Alguns jornais nacionais e internacionais de ontem (15 de Setembro) noticiaram o apoio dos países conhecidos como Bric (Brasil, China, Índia e Rússia) para um possível pacote de ajuda na crise europeia.
Tal assunto foi gerado pela iniciativa da China em oferecer "ajuda"e propor adquirir um volume expressivo de debêntures e outros ativos de países da zona do Euro, e já em negociações mais avançadas com a Itália.
É conhecida a predisposição da China em diversificar seus US3,2 trilhōes de reservas em moedas internacionais, reduzindo sua exposição ao dólar americano. Assim, tal aquisição pode se considerada ajuda, mas é também necessidade derivada de uma gestão apropriada de riscos.
Nossa presidente, Dilma Rousseff, se manifestou com discurso apropriado, informando que o Brasil sempre estará disposto a apoiar esforços internacionais nesse sentido, neste caso dependente da Europa apresentar uma estrutura viável para um pacote de resgate e, ainda, sem se comprometer com qualquer proposta envolvendo apenas os Brics.
Em escala 10 vezes menor, temos o mesmo problema da China na gestão de nossas reservas. E tal postura do Brasil demonstra seu peso crescente no cenário global. O Financial Times reconhece que "qualquer esforço do Brasil de coordenar uma resposta dos Brics à crise da dívida europeia marcaria um grande passo nos esforços do país para aumentar sua influência em questões mundiais".
Mas daí vem minha preocupação. O que vamos demandar? Vamos tornar público? Aumentar a influência e receber o quê em troca?
A China, através de seu primeiro ministro Wen Jiabao, não teve problema em tornar público o que espera. Apesar do interesse chinês na operação, como acima mencionado, deu um puxão de orelhas nos países endividados, dizendo que os "países devem cumprir suas responsabilidades e colocar suas próprias casas em ordem" - repetindo o já dito aos EUA - e fez uma ligação direta entre tal apoio e a antecipação do reconhecimento da China como "plena economia de mercado", o que favoreceria algumas empresas chinesas envolvidas em disputas comerciais.
E o que o Brasil vai pedir? A única demanda internacional recente do Brasil que temos notícia é o tal assento permanente no Conselho de Segurança da ONU - tema que faz mais sentido tratar em particular com os 5 países com direito a veto em tal conselho. Ultimamente, temos visto o Ministro Mantega esbravejar a respeito dos programas conhecidos por "Quantitative Easing" dos EUA e da chamada "guerra cambial", ambos assuntos mais de economia doméstica - políticas monetárias, fiscais e cambiais - dos países ao tentar estimular suas economias, do que na esfera de política internacional.
Vejamos o exemplo no caso da desapropriação dos ativos da Petrobrás na Bolívia, alguns anos atrás. O que o Brasil recebeu como compensação, além dos elogios do presidente Evo Morales ao "amigo" Lula? Nada que tenha sido divulgado aos contribuintes.
Seria exemplar tornar público o que Brasil espera como contra partida para ajudar a Europa ou qualquer país/ organização internacional. Para não haver especulações de que continuamos sendo República de Bananas e chamados de bons amigos, enquanto nossos ativos são usados em troca de doações para campanha de partidos políticos, com possível sobra para fundações de senadores e outros "favores particulares".
Além dos clamores populares contra a corrupção, os quais endosso com fervor, precisamos e temos uma oportunidade de aumentar a transparência na gestão dos ativos públicos, e evoluirmos como sociedade e como país digno de respeito.
Saturday, September 17, 2011
Monday, September 12, 2011
About Venture Capital Firms, Entrepreneurs and Investors (and their Differences on Variance)
Venture Capital
firms play an important role for entrepreneurs and in the overall economy,
offering sound equity financing for growth projects of new companies.
They contribute with management expertise, governance practices and knowledge about capital markets, thus helping to take the invested company to the next level.
Moreover, they make most of the profits when realizing returns from the successful investments and, as such, do pursue maximum return for their funds.
