A new chapter of life has begun for the Paulson household. Both Micah and Ady are in school full time, marking the first time in ten years that Karine and I haven’t had a child at home during the day since Micah was born in 2012. Our children are also becoming more independent for their basic needs, and their personalities and strengths are shining in new ways. Karine is discovering new hobbies as she has some breathing room for the first time in years. My work is becoming more focused with renewed attention on MarketBeat’s day-to-day operations. I am also trying to limit the number of distractions that work their way into my professional life. As we enter a new era for our family, here is my personal and professional update for the fourth quarter of 2022:
After traveling to Florida, Missouri, and Wisconsin this summer, we ended our summer by taking a family trip to southern California. We stayed at the Ritz Carlton in Laguna Niguel and went to Legoland and the California Science Center. We really enjoyed the area, the weather, and the chance to get away before school started. We will probably take a family trip to Las Vegas sometime this fall but haven’t booked it just yet.
Speaking of school, our daughter, Ady, started Kindergarten at Discovery Elementary School last month. We were elated when we found out that she would have a full-time educational assistant (EA) that helps her in the classroom. School is going as well as we could have hoped for given her unique developmental challenges. Micah started fourth grade this fall and turned 10 years old last month. He’s already made some new friends in his class this year and seems to be doing well in school. Micah also recently learned to use the DoorDash app and has already used it to order a meal for our family.
Tim Weelborg and I had the opportunity to present at Prairie Capital Summit up in Fargo on September 14th. I plan to travel to Las Vegas later this month for Rhodium Weekend, which I have gone to every year since 2014. MarketBeat employees and their spouses will be heading to Orlando for our first-ever company retreat this month. We plan on doing a private tour of Hollywood Studios and Epcot during their food and wine festival. Later in the fall, I plan on participating in the Emerging Prairie Founder’s Retreat up in Detroit Lakes, MN. Last year I was able to be a small group leader, which I will do again this year.
It’s a bad year for the financial publishing industry. It feels like there’s blood in the streets. Between this year’s stock market correction and ongoing economic uncertainty, many of our advertisers are seeing 30%-50% year-over-year revenue declines. One major financial publishing company recently laid off 110 of their 300 employees. Every week, we hear from someone who was recently laid off in our industry looking for a job. People are pulling money out of their brokerage accounts, and they have no need for investing information services if they are no longer investing.
MarketBeat is, thankfully, more resilient to economic headwinds than some of our advertisers are, primarily because we can easily shift our focus and promote products and services that are converting well in today’s market. We are currently forecasting top-line revenue of about $23 million, which will be down 10% year over year. We have slowed down on our hiring plans and reduced some of our less profitable advertising, but we have not otherwise had to make any meaningful budget cuts. We expect to remain where we are revenue-wise until the market sees a sustained recovery.
Our business focus this summer has primarily been on search engine optimization (SEO). We are updating our evergreen content pages and have created dozens of new pages to increase our footprint in search engines. We revamped both our company profile pages and cryptocurrency pages to display information in a more helpful format. We launched a new co-registration advertising platform so that we can sell co-registration leads directly to our advertisers. We continue to work on planning for our new office in the Cherapa II project. We also completed our first-ever financial audit, which was a helpful activity given our rapid growth over the last decade.
MarketBeat continues to pick up more recognition, both locally and nationally. We made the Inc. 5000 list for the seventh consecutive year. Silencer Central, another Inc. 5000 company, even had me out to speak to their team about how MarketBeat continues to hit the Inc. 5000 list year after year. The New York Post, NBC News, and Fox Business recently mentioned MarketBeat in a story about Bed Bath and Beyond. We have also inked several new syndication deals that allow MarketBeat content to be read on sites like NASDAQ.com, Entrepreneur.com, Investing.com, and Benzinga.com.
