Archive for the ‘Growth Environment’ Category

Private Equity Relationships

Wednesday, June 20th, 2018

One of the interesting dynamics, I see regularly at social events amongst the global private equity community (investment partners, portfolio company managers and non-executive directors), is a surprisingly small number of people truly at ease with their own success.  I am talking about people, who project fear (credibility), portray guilt (success) or don’t act as a peer (socially confident). Given this is a business that is founded on building superior peer-level trusting partnerships within and outside firms, you’d think individuals with those qualities will be in even greater demand in the future than simply those with impressive analytic skills.

© James Berkeley. 2018 All Rights Reserved.

Profit In A False Sense of Security

Wednesday, April 26th, 2017


I am fascinated by the probable cause when owners, Boards and top management in mid-market businesses (US$10M to US$Bn), “don’t take the money” and shortly thereafter, end up with a failing or failed business. Specifically, when a serious offer is made for growth capital or even an outright sale of the business, and in the next 6-12 months after the refusal, the fortunes of the business partially or totally collapse. Nowhere is this more visible than today’s high growth private tech businesses (the infamous “unicorns”) and in an often overlooked area, service businesses with a powerful owner-operator or managing partner in a partnership structure.

The decision-making factors are consistent throughout. The business has deliberated carefully or taken an opportunistic approach to accepting external capital or key talent. What has varied is the owners’, the Board’s  and/or top management’s judgement, resilience or trust over time. Faced with changing market conditions (regulation, technological and other convergent forces), a key client “win” or “loss”, rising/declining investor or trade interest and so on, there is a discernible change. They consciously ignore other’s prudent advice that they have implicitly trusted in the past (mitigating risk). They increasingly believe that they are “impregnable” in their market position (market hype or vanity investments). They allow common sense to be distorted by inflated but unsubstantiated talk (valuations, growth prospects, barriers to entry, unique technology etc.).

Having worked with six privately-held mid-market businesses over the past 3 years around the globe, who turned down offers and subsequently, experienced very public falls from grace (legal, e-commerce, hotels, gaming, financial services), the underlying “cause” in my experience is ultimately, poor leadership. It is people, not the business that have screwed up.

For my current and prospective clients reading this, who fear my strategic advice comes with a poison in the tail, rest assured I have had a great many more winners than losers!

Yet in the immediate aftermath of a partial or total business failure, there is a rush to assume that the firm’s opportunistic or conservative approach to accepting new capital or talent is the “cause”. That is inaccurate, and here is why. There are a great many successful businesses, who have been consistent in adopting diametrically opposed approaches to accepting external capital or ownership (in insurance, AJ Gallagher vs Hub International, in hotels, Peninsula vs. Fairmont Raffles, or in the premium art business, Christie’s vs Sotheby’s). In just the same way, sticking to niche products, services or geographies or constantly, adopting a diversification approach, is rarely the “cause” of failure.

Take great care in jumping to a conclusion. Profit is to be found, as many smart long-short investors have found, in looking out for a business owner’s, the Board’s and/or top management’s increasing false sense of security, the resulting changes in their behaviour and the positive/negative impact on their business and the competition.

© James Berkeley 2017. All Rights Reserved.


Brexit: Now Britain Quits EU What Is Next

Wednesday, March 29th, 2017

Four years ago, I contributed to this International Business Times article on Brexit. The impoverished reporter, Moran Zhang, is now a highly paid equity analyst at a Boston asset manager. Life is good.

Unlike most forecasters, I am willing to be intellectually honest about my predictions!

#1 I suggested that there was a 70% chance the UK would be still in a reformed European Union. That reform hasn’t discernibly arrived, and from Wednesday, Britain is formally leaving.

#2 I suggested there was a 25% chance the UK would be part of the “outer rings of the European Union”. That will almost certainly be the end-game in some shape or form.

#3 I suggested Brexit would be a process, not an event. There would be no zero cut-off, which is exactly what is happening. The UK will still have commitments after the formal exit date, which it must or wants to keep, for example, security cooperation.