Perfect match among interests of VC firms, investors and entrepreneurs? Well, not quite. See for instance the quotes below:
"Our business can reach a good size, with steady growth and manageable risk, thus indicating a good return on investment. Why couldn't we attract VC firms? Am I missing something?"
"Shouldn't the VC firm, as our partner, have the same interests that we do? So why pushing for faster growth, if it increases our risk so much?
They can be better explained with one example. Let's suppose that we should select one of the following US$ 1 million investment alternatives.
In the first, chances are that in 2 out of 10 you would lose the whole $1 million. In 4/10 you could recover the invested amount with no profit or loss; and in another 4/10 you could get $2 million back, making $1 million in profit!
In the second alternative, in 8/10 times you would lose the whole $1 million. And in 2/10 you would get back $6 million.
Where would an entrepreneur - who could be investing most of his/her savings in the business - place the bet? And what would be the choice of an individual making an investment in a VC fund?
From a pure expected return perspective, both alternatives would average total cash back of $1.2 million, or 20% return. From the investor point of view, the difference would be mostly dependent of his/her aversion to risk.
Clearly, alternative one has a much lower risk (statistical "standard deviation" and "variance"). The above mentioned entrepreneur would probably select that option. I believe that even the average investor in a VC fund, as long as not in a "casino betting" type of strategy, would probably finance the first business.
In alternative one, their expected fees would be $40 thousand. Compare that to the $200 thousand in the second alternative. Five times larger! This explains why VCs seem to like so much internet traffic (and other high risk/high potential size) based businesses.
This is not a criticism to VC funds in particular. The conflict occurs with most asset managers that have a performance based compensation, who make investment decisions with third party (financial) assets.
Qualified investors (the market) should be able to negotiate their investment terms. They could demand adjustments to performance fee structure, establish practices to limit risk levels or require coinvestment practices, if they feel appropriate.
My objective is to alert Entrepreneurs, who should realize such different incentives, when negotiating with VCs and understand that the lack of VC interest could mean lower investment potential but also risk, not necessarily lower expected return.
Also, if possible, look for other financing alternatives to their business such as investors that would consider a longer term, dividend based return on their investments.
They contribute with management expertise, governance practices and knowledge about capital markets, thus helping to take the invested company to the next level.
Moreover, they make most of the profits when realizing returns from the successful investments and, as such, do pursue maximum return for their funds.
Perfect match among interests of VC firms, investors and entrepreneurs? Well, not quite. See for instance the quotes below:
"Our business can reach a good size, with steady growth and manageable risk, thus indicating a good return on investment. Why couldn't we attract VC firms? Am I missing something?"
"Shouldn't the VC firm, as our partner, have the same interests that we do? So why pushing for faster growth, if it increases our risk so much?
The answer to the
questions above lies in two components that can create conflicts
between VC firm and the entrepreneur (and often also with the investor in the
VC fund): (i) impact of risk in the VC performance fees and (ii) differences in
risk aversion.
They can be better explained with one example. Let's suppose that we should select one of the following US$ 1 million investment alternatives.
In the first, chances are that in 2 out of 10 you would lose the whole $1 million. In 4/10 you could recover the invested amount with no profit or loss; and in another 4/10 you could get $2 million back, making $1 million in profit!
In the second alternative, in 8/10 times you would lose the whole $1 million. And in 2/10 you would get back $6 million.
Where would an entrepreneur - who could be investing most of his/her savings in the business - place the bet? And what would be the choice of an individual making an investment in a VC fund?
From a pure expected return perspective, both alternatives would average total cash back of $1.2 million, or 20% return. From the investor point of view, the difference would be mostly dependent of his/her aversion to risk.
Clearly, alternative one has a much lower risk (statistical "standard deviation" and "variance"). The above mentioned entrepreneur would probably select that option. I believe that even the average investor in a VC fund, as long as not in a "casino betting" type of strategy, would probably finance the first business.
And how about VC
firms? Do they have similar incentives? Let's consider a firm and its partners who
make most of their profits and bonuses from success fees, for instance, 20% of
realized returns, if any is made.
