Using Social Media Tools for M&A Due Diligence

It occurred to me that due diligence efforts are not keeping up with technology. There is an enormous amount of generative content on the social web that can help with understanding customer sentiment. Tapping into this real-time collective intelligence provides unique insight about the value of a brand. Whether the brand is a chain of restaurants,  a single unit, a manufacturer or retailer,  the “conversation economy” will deliver.

Here is how it works. FohBoh, a portfolio company of Bailiwick Capital, is the market leader in an entirely new category: Restaurant Social Media. They not only operate the leading and largest online community, fohboh.com, but are also a leading social web technology company. Their first social CRM product is called FohBuzz, an online listening platform that helps brands monitor and manage their brand online. It does this by using advanced web crawling technology to gather conversations and mentions taking place online. Since you can’t protect your company’s reputation if you don’t know what’s being said about it on social media sites, this is important.

FohBuzz creates a profile of your brand and maps each of your locations, which is a key differentiator of this product from other engines. The reputation management engine then crawls the web looking for mentions of your brand name by location. It can literally search millions of websites, news feeds, blogs, review sites, finds “status updates” and even searches photo sharing sites looking for conversations and mentions about your brand. Then, FohBuzz reads the conversation using natural Language Processing Technology (NLP) to understand customer sentiment from the prose. Seeking positives, negatives and neutral comments from conversations that don’t use relating systems to help understand how your brand is being perceived by the consumer. Powerful stuff, this NLP.

Next, FohBuzz filters all this noise into three primary categories relevant to restaurants: Ratings as it relates to Quality of Food, Quality of service and Quality of Ambiance. Advanced users can add additional fields to capture keywords relevant to any segment, or sub-segment. For example, if you operate a pizza chain, then crust, or sauce may be of interest as well.

The use cases are significant.

Different Applications for FohBuzz: The power and necessity for real time collective intelligence is becoming obvious. By tapping into the online conversation, you will have unique insights that can benefit your business. Knowing what people are saying about your restaurant is one thing. But, imagine other uses equally as powerful:

• Campaign Management and Analysis: This is the core FohBuzz function. How well do you serve your target market?  What is the customer experience?  How can you engage more effectively?  What is the customer need, the compliment, the complaint, the problem, the question, the crisis, the campaign effect, who and where are your influencers?

• Business Forensics. Your concept is proven and the management team is your best. You selected a great site at Main/Main. But, your new restaurant just isn’t performing. Customer behavior is one element you can’t easily control. With FohBuzz, you can go back a bit in time to uncover hidden conversations that may lead to the answer.

• Competitive Analysis. What are your competitors doing with social media? What do their customers say about them? How can you use this to your advantage? Who are their key influencers and can they become yours? Subscribing to a FohBuzz view of your competitor or a specific location, even for a short time, can provide unique insights that could affect your business.

• Variance Analysis. Measuring comparative store sales is everything. Arm yourself with the FohBuzz sentiment analyzer using natural language processing (NLP) in real time.

• Franchise System Insights. As part of your field team’s tool-box, FohBuzz will help you monitor and measure the quality of each franchisee; per unit, per region. Use this real-time data to improve relationships.

• Regional Reports. Compare regions from a marketing, communications, operations and human resource perspective. Set and measure social media and customer satisfaction metrics month over month.

For financial services firms, lenders and private equity firms in particular, should use this product as part of their due diligence efforts. Knowing what the customer thinks, in real-time, is critical to understanding the true value of a consumer brand. And, having empirical evidence that may suggest a weak relationship and can affect pricing, up or down.

• Due Diligence Use for Operators. Thinking of expanding to a new market? Are you an operator, FohBuzz enables you to access competitive intelligence and consumer insights in real time. Learn more about the market and customer behavior before you invest capital in a new market. Maybe that location you love isn’t perfect after all. FohBuzz should be added to every due diligence effort for a single unit or national chain to bring real-time customer insights to real estate, purchasing, operations, human resources departments. The restaurant brand is what the customer says it is, not what the operator says it is.

• Due Diligence Use for Financiers. Are you an investor or lender buying a restaurant or chain? FohBuzz enables you to access competitive intelligence and consumer insights in real time. Learn more about the market and customer behavior before you invest capital. Compare regions, or franchise groups. Compare markets, compare competitors and collect intelligence that may affect pricing and valuation.

For more information, connect with michael@fohboh.net

A New Venture Capital Model…’Cause This One Is Busted

Venture investing is still broken. I guess when I said this a couple of years ago I was secretly hoping it would find its way home and repair itself. Nope. Wrong.  But after all, I secretly hoped that Osama Bin Laden was just the name of a line of high-fashion women’s accessories!

Silicon Valley is in trouble.  America’s system to spur innovation and growth is in grave jeopardy.  Risk taking has become risk mitigation.  Investors are looking for you to pay them for the privilege of helping them do the job their investors hired them to do.  Is this good old fashioned American capitalism or what?

Silicon Valley is relatively robust compared to the rest of California and the country. Nonetheless, 9% unemployment is unacceptable for what has become known as “the world capital for technology innovation.” I fear greatly that that “capital” will relocate to China in my lifetime.

Silicon Valley began with a natural advantage: Stanford, Arthur Rock, Don Valentine, Larry Ellison, Sergey and Larry, Woz and Jobs. Then comes the rest of the VC pack and greed. We breed greed like no one outside of Wall Street—it is only appropriate that the sequel to Wall Street (the movie) titled Wall Street, Money Never Sleeps has been postponed for reasons that Gordon Gekko would support, to assure that the re-release of Avatar will reek in more profit for News Corp.

