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Financial Services: 6 Key Attributes to Attract Gen Z

Mon, 02/24/2020 - 1:04am

Now the largest generation worldwide, Gen Z accounts for nearly 68 million people in the US alone. As Gen Zers age, financial services providers will be increasingly pressed to shift focus to the burgeoning demographic.

As digital natives, Gen Zers are more receptive to influence from friends and family than traditional advertising. For marketers, strategists, and developers, understanding Gen Z's unique needs — and creating and marketing products accordingly — will be critical to reaping their value.

In Financial Services: 6 Key Attributes to Attract Gen Z, Business Insider Intelligence provides a six-point framework that highlights core traits of the demographic, which banks and payments firms can use to attract, engage, and retain Gen Zers.

This exclusive report can be yours for FREE today.

As an added bonus, you'll receive a free preview of our Banking Pro Briefing.

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Tech startups have a new 'exit' strategy. Why private equity firms have started plowing billions into acquiring startups.

Sun, 02/23/2020 - 1:52pm

  • Among startups that don't fail, most are acquired instead of going public.
  • Although most startups that are acquired are still purchased by other independent companies, a growing number and proportion are being snatched up by private equity firms.
  • In the past, private equity firms were largely considered bottom feeders, buying up companies on the cheap for their cash flow, but increasingly, they're buying companies with the intent to help them grow or to combine them with other startups to reach a larger scale — and they're more willing to pay up for them, industry experts say.
  • The trend is being driven by a surge of cash into private equity firms and the growing number of companies that are avoiding the public markets, they say.
  • Click here for more BI Prime stories.

It used to be that the goal of every startup founder was to take their company public.

That may still be the goal for most, but in the last several decades, a much more realistic option for startups that managed to stay afloat was to be acquired by another company in the same sector.

In recent years, though, a third option has emerged for startups — being purchased by a private equity fund or by a company owned by one. Those kinds of buyouts now far outnumber IPOs and account for one out of every five so-called exits for venture capital-backed companies in the US, according to data PitchBook compiled for Business Insider.

The growing influence of private equity on the startup market has "really reshaped the industry," said Wylie Fernyhough, a senior private equity analyst at PitchBook.

The kinds of startups being targeted by private-equity firms likely would have gone public 20 years ago, industry experts told Business Insider. But today, they're generally considered too small or don't have bright enough prospects to hit the public markets.

For such companies, private equity has become "an attractive exit opportunity," said Pete Flint, a managing partner at venture capital firm NFX.

The vast majority of startups that don't fail are acquired

Venture capitalists back startups with the intent of cashing out those investments at some point in the future, either by being able to sell their shares to public investors when or after the companies go public or by selling the startups to other companies.

While initial public offerings get lots of attention, they've become relatively rare. In part that's because many startups never make it to the exit stage at all, because they go out of business first. But also it's because the vast majority of startups that don't go out of business are acquired instead of going public.

Last year, for example, of the 934 startups that had some kind of exit event, 853 — about 91% — were acquired either by another company or as part of a private equity-related deal, according to PitchBook. That rate has been relatively steady over the last 18 years.

"The vast majority of exits that all of us are thinking about are things that are not the public markets," said Sean Foote, a member of the professional faculty at the Haas School of Business at the University of California, Berkeley. Acquisitions, he continued, are "the major way in which companies find their home."

While such deals have long been important, what's changed over the last 20 years is the growing influence of private equity. In that time period, private equity firms have gone from bit players in the startup ecosystem to major actors in it.

In 2003, just 17 startups were acquired by private equity firms or companies owned by them, according to PitchBook's data. That amounted to just 5% of total exits that year. By 2012, 88 startups were snatched up in private equity-related deals, accounting for 10% of all exits. Last year, 186 were acquired in private-equity deals, amounting to 20% of all exits.

Private equity firms are big players in the acquisition market

In 2004, IPOs outnumbered private-equity buyouts by a ratio of 3-to-1, according to PitchBook. But private equity acquisitions have outnumbered IPOs every year since 2008, and for the last three years, there have been more than twice as many of those kinds of deals as public offerings.

What's more, even as startup acquisitions of all kinds have skyrocketed — jumping from 279 in 2002 to 853 last year — private equity-related ones have accounted for a growing portion. They accounted for 22% of all startup acquisitions last year after making up less than 7% in 2002, according to PitchBook.

"I think it's a trend that's going to keep growing," said Lanham Napier, the cofounder of startup investment firm BuildGroup.

The amount of money startups are seeing from selling to private equity firms is still a small portion of the total value of all exits, varying from less than 1% to about 8% annually over the last 10 years. But it's grown significantly, going from just $690 million in 2012 to $6.3 billion last year. And some individual deals have become quite large.

In 2017, for example, private equity-backed PetSmart bought online pet supply retailer Chewy for $3.35 billion. And last year, PE firm Thomas Bravo acquired ConnectWise, a maker of mobile device management software, for $1.5 billion.

Generally, the private-equity firms are snatching up more mature startups. On average, the companies they're acquiring are around 10 years old, according to PitchBook's Fernyhough. By contrast, startups that went public were about 9 years old at the time of their IPO and those that were acquired by other companies were about 7 years old, he said.

But increasingly, private equity firms are backing more mature companies and using them to buy younger startups, creating larger companies or "platforms" that potentially offer better growth or market prospects, the industry experts said.

"You can sell early stage companies to PE-backed platforms," said Dan Malven, a managing director at 4490 Ventures. "I think we're going to see more and more of that."

Fewer companies are going public

Part of what's driven the surge of private-equity buyouts — and acquisitions overall — is that fewer and fewer venture-backed companies are going public. That's a trend that dates back to the 1990s and one that's linked to the growing dominance of small numbers of firms over large sectors of the tech industry, according to research by Jay Ritter, a professor of finance at the University of Florida who has been studying the public offering market since the 1980s.

But that trend has arguably been accelerated over the last 20 years by regulations that added to the costs and burdens of being a public company and, conversely, made it much easier for companies to remain private for far longer periods.

"The public market has evolved to a point where it's not that you couldn't have these companies go public, but there are significant regulatory costs that you can avoid if you stay private," said Robert Hendershott, an associate finance professor at Santa Clara University's Leavey School of Business. "Private equity is a natural way to give someone an exit."

The kinds of startups generally favored by the public markets these days are those that are growing quickly, operate in a large market, and are either profitable or have a clear path to profits, NFX's Flint said. Unfortunately, there are lots of good companies that don't meet all three of those criteria. But they can be a good fit for private equity firms, because such firms can invest in their long-term growth or combine them with other startups to give them the scale they need to be more attractive to public investors, he said.

"They are perfect opportunities for private equity rollup or acquisition," Flint said.

Private equity firms are swimming in cash

The surge in private equity buyouts has also been stoked by a huge gust of money into the industry, particularly in the last 10 years. In 2010, US-based private equity firms raised $59.2 billion, according to PitchBook. Last year, that amount had swelled to $301.3 billion.

While only a portion of those amounts are going to tech-focused funds, that portion has been growing. Tech-focused private equity funds based in North America and Europe raised just $3.7 billion in 2010, according to PitchBook. By last year, that amount was up to $68.3 billion. By contrast, the US venture capital industry raised $46.3 billion in new funds last year, according to PitchBook.

Private equity funds have access to "a staggering amount of capital," said Mike Smerklo, a managing director at Next Coast Ventures.

But another reason why private-equity acquisitions have become increasingly popular for startups and their venture backers is because the deals can be more attractive than either going public or being acquired by another operating company, industry experts said.

It used to be that private equity firms acted kind of like bottom feeders in the startup market, paying relatively small amounts for firms that had few other options and focusing on the cash flow those companies could generate for them. But that's no longer the case. Private equity firms — particularly the tech-focused ones — are increasingly looking at companies that can offer revenue growth and they're often willing to pay top dollar for them, the experts said.

Startups used to see the biggest exits by going public or by being acquired by an operating company, said BuildGroup's Napier.

Now, though, "some of these private equity firms have gotten so good at [buying startups], some of their valuations are just as big as those other things," he said.

PE firms can move quickly and offer fewer restrictions

Private equity firms also tend to be far less bureaucratic than corporate merger-and-acquisition departments, they said. Such firms also can often throw far more resources to bear on analyzing potential deals than corporations can. And the deals they strike typically don't have to go through the kinds of shareholder votes or board approvals that corporate deals often require.

"They're able to move a lot more quickly," said PitchBook's Fernyhough.

What's more, venture investors and founders often confront more obstacles to accessing their promised returns when they sell to corporations or take their companies public than when they sell to private equity firms. Typically in an IPO, there's a lock-up period of up to six months during which early investors are barred from selling the company's stock. Meanwhile, in corporate acquisitions, there often are conditions put in place that allow founders or early investors to see the full value of the buyout only if the startup hits certain financial or performance targets after the acquisition.

"When I sell a company to a private equity firm, it's clean," said Foote, who in addition to his role at Berkeley is a managing director at venture capital firm Transform Capital. "There's often very few strings attached."

It's not unusual for acquirers, whether they are large, independent enterprises, other startups or private equity-backed conglomerates, to pay for their purchases with shares of their own stock. But the private equity-backed roll-ups often are perceived to have greater prospects for growth than big, established corporations, potentially making their shares more desirable.

"We try and analyze that growth potential," said 4490's Malven. They try to figure out if "we want to ride on their equity."

The fast pace can also cut against startup founders and VCs

To be sure, the growing influence of private equity does have some drawbacks for venture capitalists and startups. The fast pace of those firms and their large research teams can go against founders and their backers, Malven said. The private equity firms can have their teams analyzing multiple companies and potential deals at once, he said. If a startup doesn't act on an offer quickly, the firm can threaten to move on to doing a deal with a rival company, he said.

"They can put you in a squeeze," said Malven.

And the firms can have their shortcomings when it comes to evaluating startups, industry experts said. Because they're typically focused on analyzing the financial health of companies, they can be very good at evaluating companies that already have established a market for their products and have a revenue stream, they said. But they're not as good at sizing up companies based on the potential of their technology or their intellectual property or their unproven ideas, they said.

"They're much at better looking in the rear-view mirror than they are in through the windshield," Malven said.

Still, by and large the venture capitalists and other industry experts said the venture ecosystem has benefitted from private equity firms providing more exit options for startups.

Venture capitalists are often looking for home runs with their investments — companies that have the potential to deliver huge returns on their investments. That remains the primary focus of firms like his, said NFX's Flint. But not every startup is going to be a home-run investment, and having the ability to get a modest return on those kinds of companies is a good thing, he said.