In alternative one, their expected fees would be $40 thousand. Compare that to the $200 thousand in the second alternative. Five times larger! This explains why VCs seem to like so much internet traffic (and other high risk/high potential size) based businesses.
It is true that total fund diversification somewhat reduces portfolio risk. But with such compensation structure, it is to the firm's benefit to undertake riskier investments, even with the odds of losing the whole
investment. Mostly if there is no VC partners'
personal money being coinvested in the fund.
This is not a criticism to VC funds in particular. The conflict occurs with most asset managers that have a performance based compensation, who make investment decisions with third party (financial) assets.
Qualified investors (the market) should be able to negotiate their investment terms. They could demand adjustments to performance fee structure, establish practices to limit risk levels or require coinvestment practices, if they feel appropriate.
My objective is to alert Entrepreneurs, who should realize such different incentives, when negotiating with VCs and understand that the lack of VC interest could mean lower investment potential but also risk, not necessarily lower expected return.
Also, if possible, look for other financing alternatives to their business such as investors that would consider a longer term, dividend based return on their investments.
Saturday, September 3, 2011
Reasons For Startup Failures
Much has been written about the subject. I particularly like John Osher’s “Top 17 Startup Mistakes You Can’t Afford to Make “(Entrepreneur.com http://www.entrepreneur.com/article/66454), as it has similarities and is, in some ways, an expansion of my view.
My experience shows that the most frequent reasons for startup failures can be summarized in three groups: (1) the market is not really there; (2) you end up needing more money than anticipated; and (3) you not only make, but persist on managerial mistakes
The first reason relates to believing that there is a market ready to buy your product or service and finding out that people do not perceive the value that you expected. Or a variant from the same theme, the market not being ready to take advantage of the value being offered. For instance, I have faced a situation where, although our product could have a relevant impact in our customers’ sales, they were not prepared to implement the management processes necessary to achieve such benefit.
There is no magic formula to prevent this, other than extensive research and in advance planning. Talking to potential customers - if possible testing the market. Controlling the enthusiasm about your idea and really hearing what they have to say, mainly their objections.
The second and most usual reason for startup failure is underestimating the cash needed in the company. Sales projections are almost always too optimistic (especially when you have to attract outside investors). Actually, I have never seen a startup original sales projection be met! Demand usually takes time to build and a new trend is different from just a fad!
Then, costs and expenses are often underestimated. Lower volumes mean higher indirect costs per unit. Organization is hired based on projections that do not realize and fixed costs built up. Expenses and taxes are sure things in business, but the same can not be said about customers or sales! And sadly, it is also usual to see entrepreneurs implementing a “rich company” mentality in startups and “eating – instead of raising – the golden eggs' chicken”, meaning their company.
The best advice for that is: plan carefully and conservatively, build an austere culture and, most importantly, have a contingency plan. Pursue breakeven like water or oxygen. Too much focus on sales and too little on profit is a serious risk.
The third reason is the owner him/herself messing up. Making mistakes is human, persisting will destroy the business. Insisting on a bad partnership; on unrealistic sales projections; on the wrong market strategy or approach; on a weak management group (maybe including yourself); and so forth.
That does not mean that you should give up early. Perseverance is key to a successful startup. It means that you should build trust based partnerships, with people that have a common set of values; that you should have a good and reliable set of advisors, with courage to tell you what you may not want to hear, and that you should listen to them.
Sure there are other reasons for failure and the advices above are easier to say than to execute. Experiences vary and chances are we all will mess up. But, hopefully we end up learning. What do you think?
My experience shows that the most frequent reasons for startup failures can be summarized in three groups: (1) the market is not really there; (2) you end up needing more money than anticipated; and (3) you not only make, but persist on managerial mistakes
The first reason relates to believing that there is a market ready to buy your product or service and finding out that people do not perceive the value that you expected. Or a variant from the same theme, the market not being ready to take advantage of the value being offered. For instance, I have faced a situation where, although our product could have a relevant impact in our customers’ sales, they were not prepared to implement the management processes necessary to achieve such benefit.
