Worst Venture Capital Fund Names in the History of the Universe

Sorry for no meaningful posts this week.  I've been busy with stupid shit like cold-calling companies that may or may not have more than $500,000 in revenue.  Miserable.  But the one benefit of looking at shit companies is finding out who their shit investors are, and making fun of them.  Without further ado, I present the Shitty VC Name Hall of Fame:

I'm really well-known for starting a VC firm that invests in best-in-class fluffers.

1. Fluffco - Seriously? They are "formed by angel investor, Irving J. Levin. Mr. Levin is a well known entrepreneur in the Portland, Oregon vicinity."  Kind of reminds me of those well-known professional basketball players in the North Korea vicinity.  Good luck fluffing, Irv.
2. Crossbow Ventures - When I fundraise, I want people to envision medieval weaponry, because the threat of me using it to kill you is the only way you will invest in this stupid piece of garbage.
3. Techxas Ventures - Technology + Texas = Techxas.  Brilliant.  You know what's even more brilliant?  Listing "Unknown" companies on your portfolio page.  Hopefully Wal-Mart gets the memo and does their next rollback commercial with "unknown" items.
4. Carrot Capital Healthcare Ventures - Carrots are for pussies.
5. Double D Ventures - I can't even find a website for this firm, probably because someone at VentureSource made it up as a joke on me.  They may have funded Fluffco at some point though.

Sadly, this list isn't a real Hall of Fame.  I just took it from the last 3 companies on the list that I have been assigned to cold-call.  Jealous?  I thought so.

-F-One

Retirement

I was thinking about retirement accounts today, because obviously the success of this blog has enabled me to retire early.  One question that arose: does it ever make sense to take early distributions at the cost of taxes and early distribution penalties?  Wait?  When can that make sense?  Certainly, in a vacuum, you should never distribute retirement savings prior to retirement: $1,000 of retirement withholdings will only be about $300-500 after taxes and penalties, and you just gave up a bunch of money that would otherwise be earning some type of yield, rather than being in someone else's hands.

Do I need to tap into my retirement fund?

So that scenario is easy to quantify.  But in a world of tradeoffs and opportunity costs, there are definitely going to be other scenarios where it might make sense for you to distribute early.  Let's look at the most common one: you have some credit card debt and aren't paying it off for a while.  If you did have unlimited funds idling in your savings account generating 1% interest income annually, then you would be stupid not to pay off your AMEX, which could be pushing 18% interest expense annually (I'm keeping these percentages very simple for illustrative purposes).  If you did not pay that debt off, you'd be losing 17% a year on your capital for no reason.  Simple.  Then again, very few people have unlimited funds.

If you are on the opposite end of the spectrum and have no savings to speak of, and no sufficient earnings to pay down debt, that is the point at which you might consider dipping into a retirement account to pay off your debt (let's pretend that loans collateralizing your 401(k) do not exist).  Similar to the savings account example, your retirement account might be earning 7% a year vs. your debt costing 18% a year.  All you need to do is make sure your foregone net interest costs offset the taxes and penalties from distributing prematurely.  The important metric is the time period over which you don't pay off the debt.  At some point  after you hold the debt long enough (maybe in 10 years), the dollar amount of interest costs will be so high that you will have wished you dumped the retirement savings to pay that debt off.  So here is a very basic decision framework that will tell you, for every dollar of debt, the payback time above which you should be touching that nest egg:

