King of Capital: Innovation Lessons from the PE World

20 Dec

In King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone, authors David Carey and John E. Morris discuss the history of the storied private equity firm and discuss what factors have enabled the company to grow from a two-man shop to an international, publicly-traded financial powerhouse. The authors address some of the most significant charges that have been trotted out against private equity and leveraged buyouts – namely the “buy it, strip it, flip it” mentality that many argue leads to job-cutting and cost-slashing, which result in weaker companies that are less likely to survive the mountains of debt accumulated during the takeover – and ultimately defend the practice, citing market data and academic research.

King of Capital is mostly a corporate biography, with a significant emphasis on the Chairman, CEO and co-founder Stephen Schwarzman, who has often been pilloried in the media for representing the excesses associated with the mountains of wealth created in the private equity business. Carey and Morris brilliantly lay out the development of the firm through an exploration of its deals – both the successful and the utterly dismal investments – and its investment team. It was particularly interesting to read about the deals by Blackstone and its competitors within a broader economic context; for example, telecommunications deals that occurred during the heady days of the internet boom were discussed, as were real estate investments that occurred during the run up to the 2007-2009 financial crisis.

The book was both entertaining and educational, as the authors took pains to delve into various financial tools and functions, debating the relative merits of stock buybacks, recapitalizations, vulture investing, etc. What I wasn’t expecting from the book, however, were valuable insights regarding innovation. As it turns out, co-founders Schwarzman and Peter Peterson weren’t just savvy investors – they were innovative entrepreneurs as well.

Here are a few key takeaways around building a successful business from Blackstone, a firm that has grown its assets under management to $157.7 billion, invested in 159 separate transactions in a wide range of industries and geographies with a transaction value of over $300 billion since 1987 by maintaining a disciplined, risk-averse investment philosophy:

Maintain flexibility in your business model. Blackstone co-founders knew they wanted to jump into the world of leveraged buyouts, but they began operations by providing M&A advice, as it was a business with high-margins, little overhead and low fixed capital costs. As Blackstone’s assets under management grew, it expanded its offerings into private equity, real estate investments, and hedge fund solutions, among others.

Attract like-minded entrepreneurial types, and award them with generous stakes in the venture. As Blackstone evolved and expanded the scope of its offerings, co-founders Schwarzman and Peterson lured the most talented investors away from established firms such as Credit Suisse and Goldman Sachs by offering partial ownership of the firm.

Do what’s best for the firm, not the individual. From the beginning, proposed deals at Blackstone were vetted among the entire partnership, often many times. Partners would poke holes in the investment argument – this promoted risk-averse, well thought out investment decisions rather than people lobbying Schwarzaman to see their deals get through.

Stick to the business that you’re best at. During the internet boom when Blackstone remained on the sidelines while its competitors and other investors were making millions of dollars seemingly overnight, Schwarzman was wise to insist that “this is not what we do well,” a position that saved the firm billions when the bubble burst.

Acknowledge when additional help is required. Schwarzman realized that he was becoming a bottleneck to investment decisions, and that further growth would only occur if he relinquished much of the day-to-day management of the firm. Blackstone looked externally, and brought on Tony James as the president and COO.

Fab Labs – Democratizing Manufacturing

15 Dec

While traveling through the states of Sao Paulo and Rio de Janeiro in Brazil last week, I often found myself dwelling on the challenges and intricacies of the supply chains of various goods and services in both the densely populated cities and the sparse, remote areas that I visited. As far as emerging markets are concerned, Brazil is one of the most developed, but its infrastructure—though rapidly developing—and its trade policies dictate that goods are often priced at a premium to their perceived fair market value. For years, multinationals have struggled with the challenges confronting distribution in markets such as Brazil, but what about the local entrepreneurs and manufacturers?

I spent two days on Ilha Grande, an island paradise a few kilometers away from the mainland, 45 minutes by high-speed water taxi. Everything anyone could need – tourists and locals alike – had to be brought in by boat. I watched from the pier as crates of food, souvenirs and various widgets were hauled in by hand, one load at a time. Not only are these goods more expensive because of the high costs incurred in transporting them to an island – as Manhattanites can testify – but they also dictate a larger environmental footprint.

