Yearly Archives: 2019

Startups Discover the Allure of the C Corporation

The individual income tax-rate cuts of the 1980s helped make LLCs the default business structure for startups – but the 2017 reduction in corporate tax rates, coupled with the capital gains tax rate increases in the 2010s, have changed the dynamic.  

As last week’s Wall Street Journal explains in “Startups Discover the Allure of the C Corporation,” in some circumstances the ‘C’ structure creates potential tax benefits for entrepreneurs and their investors:  

For years, Mr. Bisges started ventures using limited-liability companies, known for their flexibility and tax advantages. But when Mr. Bisges and his nephew, Aaron, started planning StillFire Brewing, their accountant suggested the C corporation.

Mr. Bisges is pinning this part of his business plan on Section 1202 of the Internal Revenue Code, an underused provision expanded under Mr. Obama, and one that is gaining new attention after the 2017 Tax Cuts and Jobs Act made it more attractive.

The strategy is particularly advantageous for business founders who expect to start small, keep earnings inside the company, make annual profits and then cash out. If a taxpayer holds C corporation stock for five years and follows the technical rules, capital-gains taxes on a subsequent sale get erased—on gains up to $10 million or 10 times the original investment, whichever is greater.

In a nutshell, the article argues that it may now be tax advantageous for entrepreneurs to realize their profits in the form of long-term capital gains instead of ordinary income because they can exclude from federal income tax 100% of the gain from the sale of qualified small business stock.

LLCs, S-Corps, and C-Corps each offer different advantages and restrictions, and choosing poorly can lead to expensive and difficult changes down the road. There are many complexities and issues to consider and no one right answer. Just as people shouldn’t decide to have children for the tax benefits, we advise founders to not view tax considerations in a vacuum when choosing the legal structure for their businesses.  They need to think hard about the long term goals for the business and seek expert advice on the optimal legal structure.

You can, however, reduce the number of future headaches (and possibly legal bills) if you choose the structure that is most appropriate for both your current situation and your long-term objectives.  Aside from avoiding personal exposure to business liabilities, the main considerations when choosing from among the three structures are tax consequences and corporate governance issues. 

We ourselves have invested in both C’s and LLC’s, and have found the defined governance structure of a C-corp is almost always preferable.  For a more expansive view of our thinking on the subject, we recommend you check out our 2010 white paper, To LLC or Not to LLC.

St. Pete tech firm leads in female leadership

Source:  The St. Pete Catalyst
By:  Margie Manning

 

Lanny Tucker, CEO, PowerChord, with Stephanie Shreve, vice president of customer success, and Michelle Tipton, vice president of finance.

 

PowerChord, a St. Pete software company, has bested other technology companies including Google and Microsoft in one key measure.

Following several recent promotions, women account for 40% of the senior management at PowerChord, twice the percentage of female executives in leadership at Microsoft and nearly twice that of women leaders at Google.

The women and men in leadership at PowerChord have different, and complementary, thought processes, said Lanny Tucker, a tech industry veteran who was named CEO at PowerChord in 2016.

“Sometimes us men, we want to jump up and pull the trigger and a lot of action. The women in the team add a different perspective and a very valuable perspective that benefits our customer, our recruitment of personnel and our stature in the community,” Tucker said.

PowerChord develops software-as-a-service that provides brand specific marketing for its clients, companies with hundreds or thousands of dealer distributors or franchisees.

Ballast Point, a Tampa growth capital and venture equity firm, invested $10 million in PowerChord in 2016, a few months after Lanny Tucker joined as CEO.

Since then, PowerChord has grown from 35 employees to almost 80, and as the company grows, it’s important that female leadership grow as well, Tucker said.

“There’s been study after study done. Companies that have a good gender mix have more innovation, more profitability … and they’re more admired,” Tucker said, citing Fortunemagazine’s annual list of the world’s most admired companies.“Companies that are ranked the highest in that group have almost twice as many females in senior leadership positions than the less admired companies.”

