Knowledge for Business Owners and Entrepreneurs

This is an excerpt from my monthly email where I share a handful of links to recently published content that relates to and can be helpful to those running a business. To have this delivered to your email box, subscribe here.

Managing a business, especially a successful one, is no easy feat. Most of us welcome with open arms a little help from our friends, but it’s also time consuming to discern what is useful and what is not. This newsletter is meant to save you the time of scouring the web for relevant and useful information. Below find several links and summaries of relevant ideas that may help you to dream even bigger.

Written Word: Articles, Blogs, etc.

Below find articles that can help you grow your business or help you to find a creative solution to a pesky problem.


Scaling a Business
Defines the difference between scaling and growing an enterprise, and explains how to scale effectively and efficiently.


Do You Care About Privacy as Much as Your Customers Do?
 Data privacy and consumer concerns are not only at top of mind for your consumers.


Be a Better Leader, Have a Richer Life
 Total Leadership for all aspects of life, not just work.


How to Successfully Sell Your Tech Startup
 Insights on selling a tech startup, in eight thoughtful lessons.


2020 Tax Filing Dates
Important deadlines for business and personal tax returns from the NYS Department of Taxation and Finance.


The True Cost of Co-Working
 An analysis on co-working and examination of some of the pros and cons of co-working and a traditional office lease.

Spoken Word: Podcasts

Below find some audio recordings on interesting and inspirational topics for business owners and entrepreneurs.


Making Entrepreneurial Dreams Come True
Podcast featuring leaders from Goldfish Swim School and Cultured Kombucha.


How to Scale and Keep a Cool Vibe
Selecting a unique location, communicating how you want to operate your business, and going outside your comfort zone and do what you believe in

“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”

-Jack Welch

The True Cost of Co-Working

Co-working can be an attractive option for small and growing companies. For instance, a co-working lease/agreement can provide flexibility in terms of space constraints and may provide abundant amenities, such as ping pong tables, a gym and a decked-out kitchen with kombucha on tap. However, a businesses owner must weigh the positives as well as the negatives.  But given the nature of co-working spaces, there are privacy issues that business owners have to grapple with. Most importantly, in my view, business owners should focus on the dollars and cents. How do entrepreneurs identify the break point of where co-working is no longer a viable option to accomplish their business goals? And when is a co-working space too expensive? These questions are especially important to every firms’ chief financial officer.

Pricing Models in NYC

In this post, I wanted to share some co-working pricing models from some of the co-working companies currently operating in NYC, including Industrious, KettleSpace, Regus, Spaces and WeWork. Unfortunately, these companies do not openly share space dimensions, and instead provide quotes on a per-person, or per-amenity basis.

Service ProviderMonthly CostNotes
Industrious $1,141 Premium spaces.
KettleSpace $49 Sit at a table in a café and get free coffee.
Regus $387 Traditional co-working spaces.
Spaces$518Dedicated desk in a shared space.
WeWork $613 Standard private offices with added amenities.

These are average costs based on data available at each service provider website. Costs vary based on services and amenities. Check co-working service provider website for their latest pricing.

An apples-to-apples comparison would show that these co-working spaces are costing commercial tenants more per square foot than the typical tailored NYC office lease, albeit with added services and amenities. Through my research, I’ve found that a co-working company can charge at least 10 times more per square foot than a traditional office space. Sure, co-working takes all the hard work out of customizing a space, but one may wonder at what stage a business can lease their own space, splurge on similar amenities and still spend less than what a co-working service provider charges. For smaller companies co-working makes a lot of sense, but at some point the costs may become too cumbersome to sustain a company’s growth.

Benefits of a Traditional Office Lease

A traditional lease has many benefits. This lease can give a tenant substantial control over their space. This is paramount for a company that wants to focus on customization and seeks for its brand to resonate throughout its office locations. A buildout for a financial services company will vary compared to one for a technology startup or a medical practitioner. Not only should the physical space be different, but each will have different technology, cybersecurity and plumbing requirements, for example. In fact, some landlords may also be willing to cover the expense of building out the space for a new tenant. What’s more, a business may have more financing options and easier access to funds with a traditional lease.

Is Co-Working for My Business?

