By Tom Garland, MBA 15
- The company’s free cash flow has been negative since 1994, owing to poor sales and a highly capital-intensive industry
- Significant declines in ROIC
- Opaque ownership and incentive structure
By Tom Garland, MBA 15
It’s a common student dilemma: you’ve got a full-time offer post-graduation, but you still have several more months to finish your degree. And you’re facing the up-front costs of relocating—before your first paycheck or signing bonus hits your account.
What do you do? Often, your only option is to pile more credit card debt on top of your student loans, and bite the bullet on the high fees.
Enter WeFinance, a crowdfunding startup co-founded by Willy Chu, MBA 15, that launched last week. Though crowdfunding is becoming a crowded space, Chu acknowledges, WeFinance is the first platform focused on truly peer-to-peer loans.
“Many students are paying seven to 8 percent on their student loans—even higher if you’re international—and they have living and moving expenses,” Chu says. “They’re low-risk borrowers but their credit scores don’t reflect that, and they can’t refinance until they have more credit history. Meanwhile, a peer lender in these students’ network could earn four percent or more on their extra savings.”
WeFinance launched with two critical resources. First, it has a software platform built by co-founder and CEO Eric Mayefsky, a Stanford econ PhD grad and ex-Facebook product manager who spearheaded the concept. This platform fully automates disbursements and repayments between borrowers and lenders, allowing both parties to rest easy that payments are made on time. Second, WeFinance has been tested by Chu’s network of fellow Haasies, a dozen of whom have signed on as guinea pigs seeking funding.
“My classmates have been incredibly supportive, willing to try out the product,” he said. “Faculty members have provided core guidance.”
Ton Chookhare, MBA 14, used the platform to refinance some of his higher-interest student loans, raising $5,000 in just a few weeks and lowering his interest rate from 8 percent to 4 percent. He already had accepted an offer with Kaiser Permanente, and was working on a side project involving custom suits made in his hometown of Bangkok, Thailand. “I think many people will be surprised at how willing people in their network are to offer financial support, especially when they’re getting much better returns while supporting someone they know and trust,” he says.
Chu says when he came to Berkeley-Haas, he thought he might end up working for a startup—but had no intention of launching his own. His thinking evolved while taking Entrepreneurship with Prof. Toby Stuart and Lecturer Rob Chandra. His new path began last summer when a Stanford MBA friend saw an email from Mayefsky seeking help with the venture. After a few months of working well together, Chu—who previously worked at Credit Karma and Kiva—became a co-founder. He’s focusing on marketing, partnerships, and growth while Mayefsky develops the technological infrastructure.
“I’ve benefitted from starting this in my second year, after I had a strong base, and I’ve been able to piggyback on my coursework and lessons learned from my peers who launched businesses last year,” he says. “In particular, New Venture Finance with Asst. Prof. Adair Morse has been useful.”
Chu’s goal is to expand WeFinance to 40 schools within a year, beginning with Stanford, Harvard, and Wharton. In addition to MBAs, the company will focus on law and other top master’s and undergrad program students.
Read more about WeFinance in TechCrunch.
On Feb. 27, a group of 20 Berkeley-Haas MBA students from the Investment Club trekked to Omaha, NE, to meet Warren Buffett. Every year Mr. Buffett invites students from MBA programs around the country to tour some of the Berkshire Hathaway portfolio companies and participate in a two-hour Q&A followed by lunch.
In a guest blog post, two students share what they learned from the legendary Mr. Buffett.
By Ben Ferrara and Sulaiman Al-Bader, MBA 2015
If we had to choose our Top 5 favorite nuggets from the many that Warren Buffett shared with us, it would be these:
#5. Some people go back and relive their youth by finding old Playboys; I buy old Moody’s reports.
#4. Risk is losing purchasing power—NOT volatility.
#3. Always surround yourself with people better than you are.
#2. Study success and failure through the biographies of leaders like Sol Price and Sam Walton, who didn’t care about money but about being the best and winning.
#1. Success comes from thinking and by creating time to think without meetings, committees and PowerPoint.
But there’s so much more to say…
It’s a brisk 8 degrees Fahrenheit and far from California 20 Berkeley MBAs are embarking on an adventure in Omaha. This special day includes company visits at Nebraska Furniture Mart, Borsheims, and Oriental Trading Company. Yet all of us are laser-focused on catching a glimpse of, inspiration from—and yes, a group photo with—the Oracle of Omaha. Warren Buffett is one of the few living and actively working legends in the game of finance.
En route to Berkshire Hathaway headquarters in Kiewit Plaza, we actively prepare for our Q&A with Mr. Buffett. We gather in a room with 160 MBAs—from Canada, Boston, and Austin—where a deep appreciation of capitalism and opportunity is brewing. When Mr. Buffett (and his world champion bridge partner, Sharon Osberg) enter the room, there is silence—and then, a feeling of warmth and familiarity when we see Mr. Buffett’s contagious smile and ever-present Coca-Cola product (which happened to be Cherry Coke).