“Downtown” Ilha Grande

I was reminded of a recent talk at Digital Capital Week where RTKL architect Kashuo Bennett discussed the concept of “fab labs”, small-scale fabrication laboratories that democratize manufacturing by providing local innovators with access to digital fabrication technology and rapid prototyping.  Fab Labs, which originated in MIT’s Center for Bits and Atoms, have opened in dozens of countries around the world, and their potential applications in developing countries and remote regions are particularly interesting. Instead of paying significant premiums to move goods around the world to places such as Ilha Grande, perhaps local entrepreneurs could harness local Fab Labs to design, develop, and manufacture products.

The application of Fab Labs in developing countries and elsewhere holds numerous benefits, as well as significant challenges that cannot be ignored. Firstly, fab labs allow local entrepreneurs to stimulate the local economy. When goods from large multinationals are sold in a given market, that money flows back to the corporations, rather than staying in the local economy; however, if products are designed, manufactured and marketed locally, the economic benefit created stays in that market. Additionally, one can argue the sustainability aspect of manufacturing locally, as well as the benefits of educating, training and hiring local workers needed to manufacture Fab Lab products.

Granted, it is a pipe dream to think that any community could just give up trade and manufacture everything locally – particularly given the various resources and inputs needed to manufacture anything designed in a Fab Lab in the first place – but it does seem that there is significant momentum behind such movements, and myriad markets in which the application of such “local” elements could produce innovative solutions.

Temporary Urbanism – Innovative Uses of City Spaces

2 Dec

“Cities only learn to be innovative by trying and failing – you’re not trying hard enough if you don’t fail” – DC Office of Planning Director Harriet Tregoning

Park(ing) Day

I’ve always been fascinated with cities, and spend a lot of time thinking about how smarter urban planningcan foster innovation and drive significant social and environmental change. When I saw a lecture called “Temporary Urbanism” on the schedule for Digital Capital  week, I immediately signed up.

The engaging lecture at Washington’s National Buliding Museum this past Saturday discussed how cities can effectively activate empty storefronts, abandoned lots or even cultural institutions in order to create engaging neighborhoods, boost the local economy and push sustainability efforts – all noble goals for major urban areas.

DC Office of Planning Director Harriet Tregoning, RTKL architect and 24 Hour City participant Kashuo Bennett, and Christine Ewing, Regional Fine Arts Officer at the U.S. General Services Administration shared their ideas and insights around the subject, and discussed examples in which vacant spaces have been effectively utilized to build better cities. Here are a few highlights, many of which could easily be adopted in urban areas around the world:

Park(ing) Day is an internationally celebrated event “that invites citizens everywhere to transform metered parking spots into temporary parks for the public good.” The event is particularly fascinating given the traffic, pollution and danger to pedestrians that cars create in urban environments. Tregoning suggested that more than 80% of the estimated $8,000 it costs to keep a car in the city each year – including gas, insurance, parking, etc. – leaves the local economy; extrapolating those statistics, she postulates that more than $125 million could be added back into the local economy if just 15,000 people got rid of their cars.

In comparison to the markets in other cities across the U.S., DC real estate is relatively strong: retail vacancies are 4.5% versus the national average of 9.3%, and office vacancies are 11.1% versus national average of 16%. Still, that translates to a lot of empty space. If a small percentage of those vacancies were filled with pop-up stores or art spaces, there would be significant tangible value created for the local economy, as well as intangible value in the form of more vibrant and interesting neighborhoods. Temporarium is a great example. Open for 24-consecutive days between February 18 and March 13, 2011, the pop-up storefront in DC’s Mt. Pleasant neighborhood housed 34 local artisans and crafters. It grossed more than $31,000 in sales from 1,030 customers, 70% of whom reside in immediate area – the District’s Ward 1.

Another interesting local example of the creative use of vacant space is Truckeroo, a monthly festival held June through October in a DC parking lot showcasing food trucks and live music from the area. The event has drawn thousands of patrons to a space that would otherwise lie vacant.