"More options for more capital is great for the ecosystem," Flint said. "It's great for founders, it's great for early stage VCs, it's great for customers."

Got a tip about the venture-capital industry or startups? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Here are the top 10 best performing venture funds that launched at the turn of the decade, which posted returns as high as 50%

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24 products people waste too much money on that you should stop buying immediately

Sun, 02/23/2020 - 1:12pm

  • Some items we're used to buying every day can actually be a huge waste of money.
  • Store-bought greeting cards, physical books, cable TV, and premium gasoline are just a few examples.
  • Bigger purchases, such as a boat or a time-share, often aren't worth the cost either.
  • Visit Business Insider's homepage for more stories.

Waste not, want not.

We make so many purchases that we don't always realize what we are buying — and how we could be saving money. If we take a step back and think about all of our additional costs, we could cut a few out of our lives. 

These 24 products can often be a huge waste of money:

Matthew Michaels contributed to the original version of this article.

SEE ALSO: 15 things you should never skimp on

DON'T MISS: 12 clever ways to save money every day, according to financial experts

Lottery tickets

Many lottery players purchase tickets each day with the hope of striking big, but games of chance are preventing you from having more money, not less. You are expected to lose money if you play the lottery and there is no guarantee you will even keep winnings.



Cigarettes

In New York City, someone who smokes one pack of cigarettes a day burns up over $5,000 a year. Smoking can also be a huge cost to your health — medical bills can rack up from the dirty habit even tobacco companies are quitting.



Water bottles

As Americans became more health conscious and started drinking less soda, beverage companies needed a new plan. It worked as Americans now drink more bottled water than soda, even though it costs $1.22 per gallon for a commodity that can be accessed for next to nothing.



Brand name drugs

For most products that are exactly the same, customers would usually choose the cheaper option. This does not hold true for brand name drugs, which consistently outpace sales of their generic counterparts despite having the same ingredients and effects. Save yourself some money and buy the generic ibuprofen instead of Advil. 



Movie theater concessions

Movie theaters don't make profits from film tickets, but instead through food sales. The over-inflated popcorn and pricey candy is a rip off considering you can buy the same products at the supermarket for much cheaper and many theaters don't care if you bring in your own snacks (as long as you clean up after yourself).



Café coffee

Before Starbucks and Dunkin' Donuts were on every street corner, people brewed their own coffee at home. This is still somewhat popular — especially with coffee pods — but coffee shops have taken a lot of the business. With expensive price tags and long waits, it's a wonder why everyone isn't turning to homebrew.



Books

A library is the best way to save money on an expensive hobby. Libraries are free and come with millions of books, DVDs, and other materials for you to borrow.



Timeshares

Timeshares sound too good to be true. They offer low prices for a vacation home that you can use whenever you want. But they can trap you with ever-increasing fees and low resale value, making timeshares an almost guaranteed loss.



Boats

One sign of wealth is cruising on a personal yacht, but that may be a better indicator of wasted wealth. Boats are expensive on their own, but as Saltwater Sportsman says, prices for storage, gas, maintenance, and electronic navigation drive up the initial cost.



CDs and DVDs

CDs and DVDs are becoming obsolete, but many people still shell out cash for hard copies of albums and movies. Like books, CDs and DVDs can be rented at libraries, but most people now stream entertainment on apps like Spotify and Netflix for a monthly rate that costs less than a single disc.



Cable TV

Like music and movies, television is moving from more traditional modes to online streaming. Since cable packages make you pay for more than you want, a pick-and-pay model may wind up costing you less. Streaming has the added bonus of no commercials and watching on your own schedule. 



Greeting cards

Make your own — it's more meaningful if you gift a personalized card and you'll save the $5.



Gift cards

Gift cards aren't as popular a present as you may think. Almost one in three gift cards never get used at all, CBS reported in 2014, citing Consumer Reports. And those who do use them tend to spend 20% more than the value of the card, according to Investopedia. Cut your losses and buy something more thoughtful next time.



Gym membership

Gym memberships can be expensive, so if you're not a frequent visitor, you're just wasting money. Thankfully, there are ways to be healthy and exercise outside of a gym.



Premium gasoline

Regular will do just fine. For most cars, there is no need to spend more at the pump for premium gasoline. The extra cost is not worth it, so save up at the tank and pick the most affordable fuel.



The newest gadget

Whenever a new gadget hits market, the older version takes a plunge in price. The old and new version will probably be very similar and the most recent model may have kinks to work out. Save a lot of money by going with a slightly older product that has nearly identical capabilities. 



In-game purchases

Those free games you play on your smartphone have to get money from somewhere. It turns out these games are highly addictive and designed with psychological tricks so you will spend the most money to get to the next level.



Express shipping

Online retailers can make a lot of money charging customers enormous fees for quick shipping. But while the standard option may take a bit longer, the savings is worth it.



Full-priced clothing

Buying clothing full-price can add unnecessary expenses to your monthly budget. Not only do most in-store clothing items eventually go on sale after a few weeks, but there are countless other ways to get new clothes for less. Hit up your local thrift stores, swap clothes with your friends, or check out online second-hand retailers like Poshmark or Depop to save some money.  



Going out to eat

Everyone knows that going out to eat is expensive. According to the Bureau of Labor Statistics, the average American household spends about $3,000 a year dining out. That's a huge expense. According to an article by MoneyUnder30, this number far outweighs how much it costs to prepare food at home. The average price of a meal out is $13. In contrast, the price of buying groceries and making a meal at home is around $4 per plate — a whopping $9 difference. 



Alcoholic drinks in restaurants

While a whole bottle of wine at your local liquor store may cost anywhere between $10 and $15, you can expect to pay at least $8 or $9 for just a glass at a restaurant. Cocktails can cost even more, despite only containing a shot or two of alcohol per serving. Save your pennies and order a soft drink the next time you go out to eat.



Food delivery

Food delivery services are sweeping the nation. Companies like Postmates, Caviar, Seamless, GrubHub, and more allow you to enjoy your favorite restaurants from the comforts of home – for an added fee. Delivery charges can cost anywhere from $2.99 to $8, costing you more money for the same product if you simply went and picked up your food yourself. 



High-end beauty products

Drugstore makeup has come a long way in recent years, to the point where they rival higher-end brands. The actual differences between products you find in CVS and Sephora are almost slim to none — so don't pay more for the luxury brands. 



Off-brand tech accessories and chargers

Off-brand tech accessories and chargers — meaning ones not designed by Apple, Android, Samsung, etc — are usually a waste of your money. They may seem like a cheap and easy fix when you find yourself out and about with a dead device. However, according to the experts at Money, cheap cords can actually end up breaking quickly or even damaging your device. You may end up having to purchase a new phone for the sake of a $9.99 charger. 



The Future of Fintech: AI & Blockchain

Sun, 02/23/2020 - 1:01pm

Sweeping global regulations, the growing penetration of digital devices, and a slew of investor interest are catapulting the fintech industry to new highs.

Of the many emerging technologies poised to transform financial services, two of the most promising and mature are artificial intelligence (AI) and blockchain.

74% of banking executives believe AI will transform their industry completely, and 46% of global financial services employees expect blockchain to improve transparency and data management.

In The Future of Fintech: AI & Blockchain slide deck, Business Insider Intelligence explores the opportunities and hurdles of adopting the two technologies within financial services.

This exclusive slide deck can be yours for FREE today.

Join the conversation about this story »

THE EVOLUTION OF THE US NEOBANK MARKET: Why the US digital-only banking space may finally be poised for the spotlight (GS, JPM)

Sun, 02/23/2020 - 12:30pm

What is a neobank?

Neobanks, digital-only banks that aren't saddled by traditional banking technology and costly networks of physical branches, have been working to redefine retail banking in major markets around the world.

Top neobanks in the US & EU

The top neobanks in the US and EU include:

  • OakNorth (EU)
  • N26 (EU)
  • Atom Bank (EU)
  • Revolut (EU)
  • Monzo (EU)
  • Chime (US)
  • Starling Bank (EU)
  • Varo (US)
  • Aspiration (US)

Driven by innovation-friendly regulatory reforms, these companies have especially gained traction in Europe over the last three years. While the US is home to some of the oldest neobanks — including Simple, which set up shop in 2009, and Moven, which was founded in 2011 — the country's neobank ecosystem has lagged behind its European counterpart.

That's largely because of an onerous regulatory regime, which has made it very difficult to obtain a banking license, and the entrenched position incumbents hold in the financial lives of US consumers. Navigating the tedious and costly scheme for obtaining a banking charter and appropriate approvals has been a major stumbling block for the country's digital banking upstarts. However, developments over the past year suggest these startups are finally poised for the spotlight in the US. 

Neobanks vs Traditional banks

Consumers', particularly millennials', growing frustration with legacy banking service providers, combined with their increased appetite for digital solutions, has accelerated the shift to digital-only banking. Startups and tech-savvy players are redefining the retail banking space and forcing incumbents to either evolve or lose out on this key business segment.

In The Evolution of the US Neobank Market, Business Insider Intelligence maps out the factors contributing to this shifting tide, examines how key players are positioning themselves to take advantage, and explores how incumbents can embark on their own digital transformations to stave off disruption.

The companies mentioned in this report include: Aspiration, Chime, Goldman Sachs' Marcus, JPMorgan Chase's Finn, N26, and Revolut.

Here are some of the key takeaways from the report:

  • Despite lagging behind Europe, recent developments suggest that neobanks are finally ready for the spotlight in the US.
  • Three distinct influences are responsible for creating the fertile ground for this evolution: regulation, shifting consumer attitudes, and the activity of incumbent banks.
  • Among those driving this evolution in the US are foreign neobanks including Germany's N26 and UK-based Revolut.
  • Meanwhile, two notable incumbent-owned outfits have deployed amid great fanfare: Marcus by Goldman Sachs and Finn by Chase. 
  • In this increasingly competitive landscape, incumbent banks have a range of strategic options at their disposal, including overhauling their entire business for the digital era.

 In full, the report:

  • Details the factors contributing to a shift in the US' neobank market.
  • Explains the different operating models neobanks in the US are deploying to roll out their services and meet consumer demands.
  • Highlights how incumbent banks are tapping into the advantages offered by stand-alone digital outfits. 
  • Discusses the key strategies established players need to deploy to remain relevant in the US' increasingly digital banking landscape.

