3 stages to any business

• Starting it

• Growing it

• Selling it

What do all these stages have in common?

The 3 things every entrepreneur needs to know about MONEY

How to …

make it

grow it

give it away

HOW TO MAKE IT

(and tips for starting a company)

Do you have what it takes to start a company??

Q: Why are most startup companies started by mediocre people?

A: The really smart ones know better!

How to recruit really good people

• Take your time

• Network

• Advertise in places where great people NOT looking for jobs would be

• Example: – We’re hiring software engineers at Propel.

Nobody’s Perfect

• No perfect CEOs

• No perfect engineers

• …

• The whole trick is getting people to work effectively together to complement each other

Know your strengths and weaknesses

• Focusing all your time on your strengths is a trap (e.g., technology, product)

• Spend at least as much time in filling your weaknesses (e.g., marketing)

• People tend to keep making the same mistakes over and over again (e.g., under hiring)

When recruiting remember: Skills are easy to acquire but simple behavioral change is

nearly impossible• Example:

– The “toilet seat down” problem

• Solution:– Learn how to compensate

• I’ve known excellent management consultants who consult for years before they realize this

The single biggest mistake you can make when starting or

running a company and how to avoid it

Hiring the wrong CEO

(like yourself)

People don’t always tell the whole truth

• My 4 yr old… “I didn’t do it!”

• Our President …

• Bill Gates ...

Can you imagine Bill saying…?

• “I switched to Linux on my desktop because I wasted too much time rebooting NT.”

• “Yeah, bundling IE into the OS was a brilliant afterthought.”

• “We could have easily complied with the Sun Java contract.”

How I personally made over $200 million in a year

1) Infoseek went from 5 to 100 in little over a year

2) Having 6M shares didn’t hurt either

How I made $10 million for my second startup company as a

result of attending a 4 hour free course taught at a hotel

Negotiation skills

Two courses everyone should take after they graduate from

college

• Presentation skills

• Negotiation skills

• Survey…how many have taken these?

How to sell $30 worth of lemonade in only 20 minutes on the Stanford campus and how it

relates to commerce on the Internet

The most important skill for success in the real world isn’t

taught at MIT, but that’s starting to change

Interpersonal skills

How to precisely value Internet companies

• Finally…for the first time...the secret formula revealed…

• Say someone asks:

“Is Yahoo overvalued?”• You say...

Well… If you have to ask, you just don’t get it, do you?

How AOL makes big money...

The 2 step TOP SECRET strategy revealed here for the first time….

• Make it really EASY to sign up

• Make it really HARD to cancel

My two biggest mistakes

• Refusing to acquire Yahoo for $20M in 1994 because I thought it was overvalued

• Telling Michael Robertson to “pound sand” when he wanted me to buy his company for $20M

Michael Robertson’s top secret business technique for instant

wealth

• “If at first you don’t succeed, try, try again”

• “It doesn’t hurt to be:– in the right place– at the right time – with the right product”

10 minute instructional video

• “How to make really big money using the Internet”

• Includes secret techniques used by Gates, Diller, Geffen, Spielberg, …

• Illustrates step by step techniques Robertson used in mp3.com

NOT AVAILABLE IN STORES

HOW TO GROW IT

How to legally avoid paying capital gains taxes forever

Always sell at a loss

Donate the stock

Die

A complicated technique...

How to consistently get a 60% average annual return in the stock

market

Buy and hold

10 stocks max

Microsoft, Cisco, Dell, EMC,

AOL, Sun, Intel, Worldcom, Nokia

What your stockbroker doesn’t want you to know: why trading

stocks may be riskier than gambling in Las Vegas

•Spreads

+

•Stocks are completely unpredictable over the short term

= YOU LOSE

Company announces great earnings (above expectations) but

its stock tanks. Why?

“Who the hell knows?”

• Market explanations are always done AFTER the fact

Why mechanical trading systems don’t work

Because I’ve lost money in every proven, tested system I’ve tried

Never invest in one stock

• Never > 20% of your portfolio; preferably under 10%

• I used to think that investing in Microsoft was safer than US government T-bills

• Now I’m looking at an even better investment…

The perfect investment…Can you guess what it is?