DC’s Truckeroo

There are countless other examples of innovative ways that people in cities around the world have effectively leveraged existing outdoor, retail and office space, and I’m excited about the growing interest in doing so in our very own backyard. Given the countless artists and entrepreneurs in DC – not to mention the 180 missions and embassies in DC, many of whom I’m sure would love to introduce their culture, art, businesses, etc. – I have to imagine there is a healthy demand to occupy such spaces.

What about the supply? One of the biggest obstacles of introducing such interesting manifestations of “temporary urbanism” is the bureaucratic matrix of permits, insurance and lease agreements. Maybe it’s a matter of asking for forgiveness, rather than permission? DC Councilmember Tommy Wells weighed in on the subject, noting that the city’s unofficial stance is to often turn a blind eye to such community-enriching efforts, many of which are not technically legal; for example, camping on federal parks is illegal, yet when it comes to policing #occupyDC, the city leaders look the other way.

The takeaway from the discussion was that building more vibrant urban destinations can be an exercise from the bottom-up: build better blocks, which lead to more interesting neighborhoods, which are the hallmark of desirable cities.

For more information on DC’s Digital Capital week, including a schedule of events, click here.

Mytinerary – A Smarter Way to Travel

14 Nov

Is there anything more fun and rewarding than traveling to a new city or a new country? Not in my book. Everyone and their mom loves to travel, but there are definitely a few pain points along the way that don’t necessarily take away from the trip, but they do create an opportunity to improve the overall experience.

What does the average travel process look like for most people? There are several stages of each trip that can each be as frustrating as they are exciting, which is why I’ve been thinking about an idea for a travel website and app called “Mytinerary”. For most trips, there is a meaty research and planning phase. This can be especially difficult if you are arranging a trip with a group of friends. WHERE do we go? WHAT do we do? WHEN do we go? WHERE do we stay?  There are myriad travel planning books, websites and tools that assist in the process of research and planning, but they do not address many of the intricacies of traveling – especially traveling abroad. More on that later.

After planning, the real fun begins – the actual trip. I can only speak for myself, but arriving in a foreign airport spackled with advertisements from unknown companies in foreign languages, navigating a different public transport system and finding your way through unmarked neighborhood after neighborhood, and settling down in your temporary digs before taking off to explore, work, feast, drink, meet up with friends and party (or whatever else one might do on a trip) is better then Christmas morning, Thanksgiving dinner, and other analogy-worthy awesome events all rolled into one.

Finally, upon returning home, you share your experience. You upload your pictures to Facebook, email them to grandma, and tell everyone within earshot how crazy that one night was when you met a few locals, or how much better the gelato was in that small Italian village than in your boring American city. You’re so cultured and everyone knows it!

The thing is, these three phases are all addressed by different platforms. What I propose is a comprehensive website, largely integrated with existing platforms and networks such as Facebook, Foursquare and Yelp (no need to reinvent the wheel!) that goes beyond aggregation of resources to actually provide targeted recommendations for your travels.

What inspires you to travel, or to choose a particular destination over another? Increasingly, our travel decisions are influenced by our friends. How many times have your friends posted pictures of exotic locales, prompting you to ask “Where was that? What did you do there? Would you stay there again?” Sure, we can go to Lonely Planet and similar travel sites to research, but we are more inclined to value the opinions of our friends, because we can identify more closely with their experiences. A young college student looking to hostel jump and party until 6am will have a different agenda than a married couple looking to indulge in the local foodie scene, yet each is presented the same “top 10” lists for the cities in which they plan to travel. What I propose with Mytineray is a more targeted, recommendation-based travel planning and sharing application that understands your individual travel needs and preferences, and allows you to build a trip that will be more fun and interesting to you.

