The Growth Factor

Needham Funds' Commentary

by John Barr

In This Issue
Ekso Bionics
Adam Duritz, Counting Crows
Capt Erik Quist & Liz Quist

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John Barr
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July 26, 2013
The WOW Factor - Game Changers 

In our travels throughout the United States, we visit many public companies that are investment candidates for the Needham Funds.  We also visit many interesting people and places that inform our thoughts on leadership, technology and investing.  


In this edition of The Growth Factor, we'd like to highlight nine people, each of whom left us with the sense of "WOW" -  what they are doing is game changing!  A few of these people work in public companies, a few in private companies; one is an entertainer and one is a Marine, and the last is his spouse, who works tirelessly as an advocate for veterans.

HubSpot: Changing the Way Businesses Market
Company: HubSpot,Inc., Cambridge, MA (private)

Co-Founders Brian Halligan, CEO & Dharmesh Shah, CTO 


The founders of this growing private company, Brian Halligan and Dharmesh Shah, wrote the book Inbound Marketing.  Inbound marketing turns conventional sales and marketing upside down.  In the e-commerce age, shopping and selling have changed - a company's website needs to be a "marketing hub."  By creating really great content and helping it get found, businesses can significantly reduce their cost of acquiring and retaining customers. HubSpot's All-in-One marketing suite helps businesses create and distribute content via websites, email and social media, manage leads and analyze web traffic and see which sources are generating the best leads.  These capabilities are provided as SaaS (software-as-a service).  We especially like their Marketing Grader tool.  It is free and provides a report on how well a company is doing with online marketing. 


HubSpot had revenue of $52MM in 2012 and revenue growth of 82%. Venture investors include Google Ventures, Salesforce, General Catalyst, Matrix Partners, Scale and Sequoia Partners. 
CarMax: Changing How People Buy Cars 

Company: CarMax, Inc. (KMX), Richmond, VA 

Tom Foillard, CEO   


We visited CarMax's flagship store and headquarters in Richmond, VA, and met with CEO Tom Foillard. CarMax's management and employees are driven (pun intended) to change the way people buy used cars. Their cars are up to four years old and in great shape. The no-negotiating sales process is painless, and the sales and support people know their stuff. CarMax has 118 stores around the country and plans to open 10-15 per year. Richmond is their most advanced market and they have just 11% of the used car market.

We were most impressed with how CarMax buys cars - appraising and sourcing are central to their strategy. CarMax benefits from their scale, proprietary technology and their trained appraising/buying staff. Foillard's strategy includes smart buying, which creates inventory that can be sold at a fair price. Foillard started at the company as a car buyer and was part of the team that launched CarMax in 1993.  He became CEO in 2006. He seemed to know every employee in the headquarters and employees in the stores said he visits frequently. 

Ekso Bionics: Getting One Million People Out of Wheelchairs by 2022
Company: Ekso Bionics (Private), Berkeley, CA  

Nathan Harding, CEO, & Chris Tagatac, Ambassador 


Ekso Bionics makes a wearable robot that helps people with spinal cord injuries walk. It uses  robotics to lift the legs, bend the knees and stabilize the body.   We attended a Harvard Business School Club of NY event on robotics and met CEO Nathan Harding and Chris Tagatac.  
Chris worked at Morgan Stanley for 20 years before retiring to Stowe, VT, in 2004.  On July 26, 2011, while changing a flood lightbulb, Chris fell 25 feet off the roof and was paralyzed from the waist down.  He is now part of a study at the Kessler Foundation in West Orange, NJ. Three days a week, he drives six hours to be able to walk for a few hours. He said it made him feel great - just to be able to stand and look people in the eye was a big deal. Walking increased his circulation which benefits many things. Watching Chris walk was an amazing and humbling experience - he received a standing ovation at the event. 

