Lessons in Generating Revenue and What Angels Want
BY Nitasha Tiku
Lessons in revenue generating from an unapologetic airline CEO. If you've seen the Spirit Airlines ad depicting a 30-something man in bed with his friend's mother, you know its new slogan: "You think that's low? Spirit Airlines fares are even lower." Under CEO Ben Baldanza, reports the NYTimes, the no-frills airline has made keeping costs down and scrounging for revenue its full time business. Customers may fill message boards with complaints, but for one-way flights as low as $9, Spirit isn't changing its policies: charging customers for everything from water on flights ("Where else will you buy water at 35,000 feet?" says Baldanza) to seat selection to checked baggage—and dispensing with amenities like TV screen or receptionists (instead a sign reads, "This is a self-service reception area, saving 2 cents per customer."). To top it off, every surface in the 145-seat planes can be leased by advertisers. Yes, folks, even the sick bags. Read Inc.'s Q&A with another low-frills airline exec, ex-Jetblue CEO and Azul airline head David Neeleman
Angel investors now favor smaller deals. According the University of New Hampshire's Center for Venture Research, angel investments in U.S. start-ups totaled $19.2 billion in 2008, a decline of 26.2 percent. But, more than 55,000 start-ups received funding from angel investors last year, which represents only a 2.9 percent drop over 2007. Bottom line: angels are still investing, but deals are smaller and harder to come by. In case you missed it, we compiled a list of some of the nation's best angel groups here.
Did Wagoner deserve to go? News that the Obama administration has pushed out General Motors CEO Rick Wagoner is dominating the news this morning--and sending public markets into a tailspin. The Wall Street Journal details the automaker's woes--it's been unprofitable since 2004 and faces an uncertain future--and suggests that the automaker make end up in Chapter 11 Bankruptcy. That possibility, which looked remote just a few months ago, was called by a number of Inc. readers back in 2006, in an article entitled "How Would You Fix General Motors?" (Malcolm Bricklin, the car entrepreneur who introduced Americans to the Subaru and the Yugo, also recommended ditching dealerships and brands and renegotiating with unions in bankruptcy court.) What do you think about the government's ouster of Wagoner? If you were running GM today what would you do?
Fuel from pond scum. Of the 60 "algae start-ups" in the U.S., Sapphire Energy is one of the most promising, says CNN Money. The company successfully used its algae oil fuel on a Continental Airlines flight in January, as a 2% blend. But the company owner, a molecular biologist whose worked on two start-ups before, says that he's not really interested in making an additive. He thinks that algae is the new green fuel of the future.
How the tobacco tax increase will affect the small companies. On April 1st, the largest single increase in the federal tobacco tax will take effect: cigarette tax will go from 39 cents to $1.01 per pack and tax on cigars will go from a nickel to 40 cents. NPR's Morning Edition talked to cigar manufacturers (many of them run by immigrant-run) in Tampa's Ybor City, noting that two-thirds of cigars sold in the U.S. are made in Florida or imported through the state. Eric Newman, president of the J.C. Newman Cigar factory, says, "This is our life. Shame on Congress, shame on our government for trying to put us out of business. In the days they are offering $25 billion bailouts, we don't want a 25-cent bailout. We just want the government to leave us alone to run our business the same way we've been doing it for 114 years."
A social network based on net worth. While other "elite" social networking sites already exist, the WSJ reports that affluence.org has mastered the art of separating the wealthy from the merely aspirational. They search public records for details like home prices and liens to do their best to verify that applicants have at least $3 million in net worth or at least $300,000 in household income. The site owner says that the site does have a revolving door—nowadays, they're kicking out 50 or 60 people a day.
What they used to teach you in Stanford Business School. Portfolio's Felix Salmon posts an email from a Stanford MBA (circa 1972) on the seven principles he learned in b-school. Among the lessons: "Always ask what can go wrong" and "Remember that any damn fool can compute an IRR or DCF. The trick is to find a business that can return 20% after tax, understand its critical indigenous and exogenous variables, and then run it so it meets its return target." Back in the early 70's, notes Salmon, b-school grads were still expected to go into business. As MBAs flocked to finance instead, schools adapted their curriculum. Salmon predicts that we might see a swing back to the basics, but wonders if those principles will stick.
Another entry in the electric-car race. Less than a week after Tesla's releasing plans for the Model S, Malaysia's national car company, Proton, and a Dutch-based star-tup (ironically named Detroit Electric) have signed an agreement to produce a zero-emissions sedan for the European and US markets, according to an article in Newsweek. The fully-charged car will have a range of 150 miles, a top speed of 120 mph, and it'll cost between $23,000 and $33,000. Detroit Electric says the cars will hit the market early next year.
Reporter NITASHA TIKU covers technology, finance, green business, and social entrepreneurship for Inc. magazine and contributes to the staff’s daily links blog. Her work has appeared in New York magazine, The Villager, Chelsea Now, and on nymag.com. She lives in Brooklyn, New York. @nitashatiku