There is no magic formula to prevent this, other than extensive research and in advance planning. Talking to potential customers - if possible testing the market. Controlling the enthusiasm about your idea and really hearing what they have to say, mainly their objections.
The second and most usual reason for startup failure is underestimating the cash needed in the company. Sales projections are almost always too optimistic (especially when you have to attract outside investors). Actually, I have never seen a startup original sales projection be met! Demand usually takes time to build and a new trend is different from just a fad!
Then, costs and expenses are often underestimated. Lower volumes mean higher indirect costs per unit. Organization is hired based on projections that do not realize and fixed costs built up. Expenses and taxes are sure things in business, but the same can not be said about customers or sales! And sadly, it is also usual to see entrepreneurs implementing a “rich company” mentality in startups and “eating – instead of raising – the golden eggs' chicken”, meaning their company.
The best advice for that is: plan carefully and conservatively, build an austere culture and, most importantly, have a contingency plan. Pursue breakeven like water or oxygen. Too much focus on sales and too little on profit is a serious risk.
The third reason is the owner him/herself messing up. Making mistakes is human, persisting will destroy the business. Insisting on a bad partnership; on unrealistic sales projections; on the wrong market strategy or approach; on a weak management group (maybe including yourself); and so forth.
That does not mean that you should give up early. Perseverance is key to a successful startup. It means that you should build trust based partnerships, with people that have a common set of values; that you should have a good and reliable set of advisors, with courage to tell you what you may not want to hear, and that you should listen to them.
Sure there are other reasons for failure and the advices above are easier to say than to execute. Experiences vary and chances are we all will mess up. But, hopefully we end up learning. What do you think?
Saturday, August 20, 2011
Corruption in the BRIC Countries' Governments
Corruption in emerging countries seriously impacts the ability of such economies to occupy their increasingly relevant role in the international scene.
The topic is frequently in the news about the Brics, such as in these recent Financial Times posts about Brazil http://on.ft.com/nXG6NU, China http://blogs.ft.com/beyond-brics/?p=368651 and India http://on.ft.com/ohC5p7.
It has different historical reasons and is harder to deal with where there is lack of free press or less educated population. But the problem in emerging countries remains high also due to other relevant factors.
See, for instance, Brazil. The country is a stable democracy with a free press, government agencies and reasonable legislation. Even a Public Ministry, a sort of "Internal Affairs" for government actions. However, corruption among politicians and government agents is high and even worse in the top levels of Government.
Corruption tentacles reach different institutions, in all countries. It is frequent even in private, first world companies, often in their purchasing and sales departments - let's remember that this is a two way street, and the bribing party is also corrupt!
However, private companies have closer and more efficient controls and take actions that significantly restrict such practices (at least people are fired and will have a relevant financial loss with the unemployment). And, from an economic perspective with the consideration that, in the private sector, it is the companies' shareholders, not the tax payers, who pay such bill!
Oversimplifying, the reasons for public corruption in Brazil originate in the time the country was a Portuguese colony, when extracting as much wealth as possible from the colony was a common practice and the "king's friends" (future politicians?) felt like they had the right to take their share of profits from such activity.
Since then, to take personal advantage of their position and to charge a "price" for granting licenses or for intermediating transactions has become a practice for several public authorities in all government levels, as if they were still the kings' friends, the owners of the public institutions.
Such historical and widespread practice causes certain complacency and a relevant sense of mutual protection among government authorities. As several politicians are not good examples of ethics, they prefer to conceal the problem and not expose one another. Worse, a public perception that politics is a dirty system inhibits ethical people to get involved and incentives people with low standards to pursue such career!
I believe that the Brazilian problem lies mostly in a ridiculously ineffective criminal justice system and, consequently, in the society's lack of trust in it. Despite clear disclosure by the press of unethical actions, Brazil has no history of a serious punishment for corruption, specially when committed by politicians and public employees. Often these actors are able to remain in power or, worst case scenario, step down from their mandate for a few years, with no serious consequence to their freedom or to their financial means.
