This is a presentation I gave at the Regis Tech Acclerator on July 23, 2013. I review my experiences investing in private companies and provide case studies that illustrate some very effective ways to lose money by investing badly. I share 10 lessons learned (including 2 bonus lessons!).

1. July 23, 2013
This document is solely for the presentation of confidential PNT information. No part of it may be circulated,
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presentation; it is not a complete record of the discussion.
RTA Lecture July 23, 2013
-
Simple and Effective Ways to Lose
Money in Private Equity Investments!

2. July 23, 2013
Today’s Goal
Walking through what I’ve learned about how to lose money
in PE, I hope you’ll gain a few insights on how to structure
and lead your own companies to attract smart capital and
succeed wildly …
1

3. July 23, 2013
Lecture Outline
• Introduction and background
› Me
› My company (PNT Marketing Services, Inc.)
• Ten ways to lose money in PE investments – guaranteed!
› Plus: bonus tips!
• 10-minute break
• Case studies
• Q&A/wrap-up
2

4. July 23, 2013
Enough About You – What About Me?
• Me
› Regis ‘78
› Harvard ’82
› Stanford PhD dropout ’83
› Founded PNT ‘88 with partner Phil (R’78, H’82)
› Married, 2 kids
› ADHD? Pianist, singer, motorcyclist, triathlete, RE investor,
early-stage company investor …
3

5. July 23, 2013
PNT Marketing Services Overview
4

6. July 23, 2013
What Is PNT Marketing Services?
PNT Marketing Services
(PNT) is a leading
provider of Customer
Intelligence-based
marketing services
(customer databases,
insights, and high-ROI
marketing actions).
PNT helps clients
acquire, grow and keep
profitable customer
relationships.
5

7. July 23, 2013
Our Beginnings
??? 1988 1989 2003 Today
Marketing
Finance
Operations
IT
6

8. July 23, 2013
Our Clients
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9. July 23, 2013
Our Methodology
Step 1:
• Diagnostic
Step 2:
• Creating the customer-centric marketing
and analytic datamart
Step 3:
• Generating customer insights
Step 4:
• Implementing high-ROI marketing actions
driven by customer insights
Step 5:
• Measure/track/improve (“virtuous spiral”)
PNT engages
with our
customers in
a simple and
powerful 5-
step
methodology
8

10. July 23, 2013
Our Approach
Our rigorous and
streamlined
DATA-driven
approach yields
pure Customer
Intelligence.
And that's how
we help smart
business partners
win.
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11. July 23, 2013
Investing in Private Equity (PE)
10

12. July 23, 2013
Enough about ME – what about PE?
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• Perfect for someone who’s ADHD!
› Lots of opportunities
› Lots of moving parts
› Highly risky (“Certainty of death. Small chance of
success. What are we waiting for?”)
 Rule of thumb: 7 of 10 failures, 2 out of 10 modest
success, 1 of 10 grand slam
• Track record of five years of losing money
› Unfortunately, blemished by a few good deals …

13. July 23, 2013
10 Lessons: How to Ensure That You
Lose Money in PE Investing!
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14. July 23, 2013
10 Lessons on Losing Money in PE Investing
13
• Lesson 1: Invest only in companies
with no revenue
› In fact, the farther away they are from generating
Dollar One, the better!
› Best if there’s no plan to generate revenue, either
(whether now or in the future) …

15. July 23, 2013
10 Lessons on Losing Money in PE Investing
14
• Lesson 2: Make sure the founder is
untested and hasn’t done this before
› Best if he/she has no track record whatsoever in
the industry
› Next best is irrelevant experience in another
industry …
› … and a close third is having another demanding
job that prevents him or her from putting in the time
needed to get the new company off the ground …

16. July 23, 2013
10 Lessons on Losing Money in PE Investing
15
• Lesson 3: Invest in companies that do
not have a team in place
› Make sure there’s no CMO to pay attention to
brand, audience, and market
› Make sure there’s no CTO to head up tech
platform development

17. July 23, 2013
10 Lessons on Losing Money in PE Investing
16
• Lesson 4: Don’t attempt to determine if
there’s a market for your product or
service before you spend resources
creating it
› It’s far easier to lose money by following the Field
of Dreams approach - just “build it and they will
come”
› Since the company will have no team in place
anyway (Lesson 3), it’s a short step to not paying
attention to the market!

18. July 23, 2013
10 Lessons on Losing Money in PE Investing
17
• Lesson 5: Make sure there are no
investors on board who are smarter or
who have deeper pockets than you do
› In fact, invest alone if you can – why share
success or risk with anyone else?