1. Let a = retirement account balance
2. Let b = % penalty from early distribution (assume 40% for taxes and 25% for penalties, total of 65%)
3. Let y = % annual yield on retirement account (7%; and assume post-tax to keep the formula simple)
4. Let i = % annual interest on credit card debt (18%)
5. Let d = amount of debt
6. Let n = number of years of not paying off debt above which you should simply take retirement funds to pay the debt (this is the variable that we hope to solve for)
7. Conceptually, to distribute retirement funds early, the following equation must be true: [d(1+i)^n-d] - [a(1+y)^n-a] < ba (this states that the foregone interest costs over the given time period are less than the early distribution penalty; in other words, DISTRIBUTE!)
8. Remember that if you take the early distribution of "a," you receive (1-b)*a; this is thus the amount of debt you can pay off using the distribution proceeds, meaning d = (1-b)*a
9. Resubstituting and simplifying, you get a(1-b)[(1+i)^n-1]-a[(1+y)^n-1] < ba
10. Reduce this formula to: [(1+i)^n-1]-b[(1+i)^n)-1]-[(1+y)^n-1] < b
11. Then: (1+i)^n - b(1+i)^n - (1+y)^n < 0
12. Then: (1-b)(1+i)^n < (1+y)^n
13. Take the log of both sides to get: LN((1-b)(1+i)^n) <> LN((1+y)^n)
14. Then: LN(1-b) + n*LN(1+i) < n*LN(1+y)
15. Ultimately: LN(1-b) / (LN(1+y) - LN(1+i)) < n
16. In spreadsheet form, enter "b" into C2, "y" into C3, and "i" into C4, then calculate using the formula =+LN(1-C2)/(LN(1+C3)-LN(1+C4))
17. Using the assumptions from 2-4, we have n > 10.73 years

In other words, as long as you can pay off your debt in 10.73 years or less with savings or earnings for this scenario, you should NOT be taking anything out of your retirement account.  If you are in the unfortunate position of not having sufficient savings or earnings to pay down the debt in 10.73 years, then think about doing something.  Practically speaking, unless you have unusually light penalties for early distribution, a really bad money manager getting you no returns on your retirement fund, or ridiculously high interest rates on your debt, you probably shouldn't think about using your retirement money before it's time.  But it could happen...

This post is dedicated to Antonio Cromartie, whose spending habits and child support payments (despite his large salary) make him a candidate to evaluate the retirement account tradeoff.  You're welcome for the formula.

F-One

Following up yesterday's post on coloring and formatting, here are some additional thoughts.  First, what do you do after you have color-coded all of the text in your cells, and then need to paste the spreadsheet into a presentation?  From experience, a lot of senior people get irrationally upset if the text is color-coded rather than all black.  So you could always select the range you are copying, change all the text to black, paste into the presentation and then "undo" in Excel to preserve your color-coding.  Or maybe now that you know all the shortcuts to color-code a spreadsheet within a few seconds, you don't care.  But you should care that traditional copying and pasting using Excel 2007 results in gridlines being pasted, often when you don't want them to appear.  Another big formatting annoyance.

This will make sense later...I promise

What many people do not know is that Excel can copy a selection as it appears on a physical printout.  Moreover, most printers these days have a special setting that is loosely defined as "print all text black."  The command is in different places depending on your specific printer and software, but the idea is that when you physically print a document, borders and backgrounds will print in color, while all text will print in black.  Logically, if your default printer had these settings, copying and pasting would yield the same results, eliminating the problem of having to recolor and uncolor text.  At the very least, you can paste things without the gridlines.  Here is what do (skip to step 5 if you don't care about text colors):

1. CTRL + P for print
2. ALT + R for properties...
3. What happens next differs for each printer, but typically within the "advanced" settings, you will find an option for printing text as black.  Select that option.
4. If you use CTRL + C for copying a range and pasting as a picture, you will find that the pasted image still maintains colors in the text.  The reason is that Excel is copying what appears on the screen, including gridlines, which is largely painful if you like seeing gridlines but need to remove them for every paste-in of a presentation.
5. To address the CTRL + C issue, select the range you want to copy, and then type ALT, H, V, A, C, P, ENTER, which opens up the home tab on the ribbon, then the paste menu (not intuitive when you are trying to copy something), the "As picture" option, the "Copy as picture..." option, and finally the "As shown when printed" option.  By doing this, you have told Excel to make a copy of the picture exactly as if it were printed.
6. Now, in Word or Powerpoint, you can hit CTRL + ALT + V for paste special (notice that often in the 2007 suite, ALT + E +S no longer works) and select the enhanced metafile option.