Smart Gen Y techies and savvy marketing folks gather here to invent, reinvent and hope for fame and fortune. When you are 22, your center of gravity for personal risk is very low. So, out here is where ideas are a dime a dozen, many still get funded for reasons other than their commercial value and promise. But, that’s the problem.  Nothing that 2/3 of the venture funds have already died, the remaining VC Community (Atkinson view) is made up largely of two camps:

Camp 1: Of the remaining funds only about 20% are actually investing. Many are happy to waste an entrepreneur’s time, in the name of due diligence. These funds are protecting their portfolio, reserving most of the available cash for their portfolio; follow on investments, in the hope that a little tweak here or there might get them some of their money back later on. No real new investing so no real growth for Silicon Valley jobs and limited innovation.

Camp 2: These used to be called “seed funds” and also used to find a way to be included in ecosystem of venture investing.  They would take early risk and reap greater reward when successful. These are now a mix of smaller funds and Super Angels—their investors are successful Tech execs with cash. These are the “flippers”, looking for “smoke” to invest, say $100,000, until there is “fire”. Then perhaps another $500,000 to support the non-business plan, no-revenue model “concept” until it can be sold to one of a few dozen companies as an R&D play, the cheaper of the “Buy or Make” decision.   But do they buy what they (larger companies with public currency) truly planned to make?  The hope is that since software has basically been invented and cloud-based APIs rule, mashing up tech-enabled ideas quickly will yield high returns. In some case it does. But what is really missing are the company builders.  Where are the jobs?  Where is the pride and passion for growth? Were is Arthur Rock?  We need him and his spirit back, not a revisit to the world of Gordon Gekko.

The feeder VC’s and Super Angels are feeding deal flow to their larger VC counterparts, who in-turn, sit on the boards who buy these APIs – I can’t really call them companies. Seems like an insider game to me. So, let’s add this up:

1. No company building in Silicon Valley, so no real job growth. The result is talent creep. People move and because of the high cost of living here, they won’t [can't] come back. Because the economy is still shaky, the companies that are growing (long past the VC stage) prefer to hire contractors rather than full time employees or to outsource work to other countries. This breeds insecurity and no benefits. Imagine sitting next to a full time employee who is doing exactly what you are. They have security, health, dental, vision, vacation, options, etc. You don’t. How does that make you feel? Less valuable? Less committed? Less vested in the success of the company that doesn’t value you and your contribution enough to hire you?

The result is a scared, unsettled workforce with perhaps, if lucky, a 12-18 month contract, because after that the government might find that they truly are employees, charge them back taxes and penalties and where would these companies be with that kind of cost structure?  Budding entrepreneurs are discouraged because they are less relevant, old and of course not forward-thinking.  The American Way?   Sure, according to Gordon Gekko.

2. Good promising companies have limited sources for capital. I was talking with a smaller VC the other day who said a company they looked at recently, had too much traction for its stage of investment and too little traction for the next level of players.   WHAT? Too much market and concept validation?  This is the kind of perverted thinking that many Sand Hill Road investors have these days. Some, not all of these funds reside in Camp 2.  This is the company that is too big to “flip” and too little to grow.  WHAT?  HUH?

I believe that revenue traction is e -v -e- r- y- t- h- i -n- g. Without it, your company just has an idea. So here, in the Valley, “ideas” get funded but promising businesses WITH traction don’t? Aren’t these the types of company’s that use capital to grow and hire people?  Isn’t this the way out of our current prolonged economic dilemma?  Isn’t this the American Way?  In the 60’s there was the concept of the “ugly American”, pretty soon, having adopted our methods, it will be the “Ugly Indian” or “Ugly Chinese”—no ethnic offense intended but these are countries who have used innovation to spur growth.

What’s the answer? Is it Arthur Rock? Longer-term investing perspectives? A new batch of VC’s that are truly interested in, well, venture investing?

In the interest of full disclosure I am the CEO of FohBoh, Inc., a promising young company that is generally not interested and generally unqualified for the venture investors.  But I am also a father, a citizen and a patriot who fears for the future of America when those who hold access to capital see the best opportunities in effectively going to Vegas and betting on “00” or looking outside our borders.

Restaurant Investment, Management, Strategic Advisory

Background
Bailiwick Capital Partners is an private investment and strategic advisory firm specializing in the restaurant industry. Our clients are institutional lenders and private equity investors, family offices, independent and chain restaurant operators, celebrity chefs, entrepreneurs, real estate developers, M&A attorneys and Investment bankers. Combined, we have over 100 years of experience in all facets of the restaurant industry in the U.S, Europe and Asia.

We walk the talk
Over the years we have created innovative restaurant concepts, developed, owned and operated restaurants on a national scale. We have operated and owned restaurants in the casual, quick casual, upscale and fine dining segments.

Bailiwick Consumer Group, LLC
We are also known by a predecessor company – Bailiwick Consumer Group, originally founded in 1991.

FohBoh.com
FohBoh.com, founded by Michael L. Atkinson, is the leading and largest B2B social-business community for the restaurant industry with more than 40,000 registered members from 183 countries. FohBoh is for employees (Front of House and Back of  House) as well as corporate staff , executives, vendors and service providers.

Social Media Community | Social Media Products and Services | Customer Insights Data

The Business of Restaurants

Bailiwick Capital Partners works with exciting, passionate entrepreneurs, investors, developers, financiers and chefs, to create, develop, operate and grow amazing restaurants. Over the years we have work with a number of clients to deliver some or all of our service. In some cases, we just connect, using our resources. In all cases, we love what we do.

For more information, please contact us.