19. July 23, 2013
10 Lessons on Losing Money in PE Investing
18
• Lesson 6: Invest in companies with
government-backed loans or lines of
credit
› Our federal and state governments have a terrific
track record in private investments and hardly ever
make decisions which negatively impact the
companies they’re backing, so you’ll want to invest
right alongside them!

20. July 23, 2013
10 Lessons on Losing Money in PE Investing
19
• Lesson 7: Make sure the company has
really complicated technology
› Preferably, this technology should be unproven
› It’s a bonus if the technology requires on other
suppliers to provide similarly unproven
components

21. July 23, 2013
10 Lessons on Losing Money in PE Investing
20
• Lesson 8: It’s helpful if the company is
high profile, has lots of media attention,
and has a rockstar CEO who has never
run a company before
› Figureheads with completely non-operational
backgrounds make the worst CEOs, so keep a
special eye out for those …

22. July 23, 2013
10 Lessons on Losing Money in PE Investing
21
• Lesson 9: Don’t invest with a theme or
methodology in mind
› Make sure your PE investments are scattered
across industries, technologies and themes
› It’s best, in fact, to have a complete lack of focus

23. July 23, 2013
10 Lessons on Losing Money in PE Investing
22
• Lesson 10: Don’t invest in a company
where you can add value with your
industry expertise, contacts, etc.
› It’s best if you know nothing whatsoever about
what you’re investing in
› Why would you want to help the company you’re
invested in with more than money, anyway?

24. July 23, 2013
Bonus Lessons!
23
• Bonus Lesson 1: Don’t stay in close
touch with other board members, senior
executives, advisors, or other investors
in the company
› You should maintain complete radio silence for the
best chance at losing money

25. July 23, 2013
Bonus Lessons!
24
• Bonus Lesson 2: Wherever possible,
throw good money after bad
› If your goal is to lose the most money possible, it
never makes sense to cut loses – you should
continue to invest money right up until the doors
close!

26. July 23, 2013
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27. July 23, 2013
Case Studies
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28. July 23, 2013
Case Studies
27
• Social Mobile Travel App
› Idea was great: let’s create a social mobile travel
app to provide curated content for travelers that is
there when they need it (on their smartphones) and
helps them connect in-country with other like-
minded travelers
› Space was attracting a lot of attention and capital:
intersection of social, mobile, and travel was (and
is) hot

29. July 23, 2013
Case Studies
28
• Social Mobile Travel App, cont’d
› Founder was also head of institutional sales for a major
P2P lender going through explosive growth (Lesson #2)
› Tech “team” was sub-contracted out on the fly and
changed multiple times (Lesson #3)
› No attention paid to understanding audience and
whether app would find traction (Lesson # 4)
› This idea was outside my domain expertise and I
couldn’t contribute contacts or advice except of the
most general kind (Lesson #10)

30. July 23, 2013
Case Studies
29
• Social Mobile Travel App, cont’d
› Result: a stunning success!
 The project finally resulted in an app that’s now available
on the AppStore
 However, since no thought was put into marketing it or
building audience, it’s languishing with hardly any
downloads
 All the investors (5, including the founder) lost all of their
seed capital since the founder decided to pack it in and
get back to his day job

31. July 23, 2013
Case Studies
30
• Re-commerce site (“Mint + Kayak for
re-commerce”)
› Another great idea: consumers are sitting on a mountain of stuff
they no longer want or need, have little inclination to deal with it
(it’s a real chore to sell stuff on Craigslist, ebay, etc.), and don’t
know exactly what they have or how much it’s worth.
› Re-commerce channels are under-utilized, provide various
choices for monetization, require a lot of effort, and vary in
convenience and value
› Solution was to create a platform to add an emotional trigger
(getting great deals on new purchases), shifting the goal from
“dealing with the stuff I don’t want anymore” to “getting great
deals on stuff I really want”

32. July 23, 2013
Case Studies
31
• Re-commerce site (“Mint + Kayak for
re-commerce”), cont’d
› Founder was an attorney and MBA with deep experience in
financial services (Lesson # 2)
› CTO was in place, but no CMO and no focus on finding a
market/audience for the service (Lessons # 3, 4)
› Only one other investor on board (Lesson #5) and I never
met them or spoke with them (Bonus Lesson #1)
› There was really no theme to my investing in this start-up
(Lesson #9), and I didn’t have any background in e-
commerce or re-commerce or any contacts I could leverage
(Lesson #10)

33. July 23, 2013
Case Studies
32
• Re-commerce site (“Mint + Kayak for
re-commerce”), cont’d
› Result: another money-losing success!
 Founder was abandoned by CTO who couldn’t keep contributing
his time and found another job
 No other investors stepped up to the plate when funds ran out,
and the other investor cut off further investments
 Founder, too, was under financial pressure with a young family
and turned to consulting to make ends meet
> He is now co-founder in another startup in medical technology, which
I graciously passed up
 Platform/site is live in a “beta” mode, with just a few (< 50) users
over the last few months; not enough funding or focus from
founder to continue, so a total write-off