Interested in getting the full report? Here are four ways to get access:

  1. Purchase & download the full report from our research store. >>  Purchase & Download Now
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SEE ALSO: Latest fintech industry trends, technologies and research from our ecosystem report

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'Sonic the Hedgehog' edges out 'The Call of the Wild' for 1st place at the weekend box office

Sun, 02/23/2020 - 11:32am

  • "Sonic the Hedgehog" narrowly topped "The Call of the Wild" to win the weekend domestic box office.
  • "Sonic" brought in an estimated $26.3 million while "Wild" earned $24.8 million.
  • "Sonic the Hedgehog" has been number one at the box office for two straight weeks.
  • Visit Business Insider's homepage for more stories.

It's very rare that Disney has to duke it out with any other studio for box office supremacy, but that's what happened this weekend with its 20th Century title "The Call of the Wild" against Paramount's "Sonic the Hedgehog."

The adaptation of Jack London's classic novel starring Harrison Ford and a CGI dog brought in an estimated $24.8 million its opening weekend at the domestic box office. But "Sonic," the classic video game adaptation, topped that with a $26.3 million take in its second weekend in theaters (its domestic total is now over $100 million).

The two movies have been trading blows the whole weekend. On Friday, "Call of the Wild" brought in $7 million to top "Sonic," which brought in $6.2 million. By Saturday night, the hedgehog had passed the gruff Ford movie as it took in $12 million on the day versus $9.9 million. Sunday estimates have "Sonic" edging out "Wild" once the weekend ends.

Many believed "Sonic the Hedgehog" would easily win the box office for a second-straight weekend, but the $25 million take by "The Call of the Wild" is better than industry projections (though it does have a hefty $135 million budget) as Ford's name above the poster seems to have motivated families to check out the movie. And it probably didn't hurt that "Wild" had the Disney marketing muscle behind it.

However, Paramount gets the rare two weekends in a row above the box office heap with "Sonic." The movie scored a rare box office win last weekend for the studio, and to win again is much-needed fuel for Hollywood's oldest studio that only shines these days when it's releasing Tom Cruise's "Mission: Impossible" titles.

Box-office highlights:
  • STXfilms/Lakeshore Entertainment's "Brahms: The Boy II" brought in $5.9 million. The horror starring Katie Holmes hit its projections and is a solid win for STXfilms.
  • But not all horrors are working in theaters. Sony's "Blumhouse's Fantasy Island" took in a minuscule $4.2 million in its second weekend out. Its domestic cume is now at $20.17 million. Thankfully for all involved, the movie was only made for $7 million.

SEE ALSO: The creator of "Hunters" caught the attention of Amazon and Jordan Peele with an 80-page series bible and enough ideas for 5 seasons

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NOW WATCH: Documentary filmmaker Ken Burns explains why country music is universal

Real estate insiders say these 27 books will help you understand the colorful personalities and powerful forces shaping the industry

Sun, 02/23/2020 - 11:22am

  • We asked a range of real estate insiders, including agents, executives, VCs, and analysts, to give us recommendations for books to understand the industry. 
  • They came back with a list of 27 selections. 
  • The titles ranged from "Power Broker," a classic biography of New York City planner Robert Moses, to Bill Bryson's history of the home, and even included one novel about a 19th century real estate developer. 
  • Read more BI Prime stories here.

We asked a range of real estate insiders, including agents, executives, VCs, and analysts, to give us recommendations for books to understand the industry. 

They came back with a range of titles, from sweeping histories of cities and biographies and autobiographies of powerful people to "how to" guides for investors and real estate agents. 

We compiled the list into 27 selections, presented below with summaries of their content and, with some selections, commentary about them from their nominators.  

"Am I Being Too Subtle" by Sam Zell

Sam Zell, the controversial and bombastic billionaire real estate investor, published his autobiography in 2017. Zell explains his investment philosophy, using triumphs and failures from his own life as examples. 

One of the biggest takeaways? Business is all about risk



"From Main Street to Mall: The Rise and Fall of the American Department Store" by Vicki Howard

Vicki Howard's 2016 history of American shopping in the 20th century follows the rise and fall of the US department store, explaining how the mall eventually took its place. The study is especially prescient as e-commerce has led to the "retail apocalypse."



"Crabgrass Frontier: The Suburbanization of the United States" by Kenneth T. Jackson

Jackson's 1985 history of the American suburb is a landmark work that examines the causes of suburbanization, from the creation of planned communities like Levittown to "white flight" from the cities. 

The book predicted both the reurbanization of America and the ways that suburbs have lost some of their appeal. 

Nate Loewentheil, senior associate at Camber Creek, told Business Insider that it is a "great read for anyone who wants to understand how the American metropolis took shape."



"How Buildings Learn: What Happens After They're Built" by Stewart Brand

Brand's 1994 illustrated book explains how buildings are able to adapt to different uses over their lifespan. It posits that the best buildings are easily adaptable, and explains how renovations change the character of a building. 

The book was made into a six-episode miniseries by the BBC in 1997.



"Proptech 101: Turning Chaos Into Cash Through Real Estate Innovation" by Aaron Block and Zach Aarons

This 2019 book by two of VC MetaProp's cofounders was our most-nominated book, including a nomination by Building Engines' CEO Tim Curran. The book attempts to catalogue and understand the sprawling world of proptech, touching on everything from construction tech to real-estate focused fintech. 

The book combines a view of what currently exists in real estate with a future view of where proptech is taking the industry.



"Rethinking Real Estate: A Roadmap to Technology's Impact on the World's Largest Asset Class" by Dror Poleg

This 2019 book is the other proptech-focused book nominated by our panel of insiders. Poleg examines how technology will impact all real estate asset classes, and the book explains how a wide range of technological changes, some not easily connected to real estate, are deeply changing the ways that real estate operates. 

The book was nominated by both Building Engines' CEO Tim Curran and flex-office advisor Antony Slumbers. 



"The Devil in the White City" by Erik Larson

This 2003 National Book Award finalist tells two stories: one of Daniel H. Burnham, the architect who designed Chicago's 1893 World Fair, and of pharmacist and serial killer Dr. H.H. Holmes. It is being developed into a TV series by Hulu and will executive produced by Leonardo DiCaprio and Martin Scorsese. 

Bain Capital Venture's Merritt Hummer said that the "holds a special place in any native Chicagoan's heart" for its combination of historical accuracy and "narrative flair."

"Real estate aficionados will learn about Chicago's architectural history as an added bonus," Hummer said. 



"At Home: A Short History of Private Life" by Bill Bryson

Bill Bryson's 2011 book examines the history behind the home, examining its history room by room. Bain Capital Venture's Hummer called it "a playful reflection on the everyday items that fill our homes and private lives."

The book matches its playful tone with a historical touch. 



"The Power Broker: Robert Moses and the Fall of New York" by Robert Caro

This 1974 1336-page Pulitzer Prize winning biography tells the story of influential New York City planner Robert Moses, and through that story, tells the story of the creation of the modern city. 

The book shows how Moses was able to become one of the most powerful people in the country by building a network of bridges, parks, roads and public housing across the New York metro region. 

It is widely-considered one of the best biographies of all time. 



"The Death and Life of Great American Cities" by Jane Jacobs

This 1961 classic of urban planning continues to be widely read in the real estate field. The book looks at cities, and their neighborhoods, as organisms and examines how buildings and roads can change people's behavior. 

Jacobs's book was, in some ways, a reaction to planners like Robert Moses, and is a good companion to "The Power Broker."



"City of Quartz: Excavating the Future in Los Angeles" by Mike Davis

This 1990 history of Los Angeles examines the ways that different forces in the city have impacted its growth over time. A 2006 edition brought the book into the 21st century. 

The book has a reputation for its left-wing point of view, but is invaluable for real estate thinkers looking to understand how a metropolis can be created out of a desert. 



"Miami" by Joan Didion

Didion's 1987 book examines the ways that Cuban exiles have impacted and changed Miami, and how Miami has changed them. The book isn't strictly about real estate, but it does examine how a city can be impacted by its occupants. With a global refugee crisis marring the 2010s and the threat of exponentially more climate refugees, this book is an essential read. 



"Order Without Design: How Markets Shape Cities" by Alain Bertaud

This 2018 book attempts to synthesize urban economics with urban planning, bringing a numbers-heavy lens to the city. The book highlights affordability and mobility as some of the main factors of a city's success, and argues against certain land use regulations. It also suggests that teams of urban planners should work directly with economists. 



"Evicted: Poverty and Profit in the American" by Matthew Desmond

This 2016 Pulitzer Prize winner examines evictions in Milwaukee, focusing on a cast of landlords and renters, with an eye on how evictions impact American society as a whole. The book mixes policy recommendation and a wide-scale view with the actual stories of real people getting evicted. 

 



"The Color of Law: A Forgotten History of How Our Government Segregated America" by Richard Rothstein

This 2017 history makes a case that the failures of integration wasn't just a case of de facto segregation and personal prejudice, but actual government policies that existed before and long after housing segregation was, supposedly, outlawed. 

The book, bolstered by newly uncovered research, shows how public housing and government subsidies only increased segregation. 



"The Island at the Center of the World" by Russell Shorto

This 2004 history of Manhattan uses a trove of documents from the original Dutch occupants of the island to tell the story of its early days as a colony. The book makes the case that New York, previously New Amsterdam, owes a lot of its current form to the Dutch and to the city of Amsterdam itself. 

The book was recommended by Anthony A. Tortora, Senior Vice President at LCOR. 



"Gotham: A History of New York City to 1898" by Edwin Burrows and Mike Wallace

This massive 1988 book is another deep dive into New York City, which Nate Loewentheil from Camber Creek said "you can argue is the most important real estate market in the world." Loewentheil said that this is one of the best histories of the city. 

The book isn't solely focused on real estate, but gives an accounting of how the real estate market formed over time. 



"What it Takes: Lessons in the Pursuit of Excellence" by Stephen Schwarzman

This 2019 autobiography was one of the biggest business books of the last year, and just like Schwarzman's company, touches on many aspects of the financial world, including real estate. 

Blake Liggio, a partner in Goodwin's Real Estate Industry Group and PropTech initiative, said that the book "provides a playbook of how Schwarzman built Blackstone into the leading global financial institution that it is today, including its success in real estate investment."



"Is Commercial Real Estate for You?" by Greg Biggs

This 2017 book, recommended by David Houck, the Executive Managing Director of JLL Industries was written by Greg Biggs, a Managing Director of JLL's Tenant Representation Group. 

The book outlines the different parts of the commercial real estate industry, and was written to introduce commercial real estate to those who may be interested in it as a career. 