Over the next two hours, the 84-year-old Buffett shares his wisdom on how to pick winners (both companies and people), personal models of success, how to develop a contrarian viewpoint, trends in income equality and philanthropy, and more. What makes the most impact on us is the importance he puts on picking “first-class human beings.” Mr. Buffett shares a story of meeting a Holocaust survivor who told him that whenever she makes a new acquaintance, she hears her internal voice asking: “Would this person hide me?” Her story provided a life lesson to Mr. Buffett, and now to us. He sums it up like this: “If you’re 70 years old, even wealthy, but you don’t have people in your life who would be willing to hide you in that scenario, you have not succeeded in your life, no matter how other people see you.”
Our Omaha adventure does not stop there: Mr. Buffett generously invites us to join him for lunch at Piccolo Pete’s, where we socialize with other MBAs. The two of us have the tremendous good fortune to sit with Mr. Buffett at his table, where we enjoy a plate of steak and fries, along with more of his pearls of wisdom in this intimate setting. One of these pearls is Mr. Buffett’s sharing his self-proclaimed favorite investment: GEICO. He says investing in the insurance company was a turning point for his career, and positioned Berkshire Hathaway for long-term success. He also encourages us to challenge the status quo by avoiding shortcuts in finance—for example, relying too much on third-party analyst reports—and thinking for ourselves, citing an example of exciting South Korean companies he found from a paperback book on equities.
“You’re unlikely to get great ideas from others,” Buffett tells us. This is a recurrent theme for him: thinking for yourself and following your own path, surrounded by gracious and giving people, is the recipe for success. It’s hard to argue with the sweet success of the Oracle of Omaha. As we finish our root beer floats, and leave that afternoon for Berkeley, we feel we have gained not only a renewed sense of purpose, but also inspiration about the endless possibilities we have to make a difference in this world over the course of our entire life journeys.
Big Impact in Boulder
The Win: First place in the Leeds Net Impact Case Competition in Boulder, Feb. 20-21
The Team: Akshay Yadav, Jessica Holland, Carl Olson, and My-Thuan Tran, all MBA 16
The Field: Twenty-five teams of four graduate students each, competing to solve real-world sustainability business cases
The Pitch: Our team was asked to plan the optimal coastal restoration infrastructure for a city that is facing a growing threat of erosion and severe flooding due to climate change. Our approach was to minimize costs and risks and develop a diverse capital expenditure plan to ensure long-term protection. Our solution was a three-pronged approach of green infrastructure funded by water protection taxes; earthen berms funded by FEMA grants; and wetlands protection funded by wetlands mitigation banking.
The Clincher: One thing our team kept top of mind was the Haas defining principle “question the status quo.” The solution we came up with was not a conventional way of financing similar projects, according to our research. However, we knew we needed to take a bold approach for a bold solution. We worked to mitigate the risks in our proposal, and we prepared for the tough Q&A session.
The Win: First place in the Fink Center Stock Pitch Competition at UCLA on Feb. 20
The Team: Miran Ahmad, MBA 15; Carl Choi, MBA 16; Scott Furumoto, MBA 15; and Zane Keller, MBA 15, all of the Haas Investment Club
The Field: MBA students from 10 other business schools across the country
The Pitch: Our team, “Get Shorty”, pitched a short recommendation on insurance company Assurant in the first round. Living up to iour name, we also decided to short Chinese e-commerce company Alibaba in the final round. We defended our investment thesis in front of a panel of judges, from hedge fund managers to equity research analysts.
The Clincher: While our team fielded difficult questions during the Q&A, one judge later remarked that what helped the us stand out was our ability to defend its thesis confidently but without sounding defensive.
Veteran team member Zane Keller believes that the difference came down to the team’s decision to take a controversial short position on final round stock Alibaba. “After thoroughly reviewing the macroeconomic assumptions and the underlying fundamental growth projections required to justify its lofty stock price, we knew it would be difficult to make a long recommendation.”
The Win: 2nd Place in the Rotman International Trading Competition, the largest trading competition in the world, in Toronto, Feb. 20
The Team: Master of Financial Engineering students Simon He, Yi Lu, Tanya Gupta, Tong Lu, Wontai Cho and Maoqi Wang, all MFE 15. MFE Lab Manager Charles McCutchen helped prepare the team.
The Field: More than 50 teams from universities around the world, including MIT, Columbia, NYU, Princeton, the London School of Economics, and 1st-place winner LUISS Guido Carli/University of Rome.