Recommendations can be based not only on your travel profile – which could be built by answering a series of questions, or reflecting on your previous trips – but also your location. For example, if you are planning a trip to Washington DC and staying in the Foggy Bottom area, it would be valuable to know the travel time required to get to a restaurant on Capitol Hill, or how long it might take to get out to Old Town Alexandria, Virginia. I envision Mytinerary having a “drag and drop” feature, where you add activities to you itinerary, and a schedule is created based on the average time it takes to commute from your current location to the venue, participate in whatever event you choose (a recommended 1 hour to tour the Phillips Collection, 1.5 hours to dine at the fancy French restaurant, etc.).

There is a significant “local” component inherent in Mytinerary as well. Just as millions of Foursquare users check in at sites as often as possible to achieve the coveted “mayor” status, I would imagine that those local gurus would be interested in sharing their favorite local spots with adventurous tourists. Personally, I love when friends and family come to visit me in DC, because I enjoy showing off our unique city, from the Mall to the many unique, vibrant neighborhoods. It doesn’t take a significant change in behavior to take that tour-guide approach to your Mytinerary profile; after all, you want to become known as the local travel guru, right?

I think that to have the best chance for success, Mytinerary would have to be very tightly integrated with Facebook. After all,  you are trolling through your friends’ photos to decide where to visit, then posting your own photos after your trips, so why not embrace where all the eyeballs – and wallets – are? The close integration of Facebook would also allow for tagging, not only of the people in the pictures but also for the location and time of the picture itself. After you get back from your surfing trip in Costa Rica, you would be able to post your Mytinerary photos and share exactly where and when each picture was taken; going a step further, if your Facebook friends were inspired by your photos, they could drag and drop that particular tagged location into their Mytineraries.

All of these behaviors are currently happening in some corner of the internet, in books, or by word of mouth, but Mytinerary presents an infinitely more comprehensive way to manage the entire travel experience, from planning to sharing. As far as revenue streams are concerned, there is clearly a significant opportunity for targeted advertising and referral fees from travel booking sites, but it doesn’t end there. Normally, you might not appreciate getting spammed with Rosetta Stone advertisements ad nauseam if you have no interest in learning Spanish, but you might not mind a weekly email with common phrases and valuable vocab words if you did just book a two-week tour of Argentina. The data gathered from millions of Mytinerary users is valuable not only to the website/application itself, but also to the myriad companies involved in the travel industry that desire a more robust understanding of their potential customers.

I think this is a great idea with a log of legs, and a lot of wings (travel reference, get it?). Travel books and guides are so 20th century, it’s time to sign up for Mytinerary!

Celebrity Venture Capitalists: A-Round Investments from the A-List

2 Nov

 

Leonardo DiCaprio at Mobli’s office (Image via Mashable)

A hallmark of American culture has been the extent to which we have been able to squeeze every dollar of celebrity out of our star athletes, musicians and entertainers. From the eponymous Air Jordans to Joe Namath’s 1974 advertisement for hosiery and Britney Spears’ perfume, merchandise and endorsements have been a great way for stars to supplement their (and their agents’) incomes, and expand their marketing reach.

A more interesting phenomenon as of late has been the foray of celebrities into the world of Venture Capital. Leonardo DiCaprio and Ashton Kutcher are some of the biggest names to handover cash to promising startups, but other notable stars such as MC Hammer and even tween heartthrob Justin Bieber are reported to be scratching their entrepreneurial itch by way of VC investments. Can you imagine the Silicon Valley headlines? “It’s not a bubble, it’s Bieber Fever!”

Are Kutcher and DiCaprio really as adept at identifying emerging technologies and talented entrepreneurs as the veterans at Kleiner Perkins and Andreesson Horowitz? I doubt they can model cash flows or advise on go-to-market strategies as well as the true VC players can, but apparently the Ven”star” Capitalists are doing fairly well for themselves. Kutcher, through his investment partnership called A Grade, was an early investor in such hot startups as Foursquare, Path and Flipboard, and was even part of a group that bought Skype in 2009 before selling it to Microsoft in April for more than three times the purchase amount. Yesterday, social video and photo platform Mobli announced that Leonardo DiCaprio was one of a handful of investors that had participated in its latest round of funding – a $4 million seed round – and in April, MC Hammer announced he was joining as an investor/mentor in a tech incubator in Silicon Valley called NewMe.