PowerChord announced the latest promotions last week. Michelle Tipton was named vice president of finance, and Stephanie Shreve was named vice president of customer success. Both are seven-year veterans of the company. Their promotions came two months after PowerChord named its first female vice president, Nikki Vegenski, who is vice president for marketing and strategy and also a long-time PowerChord employee.

The company named two directors as well : Nicole Clemens as director of people and culture, and Kate Dalley as director of product management.

“These are our leaders of the future. They are going to be people both with PowerChord or other companies that will take on C-level capabilities and functions in the future and we’re really proud of what they do and what they stand for,” Tucker said.

Meet the new members of the PowerChord leadership team

Michelle Tipton served as financial controller as well as accountant and HR specialist with PowerChord for seven years, before she was promoted to vice president of finance.

Traditionally, finance departments focus on historical performance, Tucker said. One of Tipton’s goals in her new role is to use data that reflects PowerChord’s past to help the company move forward.

“The past is all relevant data and it’s really important to have those analytical skills and toolsets, but also how can we expand the current programs and platforms that we’re using to become more of a data-driven team, to support the organization’s strategies moving forward,” Tipton said.

Tipton’s job is taking the next big step, as artificial intelligence and data analytics are transforming the finance function, Tucker said.

“That’s the predictive part, being able to look into the future with the data that we have in the past and be proactive in our decision making, as opposed to just reactive,” he said.

Stephanie Shreve served as PowerChord’s director of partner engagement for seven years before she was named vice president of customer success.

“My focus will be on fostering an environment of customer experience,” Shreve said. “From the moment we start talking to a potential client all the way through to bringing them on board, we want to make that a smooth seamless experience, so they can then offer exceptional customer experience to their customers.”

Prospective clients face a tough decision when considering taking on new business partners, Tucker said.

“That fear, doubt and uncertainty is won over by both metrics and data, it’s won over by past performance and recommendations of current customers. And quite frankly, a large part is personality and trust. Trust is the most important word, and that’s the hallmark that Stephanie is trying to build,” Tucker said.

Nicole Clemens, the new director of people and culture, will drive key functions of human resources and business strategy with a modern perspective built upon creating a collaborative culture and ensuring equality for all employees. Since joining PowerChord in 2015, Clemens has spearheaded instituting paid paternity leave, implemented a company-wide key performance indicators and bonus program, and has coordinated culture events to engage employees.

Kate Dalley, director of product management, is dedicated to providing scalable and efficient solutions to PowerChord’s local and global markets. She is also responsible for assessing ongoing industry needs to ensure the company is providing innovative and transformational SaaS services, while also continuing to define the ongoing evolution of the PowerChord platform.

 

 

Prepaid Technologies Acquires dash™ Prepaid Purchasing Card Portfolio

Source:  Prepaid Technologies

Deal more than doubles Prepaid Technologies’ purchasing card portfolio, adds exciting new product enhancements for the business payments leader

BIRMINGHAM, Ala.March 20, 2019 /PRNewswire/ — Prepaid Technologies, a leading provider of business payment solutions, announced the acquisition of Karmic Labs’ dash™, the San Francisco-based purchasing card portfolio and expense management solution, as well as other select assets.

The deal, which closed on March 1, 2019, adds several members of Karmic’s key personnel to the Prepaid Technologies team, with team members now operating throughout North America. The addition of the dash platform also adds a robust expense management solution and extensive card portfolio to the Prepaid Technologies suite of offerings, including payroll programs, business purchasing cards, reward and incentives and per-diem card offerings. Current Karmic and dash customers will benefit from an expanded range of services, products, and resources including Prepaid Technologies’ dedicated customer support.

“Integrating the dash purchasing card structure into our existing portfolio increases efficiencies and enhances our growing suite of solutions for businesses and payments service providers,” said Prepaid Technologies CEO, Stephen Faust. “This cardholder portfolio more than doubles our existing expense management business, elevating purchasing to the level of our payroll, incentive and rewards lines of business.”