The decision to go co-working or a traditional space will vary for each type of venture out there, and there’s no magic formula that fits all. In addition to cost savings, a traditional office lease can help to fill requirements such as branding, technology, cybersecurity, plumbing and financing. Some of the co-working pundits tout the flexible nature of a co-working agreement as a reason not to sign a traditional lease, but a properly drafted traditional lease that allows for a sublease can provide flexibility in a traditional lease situation. Focusing on the bottom line, the office space expense may be one of those make or break decisions for a burgeoning business. With strong tenant representation, an astute business owner can minimize this expense and boost their bottom line.

Chepetech Meetup in Escazú, Cost Rica

Earlier this month while traveling in Costa Rica, I attended an entrepreneur community meetup in the heart of the country’s most-prominent metropolitan area, Escazú. The meetup was organized by Chepetech and the discussion was led by Marcela Ledezma, Director at Klap, which focuses on the payments sector in Latin America (LatAm). The region represents a population of about 600 million individuals.

The LatAm Landscape for the Internet and Mobile

Smartphones, mobile devices and the Internet are becoming mainstream throughout the LatAm region. So in order to illustrate this trend, Marcela shared some data. The mobile phone penetration rate — simply defined as the number of users divided by the population — for smart and mobiles phones has more than doubled from 2013 (19%) to 2018 (43%).

As we may have suspected, younger populations of users make up over 60% of users. And taking a closer look at the data reveals that 15-24 year olds account for 32.8% of the user base, while 25-34 year olds comprise 27.7%. That leaves users 35 and older comprising the other 40%.

The Evolution of Money

To wrap up her presentation, Marcela shared an interesting timeline that reviewed the evolution of money. Her timeline began with cash exchanges in Ancient Egypt, followed by checks in the 1st century. Her timeline continued with the next big innovation of credit cards in the early 1900s. Electronic payments were next. Mobile payments rounded out the timeline in the late 1990s. Her timeline was great for illustrating that the industry is nascent and presents an opportunity for development.

Payment Solutions by Klap

The company has been able to grow its set of software solutions and offerings. You can visit their webpage for more information: https://www.oneklap.com/. On the company’s website you will see payments product solutions ranging from a hardware device to software that is available on the iPhone App Store and Google Play.

FinTechlandia, aka Ticolandia

Costa Rica is well known for its agricultural products. Contrary to this belief, the country has much more to offer than its agricultural know how. Over the years, the Costa Rican economy has been morphing into a more diversified economy, offering medical devices and other technology.

Agriculture accounted for about 16% of Costa Rica’s GDP in 1990. Interestingly, agriculture made up about only 5% of GDP in 2018 (World Bank).

Taking a look at Costa Rica’s technology industry growth, we can see what is making up for this shift. According to a recent study by Finnovista, Costa Rica’s FinTech sector has expanded by 400% since 2017.

The FinTech Opportunity

The majority of Costa Rican banks (state-owned) are slow to develop and implement the latest technologies. This presents the biggest opportunity to offer FinTech services in Costa Rica. The industry is in its infancy; there are only 25 companies currently in the space according to a study by Finnovista published in June 2019.

An Economic Struggle

True, the country is going through a rough patch at the moment. The government is in the middle of implementing tax reform (Ley 9635), including a value added tax (VAT). However, these are attempts by the administration to produce revenue in order to tackle its growing debt issues.

Actually, the change in tax policy seems positive for future growth, and the IMF suggests reforms including:

  • 1) Enhancing of the quality and efficiency of the education system and
  • 2) The promotion of innovation, technological diffusion and integration into the global value chain.

Among the many sectors that could benefit, this bodes well for Costa Rica’s burgeoning FinTech industry.

Light at the End of the Tunnel

Internet industry expert eMarketer sees continued growth for Latin America’s Internet User Penetration (as a percent of the population). They see this number rising to over 60% in 2019, up considerably from the 43% the region experienced in 2013. This supportive trend should pave the way for the industry. The trend is testament to the growing comfort level of consumers using technology for everyday tasks, like mobile payments.

Unlikely Topic

Reading the IMF provides great high-level economic analysis. This note is meant to provide some of my experiences to better illustrate some of the IMF’s findings, and also to cover some topics the IMF may not.

Last year, the IMF visit to Costa Rica concluded that the economy grew robustly in 2016. The government had taken steps to raise revenue and curb expenditures. However, there remained a major risk due to the country’s fiscal imbalance. Then, in May of 2017, the IMF issued a concluding statement, which “describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country”. These findings can be found by visiting the IMF pages:

“Costa Rica ranks better than most of Latin American countries in international competitiveness comparisons, but it should not be complacent. Enhancing transport infrastructure and public expenditure efficiency―especially in education―and competition policies should accelerate potential growth and foster inclusiveness.”

