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Dave Berkus: Investing is like horseracing

As we start 2013, it is best to heed the wisdom of those who have “been there and done that” – – particularly in the financial investments and choices we make in the future. Here’s an article which came out in November 2012, in the news of the OC Register.

Dave Berkus, the former chairman of Tech Coast Angels, has 50 years of experience investing in technology companies. He currently chairs six companies and is the author of “Basic Berkonomics,” a recent collection of personal stories about how to create, run and exit a successful business.

This past week, Berkus shared his corporate war stories with several dozen entrepreneurs, investors and business students gathered at Concordia University in Irvine for Global Entrepreneurship Week

In an interview, Berkus talked about investing in Orange County, global outsourcing and the future of technology entrepreneurship.

Q. You liken entrepreneurship to horseracing, and advise investors to bet on the jockey instead of the horse. How do you spot a good jockey?

A. That’s intuition. That is pattern matching. When you find somebody whose enthusiasm is so great, whose idea is so passionate even if the idea is wrong “you’ve gotten the first stage right. The second thing is somebody who can think on their feet. If you find that combination in somebody who is willing to take enough coaching, you have the typical qualities of a great entrepreneur. And if that first idea doesn’t work, and it never does in the way in which it’s presented to you, if you have those three things for an entrepreneur, you can make something out of that person and the company that results.

Q. How is investing here in Orange County different than investing in Silicon Valley?

A. We have a smaller pool of start-ups to filter, and often the hottest deals are bid up to astronomical valuations in the Valley. We tend to see better priced and more traditional deals in medical technologies, bio-tech, entertainment, mobile and big data.

Q. We might see a hike in the capital-gains tax next year. If that happens, are there any parts of your book, “Basic Berkonomics,” that should be modified?

A. Entrepreneurs will not change their behavior with any tax hike; so I have nothing to update or change in any of the three Berkonomics books.

Q. From an investor’s perspective, what kinds of products or services should tech entrepreneurs focus on right now?

A. This is the beginning of the big data era, where real time decisions will be made from mining vast pools of data to find a single customer’s buying inclination at the right time and place to increase favorable purchase decisions. Coupled with big data, the overwhelming trend toward use of mobile devices changes the way sellers reach, and buyers respond, to offers that can’t be refused.

Q. Is programming still a profitable area of study?

A. Still very profitable. If you go to West Los Angeles today as a programmer, you’re in demand almost more than industrial engineering was during the space era, so programming is still a very highly paid profession, very much in demand in areas of Los Angeles.

A. Should entrepreneurs employ foreign talent and resources?

A. Young entrepreneurs have to, and that’s kind of a shame because now you’re ignoring some local talent, but you’re really dividing that talent. The most expert talent is what you keep locally and pay the most for, but everything else has been going to the lowest bidder, which unfortunately means that the middle market is being dissolved. The answer is yes, I am very much in favor of doing that because these tiny businesses can’t raise enough money, can’t get to profitability fast enough. In the end, the economy here gains, even though we are giving away some of the jobs at the very early stage.

A. What technology or gadget is most important in your life?

A. For me: voice is down, text is fleeting, and well-filtered and sorted emails define my business communication. So a 4G iPad becomes my communication, data retrieval and entertainment device of choice when traveling, even feet away from my desk.

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Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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