• Recurring revenue stream• High margins/High ASP/Low cost producer

– underpaid workforce, overpriced service, zero COGs, low overhead

• Large user base• No competition• Established, well known brand name• Service never goes out of style• No manufacturing or shipping costs• Doesn’t need to worry about customer satisfaction• They pay nothing in taxes

HOW TO GIVE IT

Charitable giving agenda

• Why?

• How?

• Where?

“I worked really hard to make it”

“… we’re talking REALLY hard

…nights…weekends…holidays… gave up sex for 2 years…”

“Now you are asking me to give it away?!?”

“Are you nuts?”

“Where do you want your estate to go tomorrow?”

CHOOSE ANY TWO:Family

Taxes

Philanthropy

Who gets to spend your dough?

You? Or the government?

Giving statistics in Silicon Valley

One of the richest areas on the planet, yet for high net worth households (assets >$1M not including their home) :

• 45% give < $2,000/yr• 6% give $0

Source: Community Foundation Silicon Valley

The best things in life aren’t all that expensive

• House• Car• Vacations• Subscription to Fortune• Replay/Tivo box• Private jet• Assets for guaranteed income for rest of your life

So now what?

So we had a choice...

• Sit on our assetsor

• Put those assets to work in a way that will benefit:– ourselves– our kids– future generations of our family– our friends and community

Why it is better to donate to charity sooner than later

• No tax advantages to giving after you are dead

• No personal satisfaction to giving after you are dead

• Giving can ultimately benefit you or your family

presbyopiahair losssleep apnea/snoringlactose intolerancepsoriasisreceding gumsnear sightedtorn ACLtype I diabetes susceptiblemacular degenerationringing in my ears

Example

• Ten years from now, you might be diagnosed with:– Heart disease/stroke– Cancer– ALS, Parkinson’s disease, …

• At that time, starting a giving plan will be too late to have an impact on your health

• In hindsight, would you think keeping your assets sitting in stocks was the right move?

Life changing advice

• SK: “How do you get people to donate large sums?”

• LE: “You know, there are some people in this world who are looking for places to give money away”

• SK: “Say what? What have you been smoking?”

Was he right? Let’s find out...

What kind of person do you want to be? In “A Christmas Carol,” did you like Scrooge better

BEFORE

or

AFTER

?

Virtually all who try philanthropy stick with it

• 100% donor satisfaction at CFSV:– No donor advised endowment funds have

closed (except if the donors move)

Giving need not be altruistic

• Can be totally pragmatic• Example

– We give because we get a higher return on our assets

– Our one-time $80M donation may cure cancer, diabetes, or arthritis; save the world; help reduce pollution; …

– Was that a good use of $80M? Or should I have invested it in stocks? For whose benefit?

Giving need not be altruistic

• Or giving can be in your self-interest

• Example: donate to causes that affect or may affect you or your immediate family– aging research– heart disease– asteroids

Giving may actually make you money!

Example: – You donate to a CRT when your stock is locked up at

$50– Trust can short other shares (of the same stock) to lock

in the gain– Trust pays you back your donation over time

Result:– You can actually end up with more money in your

pocket than if you sold that stock at $25 in a selling window

“Why Give?” Summary

• We DO give to make a positive difference in our own lives and the lives of people we care about.

• We DO NOT give not out of a sense of obligation or payback or civic duty or because it is “the right thing to do” or “to create a legacy”

Why give

• Your wealth gives you an opportunity to make a difference

• If you don’t take advantage of it, who are you trusting to look out for your interests?

• We are the leaders we’ve been waiting for

• One person CAN make a difference

You can make a difference

• Progress a little at a time– Funding NEOS

discovery– Funding nuclear

disarmament– Funding medical

researchers– Funding campaign

finance reform

• Immediate gratification– Cured cancer in rabbits– Helped clean up the air

• Passed AB71 and designed the sticker

• Got top government support for SB1726

• Funded smog check measurements in California

– Helped education• Funded buildings at MIT

and DeAnza• Raised millions for Tech

Museum

Agenda

• Why?

• How?

• Where?