Prepaid Technologies’ solutions provide customers with a mobile-focused platform enabling business owners to move money in real-time to individual cards and accounts for everyday purchases. It also empowers administrators with key insights into spending, providing better control in the expense reconciliation process. These solutions are significantly enhancing traditional payments for many business segments, particularly universities and municipalities.

“The addition of dash is another prime example of how we’re fulfilling our commitment to provide the broadest suite of payment solutions to our partners and commercial clients, with a focus on quality,” said Faust.

Over the next several months, Prepaid Technologies will integrate the dash portfolio into its service offering, working diligently to transition existing clients, while also providing them with access to additional payments and business management solutions including:

  • Revolutionary payroll card programs that improves bottom-line performance and provide value to employees.
  • Reward and incentive cards to support stronger customer and employee relationships.
  • State-of-the-art API Payment Integrations that transform internal operations, speed-up payments and create operational efficiencies.

For the past 20 years, Prepaid Technologies has built an extraordinary reputation as a trusted partner and advisor in prepaid payments, helping bank partners and clients deliver efficient and meaningful payment experiences, from concept to cardholder. Learn more at in-prepaid.com.

About Prepaid Technologies

A pioneer in financial technology, Prepaid Technologies has been providing innovative electronic payment solutions including payroll, expense, gift, reward and incentive card products to employers, financial institutions, and government agencies for more than 20 years.  Learn more at www.in-prepaid.com.

Prepaid Technologies is celebrating 20 years as a leader in the business payments space. Learn more about our history and vision for the future at https://www.in-prepaid.com/prepaid-technologies-marks-20-years-of-prepaid-innovation-and-success/

Ballast Point Ventures Announces Exit from MolecularMD

Tampa, FL – February 21, 2019

Ballast Point Ventures II, LP and Ballast Point Ventures I, LP (“BPV”) are pleased to announce that they have successfully exited their growth equity investments in MolecularMD, a molecular diagnostics company founded in West Palm Beach, FL. MolecularMD was acquired by ICON plc (NASDAQ: ILCR), a global provider of outsourced development services to the pharmaceutical, biotechnology and medical device industries.

Founded in 2006 by Dr. Brian Druker and Sheridan Snyder, MolecularMD developed a core competency in streamlining the development, regulatory approval, and clinical development deployment of precision oncology medicines for well-established, long-term biopharma clients. Drew Graham and Matt Rice, Partners with BPV, served on MolecularMD’s board of directors prior to the acquisition.

Dan Snyder, the Company’s CEO since 2014, remarked, “Our team has worked tirelessly to provide our clients with an exceptional, full-service diagnostics offering aimed at accelerating the approval of cancer drugs and therapies. Ballast Point Ventures has been a great partner and tremendous resource for us in driving growth in our business. We have relished the leadership, guidance, and expertise that Drew and Matt have provided, and we appreciate the support that the entire BPV team has provided MolecularMD throughout our multi-year partnership.” He continued, “ICON plc has a very complementary strategy to our focus at MolecularMD, and we are excited to become part of the ICON team.”

Drew Graham, a Partner with BPV who served as Chairman of MolecularMD, said, “We are proud of our partnership with MolecularMD and the Company’s growth from a small business in West Palm Beach to a highly regarded player in the molecular diagnostics industry with a blue chip client base around the world.  Dan Snyder and his talented team built a great company, and I have no doubt they will help ICON achieve even greater success.”

Please see here for full press release.

About Ballast Point Ventures

Ballast Point Ventures, headquartered in Tampa, Florida, is a later-stage venture capital and growth equity fund founded in 2002 to provide expansion capital for rapidly growing, privately owned companies, with a particular emphasis on companies located in Florida, the Southeast and Texas. The BPV partners have more than 80 years of combined experience investing in and building high-growth companies in several industries, including healthcare, software, technology-enabled business services and consumer. BPV has $360 million under management across three funds and seeks to make initial equity investments ranging in size from $4 million to $10 million. For more information, visit www.ballastpointventures.com.