"Why We Buy: The Science of Shopping" by Paco Underhill and "What Women Want: The Science of Female Shopping" by Paco Underhill

Nikki Greenberg, Founder of Real Estate of the Future and Founder of Women in PropTech, recommended both of these books because they were her "go-to guide when I designed shopping centers." 

Underhill examine retail in a way that makes the books both invaluable to actual practitioners and made "Why We Buy: The Science of Shopping" a best-seller. 



"The Book on Rental Property Investing" by Brandon Turner

This 2015 book is a no-nonsense guide to real estate investment to people who are new to owning and renting space. The book is written by Brandon Turner, the host of The BiggerPockets podcast, and is the most direct guide to real estate investment for smaller investors on the list. 



"Skyscraper Dreams: The Great Real Estate Dynasties of New York" by Tom Shachtman

This 1991 book details the history of New York's real estate dynasties and the skyscrapers they've built.

"This book gives an honest and detailed description as to how New York City's skyscrapers were formed and molded by the biggest real estate families in the industry," Robert Rahmanian, principal and cofounder of REAL New York, told Business Insider. 

Will Silverman, managing director at Eastdil Secured, echoed Rahmanian's praise.

 

 

 



"The Millionaire Real Estate Agent: It's Not About the Money...It's About Being the Best You Can Be!" by Gary Keller

This 2004 book by Keller Williams founder Gary Keller is a step-by-step guide for real estate professionals looking to build long-term, sustainable businesses.  It combines elements of Keller's personal story with practical information for agents. 

"I read this book every spring to get back into the right mindset to crush it in the busy summer rental season," Michael Bello, a broker at REAL New York, said. 



"Martin Dressler: The Tale of an American Dreamer" by Steven Millhauser

This 1996 novel is the lone piece of fiction on the list. Nominated by Zach Aarons, whose own book is on this list, the book was a finalist for the National Book Award and won the Pulitzer Prize. 

The book tells the story of Martin Dressler, a son of an immigrant who becomes a hotel developer in the late 19th century.



"House of Outrageous Fortune: Fifteen Central Park West, the World's Most Powerful Address" by Michael Gross

This 2014 examination of one prestigious New York address uses the building as a canvas to explore themes of inequality, power, and fame.

The building has housed many famous and powerful people such as hedge-fund manager Daniel Loeb, Goldman Sachs ex-CEO Lloyd Blankfein, hedge-fund founder Daniel Och, Sting, Denzel Washington, and Jeff Gordon 



"The Big Short: Inside the Doomsday Machine" by Michael Lewis

This 2011 book has been adapted into a hit 2015 movie. The book, by "Moneyball" and "Liar's Poker" author Michael Lewis, examines the cause of the 2008 financial crash. While scores of books have explained the rise and fall of subprime mortgages, this book is the most successful and most widely read of them all. 



"Use What You've Got, and Other Business Lessons I Learned from My Mom" by Barbara Corcoran and Bruce Littlefield

This 2003 book by Corcoran Group founder and Shark Tank star Barbara Corcoran tells her personal story and gives some business tips along the way.

"Real estate isn't just about real estate, it's about connections and real life and this book hones in on just that," Kathryn Landow, broker at Warburg Realty, said.



A startup founder who spent 100 hours interviewing millennials found 3 hangups usually keep them from being good with money

Sun, 02/23/2020 - 11:15am

 
  • Sunny Israni, founder of personal finance app Clasp, spent over 100 hours interviewing millennials about their money perspectives and habits. 
  • In his interviews, he found that millennials who aren't good with money don't have a clear vision of what money means in their life. He also found that they tend to over-spend in social situations.
  • And, when millennials fall behind their peers financially, some of them have a tendency to give up. 
  • What separated millennials who are good with money from those who aren't is mindset — they know what role money plays in their lives and have goals, have boundaries on spending, and work to improve their finances. 
  • Want to do better with your money? SmartAsset's free tool can help find a financial adviser near you »

Sunny Israni wanted to know what separated the millennials who are good with money from those who aren't.

So he asked them.

For his new business, a personal finance app called Clasp, the tech entrepreneur and former Wall Street trader spent over 100 hours talking to millennials across the US about their money habits, attitudes, and goals to find out what made millennials good with money. 

"I wanted to target two different groups: people who tend to make really great decisions around their finances, and people who may not have made the best decisions," he told Business Insider. "I wanted to try to understand, 'what are the big factors that drive the quality of our financial decisions? Is it income? Is it geographic location?'"  

He found that what made millennials good with money wasn't either of those factors. Rather, it was how they thought about money. In his research, Israni found that three main psychological hurdles tend to keep millennials from being good with money:

1. They don't know what money means to them

Israni found that nothing had a bigger impact on how millennials manage their money than their mindset.

"I think about it in the terms of identity. As I was speaking to a lot of the participants, I got the sense that when people describe their financial behavior, they're really describing who they are as people," Israni said. "It's like their spending is a declaration of their identity."

Millennials who are good with money tended to have a clear vision of what they want from it, and know their money goals. 

"I spoke to someone from the Midwest who was early in his career and really militant with savings. I got the sense that he was deriving his whole identity from financial freedom. He had crystal clarity on what money represented in his life," Israni said. "People who weren't necessarily making as sound financial decisions had this tension around what money really represented in their life."

This tension tended to mean more than internal conflict for the millennials Israni spoke to — it also led to bad habits. "The people who had that tension the most tended to be the people who didn't necessarily make the best financial decisions," he said. 

2. They don't set limits on social spending

Israni noticed a bad habit that held millennials back: Spending too much on social situations. He also noticed that millennials who are good with money knew where to draw the line on their social spending.

"When you're in social situations, people tend to spend more, and we know this. But when I looked at the people who are doing really well, I've found that almost all of those people had an understanding with their friends and their social circle around activities that made sense for them, and that were not necessarily so expensive," he said. "I got the sense from everyone that the price tag you pay to pursue a social activity almost never really correlated with the joy and happiness and the memories that come out of that."

Meanwhile, the others kept spending, and weren't honest and realistic with their friends about what they could afford. "The people who weren't making sound decisions didn't talk about it with their friends," Israni said.

Israni made it clear that cutting out social spending isn't the answer. Rather, it's about knowing where your boundaries lie. "Have a list of things to do that don't necessarily break the bank," Israni said. "Your friendship with someone shouldn't be expensive."

3. They adopt a 'screw it' mentality and stop trying

Israni found that millennials who were financially behind didn't feel that anything could change for them. He found that eventually, they stopped trying. In his opinion, it all comes back to mindset. 

"After they were past a certain level of circumstances, they got into this whole 'screw it' mentality, where they just felt like they couldn't get a leg up," Israni said. "Oftentimes, it was mental. They felt so behind their peers that they just said 'screw it.'"

"It's exacerbated by the current macro trends, especially around climate change and our political system," Israni said. "People are like, 'well, climate change is going to end the world anyway, so might as well  live it up right now.'"

For a generation that's been behind financially from the start, that's a problem. "It is very much negatively impacting financial behavior, especially for people who are already behind," he said.

For these millennials, Israni said making progress comes down to thinking differently. "If their mindset isn't right, then they're not going to use any budgeting, whether that's a spreadsheet or an amazing app or even just you looking at your bank account," he said. Millennials who are good with money, he found, want to improve their circumstances, and don't let the doom and gloom stand in the way of their money goals. 

SmartAsset's free tool can find a financial adviser to help you get better with money »

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Bernie Sanders just cemented his frontrunner status with a huge victory in Nevada. Here's how his Medicare for All plan would remake the $3.6 trillion US healthcare industry.

Sun, 02/23/2020 - 11:09am

  • Under "Medicare for All," everyone in the US would receive comprehensive health coverage from the government.
  • The idea has sparked many months of fierce debate between moderate and progressive candidates who agree on expanding insurance coverage, but disagree on the mechanism to do it.
  • Sanders is the frontrunner in the Democratic primary race, and polls conducted in Nevada, New Hampshire and Iowa show his signature plan gaining strong support among voters.
  • Though specifics are missing on how Medicare for All would likely work, we can start gauging the effects some of the proposals could have on insurers, drug companies, employers, patients, providers and hospitals.  
  • Visit Business Insider's homepage for more stories.

The main idea behind Sen. Bernie Sanders's "Medicare for All" plan is straightforward: Everyone in the US would receive comprehensive health coverage from the government.

But the reality of implementing it is far more complex, and it has sparked heated debate among Democratic presidential candidates with dueling ideological visions — since it would represent the biggest reshaping of the $3.6 trillion US healthcare system in over half a century.

Democratic candidates all agree on expanding health insurance coverage, but they disagree on how to do it. Those on the progressive left like Sens. Sanders and Elizabeth Warren envision a government-run insurance system where Americans would get coverage including dental, vision, and long-term care, and private insurers are eliminated or sidelined. 

Sanders is the frontrunner for the Democratic presidential nomination. He just won the Nevada caucus and the New Hampshire primary and scored a near-win in Iowa. Entrance polls conducted by NBC News and the Washington Post showed voters in the first three nominating states to be largely supportive of his signature proposal to reshape US healthcare.

Moderate candidates like former Vice President Joe Biden and former South Bend Mayor Pete Buttigieg would preserve the current system. And they would create an optional government insurance plan — commonly known as the public option — and inject more federal subsidies into the state exchanges set up under the Affordable Care Act.

Candidates have proposed incremental or sweeping healthcare reform plans, but Sanders' Medicare for All bill has been held up as the standard. The legislation would virtually eliminate private insurance and provide care to everyone without co-pays, deductibles, or out-of-pocket spending. Sanders would attempt to achieve it in four years.

The estimated price tag of a government-insurance system on the scale he seeks is around $34 trillion over a decade. 

Warren unveiled her own plan last year that's projected to cost $20.5 trillion over ten years, and mirrors Sanders in many ways. But she has pledged to pursue a public option first and then pass Medicare for All through Congress in the third year of her presidency.

There is a lot of speculation on what would happen to all the key players in the healthcare system if a single-payer plan such as Medicare for All gets passed.

Though specifics are still missing on how Medicare for All would be fully implemented, we can start gauging the effects some of the proposals could have, based on analysis from groups including the nonpartisan Kaiser Family Foundation, conservative-leaning Mercatus Center, and Urban Institute among others.

Read on to see what Medicare for All would mean for every part of the US healthcare system: insurers, drug companies, employers, patients, providers and hospitals.

(This article was published on August 13, 2019 and has been updated.)

SEE ALSO: Democrats are clashing over how to fix US health care. Here are the 7 key terms you need to know.

