Archive for the ‘Investor Relations’ Category

Cut Your Losses

Tuesday, May 24th, 2022

There are times when an investor has made a reasoned bet on an entrepreneur and their business but their confidence level is now at a point that they’ve concluded an investment of £X,XXX,XXX will not in all likelihood return £Y,YYY,YYY, in their desired timeframe. This is a rational determination but you, as the entrepreneur are now dealing with the emotional and psychological issues of the person managing his or her portfolio of investments.

They have private and maybe institutional investors, partners in a fund, employees, spouses, children’s school fees, private bankers and mortgage companies, philanthropic foundations and the gardener’s welfare, who depend on their judgement. The richer the investor is, the more they are a prisoner of their own wealth, and the “welfare system” that rides on their success. Downward social mobility, or the whiff of it, has a chilling impact on investor sentiment in times like these.

There are both “internal factors” (within the entrepreneur’s control and influence e.g. distribution, marketing, production) and “external factors” (outside the entrepreneur’s control and influence e.g. competition, interest rates, inflation etc.), at play.

Right now, EVERY entrepreneur in a growth business dependent on growth capital, needs Investor Plans A, B and C (investor names, structures, combinations of cash, debt and equity, and compelling propositions). What are yours? Don’t have them, you are living on very thin ice. Why take the risk?

Clarity of Mind

Wednesday, September 16th, 2020

There are 11 traits I observe with my best clients and others that separate superior entrepreneurs from the field and attract superior investors and talent. Here is a rare and highly important trait: maximum clarity of mind and the ability to maintain that “in the moment” when taking risks in complex and ambiguous situations.

Why is it so important? The fragility or antifragility of the business in an investor’s mind is directly linked to the entrepreneur’s behaviour under pressure. Their performance with allocating capital, hiring talent, innovation and implementing strategy smartly.

You’d pay a premium where an individual has that in abundance, equally you might hesitate or not invest where an entrepreneur struggles or is susceptible to wild swings.

It is a learnable skill. Although those that start with superior talent and judgement are unquestionably at an advantage. Experience is an important contributor, which explains investors preferences for seasoned entrepreneurs.

It is diluted when we are overwhelmed (priority), lose focus (second-guessing ourselves manifest as procrastination), ill-disciplined (routine and exceptional activities), disorganised (poor time use) and lack resilience (bounce back).

How do I see it? Take any superior risk taker in any sector globally, and examine how they have maintained maximum clarity of mind. Therein lies a pathway to profit. Superior investors such as Warren Buffett use “pattern recognition” to spot it in executives and entrepreneurs they routinely evaluate.

You may not be in front of Buffett but here is a simple question: how could your ideal investors see that you demonstrably possess that trait? What stories can you tell that powerfully articulate that? Who could credibly support your assertion and influence the investor?

Investor Divorce

Tuesday, January 7th, 2020

You and business have relied on the benevolence of a long-term capital investor, who in turn has received “reciprocal benefits” from you, as the entrepreneur (dividends, asset growth and so on). How ready are you if that balance, in the investor’s opinion, is now deemed inequitable and must end?

  1. How effective is your “early warning system” before the inevitable confrontation? (hard evidence, strong anecdotal information, feedback)
  2. How much power and control over your self-interests do you possess now? (economic or legal rights, ideal alternative investors, your customers, your people, IP, technology)
  3. How much influence do you have over the investor’s decision-making? (trusting relationships, leverage, timing, potential disengagement)
  4. What must you accept about the finality of the investor’s decision? (direct and indirect consequences, risks, PR)

Seriously, when is the last time that you properly considered that scenario, if ever?

Credit

Monday, November 4th, 2019

One of the simple but often overlooked aspects for sellers of businesses, is who will take credit in the potential buyer’s firm for acquiring my business and the results that ensue? Need a simple clue, look at the press releases or media interviews surrounding past acquisitions, in the prior 12 or 18 months.

Do you have a relationship with that individual today? If not, what would it take to establish a relationship with them BEFORE you both reached conceptual agreement on a sale?

Too many sellers readily allow themselves to be delegated to “gatekeepers” (Heads of M&A, Corporate Development), and left at huge risk, in the sale process without establishing a peer-level trusting relationship with that individual(s).

The emotional objectives of the latter, largely dictate the decision to proceed because that is where risk and reward collide (consequences), and where in all probability, the buck stops (accountability).

Valuable Is Not the Same As Being Flush With Cash

Thursday, October 31st, 2019

I hear a lot of seasoned executives and entrepreneurs in mid-market businesses reminding me that there is a “wall of cash” waiting to invest into their sector (media, industry conferences). Look at the love affair private equity investors like ABRY Partners, multiple Canadian pension funds and others have with the US and UK insurance broking segment currently.