People perceive what is going on and see the lack of punishment. They end up getting used to an environment where "there is nothing to be done, nowhere to go for justice". What, in turn, creates a criminal snow ball in the system (by the way, the weakness of our justice system is also a major cause for violence, "justice with your own hands" and lack of security in Brazil).
Finally, such environment is aggravated by an issue that relates to all Bric economies: the scale of government economic intervention and its dominant participation in the economy. The State controls and therefore public employees manage several key banks and companies.
Government is involved in a larger that usual share of commercial and financial activity and is a major player in the total GDP, what multiply the opportunities for corruption. Add to that the issues discussed above and you have all elements to the spread out government corruption.
Less government presence and an effective punitive system would have a major positive impact in several economic and social development indicators of Brazil and possibly other Brics.
The topic is frequently in the news about the Brics, such as in these recent Financial Times posts about Brazil http://on.ft.com/nXG6NU, China http://blogs.ft.com/beyond-brics/?p=368651 and India http://on.ft.com/ohC5p7.
It has different historical reasons and is harder to deal with where there is lack of free press or less educated population. But the problem in emerging countries remains high also due to other relevant factors.
See, for instance, Brazil. The country is a stable democracy with a free press, government agencies and reasonable legislation. Even a Public Ministry, a sort of "Internal Affairs" for government actions. However, corruption among politicians and government agents is high and even worse in the top levels of Government.
Corruption tentacles reach different institutions, in all countries. It is frequent even in private, first world companies, often in their purchasing and sales departments - let's remember that this is a two way street, and the bribing party is also corrupt!
However, private companies have closer and more efficient controls and take actions that significantly restrict such practices (at least people are fired and will have a relevant financial loss with the unemployment). And, from an economic perspective with the consideration that, in the private sector, it is the companies' shareholders, not the tax payers, who pay such bill!
Oversimplifying, the reasons for public corruption in Brazil originate in the time the country was a Portuguese colony, when extracting as much wealth as possible from the colony was a common practice and the "king's friends" (future politicians?) felt like they had the right to take their share of profits from such activity.
Since then, to take personal advantage of their position and to charge a "price" for granting licenses or for intermediating transactions has become a practice for several public authorities in all government levels, as if they were still the kings' friends, the owners of the public institutions.
Such historical and widespread practice causes certain complacency and a relevant sense of mutual protection among government authorities. As several politicians are not good examples of ethics, they prefer to conceal the problem and not expose one another. Worse, a public perception that politics is a dirty system inhibits ethical people to get involved and incentives people with low standards to pursue such career!
I believe that the Brazilian problem lies mostly in a ridiculously ineffective criminal justice system and, consequently, in the society's lack of trust in it. Despite clear disclosure by the press of unethical actions, Brazil has no history of a serious punishment for corruption, specially when committed by politicians and public employees. Often these actors are able to remain in power or, worst case scenario, step down from their mandate for a few years, with no serious consequence to their freedom or to their financial means.
People perceive what is going on and see the lack of punishment. They end up getting used to an environment where "there is nothing to be done, nowhere to go for justice". What, in turn, creates a criminal snow ball in the system (by the way, the weakness of our justice system is also a major cause for violence, "justice with your own hands" and lack of security in Brazil).
Finally, such environment is aggravated by an issue that relates to all Bric economies: the scale of government economic intervention and its dominant participation in the economy. The State controls and therefore public employees manage several key banks and companies.
Government is involved in a larger that usual share of commercial and financial activity and is a major player in the total GDP, what multiply the opportunities for corruption. Add to that the issues discussed above and you have all elements to the spread out government corruption.
Less government presence and an effective punitive system would have a major positive impact in several economic and social development indicators of Brazil and possibly other Brics.
Friday, May 13, 2011
Microsoft Skype – New thoughts on the value of an unprofitable business
The recently announced deal, where Microsoft acquired Skype for US$8.5 billion, made me reflect about my opinion that a company should always be profitable (positive economic result) to generate a net value to society.