Giving survey

• Would you rather donate:– your own money– someone else’s money

Giving options

• Charitable Lead Trust (income to charity now, later assets pass to heirs)

• Charitable Remainder Trust (income to you now, later assets pass to charity)

• Donor advised fund• Supporting organization to a community

foundation• Private foundation

Which option?

• Smart estate uses a combination• CRT: Secure income stream for you• CLT: Pass money to your heirs• Donor advised fund: Under $1M assets;

minimizes tax bite and maximizes charitable giving

• Supporting org: >$5M in assets; you can influence investments and donations

Easiest way to donate

• Gift appreciated stock to a donor advised fund at local Community Foundation (typically $25K minimum)

• E-mail* them whenever you want to make a grant• After you make the donation, you spend the rest of

your life giving away someone else’s money!

* For any progressive community foundation

Charitable fund advantages

• You can add stock (and liquidate) when your stock is locked up

• Can donate to fund when stock peaks; decide on recipient later

• Gift to charities at anytime from the fund

• Less hassle (no personal recordkeeping, no periodic stock transfers, e-mail donations)

Advantages of charitable fund

• Endowment compounds tax free forever

• You get to give away an infinite amount of OPM and your annual grants will typically increase each year

• All this from a ONE-TIME donation!

Carnegie Foundation

• Donated $5.2M 100 years ago

• Built 65 public libraries

• Still in operation today

• Moral: A small one time donation can have a bit impact

How to donate to charities when your stock is locked up

• Your stock seems to always peak when you are locked up… but...

• You donate the stock; the charity shorts other shares

• Allows you to give charity lots more money AND gives you a bigger writeoff

• Typically done through a community foundation

Hypothetical example

• You start an Internet music company• At IPO, you are worth $2.5B, but you can’t sell

any shares• So you donate 1% ($25M) to a charitable fund• You get a nice writeoff and can make donations to

your favorite causes for the rest of your life without an additional investment

A tale of two Larrys

• Larry #1– Worth $2B at IPO– Too focused on his business to make a gift to charity– Business doing fine. He’s now worth $200M.

• Larry #2– Also a billionaire– Gave $100M to top scientist in aging to donate over 5

years– 2nd largest funder of aging research in the US – Business doing fine. He’s now one of richest people in the

world

Giving strategy

Make periodic small donations as your stock rises

Many notable philanthropists regret not having taken advantage of this strategy.

Don’t make the same mistake.

Kirsch Foundation

• Identified areas we thought were important for ourselves, our kids, our friends: environment, education, medicine, ...

• Started with a donor advised fund at the local community foundation

• Added to it over the years• Switched to a supporting organization so we could

invest assets more aggressively, hire a staff, and lobby

Kirsch Foundation

• Hired CEO• Recruited world-class medical advisory

board (including Gordon Gill from UCSD)• Currently

– $80 M in assets – Donate $6M per year – Total staff of 5, including program officers in

medical and environmental areas

My recommendation

• Start NOW with a small donor advised fund

• Add to it as you become comfortable with the results and as your estate grows

• 10% of your net worth after taxes is a good starting amount

• Supporting organizations beat private foundations on every single metric

Agenda

• Why?

• How?

• Where?

Traditional philanthropy

• Donate to American Cancer Society, United Way, public TV, etc.

How to give intelligently

• Figure out the areas important to you

• Create your own criteria (I have 20)

• Make a long term commitment

• Realize that results are often hard to quantify

• See my website for details:

www.skirsch.com

Kirsch Foundation

• We both have full time jobs• Needed a few easy goals we could accomplish in our

spare time. Root causes.– Saving the world– Curing major diseases– Restoring the environment– Improving education– Reforming politics– Funding worthwhile projects that others won’t fund– Helping out our local community– Encouraging philanthropy

Summary

• While your reasons for giving may vary, it makes sense to start a giving program now

• Easiest way to get started is set up a donor advised fund at a community foundation

• It’s as easy as opening a bank account, a lot more fun and satisfying than doing the rest of your estate planning

Summary

• The time to give to many causes is NOW, before they create a problem for you or a family member or your community

Survey

• How many of you have I convinced to setup a donor advised fund or to begin/expand your own charitable giving?

• If I haven’t, why not?

For more info

… and a copy of this talk, please see my website:

www.skirsch.com