for today. I have to get to the MEF networking party.
There are five more pages to go on this, and they contain the best part, especially Dan Rosenberg's discussion of the methodology they have in place for doing evaluations and due diligence on management for the companies they fund.
* Let me give you the story of Primis, as told to me at the Midwest Venture Summit by Jeffrey Lyons. Jeff was working with Dan DiCaro and Bob Zieserl who is now a VJC at KB Partners (or is it JK&B?) at Gray Drake Partners back in 2001. Jeff and Dan decided that they wanted to actually run a company operationally. They tapped into their network which included firms like KPMG, LaSalle Bank, Sachnoff & Weaver, and William Blair Capital Partners. They did a project for William Blair Capital Partners and through that connection they got to know Bob Sher who had come out of Knowledge Based Marketing where he had been president. Bob had also done a project on a consulting basis for William Blair Capital Partners and when Bob worked with Jeff and Dan, they decided to join forces.
Their plan was to form a company that they would run which acquires companies in marketing information services. They garnered three or four terms sheets and they got a commitment from William Blair Capital Partners for $40MM!! They made their first acquisition in June 2003 when they bought a $30MM firm out of Florida called AccuData America out of Fort Myers. AccuData is a very profitable business and to buy it, they got some help from William Blair Capital Partners, money that was side and separate from the $40MM they raised.
This is not venture, it is private equity, and the Jeff, Dan and Bob group is running the firms.
Jeff said that they work with Bob Blank and David Chandler and he also mentioned Jeff Schumacher and Bill Weaver at Sachnoff & Weaver. I don't know what firms Blank and Chandler are with, possibly William Blair Capital Partners.
* Look, if there is one thing I know, things get done a little bit at a time. So here is the story of Renew Power, also from the venture conference. I talked to Neal Huff, I believe the CEO. He told me that Tekion is a Vancouver company formed by himself and two other partners. They found the technology they wanted at the University of Illinois in Urbana-Champagne and they were looking for fuel cell technology that could be commercialized within two years to a positive revenue stream. That is when they formed Renew Power. The technology has only been in the lab since September 2003, Huff told me. This is the first fuel cell that has been inside a cell phone and has had enough power to operate," Huff said. It expands the life span, he told me, and eventually they will have a snap-in cartridge, he said. He showed me the prototype. They have eight employees now and they have raised $2MM. The first $500K came from Illinois Ventures and the next $1.3MM was from both Tekion and Illinois Ventures. The next round they raise and the one they are working on now will be, they hope, for $6MM.
* Some trivia from the venture conference:
-- Neil Kane was seen talking to Bob Okabe.
-- Michael Rosenthal of Sonnenschein Nath Rosenthal (no relation to the Rosenthal on the door) told me that Sam Rosenthal practiced law until he was 94 and came in every day; and Bernie Nath did the same.
-- Neal Gerber Eisenberg, a law firm sponsoring the event, acquired the IP practice from Alheimer & Gray which is no longer. They have Sam Zell as a client, I gathered.
-- The company in California that Bob Geras is so hot on is an electronic payment system company and Bob started with what was supposed to be a bridge loan. A year and a half later he was invested in the firm five times his initial bridge loan.
* I have to get going. It is almost 6pm. I had a good talk with Byron Miller on Friday and what came out of it was the idea that I should start a kind of "Consumer Reports" or Zagat's Guide to local networking and event organizations. Time to put aside the "nasen boren" and get down to business with some systematic input and evaluation that has real value to people. |
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