Venture Capital and Angel Investing
I continue to be impressed with the quality of venture capital deal flow that Homegrown Capital is finding in the region. We announced our first investment, Soiltech Wireless, this summer. We invested in a B2B software-as-a-service company but can’t discuss it publicly yet since the company has not completed its fundraising round. We have a term sheet out on another deal and are actively evaluating several other investments. Our goal is to invest $4 to $5 million each year so that we can fully deploy our first fund in 3-4 years.
Falls Angel Fund III continues to hear pitches from startup companies looking for angel investments. It invests in earlier-stage companies than Homegrown Capital, which allows me to participate in both funds without too many conflicts of interest arising. Ultimately, I do believe Homegrown has the better venture model because it invests in technology startups after they have achieved product-market fit, and it does not have the same geographic constraints that Falls Angel Fund has. That said, I am fully committed to the success of Falls Angel Fund III and making sure it has a diverse portfolio of high-potential angel investments.
Commercial Real Estate Investing
On the real estate side, we currently have eleven(!) different projects under construction in Sioux Falls and Rapid City. We recently closed on a loan to build the second phase of The Brixx project at Marion Ave. and Benson Road in Sioux Falls. We also recently closed on a loan to build a strip mall on the Tea Exit, which will include some welcome retail additions to Tea (stay tuned!). We regularly have new apartment units coming online at City’s Edge, The Brixx, and Edgewater Villas. We only have a couple of more projects in the hopper that we haven’t secured financing for yet. With rising interest rates and construction costs, it will be tougher to find new projects that make sense for the next couple of years. We are perfectly okay with this, because we have our work cut out for us to wrap-up and stabilize the projects that we have under construction now.
As demands for new capital have waned from real estate projects, I’ve been investing more in dividend stocks and municipal bonds. This year’s market decline has created a nice entry point for many popular dividend stocks such as AT&T, Exxon Mobil, Target, Citigroup, and 3M. I was able to lock-in 4-6% dividend yields in many companies when the market had significant dips in June and July. Overall, I see myself trending toward more stable, lower-risk investments in the future, such as dividend stocks, municipal bonds, and real estate and away from higher-risk investments such as cryptocurrencies and pre-revenue startup companies.
1 Million Cups – End of an Era
When John Meyer first started 1 Million Cups in Sioux Falls in 2014, the goal of the event was to unite and connect entrepreneurs in the community. We were largely successful in this endeavor, creating hundreds of peer-to-peer connections between entrepreneurs. There are now multiple communities of entrepreneurs in the city that meet on a regular basis through Startup Sioux Falls and other peer-groups. The need for a weekly in-person entrepreneurial touch point on Wednesday mornings has become less relevant over the years as new communities, resources, and touchpoints have been created in the community.
During our summer break for 1 Million Cups, we took a step back and asked ourselves what we wanted the future of the event to look like. We knew that the format and focus of the event would need to change, because it had largely become a community event for everyone and was no longer well attended by small business owners and entrepreneurs. We ultimately decided that the event had served its purpose, that its time had come and gone, and founders are better served by other resources in the city.
John and I had a beer to toast the end of 1 Million Cups in our city in September (see picture).
The number of philanthropic and community investment projects MarketBeat could get involved with is endless. This year we have been asked to invest in new parks, community art, medical research, leadership training courses, new facilities for non-profit service providers, community events, and several other worthy causes. We decided to take a step back to rethink how we do our philanthropic work in the community. MarketBeat is working with Maximizing Excellence, a strategic planning and non-profit consulting firm, to analyze our company’s giving patterns, help us develop a process to evaluate requests, and better communicate to the public what types of causes we would like to support. We hope to wrap-up this work by the end of the year.
In addition to our major project with Startup Sioux Falls, we have a few smaller-scale initiatives in the works. We sponsored several concerts for Levitt at the Falls this summer and hope to work with them more closely in the future. The MarketBeat Holiday Plaza will be returning for a second year in Downtown Sioux Falls this winter. We are also working on projects with both the Washington Pavilion and the Sioux Falls Area Arts Council, but it’s too early to announce details yet.
This covers all the major developments for the last quarter that I can think of. Stay tuned for more updates next quarter.