People living in the US would probably pay higher taxes, but less for their healthcare.

In the Sanders plan, patients would face virtually no costs to get medical care, as the proposal does away with most charges like co-pays, co-insurance, and deductibles. And it would be financed by a blend of new taxes.

The Vermont senator has outlined nine possible ways to cover the plan, including a 4% premium for people earning more than $29,000 a year. So far, he maintains he doesn't need to roll out more details explaining how he'd fully pay for it, making it difficult to fully assess its impact.

By comparison, Warren said she would not raise middle class taxes by "one penny" in her proposal. She's relying instead on redirecting healthcare spending from employers, state government and households onto the federal budget.

Higher income individuals would likely pay more for healthcare while lower-income individuals would generally pay less, Kaiser Family Foundation Executive Vice President for Health Policy Larry Levitt told CNBC. But he pointed out it depends on which taxes are increased.

Sanders has argued that most Americans would be better off because their healthcare savings would offset any tax increase.



Big companies would no longer have to provide insurance for their workers. They could see taxes go up, too.

More than half of Americans get their health insurance through employers, according to the Kaiser Family Foundation. 

In the Sanders plan, employer-sponsored insurance would be eliminated. Sanders has argued that Medicare for All is a cheaper alternative compared to what's already in place and that employers would spend less time and cut administrative costs providing decent health benefits to their workers.

Employers might face new taxes, though. Among the options Sanders has proposed to pay for his Medicare for All plan is a 7.5% income-based premium that's paid by employers, but exempting the first $2 million in payroll.

Under the Warren plan, employers would face a charge equal to 98% of their current health spending. According to the Tax Policy Center's Howard Gleckman, the fee could be "a flat tax" on all workers.

That means a company would spend the same amount for healthcare on a low-wage employee and an executive, possibly leading to lost wages that disproportionately affects those with smaller paychecks.

Sanders previously criticized this element of the Massachussetts senator's proposal.



Doctors might get paid less money.

One concern for doctors is how Medicare for All would affect their pay. If private insurance is eliminated, physicians could make less than they do currently.

Private insurers typically pay more for physician services than Medicare, the federal health insurance program for the elderly, according to the Congressional Budget Office. If Medicare for All was implemented, doctors would get paid government rates for all their patients.

"Such a reduction in provider payment rates would probably reduce the amount of care supplied and could also reduce the quality of care," the CBO report said.

That'd be a hit to pay for doctors treating mostly privately insured patients now, but it could boost compensation for those with many patients covered by the Medicaid program for low income people, particularly in rural communities.

Still, there are concerns that cutting payments to doctors could lead to shortages and longer wait times for medical care under Medicare for All.

"That means there is going to be a substantial increase in demand for healthcare at the same time that you're potentially cutting payments to providers," Katherine Baicker, a healthcare policy expert at the University of Chicago, previously told Business Insider.

The American Medical Association— the largest physician group in the US — opposes Medicare for All, though there are signs that doctors within their ranks may be shifting their views, according to Vox. The group pulled out of an industry group fighting the proposal.

In January, the American College of Physicians, the second-largest doctors' group, endorsed both Medicare for All and the public option as a pathway to universal health coverage in a big win for their supporters.



Hospitals are worried their funding will get cut.

It's likely that many hospitals could see the amount they get paid to take care of patients fall under Medicare for All.

The American Hospital Association and the Federation of American Hospitals, which lobby on behalf of the industry, released a report stating that an option allowing more people to buy insurance coverage via Medicare would cut funding for hospitals by about $800 billion over a decade. The groups oppose Medicare for All.

Hospitals say that government programs like Medicare and Medicaid typically pay them less than the cost of delivering healthcare. Hospitals often charge higher rates to private health insurers.

An analysis from the libertarian think-tank Mercatus Center estimated that payments to providers such as hospitals would decline roughly 40% under a Medicare for All plan.

On the other hand, hospitals that serve low-income or rural populations could benefit under Medicare for All, as Bob Herman at Axios has reported.

Under the Warren proposal, pay for hospitals would rise 10%, the New York Times reported, leading to uneven wins and losses among them depending on their location and the size of their financial cushion.



Pharmaceutical companies could face limits on how much they can charge for their drugs.

Pharmaceutical companies largely oppose a single-payer system in the US, as they'd likely face stricter limits on how much they can charge for their drugs, similar to the systems in other wealthy countries.

Sanders' Medicare for All bill would give the government more power to negotiate with drug companies and secure lower prices. The Vermont senator has visited Canada over the years to highlight that country's cheaper drug prices, which stem from the country's system of government regulation.

Under the Warren plan, the government would reduce spending on generic medications by 30% and spending on brand-name medications would drop by 70%.

Republicans have also criticized the fact that Americans face higher drug prices, and the Trump administration has proposed allowing Americans to import cheaper drugs from Canada, Business Insider previously reported. 



There'd be little role left for private health insurers.

Private insurers would likely have little role to play under the Sanders proposal.

The government would be the sole insurance provider and virtually eliminate the private insurance industry — as employers and private insurers would be barred from providing coverage that overlaps with the government system, according to the Kaiser Family Foundation.

Sanders has said that supplemental insurance would be allowed for things like cosmetic surgery, though it's not clear that there'd be much of a market, as Margot Sanger-Katz has reported in the New York Times.

Other candidates are more guarded in their approach to reform, leaving a bigger role for private health insurers instead of essentially getting rid of them under Medicare for All. Former Vice President Joe Biden's plan would preserve a role for private insurance, for example.



Pier 1's bankruptcy filing may hold a silver lining for the struggling home-goods retailer

Sun, 02/23/2020 - 10:22am

  • Forth Worth, Texas-based home furnishings retailer Pier 1 Imports has filed for Chapter 11 bankruptcy.
  • With its filing, Pier 1 noted that it is pursuing a sale. 
  • "Somebody believes in them, because they've convinced banks to give them nearly $260 million, which allows them to continue operating the business," Texas bankruptcy attorney Sid Scheinberg told Business Insider.
  • Visit Business Insider's homepage for more stories.

Pier 1 Imports has filed for Chapter 11 bankruptcy, the home goods retailer announced in a press release on Monday.

Chapter 11 may sound like a dire prospect for any company, but Pier 1's filing may reveal a ray of hope for the future of the business. When it voluntarily filed for bankruptcy in the eastern district of Virginia, Pier 1 noted that it is pursuing a sale as it goes about shutting down 450 stores around the country.

Pier 1 didn't immediately respond to Business Insider's request for further comment. 

Attorney Sid Scheinberg, who serves as the chair of the bankruptcy and creditors' rights section of Dallas law firm Godwin Bowman PC, said that it's a good sign that the retailer has obtained a $256 million debtor-in-possession financing from Bank of America, Wells Fargo National Association, and Pathlight Capital.

"Somebody believes in them, because they've convinced banks to give them nearly $260 million, which allows them to continue operating the business," Scheinberg said. "There's something there that's worthwhile to continue operating or get sold."

In its release, the company announced its intent to keep its stores and website "open and operating" throughout the bankruptcy proceedings, as well as to continue to "honor customer commitments," compensate employees, and pay vendors and suppliers.

The statement noted that Pier 1 "intends to conduct a court-supervised sale process and complete the sale through a Chapter 11 plan," with the deadline for "qualified binding bids" to be set around March 23. While those banks are setting themselves up to become more high-priority debtors — and thus get first crack at being paid off — they are also taking on risk with such a move.

While a retailer may file for bankruptcy with a buyer in mind, a judge can always throw those plans into flux by ordering the business to be sold at auction. With that in mind, Scheinberg said that it's interesting that the company has filed in Richmond, Virginia, rather than in its home state of Texas. 

He added that a strategic filing can help clear the way for such a sale. He said that leases can often be the "worst debt" that a retailer accrues.

"I think the big reason they filed is they've got a lot more retail stores that they really need," Scheinberg said. "They're stuck with all these leases. Bankruptcy is probably the only tool that allows them to reject all these leases easily without having to make some sort of deal with every one of these landlords."

SEE ALSO: Pier 1 braces for sale after filing for Chapter 11 bankruptcy

DON'T MISS: These 5 retailers have filed for bankruptcy or liquidation in 2020

SEE ALSO: Barneys is closing for good in a week, cutting hundreds of jobs. This is what the iconic department store looks like in its final days.

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I bought a 20-year term life insurance policy, and there are 4 reasons I'd tell anyone to do the same

Sun, 02/23/2020 - 10:01am

When my oldest daughter was born five years ago, I knew it was time to buy life insurance. And yet, it was another four years until I actually purchased a policy. That's because I didn't know where to start.

The most basic choice — whether to select term life insurance or a whole life plan — sent me into a spiral thinking about everything I didn't understand about insurance. 

Looking back, I wish I could tell myself that it's not that complicated. While whole life plans cover you until you die, term life insurance plans provide you with life insurance for a set number of years. 

However, term life insurance has many benefits, and is a good fit for most people. Here are the four reasons I'd tell anyone to get term life insurance. 

It's cheap

Most people shopping for insurance — especially young people — are concerned about premiums, or how much they'll be paying for insurance. One of the biggest benefits of term life insurance is that it's much cheaper than whole life insurance. 

With two young kids and a business, I'm always looking to minimize expenses. I found a $250,000, 20-year term life insurance policy that costs me $29 a month. It's cheap enough that I don't think twice about paying the premium, or even notice when it's withdrawn from my checking account. 

Life insurance will never be cheaper than it is today. Lock in your rate with help from Policygenius »

It does its job

Term life insurance has one job: to replace your income if you die. In my case, I chose a plan that would replace my income long enough to cover my funeral, pay off the mortgage, and allow my husband to stay home for a year with the kids. That's all I want or expect from my plan. It's simple. 

Whole life insurance policies, on the other hand, get complicated. They combine life insurance with investments (which is why whole life plans have some cash value and even pay dividends sometimes).

The thing is, I'm not looking for life insurance that's an investment. I have a retirement account and a rental property for that. I would rather pay for a cheaper term insurance policy and use the money I'm saving to invest separately (which is a good option for most people, according to this analysis). 

In the future, I hope to not need insurance

One of the perceived drawbacks to using term life insurance is that, eventually, your term expires. By then you're older and possibly sicker, so buying another term plan can be very expensive. 

That's a good thing to be aware of. And yet, I'm hoping that by the time my term expires (in 19 years) I won't need life insurance. 

If you're financially stable with little debt and a robust savings account, you don't need a big payment when you die. Instead, you can rely on your assets to cover funeral expenses and provide some financial support to loved ones, if necessary. 