Amped up: PowerChord delivers hit after hit for clients

Source:  Business Observer FL

By:  Brian Hartz

With its unique origin story and approach to e-commerce, the St. Petersburg tech company strikes a chord with multi-location brands and franchises. Can it manage rapid growth while maintaining its culture?__________________________________________________________________________________________________________________

PowerChord Inc., a St. Petersburg digital marketing company, comes by its cool name honestly. Prior to having a go at entrepreneurship in 2001, founder Pat Schunk played guitar for classic rock icon Stevie Nicks and wrote music for Seven Witches, a New Jersey heavy metal band. He also contributed to the soundtrack of the 1991 “Teenage Mutant Ninja Turtles” movie.

The firm’s coolness added a level of competence in 2015 with CEO Lanny Tucker, who came to PowerChord from Celebration-based Channel Intelligence, acquired in 2013 by Google. Tucker, 69, broke into the tech sector with Hewlett Packard and in 2005 moved to Florida from California.

PowerChord’s genesis, Tucker says, stems from Schunk’s frustration with buying music equipment online in the early days of e-commerce. “The websites were disjointed and the product descriptions weren’t there. He said, ‘There’s got to be a better way.’”

There was, and by finding it, PowerChord, with some recent success, has bumped into a noted business challenge: Managing rapid growth without diluting the service that led to the growth in the first place.

“Great ideas don’t always come from your top dozen executives. They come from people who are out there facing the customer, who understand the customer and deal with them every day.” Lanny Tucker, CEO of PowerChord Inc.

 

Schunk, in launching the firm, saw an opportunity to create dynamic, geo-targeted “digital storefronts” for multi-location brands and franchises. Think products such as Kohler bathroom fixtures and Stihl power tools primarily sold via dealership networks. Using location-based data and advanced search engine optimization tools, the PowerChord platform converts online browsers into in-store shoppers.

Take Stihl, which has 10,000 dealers nationwide, Tucker says, “many of whom are independent businesspeople.”

PowerChord provides a digital storefront for each Stihl dealer, and, says Tucker, the company has the unique ability to control storefronts on a customized basis.

“So imagine if you’ve got a hurricane blowing through Miami, you want to be talking about chainsaws, for example, or brush-clearing equipment,” Tucker says “But let’s say that same weekend you’ve got a snowstorm in Boston and New England, so you want to talk about snow removal. We have the ability to change all of that dynamically.”

PowerChord’s solutions have been the equivalent of a Top 40 hit — in Stevie Nicks parlance, a “Landslide.” Its platform powers about 15,000 digital storefronts in more than 30 countries, and it has also worked with household names including Spotify, Hulu, PayPal and Facebook. Its revenue has doubled during the past three years, reaching $25 million in 2018, and Tucker expects revenue growth to accelerate even more in the coming years.

Rapid growth can sometimes be too much of a good thing, though, because it presents staffing challenges. Tucker says PowerChord has about 70 employees, with a significant chunk hired in the past year as the company strives to keep up with rising sales. “We’re interviewing every day,” he says, “for a broad selection” of positions.

Tucker says hiring employees who want to stay and grow with the company is a priority. That’s one reason why PowerChord has been diligent about implementing a unique organizational culture that involves staff from all departments in high-level decisions.

“I want to hire people who are smarter than me,” Tucker says. “What I’ve found is that great ideas, whether related to products or strategy or anything else, don’t always come from your top dozen executives. They come from people who are out there facing the customer, who understand the customer and deal with them

Proving the theory, Tucker involved some 30 employees outside PowerChord’s C-suite in the firm’s 2019 strategic planning sessions. That means hundreds of ideas can be brought forward. Then, through a distillation process, the sessions will produce a few key companywide strategic initiatives, as well as department-level goals ripe for execution.

Tucker, in the process, balances pushing staff with realistic expectations. “We’ve got to challenge employees, but we’ve also got to guide them,” he says. “As employees grow and mature, and as the company grows, you can start taking on more things and still not have plates hit the floor.”