Is this phenomenon a brilliant move on behalf of prescient celebrities with an eye for “companies that solve problems in intelligent and friction-free ways and break boundaries,” as Kutcher replied in a May interview? Or are startups realizing that celebrities can increase the brand awareness many times over, seemingly overnight, as in the case of Justin Bieber earning more than 1,700 followers within an hour of posting his first picture on Instagram?

Whichever the case, I appreciate the entrepreneurism exhibited by these celebrities. I never thought I would be giving props to anyone appearing on Perez Hilton, but I can’t help but applaud the Kim Kardashians and the Olsen twins of the world who appear to be testing out the waters of the business world by using their brains – okay, their checkbooks might be more accurate – to diversify their careers. My question is, how long will it be until there is a fund we can invest in that only manages portfolios of star-backed startups? Or what about a VC training camp for the rich and famous? Now that’s innovation!

Google 3D Driving Directions Makes Trip Planning More Fun

26 Oct

Bem-vindo à Ipanema!

Ever since the first Model T rolled off Henry Ford’s assembly line, we have been driving around this earth of ours town wondering, “Am I lost? Which way do I go? I could’ve sworn that right turn was coming up…” Travel maps sure did help, as did the local gas station attendant, but now there is a navigation tool available that – in addition to suggesting efficient routes and providing step-by-step directions – allows you to not only determine your course of attack, but also preview the drive in an engaging, movie-like experience.

A few weeks ago, Google released a revolutionary mapping service that takes driving directions into the 3rd dimension. With the Google Earth plug-in, you can get a bird’s eye perspective of your proposed route.  Google’s 3D driving directions leverage data and images from a variety of sources to build real-time videos tracking your proposed route. The video can be paused at any point, so you can stop and explore the local landscape or familiarize yourself with an area from different angles.

I personally discovered this feature, released on September 30, while planning a vacation to Brazil. I used the tool to discover interesting towns and beaches on the drive between Sao Paulo and Rio de Janeiro, and was amazed at the extent to which every detail – from downtown skyscrapers to offshore coral reefs – were highlighted along the way.

Will Google’s new 3D driving directions guarantee that you’ll never be lost again? Probably not, but it will definitely provide an entertaining, post-recession alternative to the family vacation. Can’t make it out to California for that epic cruise down the Pacific Coast Highway? Here, let me help:http://motv.st/pCbDzK

BRIC’s and Beer

20 Oct

As Germany’s infamous Oktoberfest winds down to a close, I find it appropriate to reflect on one of my favorite subjects: beer. After water and tea, beer is the third most popular beverage in the world, and one of the oldest prepared beverages – evidence of beer brewing, accidental or not, pre-dates written history by millennia. I find it particularly interesting to think about the challenges modern brewers face in marketing and distributing beer in such a competitive market, especially in some of the world’s largest populations and economies: the BRICs.   

A recent Businessweek article profiled the push by Budweiser, Anheuser-Busch InBev’s flagship brand, into Brazil. Interestingly enough, Brazil is the birthplace of the majority of the parent company’s board, and is the world’s fourth largest beer market by volume.  The annual per capita consumption of beer in South America’s largest country was 47.6 liters, according to Japanese brewer and holding company Kirin; seeing as how per capita consumption for the top 20 most fervent beer drinking markets is at least 59.6 liters, Budweiser and its competitors must be licking their chops at the opportunity to convert more Brasileiros from drinking caipirinhas to drinking cervejas.

In Russia, unsurprisingly, beer takes second place to vodka as the most popular alcoholic drink, and many consumers view beer not as an alcoholic beverage, but rather as a soft drink. Still, Russians consume on average 58.9 liters per capita.  Presently, the market is dominated by domestic brewer Baltika(now owned by Carlsberg), while AB-InBev’s Budweiser controls just 0.5% of the market. Though thirsty Russians may prefer vodka to beer, they still consume enough to make it the world’s third largest beer market, according to Kirin.