Where Are We Today? A 20% devaluation against the USD, a more attractive export environment, a stock market near all-time highs and near record low interest rates. Signs of inflation increasingly present in the food we buy at the local stores. By almost all measures, we remain in a largely attractive environment for inwards investment, consumer confidence, albeit productivity improvements are slow to feed through and personal debt levels remain high. There remain sharp geographical distinctions. A city state in London that has abundant foreign wealth slushing around, albeit not so much into £10M+ prime residential property but still seeking a home in private equity via funds or increasingly direct investment.  A robust jobs market. In comparison, some of the provincial towns and particularly in Victorian seaside resorts, where prospects for commercial businesses and the local population are less rosy. High streets (or Main Street, as my American friends love to refer to it), is symbolised by abundant charity shops dispersed between closing down sales. Little or no meaningful investment into new economies and new careers. There is a visible political, economic and social divide.

Where Are We Headed? Does anyone really know? Of course not but that doesn’t stop us hazarding a guess. We are in for a minimum 18 months of fraught negotiation, where I think those in the strongest position (Germany) will push the case for a fair settlement with the UK and those in the weakest position, will stubbornly resist (France, Italy, Spain). Politicians will think with logic and act on emotion. Traditional enmities and grievances will be magnified. Leaving is not going to be easy for those remaining in Europe and the UK. Fault lines already visible in the UK, will become more adversarial. We have to learn not to take what others say literally but to take them seriously. That applies to those outside the political bubble, investors, businesses and those directly affected by the political decisions. It is a boom time for patient private capital that can look beyond the immediate volatility.

Life after Brexit for the UK, is also largely dependant on the speed and quality of the trading alternatives. Can the UK create or rather build powerful interfaces with non-EU members to attract abundant sources of capital, people and innovation? Can it manage that process while adhering to the need to control immigration? Probably so. The UK’s future relationship with US, China, India, Canada and so on, has two forks the public (trading agreements) and most importantly, the private sector, the ability of UK SME and mid-market firms, the largest net jobs creators, to open new foreign markets, to attract new sources of capital, to spur new innovation not simply solve existing problems and so forth. The headlines about large global employers shifting jobs are far less significant, yet the media doesn’t portray that story.

The real story is the skills, behaviours and experience each of us has to thrive in that environment. What are we going to do about it? What are we going to push our employers, employees and investors to do about it? What has got us to where we are today, is in all likelihood going to be insufficient in a post-Brexit UK.

My prediction is that in four more years, 2021, there is a 70% chance the UK is in a more prosperous position than we are today. I think there is a 20% chance that we are in a mildly negative position (period of extended sluggish growth). A 5% chance that we are in a disastrously worse position (serious recession, sharp contraction in spending).

I didn’t vote for Brexit but now we are where we are today. Private polling has shown that there is a “silent majority” (former “Remainers” and “Brexiteers”) determined to make a success of their lives. There will of course be the “Victims of Brexit”. Those who will link the decision to leave the EU to their current and future woes, while consciously disregarding their failure to personally reinvest in their own skills, behavioural traits and experience. Those, who absolve themselves from personal accountability for the decisions that are within their control.

Let’s regroup in March 2021!


© James Berkeley 2017. All Rights Reserved.


Education Technology To Trump Artificial Intelligence Buzz

Friday, July 22nd, 2016

I have had three separate occurrences this past month for family members needing quick advice for a range of more serious and less serious healthcare conditions. Here in the UK, the National Health Service’s Accident and Emergency Departments have become the repository for all conditions and advice outside of normal UK working hours, irrespective of the urgency or severity of the condition. According to one enthusiastic A&E nurse in a London hospital,  at a minimum 50% of patients don’t have a condition that warrants being there! We have a healthcare customer base that is