I can't predict the future, but I'm actively working toward being "self-insured" in this way by the time my term life insurance policy expires. 

It's money well spent

The ironic thing about life insurance is that the best-case scenario means you're throwing money away. I really hope that I'm alive and well in 19 years, and that I've "wasted" the $6,960 I'll have paid in life insurance premiums by then. 

But the truth is, that money won't have been wasted at all. Right now, having life insurance and knowing that my family is protected if I die gives me tons of peace of mind. I sleep better knowing if the worst happens my husband won't be scrambling. Sure, I hope I never need the life insurance policy, but I'm happy to pay for it knowing that it could make an unbearable loss slightly easier on my family in the worst-case scenario. 

I spent four years knowing I should buy life insurance, but paralyzed by the options. Now that I've had insurance for a year, I see the ways it's eased my stress levels, for a small cost. That's why now I'm the person telling friends and family: "Don't wait."

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THE RISE OF BANKING-AS-A-SERVICE: The most innovative banks are taking advantage of disruption by inventing a new revenue stream — here's how incumbents can follow suit

Sun, 02/23/2020 - 10:01am

Fintechs are encroaching on incumbents' share in the banking game, forcing them to explore new business models — but tech-savvy legacy banks can treat this as an opportunity rather than a threat by moving into the Banking-as-a-Service (BaaS) space.

BaaS platforms enable fintechs and other third parties to connect with banks' systems via APIs to build banking offerings on top of the providers' regulated infrastructure. This means banks that launch BaaS platforms can actually benefit from fintechs entering the finance space, as it turns fintechs into customers rather than just competitors. Other benefits from launching a BaaS platform include being able to monetize such platforms, establishing strong relationships with fintechs, getting ahead of the curve in terms of open banking, and accumulating additional data from third parties.

In The Rise of Banking-as-a-Service, Business Insider Intelligence looks at the benefits banks stand to gain by offering BaaS platforms, discusses key players in the industry that have already successfully launched BaaS platforms, and recommends strategies for FIs looking to move into BaaS.

The companies mentioned in this report are: BBVA, Clearbank, 11:FS Foundry, Starling.

Here are some key takeaways from the report:

  • Offering BaaS also allows banks to unlock the opportunity presented by open banking, which is becoming a vital part of the financial services industry.
  • There are two key types of players — BaaS-focused fintechs and BaaS providers with a retail banking arm — that banks will need to learn from and compete against in the BaaS space.
  • Banks that have embraced digital will have an easier time ensuring that their infrastructure and systems are suitable for third parties.
  • It's vital for incumbents to accurately assess third-party needs to create an in-demand portfolio of white-label BaaS products.

 In full, the report:

  • Outlines what BaaS is and how it relates to open banking. 
  • Highlights the benefits of launching a BaaS platform, including two different monetization strategies.
  • Explains what BaaS players are currently doing in the space, and outlines the services they offer.
  • Discusses what incumbent players can do in order to launch their own successful BaaS platform.

Interested in getting the full report? Here are four ways to access it:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
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A WeWork exec who was Rebecca Neumann's cousin regularly ran up huge expense reports before other execs ganged up and forced him out

Sun, 02/23/2020 - 9:56am

Mark Lapidus left his high profile executive role as a real estate kingpin for coworking giant WeWork in October, 2018, under mysterious circumstances, according to WeWork employees who worked in the real estate group at the time. 

The official story, among those who heard it, was that, as one of WeWork's earliest employees, he was exhausted from non-stop dealmaking and travel, disliked the humdrum of a company grown past its startup roots to over 9,000 employees, people with knowledge of the matter told Business Insider.

But there was more to the story. 

As Business Insider previously reported, in the summer of 2018, a woman who formerly reported to Lapidus and later worked on the same real estate team, sent a document with allegations that, while they didn't name Lapidus directly, involve involved the department he once ran and its general culture. Among some of her softer allegations: bosses were sleeping with subordinates and rampant hard drug use. She was threatening to sue. Business Insider obtained a copy of the document.

WeWork conducted an internal investigation found credible claims of drug use and sexual relationships between employees and their bosses. It offered her a settlement. Neumann also bowed to pressure from several members of his senior leadership team to negotiate an exit for Lapidus, sources told Business Insider. 

Until that investigation, Lapidus had seemed untouchable.

He was the first cousin of Rebecca Neumann, wife to then-WeWork CEO Adam Neumann, and had been with the company since nearly the beginning. He had overseen some of WeWork's most precious real estate deals as the global head of real estate through 2016, before he moved into other roles on the team. For years, the company had gathered on a large property his parents owned for a raucous party known as Summer Camp.

Former colleagues characterized him as a good dealmaker who loved to schmooze and party.

His expense reports, per records viewed by Business Insider, offer a window into a wild lifestyle enabled by WeWork.

In May 2017, Lapidus spent more than $5,000 for a team outing at hot London nightclub The Box, per records reviewed by Business Insider.

Later that month in Las Vegas, Lapidus paid $36,000 for a table at Encore Beach Club and another $9,000 for one dinner while he was at real estate conference International Council of Shopping Centers (ICSC).  The Vegas event, ICSC, has in the past been notorious for hard partying and wild spending across the real estate industry.

At ICSC, Lapidus racked up $9,500 in room charges at the Wynn hotel, including more than $500 at the spa.

One WeWork real estate executive recalled being shocked by Lapidus's spending, since the conference was full of people ready to shower WeWork executives – their clients – with dinners, bottle-service tables, and other gifts.  But another explained that the large tab was the result of an event WeWork threw to schmooze its landlords and other groups.

To read the full investigation into a trail of settlements at WeWork, and how one woman on Lapidus' team got paid over $2 million in cash to go away ahead of WeWork's major Softbank fundraise, click here.

Have a WeWork tip? Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a non-work phone, email at mmorris@businessinsider.com, or Twitter DM at @MeghanEMorris. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.

Now Read: WeWork paid over $2 million to a woman who threatened to expose claims of sex, illegal drugs and discrimination in a horrifying 50-page document.

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Here's exactly where to keep your money for every financial goal

Sun, 02/23/2020 - 9:50am

 

No financial goal is complete without a time horizon.

Knowing how long you have to reach your goal informs your savings strategy, including where to keep the money so you can preserve it or grow it.

The best place to keep money earmarked for specific financial goals — whether it's a down payment, travel, unexpected bills, retirement, or your kids' college education — ultimately depends on when you need it.

Here are some general guidelines to follow:

You need your money in 1 to 3 years

Money you need access to in the next few years is best kept in a highly liquid account, such as the following:

High-yield savings

A high-yield savings account is a deposit account that earns more interest than a checking or traditional savings account, but comes with the exact same features: accessibility, FDIC insurance, and no market risk. Some high-yield savings accounts limit withdrawals to six times per month.

The best high-yield savings accounts charge no monthly maintenance fees, so there's no outlay on the saver's end. The interest you earn — known as the annual percentage yield (APY) — will be deposited into your account on a monthly basis, adding to your balance and thereby increasing your next interest payment. Remember that any interest you earn is included in your gross income for tax purposes at the end of the year.

Money-market account

Money-market accounts are another type of savings account. They're not to be confused with money-market funds, which are a type of low-risk investment.

There's little difference between a high-yield savings account and a money-market account. Both typically come with low or zero monthly fees; relatively high interest rates, often above 2%; are FDIC insured up to $250,000 or more; and are smart options for storing savings you may need in short order.

CD

If your savings is already set aside and you don't need to contribute additional funds to reach your goal, a certificate of deposit, or CD, could be a good option.

A CD is yet another savings product. Unlike the others, however, it's best for storing money that you won't need until a predetermined date — i.e. not an emergency savings fund that you may need to tap unexpectedly. 

CDs offer a fixed interest rate for a set period of time, usually ranging from three months to five years. If you decide to withdraw your money before the maturity date, you'll forfeit any interest earned up to that point, in most cases. If you don't want to tie up your money completely, but still want to earn a higher interest rate than a savings account, consider a no-penalty CD.

You need your money in 3 to 5 years

If your financial goal isn't in the near future, you can utilize a CD to lock in a growth rate that will likely keep up with inflation. If you're comfortable taking on some risk, you might consider investing in the market through a brokerage account. 

CD

Again, a CD is best for money you don't need — or want — to get to quickly. In an effort to preserve your savings, a CD is a good way to create a barrier between your money and your impulse to spend.

Typically, the longer the term, the higher the interest rate you'll lock in. One downside to note, however, is that many CDs don't accept additional contributions after the initial funding period. 

Brokerage account

When you have extra money sitting in your savings account that you don't need for a few years, it may be time to invest it. The opportunity cost of sitting out of the market is high, particularly if you're young.

The typical advice on the right timeline for investing is not to invest money you need in the next five years. Depending on your risk tolerance, however, three years may be enough time for your money to recover from a loss, barring a recession or an otherwise unusual downturn.

Historically, the stock market has returned an after-tax average of about 6% to 7% annually, which is many times over what your money could earn in a savings account. If your risk tolerance is low, stick to lower-risk investments, like bonds.

You need your money in 5 years or more

If your financial goal is more than five years away, you have a long-term horizon. That generally means you can afford some fluctuation in the interim if it leads to greater returns.

Brokerage account

The key to any type of long-term investment success is choosing an asset allocation that matches your risk tolerance and time horizon. Generally, a low risk tolerance will mean investing more in bonds and less in stocks or equities. If you want help coming up with a strategy that's specific to your goals, talk to a certified financial planner or investment adviser.

Retirement account

Most people need decades to save adequately for retirement.

Whether it's an employer-sponsored plan at work or an IRA, your retirement account is basically an investment account with tax benefits. When it comes to funding a multi-decade retirement, investing provides the only kind of growth your money requires. 

SmartAsset's free tool can find a financial adviser to help you find the right place for your money »

Join the conversation about this story »

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Suddenly losing her job inspired this marketing pro to start a project to help Chicago's laid-off tech workers find their next gig — and break the shame of layoffs

Sun, 02/23/2020 - 9:45am

  • When Megan Murphy was laid off from her job at a Chicago-based tech company before Thanksgiving, she created a spreadsheet and slack channel, and invited other job-hunters to join. 
  • The newly-born Chicago Superstars allows laid-off local tech workers to network, connect with recruiters and find new jobs. 
  • As waves of layoffs hit the tech industry across the country, crowd-sourced spreadsheets, job seeker databases and online communities like Chicago Superstars have cropped up around the country, pointing to a demand for a space where job-hunters can band together and support each other. 
  • Visit Business Insider's homepage for more stories.