The Indian beer market dates back to the early days of the British Empire, when porters and the appropriately named India Pale Ales were exported to the subcontinent. According to the Institute of Alcohol Studies, the number of Indians consuming alcohol has increased from 1 in 300 to 1 in 20; even though alcohol consumption has grown rapidly, as marketers increase their efforts, beer accounts for only 10% of all alcohol consumed. What is the most popular beer in India? Kingfisher – roughly 1 out of every 3 bottles of beer sold in India is this lager, brewed by Bangalore-based United Breweries Group.

China, the world’s largest country by population, is unsurprisingly one of the fastest growing markets for beer in the world. China is already the world’s largest beer market by volume, yet per capita consumption – 22.1 liters – doesn’t even warrant the country a place in Kirin’s ranking of 35 beer-drinking countries.  As Madison Avenue advertisers and their international brethren refine their offerings for the Chinese market, one can imagine that it will only be a matter of time before the Chinese catch up to Western beer drinkers. Will foreign breweries be able to successfully infiltrate the notoriously difficult to navigate economy of China?  Yes, but not organically; CR Snow, a joint venture between SABMiller and China Resources, brews Snow, which eclipsed the domestic beer Tsingtao as the market leader for the first time in 2006.

Tastes vary among cultures and country to country, but there is no denying the investments that the world’s largest breweries are making to court those in the largest developing countries. The American image abroad hasn’t exactly been spotless in recent years, but what about American brands? According to Chris Buggraeve, AB InBev’s Chief Marketing Officer, American values resonate globally, even if American politics don’t. “It [Budweiser] doesn’t stand for America. It stands for deep American values that are extremely relevant worldwide,” he says. Cheers to that.

Digital East 2011 Conference: Relationships and Customer Experiences

3 Oct

Last week, I attended the second annual Digital East conference in Tyson’s corner. The two-day event, attended by digital executives, senior marketers, entrepreneurs, web strategists, bloggers, investors and consultants such as myself, explored the latest innovations and trends in the social media, mobile, cloud, analytics, e-commerce and online advertising worlds, among others. Panels and presentations were often peppered with subtle sales pitches and data points highlighting explosive growth and success of various companies, but the two things that struck me as the biggest takeaways were the acknowledgement of a shift from anonymous online profiles and strictly digital engagement towards real-world, local relationships, as well as an emphasis on creating compelling customer experiences.

“Can’t we use technology for something better than a coupon?” asked a Gowalla developer. In his presentation titled “Telling Better Stories”, Gowalla’s Director of Business Development, Andy Ellwood, discussed a macro shift “from relevance to relationships” that is driving change in the industry. The internet and technological innovations allowed us to create a thriving digital world, but now we see a resurging interest in engaging in the real world around us, enabled by powerful mobile devices, geo-location services, and creative – albeit unproven – business models.

The growing emphasis on relationships, rather than anonymity, manifests itself in various ways: Gowalla and Foursquare create a social diary out of everyday urban adventures; startups Banjo and Sonar enable users to identify and connect with others in their networks in real time; and myYearbook emphasizes the fact that in social games, WHO you play is as important as WHAT you play, and that gaming has moved beyond entertainment, towards a platform to build relationships.

It was also really interesting to hear everyone from Capital One’s VP of Digital Marketing to LivingSocial’s Marketing Director discuss the importance of creating compelling, “non-brokered” experiences for your customers. The emphasis on customer experiences is especially relevant to advertisers, who acknowledge that they no longer hold their audiences captive through forced viewing, but instead must provide an environment of choiceful, on-demand experiences. Consumers are seeking content, not commercials. Especially in an increasingly competitive environment where a seemingly infinite number of marketers must compete for the increasingly limited attention spans of consumers, creating compelling and engaging customer experiences will be the key to success in the digital marketplace.

It was exciting to see such growing interest in this sphere in the DC area, which, given the federal government’s role in the local economy, hasn’t exactly been known as a hub of technology and innovation. I don’t think Digital East will rival SXSW anytime soon, but I hope it continues to grow in both the number of attendees and the quality of the panelists and presenters.