Voila!  Pasted with no gridlines and as black text.  Bonus point on colors: In Excel 2007, you can transfer color palettes easily by saving them and them copying them out of the default folder.  ALT + P for page layout, then T, C for "Colors" followed by ALT + C for "Create New Theme Colors..."  If you name this theme, it will show up in your default color palette folder as an XML file; on my computer, the folder is C:\Users\Ron Mexico\AppData\Roaming\Microsoft\Templates\Document Themes.  You can then freely copy these palettes to the same folder on other computers, which will cause them to appear on your Excel palette menu.

That also works for the other Microsoft applications, which should make it clear to you why the Presentations group used to call me MichaelSoft Jordan.  Oh shit!

-F-One


 

Coloring Linked Cells

No matter what firm you work at, best practices and common sense dictate that you color hard-coded numbers, formulae and links to other worksheets using distinct colors.  We have discussed the first two, which are easily accomplished using F5, ALT + S to select either constants or formulae (Microsoft says formulas; they're apparently interchangeable).

Unfortunately, Excel does not have a built-in command to highlight all cells linking to other worksheets.  That means if you are working late at night on the Sunday-Monday morning of Labor Day weekend and need to color all other-sheet links to green in a spreadsheet with thousands of rows mixing numbers, formulas and other-sheet links, YOU ARE FUCKED.  Until now.

With the help of my some times enemy and other times friend visual basic, you can do what F5 does, but to select formulas with links to other sheets.  Remember, I am not a VBA expert, but I know how to use Google and combine other people's VBA code.  Here is what to do:

1. ALT + F11 to open up Microsoft Visual Basic within Excel
2. ALT, I, M to insert a new module
3. Within the module code editing window, paste in: Sub FormatOtherSheetLinks()
   Dim TestRange As Range, C As Range, MyRange As Range
   Dim FirstAddress As String, SheetString As String
   Dim wsh As Worksheet
   
   On Error Resume Next
   Set TestRange = Cells.SpecialCells(xlCellTypeFormulas)
   On Error GoTo 0
   
   If Not TestRange Is Nothing Then
   For Each wsh In ActiveWorkbook.Worksheets
   SheetString = wsh.Name & "*!"
   SheetString = Replace(SheetString, "'", "''")
   With TestRange
   Set C = .Find(SheetString, LookIn:=xlFormulas, LookAt:=xlPart, SearchOrder:=xlByRows, MatchCase:=False)
   If Not C Is Nothing Then
   FirstAddress = C.Address
   If MyRange Is Nothing Then Set MyRange = C
   Do
   Set C = .FindNext(C)
   If Not MyRange Is Nothing Then Set MyRange = Union(MyRange, C)
   Loop Until C.Address = FirstAddress
   End If
   End With
   Next
   If Not MyRange Is Nothing Then MyRange.Select
   End If
   
   Set TestRange = Nothing
   Set MyRange = Nothing
   End Sub 
4. F5, ALT + R to run the module on each desired sheet

Notice that all the formulae with links to other sheets are highlighted.  See for yourself by hitting CTRL + ~.  Now, all you need to do is color the highlighted cells!  You can also hit ALT, F, E to save the module for future use.

So how did this work?  Imagine that a human was doing this exercise.  He could use CTRL + F to find each cell containing links to other sheets by searching for "!" within each formula.  He could then select each cell that contained "!" cumulatively (using either the keyboard and SHIFT + F8 or the mouse and CTRL).  Excel does all of that almost instantaneously.  The only problem would be if you write footnotes like, "Assumes leverage of 3.5x!!!!" because that's getting highlighted too.  Anyway, imagine the spreadsheet is huge and contains a mix of constants and other formulae.  That could have been a 15-minute exercise, but will now take 2 seconds!

