NetSuds Monthly Report

4.6 Market Segments

The four market segments covered in the main body of the forums are (1) hightech, (2) medtech, (3) venture capital and entrepreneurism and (4) service providers. Click on any of the four market segments and you are taken to forums discussing those segments. NetSudsers will be interested in hightech while MedSudsers will find the medtech section of interest. Both will find information of interest in the 2 remaining categories. If you find these four categories too restrictive, contact me and I'll consider adding another category or two for you.

4.7 HighTech - the NetSuds Category

Remember, the forums are just getting started and their usefulness will increase as their usage increases. See http://www.masvf.com/forums/forumdisplay.php?f=6 for the categories which will define the HighTech forums for now.

Companies: All tech companies eventually will be listed in the Companies section. Each company will have a thread. Discuss what you want about a company. See http://www.masvf.com/forums/forumdisplay.php?f=17 for details.

General HighTech: Discuss anything about hightech in this forum. See http://www.masvf.com/forums/forumdisplay.php?f=22 for details.

People On The Move: Ultimately, people are the most important topic on the forums. Wondering where your long-lost friends and colleagues are working? See http://www.masvf.com/forums/forumdisplay.php?f=12 for details.

Press Releases: Companies need notice. Companies have news to share. Your company is encouraged to post its press releases at http://www.masvf.com/forums/forumdisplay.php?f=13 for details.

Pre and Post Event Networking: Attending or attended an upcoming or recent event? Network with fellow attendees here. See http://www.masvf.com/forums/forumdisplay.php?f=25 for details.

Job Listings: Post your job openings here. Just start a thread with the name of your company. No executive search firms are allowed to post their positions. See http://www.masvf.com/forums/forumdisplay.php?f=28 for details.

4.8 MedTech - the MedSuds Category

Similar categories exist for the MedSudsers.

4.9 Venture Capital & Entrepreneurism

http://www.masvf.com/forums/forumdisplay.php?f=8

4.10 Service Providers

This forum is currently not built but will eventually list the companies which provide services to the hightech and medtech marketplaces. For example, we will list PR firms, law firms, accounting firms, executive search firms, ISPs, CLECs, consulting firms, training firms, etc. Check back on September 1!

4.11 Rants & Raves

These "extra" forums are for off-topic discussions among NetSudsers. Pick your favorite or your favorite emotional topic. Sports, politics and other subjects are a-ok here - http://www.masvf.com/forums/forumdisplay.php?f=9 - but forbidden in the hightech and medtech sections of the website.

6.0 NetSuds CEO Roundtable - Next Roundtables starting in January 2005

NetSuds is opening up another group of CEO Roundtables in January 2005. If you are tech or medtech CEO and want to join us, (the first session is free), contact matt@netsuds.com. A synopsis of the CEO Roundtable can be found at www.netsuds.com/ceo/ It is repeated here as well.

Membership Only CEOs of tech and medtech companies are allowed to join the NetSuds CEO Roundtable. If you are a VP, CxO or President, you are not welcome unless you also hold the CEO title. Perhaps we will start a CFO, CTO or COO Roundtable but until then, we are only interested in the top dog, the CEO. If you are interested in becoming a member, contact matt@netsuds.com. Membership is not automatic. There must be an available spot open in the roundtable. You must have employees. Your company must be incorporated. Your company must be a tech (communications, IT, software, Internet) or medtech (medtech, biotech, life sciences) company. You must pay a yearly fee of $1500 in advance. You may not send substitutes to the Roundtable.

Roles Unlike the days of knights, kings and Camelot, there is no king of the NetSuds CEO Roundtable; only a facilitator; Matt Noah, CEO of NetSuds.com, Inc. Knights are replaced by CEOs and the table won't be quite round.

Schedule The Roundtable will meet 10 times per calendar year on the last Tuesday of every month. Each meeting lasts 2.0 hours starting at 7 am. A facility convenient to the majority of Roundtable members is used. A continental breakfast is served.

See the following URL for more information on our executive search service - www.netsuds.com/search/

By NetSudser D.J. (Del.) Richter, Drichter566@cs.com, CFO Initiatives, 763-498-0047

During the current changing economic climate, many books and publications include articles about improving a business for sale through merger and acquisition or for entering the IPO market. As many investment bankers will tell you the IPO market today is not the panacea it was in the 1990’s. For most small businesses an IPO is not the best “exit strategy”.

As noted in a recent article by Gabor Garai in Business Week (BW), merger and acquisitions (M&A) have out stripped the IPO market in 2003 and are scheduled to do so in 2004. Garai stated “According to research outfit Mergerstat, middle-market M&A rebounded from a low of 251 transactions, valued at $26.9 billion, during the first quarter of 2003, to 331 transactions, worth more than $42 billion, during the fourth quarter of 2003. This year, more than 250 middle-market transactions were announced in January, 2004, alone.”

Many companies are now in a buying mood due to increased profits, the need to fill out marketing gaps in their product lines and interest rates remaining historically low. In addition there is a large amount of cash on the sidelines that may need to be invested as the economy continues to grow.