Of course it is understood that, often, the profit as stated in the GAAP Income Statement should be adjusted to reflect the actual economic result, mostly when intangible assets (such as brands, start-up costs, market share, etc.) are being built and not accounted for in the Balance Sheet.
My consideration so far had been that, if a for-profit company is not (economically) profitable, although some of its stakeholders could benefit from its operations, when considering the sum of all stakeholders' gains and losses, the company would be consuming more resources than the value generated, therefore wasting society’s resources.
Was Skype generating value to the society with its recurring loss, year after year? I do not believe so. What was Skype’s real economic value before the Microsoft deal, a company still losing money after several years of operations? Its stock market value? Maybe.
However, the company had built an intangible asset that few people realized: its value to Microsoft (or the potential negative impact to Microsoft business if it were acquired by Google! – see related article http://www.ft.com/cms/s/3/e4866140-7bef-11e0-9b16-00144feabdc0.html?ftcamp=rss ).
Skype had an intrinsic value not related to its existing operations but, rather, to an outsider, not even a stakeholder. Within Microsoft, even if Skype is still unprofitable but contributes in a larger amount to the overall profitability, it is generating value!
This transaction made me remind that, even if a company is unprofitable, we should still look at the broader picture and see if it is strategically contributing to another party’s profit in a larger amount. If it is, there is a net benefit to society!
Another reinforced lesson is that we, entrepreneurs, should keep the perspective that our company may have an intrinsic or potential value to an outsider (not even stakeholder) beyond what it can generate by itself. Being able to identify such opportunities and work towards profiting from that value makes a lot of sense.
So far, the fall in Microsoft stock price implies that not every shareholder believes all that $8,5 billion value was there. But for the sake of our analysis, let’s assume that Mr. Gates and Mr. Ballmer know what they are doing…
Friday, April 8, 2011
Is Success Random and Successful Entrepreneurs Just Lucky?
Leonard Mlodinow in his book “ The Drunkard’s Walk” comments on how randomness rules our lives.
He reminds us of our statistics classes, Pascal triangle, probability laws, randomness, series, sequences, limit. Shows us how we can make mistakes, misled by our intuition, that ignores the influence of random events (the "Ask Marilyn" example is remarkable) and presents a historic context on some people that have made a relevant contribution to such field.
And concludes with his view that, in the end, chance is more fundamental than causality: some of us will be successful and others unsuccessful – things are not really about competence and realization.
It is about this specific subject, in what it relates to entrepreneurship, that I want to comment.
Although I agree that we can all be placed statistically within a “normal curve” distributing different degrees of success, and that factors beyond our control have a relevant impact on the final outcome, our individual position in the curve is not random.
There is a difference between random and “of unknown trend or cause”, or even "uncontrollable" - and Mlodinow seems to often use these different concepts interchangeably. The consequences may be similar in some aspects, but it is incorrect to classify as random events that are very difficult to foresee or control.
Actually it is questionable if pure randomness can be achieved, as even the mentioned movement of a "dye in a glass of water" will have causes and trends that may be unkown, but not necessarily random.
I read in such determinism - "Randomness Rules!" - an implicit connotation of resignation, like "there is nothing you can do, just give up"! It is like randomness is a “god”, the omnipotent cause of what we can not explain.
It is true that when we look at the whole population (say of entrepreneurs or fund managers) the chances are high that some will be positive outliers, that others will fail and the average will not beat the “market”. However, implying as a general truth that randomness is the main reason for outperformance (he mentions Bill Gates as an example) just underestimates the value of people who plan their actions, prepare for contingencies or know how to react to unforeseen events.
Of course, such events will take place and will have an impact. Good or bad luck are relevant. But individual decisions, actions or omissions will also significantly affect the outcome.
Entrepreneuring - actually life - is a lot about dealing with the imponderable, unforeseen and uncontrollable. Being lucky helps. But, do not underestimate the importance of doing your share of effective work. Be competent, proactive, anticipate, be flexible, adapt and, most important, persevere.