When Megan Murphy was suddenly laid off from her marketing job at a Chicago-based software company in November — right before the holiday season — she had few resources on which to draw, and no network to call on to find her next gig.

"What does it say about me as an employee that I'm not critical to the organization? My brain was spinning," Murphy told Business Insider. 

It didn't take long, though, for inspiration to strike. Taking her cue from a trend that started in Silicon Valley last year in the wake of layoffs at Juul, Zenefits, and Uber, she created a spreadsheet for laid-off workers to circulate their names, positions, companies and LinkedIn profiles. Referrals help people get hired faster than employees who throw their resumes at online job postings, Murphy reasoned. 

"Job boards are everywhere," Murphy said. "The power of the community is how we can help you avoid that application-tracking black hole." 

Chicago Superstars, as the project came to be known, is one of the latest examples of how the tech industry is banding together for support in a time when mega-companies like Uber and WeWork go through rough patches that see big layoffs.

To help laid-off workers grappling with the emotional toll of suddenly finding themselves without job or purpose, Murphy took the project one step further and added a form that invited applicants to join a chat room in the Slack app and support each other through the process. 

"Misery loves company," she joked in a blog post describing the project.

Like many *incredible* people in #chicagotech, I just got laid off.

I'm building a list of people I know to be both spectacular and open to new opportunities in Chicago.

and I'm sharing Thursday.

Want in? Drop your details

Robert F. Smith on becoming the richest black man in America, what companies get wrong about diversity, and what he's doing to help mint more black billionaires

Sun, 02/23/2020 - 9:42am

  • Robert F. Smith was among the first African Americans to run a private equity fund, he told Business Insider.
  • The billionaire businessman pushes diversity initiatives at every software company he invests in, and says it helps them create better products.
  • Smith made headlines in May after announcing that he would pay off the student loans of a Georgia-based, historically black college's graduating class.
  • Visit Business Insider's homepage for more stories.

Robert F. Smith is the richest black man in America, and one of only four to currently have a net worth of more than one billion dollars. The son of two Denver-based school teachers, he earned degrees from Cornell University and Columbia Business School before founding Vista Equity Partners, a private equity firm that specializes in software companies, in 2000.

From the journey of becoming a black private equity titan, Smith knows one piece of conventional wisdom to be true: Life really is lonely at the top. Smith is now spending his $5 billion fortune to make sure it doesn't stay that way.

Most famously, Smith volunteered to pay off the student loans of Morehouse College's entire graduating class while delivering their commencement address in May. He later expanded the gift, which the historically black university said totaled $34 million, to cover any outstanding educational debt owed by the students' parents.

Smith's efforts don't only benefit African Americans. Vista exclusively invests in software companies — a rarity in private equity — and has emphasized gender diversity initiatives at all of them. Vista also hosts an annual conference where female leaders from across the firm's portfolio, representatives from Columbia Business School, and other tech executives discuss strategies for getting more women into their highest ranks. After moderating a panel at this year's event on February 19 in New York City, Smith sat down for an interview with Business Insider.

The following interview has been edited for length and clarity.

Taylor Nicole Rogers: One of the things Vista is best known for is looking beyond the Ivy League to pull talent from a wide variety of backgrounds. How do you do that?

Robert F. Smith: What we're really looking for are the smartest people on the planet to work for us. The key is to make sure that we go as broad as we can, so we can be reflective of what this planet looks like in the companies we operate. 

Our products service every industry. We're in 175 countries, we have 225 million users of our software. They all look different. If you design software for just one certain segment and one certain way, then that, most likely, is all that's going to use it. There are about seven billion people on this planet. Only 26, 27 million of us actually know how to write code. So we have got to go find those folks and cultivate and develop them.

You have to create a workforce process and a workforce environment that makes people feel not just invited to the party, but also asked to dance. It's a matter of necessity more than anything else.

Rogers: How do you explain that line of thinking to your investors and to the executives in your portfolio companies who don't share the same approach?

Smith: Take a company like Jamf [a company Vista invested in in 2007 that sells software that allows businesses to pair all of their Apple devices]. This is a company in the Midwest and by its natural evolution, it just would not have the most diverse workforce. But the CEO, Dean Hager ... looked at our best practices and expanded the opportunity set of our applicants. He now has one of the most diverse workforces and one of the faster-growing companies in the portfolio because we went through what I call the retooling effect. 

They [are now] 30% women and they have four or five times the number of people of color that they had five years ago. They put in a concentrated effort and said, 'We've got to change this — not because it's the right thing to do, but because it's a business necessity.'

What companies have to do is be more thoughtful about how they engage their customer base. And what's their customer base? Well, they look like what the world looks like. You've got to build an organization reflective of your customer base so you can maintain product superiority and gain market advantage.

Rogers: Does diversity impact the way that you run your company?

Smith: Our business is a little different in that we're business- and not consumer-focused. We realize the importance of reflecting what the business environment looks like, not necessarily the localized consumer environment. The business environment globally has some attributes associated with higher intelligence and capacity and the ability to execute. You've got to make sure you have people in your organization who are reflective of that.

Rogers: Speaking of the global business environment, there aren't a lot of people out there who look like you that have achieved your level of success. What has that been like?

Smith: I realized when I decided to go into chemical engineering that there were very few African American chemical engineers. I could probably name six African American chemical engineers that I've met in my entire life to date. 

When I decided to go into this world of private equity, there were no African Americans running funds of any size. And today I have a group of more diverse managers who I work with. We have our own organization, where we talk and we help each other create. I call it peer-to-peer engagements to help each other think about raising money and organizing our businesses better.

There was nobody who looked like me running a major private equity firm anywhere near the size that we are — or even near the size that we were at the time. So that's part of being a pioneer — it's not just blazing the trail, but putting some trail markers, knocking the weeds down, and putting some pathways of support behind you for others of your community to follow.

Rogers: You're now one of the best-known philanthropists of your generation, but you've focused your giving on a population not many other donors have: African Americans. Why is that?

Smith: I tell people there's nothing greater than liberating the human spirit. Think about 400 young African American men who had just done the heavy lift. Many of them had college loans and parents PLUS loans coming out of their neighborhoods, fighting what they were fighting for, and then getting educated. Now they did all the heavy lifting. And I thought, what can I do to uplift their spirit that is already high? And I thought liberating 400 spirits 400 years after 1619 is probably a good, good thing to do.

SEE ALSO: A billionaire agreed to pay off my student loans in full. Here's what it was like — and how I plan to pay it forward.

DON'T MISS: Meet Laura Arnold, the billionaire philanthropist taking on the parole system with Jay-Z and Meek Mill

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GOLDMAN SACHS: Buy these 12 stocks to keep crushing the market as profit margins shrink

Sun, 02/23/2020 - 9:13am

  • David Kostin, the chief US equity strategist at Goldman Sachs, says an elite handful of companies with high, steady profit margins will likely outperform the market in the months ahead.
  • He says the combination of rising wages and high costs will keep profits under pressure for at least the rest of the year — and that comes after a year of already-weakened margins.
  • The stocks on his list have posted much bigger margins in the last year and haven't suffered a decline in margins at any time in the last two years.
  • Visit Business Insider's homepage for more stories.

A surprise can be a welcome distraction, and David Kostin — the chief US equity strategist for Goldman Sachs — says a little bit of good news over the last few weeks may have papered over a lot of worry.

Fourth-quarter earnings were better than expected overall, and that's helped stocks set new records in spite of the spreading Wuhan coronavirus epidemic, the unsettled Democratic presidential primaries, and other sources of uncertainty.

Kostin argues that a surprisingly low tax rate helped corporate America beat expectations. But he also thinks the cheeriness that inspired may not last. That's because company profit margins look week, and that creates a significant threat to earnings, the main source of fuel for the stock market.

"Margins contracted in every sector in the S&P 500 and declined in aggregate for the fourth consecutive quarter," he wrote in a note to clients. "Margins remain a key risk to the earnings outlook."

A tight labor market with rising wages, along with other costs for companies, mean that's going to continue to be an issue for the rest of this year, in Kostin's view. He says there's little room for improvement for now.

"The margin outlook is likely to remain challenging unless companies are able to raise prices to pass through costs or the labor market cools," he wrote.

Read more: MORGAN STANLEY: Buy these 25 non-Tesla stocks to cash in on the electric-car revolution

Adding to that risk, according to Kostin, is that investors were more likely than usual to dump stocks that missed earnings expectations in the fourth quarter.

So he's pulled together a list of the companies that are best protected from that earnings risk. As a group, Kostin writes that they have lot of pricing power, and companies with that power generally outperform when investors think margins are coming under threat.

Each of these 12 stocks have stronger gross margins than other companies in their respective sectors, and those margins have not fallen during the past two years, giving them a track record of stability. They're arranged from lowest to highest based on how much their margins expanded over the past year.

SEE ALSO: Matthew Dent grew his fund's assets by 27% in just one year. He breaks down which company is the 'next Berkshire Hathaway' — and shares 4 other top stock picks.