A Cool Business Model

19 Sep

A few weeks ago while visiting Dallas during its record-breaking heat wave, I came across a gem of a franchise. A cupcake shop? Taco stand? Nope, none of the above. Ice House America, as the name suggests, manufactures and franchises ice vending machines that automatically dispense cubed or chipped ice on-demand. The commoditization of such a simple product, frozen water, has proven to be a success not only for the company, but for the franchisees as well.

An Ice House America Vending machine beckons in the 108-degree Texas heat

The vending machines range in size from 30” x 30” miniature units to 200 square foot stand alone sheds with the capacity to make 6,750 pounds of ice each day, enough for 525 separate sales. According to a press release, Ice House is transforming the $2.5 billion U.S. packaged ice industry by producing ice at the point of sale providing a more cost-effective, superior product than the traditional direct store delivery pre-made bagged ice trucked from a central ice plant, and touts the smaller carbon footprint of its unique delivery model.

Ice House America’s franchised vending machines can cost up to $100,000 to get up and running, and the company suggests that franchisees take on average $90,000 – $110,000 per year, per machine. The ice business is a regional market, so the barriers to entry are pretty low, with sizeable profit potential. Since it’s founding in 2003, the company has sold more than 2,200 vending units – that’s a lot of cold, hard…ice. Continue Reading»

Not that I’m trying to get into the ice business, but one has to imagine there are myriad locations where one of these vending machines would make a killing. Campsites, beach towns, college campuses and high-traffic event venues are just a few of the areas that I imagine would have a strong demand for bulk ice.

Is ice the new gold? Probably not, but it’s still a solid investment, at least according to Ulysses Management, LLC. Ulysses, a NY-based investment firm, announced its acquisition of the Jacksonville, Florida-based Ice House America and its affiliated companies in May 2011. Whether the franchise will enrich its investors and franchisees is uncertain, but one certainly can’t disagree with the fact that the homegrown company is putting a lot of people to work and doing its part to keep the economy from “overheating”!

Google’s Acquisition of Zagat Feeds Push to “Local”

14 Sep

Zagat posted this cheeky review upon the Announcement of the acquisition

The rest of us might be keeping a tight grip on the purse strings as we weather the storms of this epic recession, but not Google. The search giant has been on a spending spree as of late, and its latest two acquisitions of Motorola Mobility and Zagat show its commitment to growth and innovation regardless of the economic environment. I think that it will be particularly interesting to see how Google integrates Zagat, a company that will give Google another foot in the door of the “local” services market, because Google is so well positioned to compete against other B2B restaurant service providers such as OpenTable.

Zagat put itself up for sale in 2008, when it was said to be valued at $200 million, but Google acquired the company for considerably less (many commentators have noted Google must have paid less than $66 million because there was no automatic FTC antitrust review).  The restaurant grading service was one of the most influential tastemakers in the world of haute cuisine long before the advent of user-generated content on online platforms such as Yelp (which, coincidentally, Google tried to acquire in 2009 for ~$500 million), but has since ceded popularity to competitors.

A Zagat guide in a hungry consumer’s hands can drive dining decisions, but what about a Zagat business in the hands of Google? Upon the announcement of the acquisition, OpenTable’s stock tumbled 8%; clearly the market anticipates that Google might expand into the restaurant reservation services with the acquisition. OpenTable’s restaurant management solution is a combination of software and hardware that requires a significant upfront investment. The service helps restaurants to manage demand and market their businesses, but the breadth of services pales in comparison to those that Google could offer. With the Zagat acquisition, Google could develop a software restaurant management solution, and derive revenues from the sales its other B2B services.

Additionally, Zagat will strengthen Google’s foray into the world of location-based services and daily deal offerings, and one can imagine a mobile solution that would be a mash-up of all the above, a la Living Social’s Instant Deals.

Google made a name for itself by aggregating information and returning information sought out by users in the form of search results; will the company leverage Its acquisition of Zagat to move from aggregation to recommendations based not only on user’s searches, but also their location and prior consumption history? Time will tell. In the meantime, I’ll whet my appetite for innovation in the food services industry with a healthy serving of Willie Nelson and Chipotle in this brilliantly animated video.