Since the launch in early 2012, Ekso has placed over 40 units in rehab centers around the world, and over 1,500 people have walked.  Nathan's vision is to have one million people walking in ten years.   
Entegris: New Frontiers for Advanced Materials Science
Company: Entegris (ENTG), Billerica, MA  

Bertrand Loy, CEO 


Gov. Deval Patrick and Entegris executives (left to right: Bertrand Loy, Entegris CEO; Greg Graves, Entegris CFO; Gov. Patrick; and Gideon Argov, former CEO) discuss the company's plans to invest $50M in a new R&D center.
in Bedford, MA. The center will house engineers and scientists from a number of Entegris facilities. Entegris' products are used for contamination control in the manufacturing of semi-conductors, flat panel displays, LEDs and high-purity chemicals. These products include sophisticated filters and filtration media, which control con-tamination measured in widths of atoms. Materials science is key to these products.


i2M stands for ideas to market.   We recently had the chance to visit with CEO Bertrand Loy and CFO Greg Graves at Entegris' headquarters in Billerica, MA. Bertrand became CEO in November 2012 after 17 years with the Company.  He has continued the Company's vision to be the leader in filtration and materials science. 

Adam Duritz: Passionate Performer & Content Creator 
Adam Duritz, Lead Singer/Songwriter, Counting Crows


While in Boston after two days of visiting semiconductor equipment suppliers, we happened to pass the Bank of America Pavillion and noticed a concert beginning. The concert featured the Wallflowers and Counting Crows.  Lo and behold, they had tickets available. 


"Fame is not something you do; it's something other people do to you. You act like yourself and everybody else acts really weird." - Adam Duritz, Parade Magazine, June 12, 2013
Lead singer Adam Duritz and Counting Crows had their first hit in 1993 and have been together at the top for over 20 years. I was impressed with his energy and enthusiasm on stage.  The performance and the music were a pleasure to listen to.  


Duritz works with upcoming music talent and has an apt view of the music business. He is a believer in the great content that HubSpot, BrightCove and the over-the top video providers enable. As Duritz stated to Ned Ehrbar of Metro Boston in a recent interview, "I want to work with people who simply have a good business model, and the record companies' business model is not particularly good. They still can only think about selling things through radio and making really expensive videos, and that's about it. Those things are all great, but there's more to it than that."  
Captain Erik Quist, USMC, & Elizabeth Quist:  Helping Wounded Soldiers

On May 28, I had the pleasure of attending Colby College's Class of 2013 commencement to watch my daughter Hilary graduate. Two of the honorary degree recipients received a standing ovation. Captain Erik Quist, USMC, Colby '99 and his wife Elizabeth Quist '98 were honored. In 2002, after 9/11, Erik Quist left a career in technology to enlist in Officer Candidate School. He served tours in Iraq and Afghanistan over the years.


On August 5, 2011, Captain Quist commanded 220 newly installed Marines in Afghanistan's Helmand Province when his armored vehicle was struck by a roadside bomb with 60 pounds of explosive. Quist and his troops were seriously injured. He was flown to the "Wounded Warriors Floor" at Walter Reed National Military Center in Bethesda, MD. He was one of only two officers on the floor and made the rounds talking to young Marines who'd lost limbs. Quist faces a long and uncertain recovery, but his spirit of leadership and sacrifice is amazing.


Prior to Erik's injuries, his wife Liz started the Semper Fi Fund from her kitchen table in Virginia. The fund was to help families of Marines killed and wounded. In 18 months, her new organization raised and granted $10 million. Quist said she had a very hard time walking into hospital rooms and talking to the Marines, their mothers, fathers, sisters, and brothers - that she found it difficult to contain her emotions. "Now to be back here as one of those families-it's bizarre," she said." Like her husband, she devoted herself to helping the wounded.


In a  November 2011 story in the Colby Echo, Erik talks about life and opportunity in Afghanistan. "In Helmand Province, that means offering people a better alternative to life under the Taliban. And a better life is tied to economic opportunity and safety."

Liz Czernicki Quist '98 and Capt. Erik Quist '99 at the Hunter Holmes McGuire VA Medical Center in Richmond, Va.

This video is of all of the Colby Honorary Degrees. The presentation to the Quists starts at 8:50 and goes thru 14:20. It's okay to applaud!

*The Needham Funds aggregate ownership as a percentage of net assets in the stated securities as of 6/30/13: KMX 3.36%; ENTG 1.52%.
The information presented in this commentary is not intended as personalized investment advice and does not constitute a recommendation to buy or sell a particular security or other investments.
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