Employee empowerment is also a major part of PowerChord’s culture. Company policy allows for a generous amount of paid time off, for one, and managers are instructed to be tolerant of mistakes. “You have to be able to accept good news and bad news equally quick,” he says. “I’m a huge believer in that because if you’re not out there trying, you can say, ‘Well, I’ve never had a failure.’ But if you say that, you’ve never pushed yourself and you’ve never really tried.”

(This story has been updated to clarify that PowerChord does not offer unlimited paid time off to employees.) 

Ballast Point Ventures Announces Majority Recapitalization of YPrime

Tampa, FL – February 7, 2019

Ballast Point Ventures II, LP (“BPV”) is pleased to announce that Flexpoint Ford has led a majority recapitalization of BPV portfolio company YPrime, a global leader in cloud-based eClinical solutions. Ballast Point Ventures II has retained a substantial minority stake in the Company, and BPV Partner Matt Rice will continue to serve on the Board.  BPV II originally invested in YPrime in 2013 to help the Company grow its sales and marketing teams and further enhance its technology platform with additional product offerings.  BPV’s investment facilitated the Company becoming a premier provider of electronic Clinical Outcomes Assessments (eCOA), a large and rapidly growing segment within the eClinical landscape.

“When we decided to raise our first round of outside growth capital in 2013, we knew the Ballast Point Ventures team was aligned with our vision for YPrime and would be a great partner as we scaled the business,” said Shawn Blackburn, co-founder and CEO of YPrime.  “We are grateful for the leadership and guidance that Matt and the team at BPV have provided over the years, and we are excited to continue our partnership with BPV as YPrime expands.  The new investment from Flexpoint Ford will allow us to accelerate our growth of technology solutions across global clinical trial operations and will provide us with additional strategic resources and capabilities to support our continued rapid growth.”

Matt Rice, Partner at BPV, remarked, “At YPrime, we saw the opportunity to partner with a tenacious and innovative management team operating in a large, rapidly growing industry undergoing fundamental change.  Shawn and the YPrime team made the right investments in both people and technology and have positioned the Company as a leader in the eCOA market.  We are proud to support YPrime in this next chapter, and we look forward to the Company’s continued success during our partnership with Flexpoint Ford.”

About YPrime

Founded in 2006 by Shawn Blackburn and Jaime Cook, YPrime provides innovative software solutions and consulting services to pharmaceutical, biotechnology and life sciences sponsors, clinical research organizations, research sites and patient users to enable efficient and collaborative clinical trial data collection and information management. Data services tools eliminate data silos and help sponsors bring together fragmented clinical research data into contextual and actionable information. For more information, please visit www.yprime.com.

About Ballast Point Ventures

Ballast Point Ventures, headquartered in Tampa, Florida, is a later-stage venture capital and growth equity fund founded in 2002 to provide expansion capital for rapidly growing, privately owned companies, with a particular emphasis on companies located in Florida, the Southeast and Texas. The BPV partners have more than 80 years of combined experience investing in and building high-growth companies in several industries, including healthcare, software, technology-enabled business services and consumer. BPV has $360 million under management across three funds and seeks to make initial equity investments ranging in size from $4 million to $10 million. For more information, please visit www.ballastpointventures.com.

About Flexpoint Ford

Flexpoint Ford is a private equity investment firm that has raised more than $2.3 billion in capital and specializes in privately negotiated investments in the healthcare and financial services industries.  Since the firm’s formation in 2005, Flexpoint Ford has completed investments in more than 30 companies across a broad range of investment sizes, structures and asset classes.  Flexpoint Ford is headquartered in Chicago, Illinois. For more information about Flexpoint Ford, please visit www.flexpointford.com.