As a result, companies that are anticipating an M&A transaction should provide time to get their house in order. With the current regulations, this may take twelve months to two years. As noted in the BW article above and in books and publications by noted M&A experts, there are several important steps that must be taken to improve the value of the company and make it more salable at a price acceptable to the owner and investors.

During more than 25 years as a CFO with hands-on M &A experience, the following suggestions have been effective for maximizing value:

1) Put your financials in order and think about what buyers want. An ideal IPO requires accelerated growth rates which may not need strong operating earnings. However, acquirers want steady profit growth, healthy margins and predictable cash flows. Improve your market niche and run the company from the buyer’s point of view for at least one year.

2) Clearly articulate near term goals. Buyers are interested in rigorous business plans that spell out how you will achieve your goals over the next 12 -18 months.

3) Fill out your key management team with seasoned professionals. CEO’s and CFO’s are often considered expendable, since an acquirer may want to put their own people in these roles. But the operating management team is seen a key to ongoing growth and development.

4) Present a strong case for unexploited opportunities. Buyers are looking for products and services that can complement their offerings and access existing distribution systems. To the extent that you show you can take advantage of these opportunities with the buyer’s leverage, the more attractive your company will become.

5) Demonstrate your ability to leverage financial strength. Because most buyers will be making the acquisition with borrowed funds, they will respect your ability to make things happen through leverage.

6) Hire an investment banker (M&A expert) in the beginning to help you through the entire process.

f) Prepare restated financial statements that adjust for non-recurring items and owner “perks”. But remember, restated earnings are not as valuable as reported earnings.

8) Find an attorney, other than your current legal consul, who is an M&A expert.

10) Sarbanes-Oxley requirements should be determined early so compliance can be met as necessary.

As you position your company for an M&A exit it is important to remember that the process may take longer than anticipated. For best results, acquire outside advisors early in the process. Early ground work can only work to your benefit and enhance the overall value of your company. Following the above common-sense practices can help you achieve a successful conclusion when the time is right to complete the deal.

Former VISI employees Michael Horwath and Bil MacLeslie have left VISI and formed ipHouse by apparently acquiring GoldenGate Internet and Bitstream Underground. The Business Journal reported on September 3 that the two, along with Bill Lyon are founding ipHouse as a "customer-centered ISP venture". As a former customer of VISI who dealt directly with Bil and Michael, I can't think of two ISP executives who I would rather not deal with. I found their brand of customer service to be confrontational and unproductive. Let me provide the necessary background and rationale.

VISI sponsored a NetSuds evening gathering in 2000 and agreed to pay in services rather than in cash. The event was so successful, that the services pricetag owed NetSuds was approximately $15,000. At the time, NetSuds chose to use the ISDN services of VISI; a service arrangement which would require VISI to extend services to NetSuds for at least 2-3 years. The service was generally reliable but suffered from outages which were blamed on their ISDN port. The port apparently needed to be reset occasionally; something which they could not detect automatically so I had to alert them to it. In other words, I had to monitor my ISDN line constantly. To me, that is not a "customer-centered ISP".

NetSuds operates a double opt-in, double opt-out email list. That means that people can not subscribe others to the email list because a confirmation response from the subscribed email address is required before any email address is added to the list. It also means that people unsubscribing have to go through a 2-step process so that pranksters can not unsubscribe others from the list. At one point, the software running this email list had a bug in a particular release where unsubscriptions weren't working 100%. Both Mike and Bil know about opt-in, double opt-in and software. And both knew intimately of NetSuds; one of the reasons they sought NetSuds out to host a NetSuds gathering as they launched their new data center in St. Paul in 2000. That NetSuds event drew 700-800 people; one of the largest ever hosted by NetSuds. Hundreds of people toured the VISI data center - a complete success for VISI's sponsorship.

From what I can ascertain, Mike is the techie and self-appointed judge, jury and warden of all tech issues wherever he works. As his email signature line appeared to me states, "Garbage In -- Gospel Out." Some of Mike's friendly "customer-centered" comments to me include such winners as "I don't care if you like me, I really don't. It is not my job to have you like me. But I do hate spam and the spammers that do such." Or "I feel that you spam, you have spammed, and you will continue to spam until you are shut down from every respectable ISP in the area." Mind you, at the time, I am still a VISI customer. NetSuds had been hosted and serviced by gofast.net, Agiliti, Manage.Net and USInternet throughout the years in the Twin Cities. No other such problems have existed with any other ISPs. Perhaps Mike does not consider any of these firms respectable ISPs in the area.

The exchange with Mike Horwarth is much more extensive but not worth going in to at length here. The issue with Mike could have been mitigated had a "customer-centered" boss like Bil MacLeslie taken the appropriate action. Instead, Bil stood firmly behind Mr. Horwath.

I frequently am asked about recommendations for web designers, data centers, ISPs, wireless providers, IT consultants, manufacturers, law firms, accounting firms, PR firms, etc.

My experience with CLECs, data centers and ISPs is mostly positive. I can recommend Agiliti (bought gofast.net), USInternet, manage.net, Onvoy, Inflow, XO Communications and others. There is only one which I never recommend and I have good business reasons.