  • Increasingly uneducated about the resolution of minor and major health illnesses and injuries
  • Struggling with the increased automation in the healthcare system
  • Rapidly growing and drawn from very diverse backgrounds and cultures
  • Expecting greater access to world-class advice and near real-time resolution of all healthcare problems
  • Expecting free or near-free cost of advice and treatment
  • Reconciled by politicians that fear to speak out about the paucity of mass healthcare education
  • Comforted by a media that is only too keen to promulgate a sense of victim hood for a good headline

The response has been to rejig the supply of healthcare resources, the productivity of those resources and the automated processes. To channel all requests for help, outside of normal UK working hours, to emergency healthcare professionals, to ask them to enforce the prioritisation of all out-of-hours healthcare treatments, to perform to their best and to be on the front line taking the flak from patients and dependants frustrated at average wait times. Who would want to work in A&E?

Surely in this mobile-connected age there is a higher touch higher tech solution to the education, prioritisation, delivery of advice and resolution of illnesses and injuries? We are moving away from the archaic idea that every child gets the same textbook in school and in future embracing “adaptive learning”, where every child has materials updated in real time, customised to what they know and how they learn best. Using software to handle the basics and freeing children and teachers to spend the rest of the day interacting on group projects and personalised instruction. A back to the future revolution, not a dependence on online learning.

We have spent billions building “algorithms” that allow machines to ape human behaviour (artificial intelligence) but a tiny percentage of that on aiding humans to become smarter than the automation suppressing our talents and enthusiasm in the workplace. The NHS is but one example where we need to leverage technology to enhance, not replace us. To invest in human intelligence (customers, managers, employees and payors).

The same applies in almost every business. We suck the energy and life out of our employees and clients, asking them to perform basic activities without regard to the outcomes (onboarding clients, resolving complaints, adhering to redundant policies and procedures etc.). The automation is swamping their abilities to apply common sense, to provide outstanding customer service (speed and quality of response), to create loyal and “permanent” customers and in return obtain fulfilment from their work. How else explain the rising boredom levels in almost every professional workplace?

Yet executives in banks, insurance companies, professional service firms and others respond by deploying huge amounts of capital to harness big data and analytics, to make smarter artificial underwriting, investment and advisory decisions (models, augmented reality, robots and so on).  A tiny slither of that amount on enhancing their own managers, employees and customers intelligence, and when they do, it is on prosaic “one size fits all” training programmes, where they have close to zero understanding of the return on investment. Consequently, huge swathes of the workforce, management and customers are ill prepared for the disruption.

If you are not convinced that education technology from the children’s nursery through the workplace and into senior living represents a huge growth business and investment opportunity, you are sleepwalking through life.

© James Berkeley 2016. All Rights Reserved.





The Insurance Corporate Venturing Pulse

Monday, July 18th, 2016

When you introduce two good friends that you know from two completely different walks of life, there is that pregnant pause in which both seek to find a common connection and language to build a relationship. To the introducer, it seems perverse that there would be a delay, you know both people intimately and you have thought long and hard before introducing them. So I liken the insurtech corporate venturing world today.

Inherently it makes sense that entrepreneurial tech businesses have the capability to transform venerable insurance businesses. In most cases there are shared values and a receptiveness to make a relationship work. Yet there is an uncertainty born of speaking different “languages” and the reality that operates in their respective sectors (resisting and embracing change, regulation, corporate bureaucracy and inertia).

Having assisted a number of businesses on both sides of the table, here is my current take:

  1. The quantum of insurance tech money will double in the next 24 months. There will be a greater concentration of capital in the hands of a smaller number of powerful brands (VCs, CVCs and UHNWs), who are able to raise capital faster.
  2. You will rarely hear about the failed insurtech investments but be certain 80% of the so-called strategic investments will never be strategic, in that those technologies are successfully adopted into the insurance corporate venturing unit’s mothership.
  3. Only 50% of an insurance corporate venturing unit’s invested companies today will be their best corporate investments next year in view of internal and external changes.
  4.  A more formal insurtech investment ecosystem will arise with greater concentration in a smaller number of hubs (Silicon Valley, New York, London, Singapore) that foster innovative environments. If you are not “present” locally, as a service provider, you will not be in the game.
  5.  Speed will be as, if not more important a factor than the quality of the capital, for entrepreneurs in the best insurtech opportunities. Bad news, for insurance corporate venturing unitss with long decision-chains or timelines.
  6. Insurance corporate venturing units that create a powerful gravity to their brand will triumph over those who are largely reliant on opportunistic investment ideas landing in their “inbox”. Heightened importance of peer referrals, networking, publishing, speaking, writing and so forth.
  7. With increasing numbers of people in the insurtech ecosystem, there will be a filtering out of people (entrepreneurs, investors and others) who are truly centres of expertise and objects of interest. Having your CEO make blow-hard statements about his visit to Google, facilitating an insurance disruption event or thinking that merely pushing out generic position papers on your own or a third party’s platform will get you there, is a fool’s paradise.
  8. Tech entrepreneurs that live at 35,000 feet and are beholden to the future without regards to the health of today’s insurance industry, today’s realities of marketing an early stage business and today’s decision-making are living in cloud cuckoo land.

Copyright James Berkeley 2016. All Rights Reserved.


The Healthy Man Of Europe

Monday, February 22nd, 2016

How are we personally better supported or better off in/out of the EU? In the run upto 23rd June, politicians, business and an array of other interests will seek to explain to us, the electorate. For once, we are witnessing a healthy discussion about Europe’s relevance to the future of one of its’ largest members, the United Kingdom. Politics is working. That is to be applauded and set against short-term uncertainty stirring the financial markets, a price worth paying for.

© James Berkeley 2016. All Rights Reserved.

Real Time Learning

Wednesday, November 4th, 2015

In all the talk about data and analytics far too little attention is being devoted to the benefits of immediate information, access to various platforms and the application of valuable information to existing and new forms of knowledge. The wealth management industry is an obvious case in point. Fintech innovation is and will spawn a variety of platforms that can generate information immediately, from the daily movements of portfolio values to the best life insurance rates for a 45 year old HNW business owner with a congenital heart condition. These technology platforms are readily accessible by investment managers, insurers, relationship managers and clients. The challenge for many clients and their advisers is access to too much information. How do you distil it down and customise it to what each client needs to know, not what they can access at the click of a button? How do you maximise the effectiveness of the hour in front of the client (results, not information exchange)? How do you balance that goal with the need to adhere to appropriate regulatory standards?

What it means for wealth managers:  speed will be as important as the quality of their advice.

The skills, behaviours and expertise to identify small amounts of valuable data, format it into valuable information and apply it to the client’s existing knowledge and their desired objectives will be even more valuable. Equally, the ability to not get lost chasing a strand of interesting information that leads to no discernible benefit for the client (poor usage of the client’s time) will also be prized.  Wealth managers self-talk and thinking about the value the client walks away from them with will need to change (educator and collaborator, not a salesman) in an increasingly digital age. Their marketing approaches will need to evolve faster than they can probably imagine (promote their ability to help clients live the life they want to have, client testimonials, references, case studies etc). Beyond the increasing ability to customise their products, services and relationship to the individual client needs, they will need to reinvent their business models to economically accomplish that in a regulated environment. Their remuneration basis will needs to better align with the value the client perceives they are receiving from the relationship manager, not the investment approach. Their use of powerful language and education skills will be a point of differentiation with their ideal clients in accomplishing that objective.

Internally, wealth managers and advisers organisational structures will need to adapt to faster dissemination of valuable information, at the right time, in the hands of the right person. Superfluous people, technology and processes needs to be abandoned. They need leaner and more agile organisations. They need new collaborations internally with asset class experts and external expertise merged with their own to allow the clients to make smarter lifestyle choices.

The concept of real time learning feels “foreign” to many in the wealth management business, whose desire to help their clients make wise decisions is tempered today by a wall of regulatory requirements. Shouldn’t the focus be on making sure we and the client have ticked the appropriate boxes? Yes of course that is important but your future is also about speed (responsiveness, value “in the moment” and meeting or exceeding your clients expectations). Time not money is your clients scarcest commodity. Your ability to maximise the return on the client’s time invested in accomplishing their personal goals is your future success metric.