First of all, let’s tackle the infrastructure. Roads are a big issue in Costa Rica, and a well-developed transportation system is lacking. You’ll hear many of the locals talk about how they would improve the roads and bridges. After spending many hours on the road, I’ve wondered how much productivity the country is losing in traffic while the workforce is commuting to work. This issue may exist everywhere, but I feel like it exists more here in Costa Rica. Most urban locations are connected by roads that bottleneck at every river crossing, which exacerbates the problem. On the bright side, there is noticeable improvement recently, as some major bridges have been revamped. However, I think the big question is: Will these improvements sustain a growing population with an increasing availability of credit for consumers?

“Continued sectoral transformation towards high growth and higher value added services, supported by adequate public investment and regulatory framework, should make the economy more resilient to climate change and mitigate the latter’s regressive impact on income distribution.”

Costa Rica touts itself as a magnet of Foreign Direct Investment (FDI). The IMF’s assessment seems to call for higher value added services, and I tend to agree on this point. Most of the FDI I have seen pouring into this country is in the form of call centers and service centers. Foreign companies rely on relatively cheap labor to fill jobs that may not be at the forefront of any technological evolution. Roles that focus on Data Mining, Business Intelligence, Digital Banking and Machine Learning are few and far in between. Perhaps the country could do more to bolster the technology sector labor opportunities to reflect a global appetite for cutting edge labor force.

It’s easy to sound negative when one speaks about traffic and lack of jobs in the economy. These two points highlight some of the findings released by the IMF.

When travelling in Costa Rica, “pura vida” is the way of life here. So take it easy when visiting this country. The IMF won’t write about the diverse wildlife that calls this country home or the various landscapes that make up the country’s roughly 20,000 square miles. So, I’ve included some pictures here, enjoy!

Let’s take a page from the sloths’ playbook, and relax today. #Nature #Wellness #Sloth #Wanderlust #Travel

A post shared by Visit Costa Rica (@visit_costarica) on

The view of the Rio Savegre waterfall sure beats the view of your desktop. #SavetheAmericans

A post shared by Visit Costa Rica (@visit_costarica) on

Pura Vida

As you may know, my wife and I have decided to move to Costa Rica. This is an extremely exciting time for us, as we embark upon this amazing adventure.

The intention of this note is not to say goodbye, however. Think of this as an update on where I’ll be spending most of my time… on a beach off Pacific coast of Central America sipping micheladas. Well, not exactly true.

Seriously, here’s a more realistic picture of what I’ll be doing. I will continue to look for opportunities to expand my markets knowledge and my investment portfolio. Costa Rica is a stable country without a military, and per capita, it attracts the highest level of foreign direct investment in all of Latin America. I’ll be sure to publish some of the opportunities I find worthy of sharing.

So, I’m easily reachable via email, whatsapp, google hangouts, SMS, MMS, FaceTime, Viber, Tango, Skype. Who isn’t? Of course, I’ll be making the occasional visit to various US cities.

So, with that, I’d like to say hasta luego and pura vida!

Crying Wolf

In July of 2012, interest rates on the US 10-year Treasury were at their lowest levels ever. Also, the rate on the average US 30-year Mortgage stood slightly below 3.5%. At the time, it seemed like a great time to try to lock in low rates as rates were destined to take off. If you’ve read my previous posts on this topic, it may seem a little like the story of the boy who cried wolf. Rates were on their way up, and the big, bad wolf would usher in higher rates. Those with floating loans may have been exposed to higher interest rates and would feel the pinch of higher debt service payments. In hindsight, however, the past becomes clearer.

Three years and one rate hike later, it now seems like the Fed is in no rush to raise interest rates (see video below). In fact, the market is pricing in close to even odds that the next Fed interest rate move will be up or down. Curious how an external event (Brexit) can change the trajectory of where rates are headed, but we’ll leave that discussion to the experts.

How Brexit Has Changed the Odds for a Fed Rate Hike (Bloomberg Video)

Below is a chart of the interest rates of the 10-year Treasury bond and the average US 30-year Mortgage. Since rates hit a peak in the 80s, interest rates have been trending lower. When will this trend end?

