2017: Some of my winners– and losers

Published in the San Diego Union-Tribune, December 18, 2017

This is the last column for 2017, but to quote our former governor from his former life as the Terminator, “I’ll be back.”

In keeping with end-of-year columns, it is time to do the infamous scorecard — the box score on the stats — the wins and losses, hit by a pitch, thrown out stealing, fielder’s choice, hit into a double play and into the seats in the upper deck.

I had a tough year in fintech. My consumer finance company got crushed. When the dust settles, I will get about 30 cents on the dollar in worthless warrants from an overvalued acquirer who will likely go broke in the next few years as well, or they will sell to another company for worthless stock — and so the cycle goes.

Another company I backed three years ago is about to go broke. We tried hard, but our big customer stopped working with us and in the end, I will get about 30 cents on the dollar when we sell the assets.

On the positive side, it was a good year for my prison business. I have been spending more time at Donovan State Prison and have been offered my own cell if I want to spend the night to avoid driving back in traffic. I found that to be quite thoughtful.

I am actively working with a few of my favorite felons to develop a television show. A couple of my “advisers” are now on parole, having spent the last few years at Pelican Bay in the SHU (solitary confinement). If my mother could only see me now.

My adventures in biotech have proven to be more profitable. This supports the theory that you need to bet on the jockey and not the horse.

In the middle innings, we went to the bullpen. One of our biotech companies was struggling, and I went to an angel group and said I needed $250,000 to stay alive and would accept investment at a $3 million pre-money valuation. I told them that there was also a 50-50 chance that a wild man who was poking around might invest $800,000 in the next couple weeks.

In essence I offered them a discounted lottery ticket. When they asked how much money we had in the bank at that time, I told them $6,000. Then three things occurred. First, they laughed at me; second, they threw me out (bodily) and third, the wild man showed up 13 days later with a checkbook and put in $1.2 million at a $9 pre-money valuation. Let me tell you, this venture racket is no way to make a living.

I have another biotech in the microbiome peanut allergy racket. It took 11 months to negotiate the license from the tech transfer office of a famous East Coast organization. That experience only goes to reinforce my loud and frequent appreciation for our local tech transfer offices. They are supersonic by comparison (and easier to work with). So, the learning curve here is to stay local.

But after battling the boys back East for almost a year and working through four COI issues (conflict of interest waivers, when geniuses who are working in a hospital or university want to try to make some real coin on the side), the starting bell finally rang and we raised $500,000 in three weeks (oversubscribed). I think some of the investors may have come from Jimmy Carter’s friends — you gotta love peanuts!

I also backed a software company that is going to solve the problem of security for medical data. It was above my pay-grade technically, but again, the jockey was very smart. But I couldn’t raise a dime until I finally found someone who “got it” technically and knew the market and why our sliced bread was both needed and wanted (i.e., someone would pay us). The rule here is simple, find the right guy — it is always about the team.

I backed a “fat” company. This is another lottery ticket. If the mice get skinny and drop dead, we are alive. If the little monsters stay fat and live, we are dead. A simple binary outcome. (Science can be elegant.)

On the homefront, my wife signed up for another year (whew), and my faithful Sancho Panza, Ms. Nicole Rockstead agreed to do a 26th year with me. In addition to normal health benefits, she also gets psychiatric coverage.

 

 

Rule No. 2018: Be ready!

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