In their next breathe, they explain their own difficulties in attracting any of it fast (largely external factors).

The tough reality is

  1. They are insufficiently valuable today, and in future.
  2. They are not a person of great interest to those controlling the majority of that cash
  3. Those investors are not their ideal investors.

Which is it?

If you refuse to honestly answer that question yourself, it is tough to move forward with proper focus.

Silence

Thursday, September 26th, 2019

When entrepreneurs and investors forget that first and foremost they are in the communications business, I have two words for you: Neil Woodford. Silence is never “golden”, it is just a vacuum created into which people’s fears or concerns percolate unchecked.

Success

Tuesday, July 23rd, 2019

Summertime at many British seaside resorts invariably includes a detour to the funfair for many families. The seduction of playing the 2p slot machines with a waterfall of coins tantalisingly perched at the edge. Just one coin might trigger a flood of coins or it might not?

The problem is, it is rare that one coin causes the breakthrough. Indeed, the “pros” around these machines line up a small barrel of coins in the slot and fire a cluster of coins, knowing that in the ensuing mayhem, one large jolt has the greatest probability of triggering the waterfall.

The same analogy is true for entrepreneurs seeking growth capital to exploit the “next big opportunity” (“NBO”) in their sights. The single shot strategy with investors rarely works. Yet a great many entrepreneurs I meet, particularly with enterprise technology, are hardwired to think that maintaining privacy is more important than attracting the widest pool of ideal potential investors. They are too slow in attracting capital, competitors arrive on the scene with bigger balance sheets and the riches go to them, not the entrepreneur.

Make speed your driving force in raising money. Remove everything that detracts from the speed of acquiring growth capital (process, procedure, structure). Do that and while you cannot guarantee success, you will give yourself the very best chance.

Hanging In There

Monday, July 15th, 2019

Off a thrilling weekend of sport, two fine examples (Novak Djokovic and the England Cricket World Cup victors) of the merits in “hanging in there” for entrepreneurs, when things aren’t going right with your capital raise.

The market conditions aren’t ideal today, your timing is “off”, and the investor across the table seems to be to dictating play at every turn. Keep the faith in your own judgement, make the decisions that you know to be right and have the courage to not fear failure. You’ve succeeded when not at your best. You’ve attracted capital from those resistant in your initial approach. You’ve learned that building trust is essential before investors will commit (take your time). Don’t allow “second guessing” to infect your thinking or performance (fear and procrastination).

Ownership

Wednesday, July 10th, 2019

Understanding “why” we own or might own a business, an investment or a racehorse, is far more revealing (emotional and psychological reasons) than the mechanics (structure).

Yet the overwhelming majority of people you meet (investors, advisers, wealth managers), rush to examine the plumbing, the wiring and the construction, to grasp “how” something is, or could be, owned by another owner.

Who has your best interests at heart?

Come Prepared

Thursday, June 13th, 2019

Here in London, the month of June is arguably the best time for international tourists to visit the city. What with the pageantry of The Trooping of the Colour, Royal Ascot, Henley Regatta, Wimbledon, and major music acts in town, it is a sporting and social mecca. However, unseasonal rain and cool temperatures, as visitors are experiencing this week is an occupational hazard. It necessitates everyone has a plan B and C for what to see and do, and what to wear.

The same is true for an entrepreneur having prepared their business for sale, selected a preferred bidder and negotiated the terms of a deal. Here is three common situations:

  1. Misunderstandings arise when a whole new group of advisers –
    lawyers, accountants, bankers and other financial advisers – arrive, when they’ve not been privy to the negotiations or to the nuances of the conceptual agreement reached.
  2. Highly important issues arise in the due diligence process.
  3. There is a deterioration in the financial performance of the business.

What is your “wet weather” option?

You need a mixture of preventative and contingent actions.

“Preventative“, in the form, of a growing peer level trusting relationship and intimate dialogue with what I term, the “economic purchaser”. The individual with the means and authority to approve the purchase, whose P&L will pay you for the business, who has the veto right or will claim credit for the acquisition or investment. Where you can ask the economic purchaser to intervene where his or her lawyers are hung up on moderate or low importance issues and threatening to delay or derail your agreement.

Contingent“, in the form of

  1. a willingness to end the discussions with the purchaser if your objectives are not being met.
  2. you can quickly attract alternative ideal bidders (personal/emotional connection to you and/or the business, have a need or one that can be easily rekindled for the investment, can move fast and possesses means and authority to pull the trigger).
  3. ceasing the entire sale process.

Experienced sellers know there are no guarantees, just as those tourists splashing through the rain towards the Tower of London and the London Eye must accept this week.