Crying Wolf
Borrowers could take advantage of these historically low interest rates environment by locking in today’so relatively low rates. Or will rates move even lower, proving this to be just another case of the boy crying wolf?

rates20160630

Wolf image borrowed from speakaboos.com.

Crowdfunding: What Is It? What’s in It for Me?

Much hype regarding Crowdfunding has hit the internet recently, given new rules (effective May 16, 2016) adopted as part of Title III of the Jumpstart Our Business Startups (JOBS) Act, also known as Regulation Crowdfunding. The purpose of this article is to provide some information on Crowdfunding in the US and what the new regulations mean to investors and business owners.

What is Crowdfunding?

Crowdfunding is a term that describes fundraising via the internet, and from a large number of individuals. Companies like Kickstarter and IndieGoGo have been in this space for years, and there are many new Crowdfunding platforms that now offer Investments in many different types of projects and ventures, from technology to the arts to real estate. Understanding the different types of Crowdfunding could help you understand if an investment in a Crowdfunding venture makes sense for you.

With the new regulations, Congress has worked to provide some guidelines on this evolving investment topic. Given that businesses can use Crowdfunding to raise funds in exchange for an interest in company ownership, this clearly lives within the realm of Securities and Exchange Commission (SEC) purview. Title III offers expanded leniency to an opaque and fairly new space, and it establishes a set of parameters that are intended to help small businesses raise funds from a group of individuals while at the same time protecting investors.

Crowdfunding Models fall into two categories; those that need to comply with SEC regulations, and those that don’t. The table below includes information concerning different types of Crowdfunding. Business ventures, which fall within the SEC purview, are the main focus of this article.

crowdfundingTypes

What does it mean to me, the Investor?

As an investor looking to get involved in Crowdfunding, the new regulations mean a larger number of new investment opportunities to choose from. For example, an investor that has traditionally put money in stocks and bonds may now have the ability to diversify their portfolio by investing in small startups and real estate ventures that were previously only accessible by more wealthy, accredited investors.

In terms of existing SEC governance, Regulation A+ (Reg A+) and Regulation D (Reg D) registration exemptions offer fundraisers alternate fundraising opportunities. The Reg A+ exemption allows smaller companies to offer and sell up to $50 million of securities in a 12-month period from accredited and non-accredited investors. The Reg D exemption allows companies to target accredited investors for their fundraising activities without the need for full registration.

accreditedInvestorChecklist

Regulation Crowdfunding lowers the bar in terms of these investor capital hurdles and opens the door to non-accredited individuals that want to invest in smaller business opportunities. That’s great news, but there are limitations on how much one may invest. Individual investments in all Crowdfunding issuers in a 12-month period are limited to the following two investment caps.

crowdfundingInvestorLimits

What does it mean to me, the business owner/Crowdfund issuer?

For someone raising cash for a new venture or growth opportunity, this regulation opens up another source for fundraising activity. However, the new regulations have also provided Crowdfund issuer limits.

One fundamental limit of Regulation Crowdfunding is that the amount raised by Crowdfunders may not exceed $1 million per year. For some businesses, this could be a marginal amount of startup cash. Also, the cost of registration and compliance may quickly outweigh any benefits associated with Regulation Crowdfunding.

In this case, a Reg A+ or Reg D offering may better suit a business owner. Furthermore, there are other considerations, such as keeping up with disclosures, filings and regulation compliance. The Reg A+ and Reg D exemption offerings may have some distinct advantages over full registration and registration required by Regulation Crowdfunding. Also, Reg A+ and Reg D allow a business to raise more capital for larger projects, which can more easily absorb the costs of legal, accounting, platform and other expenses associated with the Crowdfunding process.

crowdfundingIssuerDisclosures

Now, working through the math of individual investment limits set forth by the new regulation, this means by definition each Crowdfund that raises the $1 million annual limit would have at least 10 investors each contributing $100,000. Alternatively, a company may raise smaller amounts from more investors. For example, a Crowdfund could comprise 400 investors each with $50,000 in annual income and net worth of $100,000. The idea is that these new investors will now come in many shapes and sizes.