12. VeriSign

Ticker: VRSN

Sector: Information technology

Market cap: $24.5 billion

Average 5-year gross margin: 83%

1-year gross margin change: 395 basis points

Source: Goldman Sachs



11. Hasbro

Ticker: HAS

Sector: Consumer discretionary

Market cap: $13.3 billion

Average 5-year gross margin: 52%

1-year gross margin change: 444 basis points

Source: Goldman Sachs



10. W.R. Grace

Ticker: GRA

Sector: Materials

Market cap: $4.1 billion

Average 5-year gross margin: 40%

1-year gross margin change: 467 basis points

Source: Goldman Sachs



9. Williams

Ticker: WMB

Sector: Energy

Market cap: $25.9 billion

Average 5-year gross margin: 30%

1-year gross margin change: 487 basis points

Source: Goldman Sachs



8. Cadence Design Systems

Ticker: CDNS

Sector: Information technology

Market cap: $22 billion

Average 5-year gross margin: 86%

1-year gross margin change: 487 basis points

Source: Goldman Sachs



7. Citrix Systems

Ticker: CTXS

Sector: Information technology

Market cap: $15.1 billion

Average 5-year gross margin: 84%

1-year gross margin change: 586 basis points

Source: Goldman Sachs



6. AbbVie

Ticker: ABBV

Sector: Healthcare

Market cap: $139 billion

Average 5-year gross margin: 78%

1-year gross margin change: 606 basis points

Source: Goldman Sachs



5. Bio-Rad Laboratories

Ticker: BIO

Sector: Healthcare

Market cap: $12.1 billion

Average 5-year gross margin: 55%

1-year gross margin change: 684 basis points

Source: Goldman Sachs



4. Pegasystems

Ticker: PEGA

Sector: Information technology

Market cap: $7.8 billion

Average 5-year gross margin: 67%

1-year gross margin change: 774 basis points

Source: Goldman Sachs



3. Johnson & Johnson

Ticker: JNJ

Sector: Healthcare

Market cap: $391.7 billion

Average 5-year gross margin: 69%

1-year gross margin change: 785 basis points

Source: Goldman Sachs



2. Seattle Genetics

Ticker: SGEN

Sector: Healthcare

Market cap: $20.8 billion

Average 5-year gross margin: 90%

1-year gross margin change: 803 basis points

Source: Goldman Sachs



2. Seattle Genetics

Ticker: QGEN

Sector: Healthcare

Market cap: $8.5 billion

Average 5-year gross margin: 63%

1-year gross margin change: 1,078 basis points

Source: Goldman Sachs



The CEO of $2.75 billion GitLab explains what the company has to do to maintain its culture of radical transparency after it goes public this year

Sun, 02/23/2020 - 8:45am

  • Back in 2015, GitLab set a very specific goal: It would go public in November 2020. Now worth $2.75 billion, GitLab is still on target — though GitLab CEO Sid Sijbrandij says that it "might be sooner, and it might be later" depending on market conditions.
  • Sijbrandij says that to get there, the company needs to build a more "predictable" business and make itself more transparent to would-be investors.
  • In the past year, GitLab nearly tripled in size, but has also undergone some internal turmoil as employees and executives depart under unusual circumstances.
  • GitLab also faces intense competition from GitHub, which is backed by Microsoft's vast resources.
  • Visit Business Insider's homepage for more stories.

Back in 2015, developer startup GitLab called its shot: It would go public in November 2020.

As that date draws closer, the startup has built itself up to a $2.75 billion valuation, and closed a $268 million funding round in September. In January of this year, GitLab also announced that it had surpassed $100 million in annual recurring revenue. And the all-remote company hit 1,100 employees, almost tripling from 400 a year ago.

Despite all these changes, GitLab CEO Sid Sijbrandij says the company is still on track to go public this year — though it may or may not be right at its original planned date of November 18th. He notes that the company is "not beholden to that date," and that market conditions might forcing plans to change.

"It might be sooner, and it might be later," Sijbrandij told Business Insider. "The date we set is an ambition."

The timing is for a few reasons, Sijbrandij said. In 2015, when it set the goal, the company took its first venture capital, and Sijbrandij said that it wanted to show investors a return on the investment sooner rather than later. Secondly, that same year is when it started issuing stock options to early employees, with a four-year vesting period.

In other words, employees and investors alike are primed and ready for the chance to cash out on their GitLab shares. "We want to make sure that pretty soon afterwards, there was liquidity," Sijbrandij said.

Previously, Sijbrandij told Business Insider that the company is leaning towards a direct listing, but he now says that it could still go the more traditional IPO route. 

Either way, Sijbrandij says, the company has some work to do in order to make its very startup-like business and working style more palatable to Wall Street investors — especially as the rising competitive threat from the Microsoft-owned GitHub only grows.

"Reviewing all the aspects of our business is a lot of work," Sijbrandij said. "I expect a lot of discussions about transparency and combine that with making sure the investors have the right information to base our decisions."

Transparency

A big part of the company's IPO prep is around its much-prized culture of transparency, Sijbrandij says.

GitLab has always prided itself on making all information available to parties inside and outside the company — its IPO plans were in a public document for anybody to view, from the moment they were made. Similarly, the company publishes certain information about its revenue, employment stats, and even the employee handbook, where anybody can see.

Sijbrandij says that if GitLab wants to keep up that transparency after IPO, it will have to get a lot more diligent about making sure that any information it does share publicly is up to Wall Street standards. And once it's subject to SEC scrutiny, it will also have to come up with a plan for quickly correcting any mistakes in public documents.

"One of the things that will be different from other companies is we're a much more transparent company than most," Sijbrandij said. "Being a public company means you're sharing more with the world...We want to keep saying a lot and keep sharing a lot, but whenever there is an inaccuracy, we're much better at addressing that inaccuracy."

A 'predictable' business

Sijbrandij also says GitLab is working to make sure business becomes "predictable," even as its revenue grows. As a public company, Wall Street will be keeping extremely close tabs on the company, and Sijbrandij says GitLab needs to "manage expectations accordingly."

"If you're a public company, investors don't just want to see growth," Sijbrandij said. "We have to rely on meeting the predictions that you gave off. At GitLab, we're good at growing fast, but in the past, we had one quarter that was good, one quarter that was not as good, and the next quarter was even better."

A big bar to that predictability has been hiring, Sijbrandij says. There have been quarters where the company simply didn't have enough headcount to keep pace with growth, holding it back from reaching higher highs, he said. It's something the company has gotten better at over time, he says. 

"It's hard to keep hiring the exact high amount of people while having a super high bar," Sijbrandij said.

Sijbrandij also says GitLab has a "high-margin business," which will help as it prepares to go public. He expects that in the long term, GitLab will show "high profitability."

Executive changes

Another step towards the IPO has been some new executive hires.

In January, it hired Michelle Hodges as vice president of global channels and Robin Schulman as chief legal officer. Sijbrandij said that hiring a chief legal officer was "a really important goal" as GitLab gets closer to becoming a public company.

However, the appointment of Schulman to the role follows a period of upheaval at the company. Schulman's predecessor as the company's top lawyer, vice president of legal Jamie Hurewitz, was fired from GitLab in January, as Bloomberg reported at the time.

The Register reported that her termination was linked to Hurewitz's support for Candice Ciresi, GitLab's former director of risk and global compliance, who resigned over claims that the company is 'engaging in discriminatory and retaliatory behavior' after proposing a ban on hiring in China and Russia.

In a broader sense, the Register report indicates that the company has seen some executive turnover, linked to concerns among GitLab's female employees of unfair treatment, unequal pay, or limited advancement opportunities at the company.

A company spokesperson says that "diversity and inclusion is a core GitLab value," and that "because we value the privacy of our current and former employees, we do not discuss personnel issues publicly."

Market timing

In the run-up to IPO, Sijbrandij says he's also keeping an eye on murmurs about a possible economic downturn. He says that GitLab would have some advantages in such a situation — the company's technology helps developers be more productive, if nothing else — such a downturn would certainly impact the company.

"If you Google GitLab's biggest risks, an economic downturn is one of the biggest things we list," Sijbrandij said. "On one hand, it won't hurt so much because GitLab is not only a way to increase revenue for companies but also a way to save money...What you do see in an economic downturn is that decisions are delayed and the sales cycle gets longer."

If GitLab were to go public, it would also be in a market climate that hasn't always been kind to high-flying startups Companies like Uber, Lyft, and Casper have hit turbulence since their own recent IPOs.

Bigger goals ahead

Right now, one of GitLab's biggest competitors is GitHub, which is now owned by Microsoft. To compete with GitHub and its very deep-pocketed owner, Sijbrandij says GitLab needs to make sure that it uses its biggest advantage as a smaller company and move faster.

"Every month we're shipping a new version that has 50 significant features," Sijbrandij said. "We want to keep innovating faster than the rest of the industry. If you're going to base your whole company on one DevOps platform, it better be the best and most complete platform."

It's also important to note that the November 2020 wasn't the end of GitLab's plans for the company. By November 2023, it plans to hit a billion dollars of revenue, to be cash flow positive, and for its employees to have a high satisfaction rate about working at the company — among other milestones.

In the interim, Sijbrandij says, he's gratified that the company has seen the growth that it has.

"We're excited that customers are trusting us and investing in GitLab," Sijbrandij said. "We're excited that we've been able to grow at a really rapid pace last year."

Do you work at GitLab? Got a tip? Contact this reporter via email at rmchan@businessinsider.com, Signal at 646.376.6106, Telegram at @rosaliechan, or Twitter DM at @rosaliechan17. (PR pitches by email only, please.) Other types of secure messaging available upon request. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Leaked memo: A key Google Cloud president is leaving his role amid a reorganization that will see 'a small number' of positions eliminated

Join the conversation about this story »

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These are the hottest fintech startups and companies in the world

Sat, 02/22/2020 - 8:00pm

It's a fascinating time for fintech.

What was once a disruptive force in the financial world has become standard practice for many industry leaders. 

Fintech industry funding has already reached new highs globally in 2018, with overall funding hitting $32.6 billion at the end of Q3.

Some new regions, including South America and Africa, are emerging on the scene.

And some fintech companies, including a number of insurtechs, have dipped into new markets to escape heightened competition.

Now that fintech has become mainstream, the next focus is on the rising stars in the industry. To that end, Business Insider Intelligence has put together a list of 10 Up and Coming Fintechs for 2019.

Coconut

Total raised:   £1.9 million ($2.5 million)

What it does: Coconut is a UK-based current account and accounting platform for small- and medium-sized businesses (SMBs).

Why it's hot in 2019: Next week, Coconut will launch its first subscription service, dubbed Grow, which will bundle unlimited invoicing and end of year tax reports, for £5 ($6.51) a month. This will make it a very attractive option for SMBs, that conventionally don't have a lot of time on their hands to handle their accounting.

Brex

Total raised: $282 million

What it does: Brex is a US-based corporate credit card provider, which initially focused on serving startups.

Why it's hot in 2019: The startup gained unicorn status in 2018, only months after it launched its first product. Now, after receiving debt financing worth $100 million, Brex wants to target larger enterprises with its topic — opening it up to a whole new set of customers and helping bring the company to the next level.

Want to get the full list?

There's plenty more to learn about the future of fintech, payments, and the financial services industry. Business Insider Intelligence has outlined the road ahead in a FREE report, 10 Up and Coming Fintechs for 2019

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Future of Fintech: Funding's New Guard

Sat, 02/22/2020 - 3:04pm

Over the last decade, fintech has established itself as a fundamental part of the world’s financial services ecosystem.

Today, fintech financing is surging across the globe, despite major banks remaining cautious about acquisitions.

Instead, three emerging trends are fueling the current fintech boom: new geographical fintech centers, more late-stage mega-rounds, and the rise of fintech-focused venture firms.

In the Future of Fintech: Funding’s New Guard slide deck, Business Insider Intelligence explores how these three key trends are driving a surge in funding.

This exclusive slide deck can be yours for FREE today.

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