Jeff Vinik’s deep dive on stocks, startups and ‘Florida man’

Source:  St. Pete Catalyst

By:  Margie Manning

Drew Graham (left), managing partner, Ballast Point Ventures, interviewed Jeff Vinik at the Florida Venture Capital Conference. (Photo credit: Stuart Rudolph, ScaleUp Executives)
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Jeff Vinik opened up about getting back into money management, his investment philosophy and the infamous “Florida man” during a candid interview at the Florida Venture Forum’s Venture Capital Conference.

It was the first public interview Vinik has done since announcing earlier this month he would relaunch Vinik Asset Management, a fund he ran between 1996 and 2013.

Vinik, who owns the Tampa Bay Lightning and is partnering with Cascade Investment on the $3 billion Water Street Tampa development, became a well-known name in the investment community when he managed the Fidelity Magellan Fund in the mid-1990s. Vinik — who described himself as “relentless”—  said he still spends five or six hours a day reading Wall Street reports.

“I love it so much I can’t stop doing it,” Vinik told Drew Graham, managing partner of Ballast Point Ventures, during the interview. “I don’t put many trades in, but I follow companies. Today is the busiest day of earnings season. There will be 300 companies that will report earnings today and from my analysts I’ll get Wall Street research on every one of them. I’ll spend 10 seconds on some,  two minutes on others, looking for ideas.

“I’ve been doing that for the last two years and I thought, as long as I was doing all this work I might as well get paid for it.”

The market has shifted from active money management to passive management and computerized trading strategies. Vinik said he sees opportunity in active management.

“The story that I’m telling is that active has underperformed for so long and competition has decreased, that we are now finally at the time for active to outperform passive and I’m going to be taking advantage of that. I don’t really believe that,” he said. “I actually think passive will still outperform. I think the human emotions of greed and fear are every bit as strong as they were 20 or 30 years ago. I see hedge fund managers making the same mistakes, buying high and selling low … but reading so many hours a day like I do and having people feed me information, like a point guard in basketball, and being such a generalist, I think I can make it work for me, but I’ve got to prove it.”

He described his investment philosophy for public companies as simple — buy good companies with good earnings and good management. He’s industry agnostic  but singled out Software-as-a-Service as a hot sector right now.

Vinik also has been active in private company investing, including putting money into local startups such as digital health firm Peerfit and educational technology company Knack. He’s also backing Embarc Collective, a downtown Tampa hub that will bring together entrepreneurs, venture capitalists and other funders, and academic resources in one space.

“We want to make it as easy as possible for entrepreneurs to get to the next level. Many won’t but some will,” Vinik said.

Vinik – who has called on everyone in the area to be an evangelist for Tampa Bay — said he was speaking to a group of high school students a few years ago and was surprised by how many of them said they wanted to leave Tampa after graduation.

“That was like a light bulb going on. How do we keep talent here and attract talent, which I believe we can. It’s education, it’s getting this entrepreneurial movement. It will build on itself as we go along. It’s still early, but we do have momentum.”

Florida traditionally has been better known for tourism and for “Florida man,” a Twitter handle and a euphemism for weird news that comes out of the state.

“There’s an Arkansas man. There’s a Texas man. But it’s the Florida man that’s getting published every day … We’ve got to do a better job of getting the word out,” Vinik said. “I moved from Boston and it’s fantastic here … People don’t know what they’re missing.”

He predicted growth in Florida’s business community and the venture industry would outpace tourism over the next 20 years.

He touched on a couple of other topics in response to audience questions.

Sports. “If sports were a stock, it wouldn’t be the first stock I would buy.” That’s because young people spend less time playing and watching sports than they used to, as the internet has captured more of their interest. He has an investment in an e-sports company, Team Liquid, and said he’s bullish on that investment.

Attracting entrepreneurs to the area. It’s key to build critical mass, Vinik said, so that someone moving here from out of town knows there’s a fallback to go to if their venture fails. “The type of people we attract are early adopters,” Vinik said. “Tampa Bay is not Miami, which has blossomed and exploded. I’d like to think we have that ahead of us. People who are the early adopters come in and want to be part of that movement, as do I.”

© 2019 Ballast Point Ventures. All rights reserved.