Intentions create miracles
Everyday, the average private business founder follows a simple and repetitive routine in managing their business, simply doing what everyone else in the industry does. Only a few unique founders carry solid intentions to draw a new investment path, driven by ambitions for higher value or realization of eminent threats. Such intentions spark a series of Investment Deals (see below) and a myriad of emotions as founders leave comfort zones and shift to new territory.
As a deal maker, I witness more success on the deal table in introducing investors to founders who carry such intentions as it drives them further towards successful deal closure. On the other side of the deal table, investors are continuously exploring markets waiting to discover the next ambitious founder and partner. Ironically, I recently learned from a close friend coaching large corporate leaders that, given its incredible impact, top executives training programs are advocating the power of ‘intentions’ in shaping leaders. Indeed, the spark of such intentions create miracles that take private businesses to the next level.
Stuck in 2nd gear
Despite carrying intentions for new investment horizons, some founders find themselves stuck in second gear, observing routine financial performance in board meetings. Such businesses are exposed during market upswings (losing upside opportunity) and downswings (destroying value) as fragile business models expose vulnerability. Ambitious investors are more attracted to agile models that adapt to market waves, display above average growth in good times and resilience in challenging times.
A few investment deal designs that equip founders in fulfilling their intentions are highlighted below:
Intention: To accelerate growth for expansion plans using external finance through investment partners. Additional growth capital can reduce several years in the time to execute expansion plans as well as redistribute risks.
2nd gear mode: Slow or no expansion due to reliance on self finance and fund constraints.
Intention: Accelerated growth through the acquisition of companies with strategic know how and resources from industry players along the value chain.
2nd gear mode: Purchasing ready made services or products from other industry players paying a premium and carrying third party risks, while attempting to build resources with extensive financial resources and time.
Spin / Split off
Intention: Focus on high quality of companies and resources by separating the performance of each company as well as key resources. It is wise to sell non performing companies and assets to maintain a high quality portfolio.
2nd gear mode: Mixing performance of good and poor performing companies and resources. Overall performance might appear positive in some instances, however, good performance will not be truly recognized, non performers will overweigh finances and competition will likely outperform.
Intention: Releasing liquidity through the sale of minority, majority or full shares of investments with limited growth potential and acquiring (new) or reinvesting (existing) with faster growing opportunities. It is advisable to plan an exit at the right timing with favorable valuations and market conditions.
2nd gear mode: Sticking to a non growing company forever, freezing liquidity that could be otherwise invested in more attractive opportunities, owning shares with stagnant prices and increasing the threat of growing competition backed by investment partners.
Intention: Joining forces with industry players to build on synergies and capture upside potential and reduce downside threat.
2nd gear mode: Facing market opportunities and threats in solo mode, increasing concentration of risks while leaving a company’s fate to solo resources and industry competition.
One really good investment deal
Successful investors and founders do not necessarily execute multiple investment deals in the same company to succeed. On the contrary, too frequent and inconsistent investment decisions can lead to over-burn and deal fatigue.
In fact, success on the investment horizon relies on the really good investment deal executed once in a company’s life time, or once every (five) years…
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