It’s important to highlight these numbers, given that keeping track of all the contributions made by these investors can become a daunting task. Luckily for Crowdfunders, the new regulation also stipulates that Crowdfunding activities must be conducted through a funding portal or registered broker-dealer. This requirement is also meant to combat fraud, but it comes at a costs. Platform and compliance fees, as published by Venturebeat, can range from 7% to 39%, depending on the amount of money raised.

What does the future hold for Crowdfunding?

The industry is fairly new, and there are many possible applications. Opening up the funding spigots will provide more opportunities for investment. For example, mortgage funding is now being raised via Crowdfunding, replacing traditional mortgage bank lending. High yielding commercial buildings can now help to diversify the investments in an individual’s personal portfolio. Could Crowdfunding overtake peer-to-peer lending? What role, if any, will the traditional banking community have with Crowdfunding?

Looking forward, will retirement accounts (i.e., 401Ks) offer consumers opportunities to invest in Crowdfunding ventures, such as real estate investments and startups? The retirement accounts industry has traditionally allowed investors to access investments via equity and fixed income mutual funds. The Investment Company Institute reported total US retirement assets were $24.0 trillion as of December 31, 2015, with almost $5 trillion in 401K investments. These potential Crowdfunders present a huge opportunity to bring new assets to the business startup masses.

Like with all investments, one should do their research to fully understand the risks of Crowdfund investing. Crowdfunding seems to offer investors with diversification, and one should weigh the risks (such as lack of liquidity) to determine if these investments are appropriate for them. Those looking to raise cash should also investigate all the options available.

Contributions by: Ilan A. Nieuchowicz, Carlton Fields, Attorney, Shareholder and Member of the Firm’s Crowdfunding Taskforce. For more information, visit Ilan’s biography.

Image borrowed from ebuyer.com.

Some useful articles on Crowdfunding

Ringing the Closing Bell at the NYSE

Since I’ve been asked by many about my recent participation in the Closing Bell ceremonies at the New York Stock Exchange (NYSE), I thought I’d share some thoughts on the event.

A little about the NYSE Closing Bell: One of the most familiar images of the NYSE on the evening news is the loud ringing of a bell, signaling the opening or closing of the day’s trading. Trading floor bells are more than just a colorful tradition. They are critical to the orderly functioning of the marketplace, assuring that no trades take place before the opening or after the close (taken from the NYSE website).

With Mix Diskerud, midfielder for the NYCFC
With Mix Diskerud, midfielder for the NYCFC

A little about this rare opportunity: I was invited to be part of the Closing Bell ceremony at the NYSE on April 14. To promote 100 years of the Copa America as well as their upcoming tournament in North America, the Copa America planning committee invited Mix Diskerud (NYCFC midfielder) and local soccer fans to join them in ringing the bell.

First, we were given a tour of the trading floor and met some of the traders. Then we went up to the podium to initiate the ringing of the closing bell at precisely 4pm EST. Finally, we took some photos with the official Copa America tournament cup.

So, I was there to represent Ecuador and I wore my yellow jersey under my suit jacket. Given I’m a North American Latino that grew up playing soccer and works in the Financial Services industry, this opportunity seemed too good to be true.

Now, thinking a bit more about this opportunity… yes, I was excited to be a part of it, but there was more at work here than my selfish reasons. This was an excellent marketing opportunity for Copa America.

Copa America at the NYSE
Copa America at the NYSE

Each market day, 150 million global viewers are tuned in to watch the closing bell. This of course is only a fraction of the 1 billion global viewers that tuned into the 2014 World Cup Final in Brazil, but it’s a big step for soccer in terms of putting it among the most popular sports in the US. Furthermore, it was a chance for Copa America to target the 55 million Hispanics living in the US.

Congratulations to the Copa America planning committee on throwing a great event. In all, it was an amazing experience, and I’m looking forward to watching the tournament over the summer.

When Will Low Rates Go Higher?

The market remains focused on when the Fed will continue raising interest rates, a campaign it started in December 2015. However, economic data may be causing the Fed to re-think its rate trajectory.

One data series I’ve been keeping an eye on is the interest rate on the 30-year mortgage. Since the Fed increased rates late last year, mortgage rates have actually fallen by almost 40 basis points or 3/8 of a point. It seems these market rates don’t want to follow the Fed higher. To the contrary, these rates are heading in a downward direction, the same trend they’ve been in since the 80s. Whatever it is the Fed decides to do, what one can observe is that rates are historically low and one could use this as an opportunity to lock in low interest rates.

mortgageRates30yr