34. July 23, 2013
Case Studies
33
• Electric car company: Fisker
Automotive
› Founder was Henrik Fisker, rockstar auto designer and
industry veteran (Lesson #8)
› Bleeding-edge technology (Lesson #7)
› Backed by US Govt (Lesson #6)
› Not an area I knew (Lesson #10)
› Not really part of a theme (Lesson #9)
› I went back in for two additional rounds (Bonus Lesson
#2)

35. July 23, 2013
Case Studies
34
• Electric car company: Fisker
Automotive, cont’d
› Results were really spectacular: Fisker had huge
tech/engineering problems, defaulted on its government
loan, laid off almost everyone, and is seeking a buyer
now …

36. July 23, 2013
Case Studies
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37. July 23, 2013
Case Studies
36
• Automated monitoring support and
data analytics for distributed
generation systems focusing on
solar PV: LocusEnergy
› Founded in 2007, company was started by a serial
entrepreneur (Mike Herzig) and has experienced rapid
growth and adoption of its hardware and software in the
marketplace

38. July 23, 2013
Case Studies
37
• LocusEnergy, cont’d
› I really violated a lot of my sure-fire, money-losing lessons on
this one:
 Company had revenue when I invested (Lesson #1)
 Mike, Locus’ founder, had a track record as a serial
entrepreneur (Lesson #2)
 Locus had a great team on board already (Lesson #3)
 They had a tested – and growing – market for their products
and services (Lesson #4)
 Many smart investors, some with deep pockets, were on
board (Lesson #5)
 I’ve stayed in close touch with Mike, other investors, and an
IB firm who’s raised money for them (Bonus Lesson #1)

39. July 23, 2013
Case Studies
38
• LocusEnergy, cont’d
› My results were therefore unfortunately not in line with my other
investments; to date (after 2+ years) I’ve almost doubled the
value of my investment and the company is on track for
continued solid growth

40. July 23, 2013
Case Studies
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• Responsible teen spending
company: BillMyParents
› This was brought to me by a boutique investment firm
› I tried my best to lose money on this one, but it violated too
many of my rules: in-place team, climbing revenue, tested
market adoption, etc.
› I couldn’t take the pressure, so I sold out after 6 months for a
40% gain on my initial investment
› Epilogue: I should have held on!
 Current value of shares down 50%

41. July 23, 2013
Case Studies
40
• Online social reputation scoring (FICO for
sharing economy): TrustCloud
› Chairman, CEO, CTO, and COO are all serial entrepreneurs
(violation of Lessons #2 and #3)
› Rapid adoption of platform by users (10K+ and growing) violates
Lesson #4)
› Chairman and co-founder is tied to large angel-investing group
(Lesson #5) and this is right in the middle of my investing theme of
companies leveraging social data to provide value (Lesson #9)
› I’ve also got plenty of contacts who can help these guys (Lesson
#10), and I’ve stayed in touch with the Chaiman, CEO, CTO, and
COO (Bonus Lesson #1)

42. July 23, 2013
Case Studies
41
• TrustCloud, cont’d
› It’s not too late – company is still in early stages and has little
revenue, so I may still eke out a win and lose money on this one, but
with the team in place the odds are against me …

43. July 23, 2013
Case Studies
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• Career matchmaking site: Sokanu.com

44. July 23, 2013
Case Studies
43
• Sokanu, cont’d
› Great team in place, including CEO/founder who has hired PhD scientists to
help build his platform (flouts Lessons #2, #3)
› Site has really gained traction with many thousands of users (Lesson #4 out
the window)
› Many investors including a UK venture fund have signed on (violates Lesson
#5)
› Fits theme of companies leveraging data to create value (Lesson #9,
ignored)
› I’ve already added value by introducing the CEO to a client of ours who is
very interested in partnering with Sokanu to provide value to my client’s
4MM+ customers – this would be a big win for Sokanu (sorry, Lesson #10)
› Finally, I’ve stayed in touch with other investors and with the CEO (bye bye,
Bonus Lesson #1)

45. July 23, 2013
Case Studies
44
• Sokanu, cont’d
› With a great team, solid investors, excellent market traction,
revenues, and a great adoption curve, it’s unlikely I’ll lose money on
this investment, but hope springs eternal …

46. July 23, 2013
Q&A / Wrap-Up
45

47. July 23, 2013
Q&A / Wrap-Up
46
• Any other questions, criticisms,
conundrums, quibbles, concerns, or
comments?
• To reach me:
› tony@pntmarketingservices.com
› 914-588-7278