The Competition: Morgan Stanley Sustainable Investing Challenge
The Outcome: $5,000 and access to an impressive network of potential investors
The Team: Zach Knight and Chad Reed, both MBA 15
The Field: More than 220 MBA students from 39 institutions across the globe submitted applications. Ten teams were selected and presented at Morgan Stanley headquarters in NYC.
The Challenge: The challenge seeks outstanding proposals for novel investment strategies to meet some of the most pressing global challenges. As the world’s population approaches 9 billion people by the year 2050, the challenge of meeting human demand for scarce global resources will intensify. Finance has a key role to play in meeting this challenge. Moreover, an increasing number of institutional investors are seeking sustainable investment opportunities for their portfolios. Teams are encouraged to think beyond venture capital fund vehicles and strategies.
What made them winners (in the team’s own words): We tackled a challenge no other team addressed — lending to small-scale, sustainable U.S. fisheries — in an innovative and creative manner. Our financial instrument acumen was second to none, and our entertaining presentation told a compelling personal narrative.
The Haas Factor: Pitching a new and creative financial instrument, as exciting as that can be for us finance nerds, really needs a humanizing story to connect with a larger audience. By focusing on an individual who will both benefit from our work as well as provide returns to our investors, storytelling became an crucial element of our success as we were the only team to employee this strategy. Our story focused on Larry Collins, a small Bay Area crab and sole fisherman, who has been left behind by rights-based solutions to fishing.
Another key Haas value that was stressed throughout our core classes was that feedback is a gift. We pushed all our classmates, professional contacts, and even first-round judges for feedback. This was certainly helpful as we entered the final round of Q&A.
The Haas Impact Investing Network: While Chad and I are not members of the network, our classmates who are involved in the Haas Impact Investing Network were able to provide meaningful feedback throughout the process, including help with our final pitch. Their feedback was essential to our last-minute final touches, pushing us with some tough questions (as the Q&A part is usually the make or break with these competitions) and providing general feedback on our idea.
Most memorable experience from the competition: We saw great speakers, met interesting contestants, and got excellent presentation experience, but the most memorable part of the competition was seeing a room full of more than 200 people at a major Wall Street bank brought together by an interest in impact investing. We both very excited to see that our passion for the impact investing space, which is a key reason we both choose to come to Haas, was shared by so many.
The Competition: Origami Idea Challenge by Origami Partners LLC
The Outcome: Five Haas students beat out teams from Stanford, UCLA, and the University of Texas to win their division and $10,000. They now face seven other finalists for the $50,000 grand prize, to be announced May 16.
The Team: Evening & Weekend MBA students Carmen Maxim, Iris Korovesi, Andrew Masalin, Paul Roberts and Joel Morehouse, all MBA 2016.
The Field: The competition attracted 117 entries from students and professionals around the world. For the final round, Haas will go head-to-head with Dartmouth, University of Virginia, University of Nevada-Reno, Northwestern, Columbia Business School, and the Indian School of Business.
The Challenge: Origami Capital Partners is looking for a unique investment opportunity that is large enough to absorb $100 million of capital and last from one to seven years. Investments can include any asset class or geographical location.
What made them winners (in the team’s own words): We won because we were a diverse team with extensive international expertise and a wide range of industry experience: : investment banking, financial modeling, market intelligence, pricing analytics, technology, architectural engineering, and real estate. Our diverse knowledge and common interest in finance allowed us to come up with various ideas across different sectors and regions, before narrowing it down to the idea that we all felt provided the highest potential upside, using our value investing lenses.
The Haas Factor:
For this competition we questioned the status quo, by pushing ourselves to come up with an idea that ignored geographical boundaries and conventional investment structures. Despite our diverse backgrounds, we all engaged with this competition in an effort to learn from our peers about investing. Our confidence in our idea allowed us to put in long hours of research to come up with a solid investment thesis.
Where your idea/strategy came from: We looked for illiquid investments opportunities that would have long-term value, but are currently undervalued. Our team’s experience with real estate in the US allowed us to evaluate undervalued real estate opportunities in other regions and to identify the structure that would best fit Origami’s investment mandate.
Your most memorable experience from this competition:
Reading the email that we had made it to the last round!
Experience in M & A due diligence for a “Big 4” firm sparked Landon Mizuguchi’s interest in getting involved with a wider array of financial transactions. “After speaking with friends and soon-to-be classmates, I knew that investment banking was a perfect fit–I could develop skills in valuation and business strategy, and continue to work on M&A transactions, while also advising clients on IPOs, takeover defenses, debt offerings, and all things corporate finance.” This summer he interned in the San Francisco office of a global investment bank.