© James Berkeley 2015. All Rights Reserved.

The Generalisation Trap

Tuesday, November 3rd, 2015

Don’t you just love it when when you hear statements like “the millennial generation are different, they don’t want what we want.” Excuse me but don’t they want peace, prosperity, rising health and education standards, and a better quality of life? Generalisations are the lazy and intellectually dishonest way to make sense of the world we live in.

The same holds true about different types of ownership. “Ah, private equity ownership confers being a slave to an accountant” or “VC’s want your sole and to eat it”. Yet the PE and VC ecosystem is a very broach church. There are firms and partners (EQT, Sequoia and JZI Capital), whose track record of long-term investment, high levels of engagement with top management and collaborative success is far preferable to trade investors.  Indeed, they might look, speak and act much more like an investment fund.

Different forms of capital: The oft repeated one in today’s reinsurance business “the Pension Funds and the Insurance Linked Securities providers are unproven capital”. Sorry but these folks are mostly highly conservative people, whose investment bets in other asset classes dwarf the minuscule reinsurance sector. Indeed, they have hired many of the very same experts who the traditional reinsurance sector has relied on for smart underwriting decisions.

Doing business in different countries: “Americans are more direct and will not beat about the bush. Brits dance around the tough issues”. Sure, there are US clients, business partners and colleagues in my 25 year career that have those behavioural traits but there are a great many analytic and amiable characters, who in a negotiation or client relationship are highly prone to avoid confrontation and join the list of world champion procrastinators.

My point here is be careful generalising your way into an intellectually dumb corner. Come with hard evidence or strong anecdotal information and carefully apply it to a particular situation.  “Ah the Spanish, it is always mañana”

© James Berkeley 2015. All Rights Reserved.



Garnering Investor Movement and Motivation

Thursday, October 30th, 2014

Why do so many conversations with investors move so slowly or don’t go anywhere at all. I observe the “cause” is largely a result of entrepreneurs and executives own shortcomings. There is a simple question to answer, can you (the entrepreneur or executive) convince the investor you can be of help, or will the investor convince you that you cannot.

  1. Mindset: do you see the fundraising process as adversarial (“taking” the investor’s money)  or involving shared responsibility (helping the investor achieve their own objectives). This why television shows such as “The Apprentice”, which largely depend on the former to drive television ratings, are a terrible example. Do you really want Donald Trump or Alan Sugar, as a business partner. Their track record with relationship-building would cause any sane person to run a mile.
  2. Effective Influence:  there are only three ways to influence an investor’s behaviour and two of them won’t help you.
    • Threat. You might move along their interest an inch by scaring them but you won’t gain their commitment. (“Your competitors are going to kill you if you miss this huge growth opportunity.”) It just results in hardening their feelings if they are resistant.
    • Peer Pressure. (“You are missing out on the next big thing”).You may cause investors to move a mile, rushing towards investments in these areas like sheep but rarely does it generate long-term commitment. For example, cyber risk insurance propositions, are garnering huge interest but very few are getting serious investment support today.  
    • Investor’s Self-Interest. An appeal to mutual self-interest is the only tactic that works to create movement and motivation to act. Why? The investor grasps how important your partnership is in achieving his or her own objectives or goals (future growth of the fund(s), improved image, attract higher quality returns and investors, a potential promotion or bonus etc). That is why fundraising cannot be a tussle but must be collaborative, where both parties visibly “win”, personally AND professionally.

I am publishing a paper, “The Five Myths of Investor Demands” next month. I’ll happily share my best tips by phone or email .

© James Berkeley 2014. All Rights Reserved.


An Interview with Me From

Thursday, September 11th, 2014
The Street, the financial media publication providing actionable ideas from the world of investing, finance and business has interviewed me here:
“China’s Economy to Surpass U.S.: When and Why It Matters”