Speaking of taking 2 seconds, I decided to write this post while thinking of ways to satisfy Mrs. F-One.  Happy Labor Day Weekend.

-F-One

Millions of Stupid Abbreviations

How do you abbreviate "millions" when you are writing about millions of dollars but have limited space on your pages?  Most bankers tend to use "mm" or "MM" as their abbreviations of choice.  But how is this possible?  There is only one "m" in the word!  And somehow, for consistency, the "mm" methodology is shared in abbreviating "billions" as "bb" or "BB," which becomes really confusing if you ever have to talk about billions of dollars on the same page as big balls or busty brunettes.

As a starting point, think about metric nomenclature, in which "K" stands for "kilo" (1,000) and M stands for "mega" (1,000,000).  After all, that's why you pay for champagne rooms by dropping several "k" rather than several "thousand."  And if you're talking about electronic data storage, 1,000 bytes (8,000 bits, but that is a whole other conversation) could also be called 1 kilobyte, or 1 KB.  Therefore, $1,000,000 would really be called 1 megadollar, or 1 MD.  But that's too ambiguous, since so many people in finance call themselves MDs!  What about 1 M$?  That is my suggestion if you want to be consistent with the metric system (which rich scientists also abbreviate as M$...confusing).  But practically speaking, people will whine about not having a currency sign as the leftmost character in an expression of numerical, monetary amounts, unless they are European.

I prefer the Euro sign on the right of the number because my beret constricts the blood flow to my brain.

Since I reside in America, the currency sign MUST be the leftmost character in the expression.  Thus, the best compromise with the metric system for abbreviating $1,000,000 appears to be $1M, as in $1 mega.  Then, theoretically, $1,000,000,000 should be 1 gigadollar, or $1 giga shortened to $1G.  But I've never seen that in any presentations before.  Why?  Because people are stupid, and will just ask you whether $1G means $1,000.  Now how do you feel about people that deal with billion dollar transactions not knowing the difference between $1,000 and $1,000,000,000?

So how did we ever get to mm, MM, bb, BB, etc.?  I've heard lots of theories about these, so let me highlight them (and how stupid they are) for you.

1. 1MM should represent 1 million because M is the Roman numeral for 1,000: A lot of people actually only know the first 9 digits of the Roman numeral system and assume this is true.  Really?  How do you write "20" in this system?  XX!  And "XX" doesn't mean "100," so why the hell would "MM" mean "1,000,000?"  Hopefully you told that big oil and gas company that their acquisition synergies would be $50MM next year, since you seriously meant $100,000, or 2 secretaries.  Note that drawing a line above (overlining?) the two Ms means multiplying, so that would theoretically work.
2. 1mm should represent 1 million since mm is the abbreviation for megamillions:  What?  First of all, I have heard many people say this, and it makes no sense.  Maybe they mean multimillions, but megamillions means either trillions or the lottery.  And "mm" means millimeters.
3. 1bb or 1BB should be used to represent 1 billion for consistency with abbreviations meaning 1 million: False.  Ah, the compulsive/psychotic fixation of bankers to make all formatting consistent, even if doing so makes no logical sense.  Neither bb or BB make ANY sense.  It's not even like we say begabillions or bultibillions.  Maybe they mean bunch(es) of billions like a fucking cereal.

Realistically, the best we can probably do is $1M and $1B for $1,000,000 and $1,000,000,000, respectively.  And guess what?  $1,000,000,000,000 would be $1T, which coincidentally matches the metric prefix of "tera."  But to be clear, my personal preference would be scientific notation; I suggest custom number formatting of $0.0_)E+00; ($0.0)E+00; "- " or you could always use the old-school method of x 10^a.  Keep in mind that if you are using Word, you can superscript selected text using CTRL + SHIFT + = and subscript using CTRL + =.

Lastly, what do you call someone obsessed with numbers in the quadrillions?  A petaphile!!!

-F-One