Student: Landon Mizuguchi, MBA 14
Thrilled to be with this investment bank because: “This firm has such a strong culture of promoting teamwork, doing right by clients, and adhering to a set of business principles that resonate with me personally. And the people are quite similar to those at Berkeley-Haas: insightful and impressive, yet pleasant and down to earth.“
Can’t believe he’s getting the chance to: Participate in live M&A negotiations. “This experience provided me with invaluable insight into the tactical approaches and preparation necessary to execute large-scale transactions.”
New skill applied: Financial modeling. “Over the course of the internship, I worked on several financial analyses, including discounted cash flows, merger consequences, comparable companies, and leveraged buyouts.” He says his Corporate Finance and Mergers & Acquisitions courses provided the theory and context necessary to conduct these analyses in practice.
Banking Geeks Out: “Our SF office periodically holds ‘Geek Out’ sessions where an employee presents the art or science behind an interesting topic. One Managing Director (“MD”) shared his secrets behind earning/using Frequent Flier Miles, and, during our internship, summer analysts/associates taught the office about subjects ranging from unique forms of electricity, to the art and history of DJ’ing.”
Advancing career goals by: Learning. “I am working on interesting transactions with incredible people who have loads of experience, so whether I remain in investment banking or pursue another path, this internship has been wonderfully rewarding for my career.”
From meetings with the CFO to football matches, how an internship with Azul Airlines in Brazil is expanding one student’s understanding of corporate intricacies and national culture.
Student: Josh Polsinelli
Interning with: Azul Airlines, Barueri (São Paulo), Brazil. “I’m working with corporate finance to help analyze potential investments and the effectiveness of existing projects. ”
Excited because: Azul founder and CEO David Neeleman also co-founded JetBlue. “I’m amazed at what JetBlue did to the airline industry in the US in the early 2000s, shaking up a largely stodgy industry and being profitable in doing so. And, by living in Brazil during a historic time, I’ve been able to appreciate both the country’s excitement (forthcoming World Cup and Olympics) and its challenges (massive protests) and understand why Brazilians are now making themselves heard.”
Getting the chance to: See Brazil. “Free flights are definitely the top perk of working for an airline so I’m traveling to different parts of the country almost every weekend. Work is pretty amazing too – Azul is a fast-growing company on the verge of some big things and I’m able to work closely with the CFO to develop projects that are going to have a real impact.”
Well prepared, not winging it: “A highlight has been putting together and presenting a competitive analysis showing where Azul is succeeding and where it can improve as measured against some of its peers. For my presentation to a 30-person group that included the CFO, I drew on things I learned in Leadership Communication. Effective non-verbal communication is critical when making a presentation in English to a largely Portuguese-speaking audience! Corporate Finance has been essential as well; I’m applying lessons I took from that class almost daily.”
Inside Azul: “For a company with 10,000 employees, Azul retains a small-company feel where impromptu meetings and office drop-ins are common. Even the senior team here is incredibly open–I’ve had the opportunity to sit with many of the officers for a casual conversation or a chat about the aviation industry.”
Advancing career goals by: “Getting hands-on experience at a fast-growing consumer-focused company. My time at Azul is helping me transition from a career in financial services to a role where I’m able to better understand the intricacies and operations of a company.”
Student: Ronan Kennedy, MBA 14, Evening & Weekend MBA Program
Then: Production Manager, Topcon Positioning Systems
Now: Associate, JPMorgan Chase (JPMC).
What he does: “I’m a project manager for the design of JPMorgan and Chase’s mobile apps. We’re also working with companies like Square and a slew of Silicon Valley startups to connect their innovations in e-commerce and mobile payments to the retail and corporate banking power of Chase. And I’m working to redesign the private banking app for JPMorgan, giving high-net-worth customers a better experience on their mobile phones.”
Excited to be: Part of the mobile payment revolution. “Magnetic strips on the back of a piece of plastic are dated and inefficient. In today’s world of hyper-connectivity, there must be a better way to connect a consumer’s digital wallet to the retailer/business’ digital accounts.”
Why JPMorgan Chase: “I thought this role would be a great way to bridge my experience in operations with my desired future in finance. It also allows me to participate in an emerging use of technology and potentially impact the commerce of the future.”
Critical career planning tools: “Career services took me in as an ‘explorer’ and helped transition me into a targeted career ‘switcher,’ advising me to take it one switch at a time. Resume reviews, mock interviews, and story-telling sessions helped me create a unified message.”
Networked: While doing research for internal projects, I have reached out to several alums in the Private Banking and Investment Banking areas of JPMC, which streamlined my research. We’re not JPMC people trying to talk business, but rather two Haas alums chatting about ‘what if…?’ The common foundations allows for quicker, more frank conversations, and an immediate friendship.”
Life Lessons: “‘Show up and be present!’ from Mark Rittenberg’s Leadership Communication course. Connect with co-workers, share stories and experiences, and have a dynamic voice on teleconferences to help reduce the perceived distance while on dreary phone calls.”