“Chances” that you will place yourself among the outperformers are just higher.
He reminds us of our statistics classes, Pascal triangle, probability laws, randomness, series, sequences, limit. Shows us how we can make mistakes, misled by our intuition, that ignores the influence of random events (the "Ask Marilyn" example is remarkable) and presents a historic context on some people that have made a relevant contribution to such field.
And concludes with his view that, in the end, chance is more fundamental than causality: some of us will be successful and others unsuccessful – things are not really about competence and realization.
It is about this specific subject, in what it relates to entrepreneurship, that I want to comment.
Although I agree that we can all be placed statistically within a “normal curve” distributing different degrees of success, and that factors beyond our control have a relevant impact on the final outcome, our individual position in the curve is not random.
There is a difference between random and “of unknown trend or cause”, or even "uncontrollable" - and Mlodinow seems to often use these different concepts interchangeably. The consequences may be similar in some aspects, but it is incorrect to classify as random events that are very difficult to foresee or control.
Actually it is questionable if pure randomness can be achieved, as even the mentioned movement of a "dye in a glass of water" will have causes and trends that may be unkown, but not necessarily random.
I read in such determinism - "Randomness Rules!" - an implicit connotation of resignation, like "there is nothing you can do, just give up"! It is like randomness is a “god”, the omnipotent cause of what we can not explain.
It is true that when we look at the whole population (say of entrepreneurs or fund managers) the chances are high that some will be positive outliers, that others will fail and the average will not beat the “market”. However, implying as a general truth that randomness is the main reason for outperformance (he mentions Bill Gates as an example) just underestimates the value of people who plan their actions, prepare for contingencies or know how to react to unforeseen events.
Of course, such events will take place and will have an impact. Good or bad luck are relevant. But individual decisions, actions or omissions will also significantly affect the outcome.
Entrepreneuring - actually life - is a lot about dealing with the imponderable, unforeseen and uncontrollable. Being lucky helps. But, do not underestimate the importance of doing your share of effective work. Be competent, proactive, anticipate, be flexible, adapt and, most important, persevere.
“Chances” that you will place yourself among the outperformers are just higher.
Saturday, March 12, 2011
First Impressions about the Angel Investment World
As I am getting my first contacts with the world of Angel Investing, I am surprised with some seed investors who act in the market with the strategy of making several (dozens, hundreds) investments, often not even appropriately reviewed, trying by chance to get one big deal.
I believe that Angel Investing is different from that, what looks to me more like “supposedly educated” gambling - often betting with other’s people money - and sometimes also targeting at personal media exposure.
I believe in Angels trying to get an appropriate return for their financial risk, but also trying to contribute to the enterprise, sharing experience, network and coaching young people into good leadership practices.
On the other side, I have also seen a number of “entrepreneurs” aiming more at making money by selling stock of their early stage companies than from dividends of the profitable companies they were supposed to build. Of course, making money is a key aspect, driver of all such effort - and there is nothing wrong with that! - but it is not everything we, entrepreneurs, are usually looking for (see my previous post “personality profile”).
I believe that business related Entrepreneurship is about building an enterprise that should add value to the society. Within this context, it is about building a company that generates profit, operating within ethical principles.
Dear entrepreneur, remind that making money for ourselves from deficit generating business may be nice, but probably wastes society’s resources and investors’ net worth. Making money as a consequence of a succesful company, an entity that you created and turned into a profitable and self sustained operation, is truly rewarding.
Angels and entrepreneurs should pursue to make money and also build value to society.
I believe that Angel Investing is different from that, what looks to me more like “supposedly educated” gambling - often betting with other’s people money - and sometimes also targeting at personal media exposure.
I believe in Angels trying to get an appropriate return for their financial risk, but also trying to contribute to the enterprise, sharing experience, network and coaching young people into good leadership practices.
On the other side, I have also seen a number of “entrepreneurs” aiming more at making money by selling stock of their early stage companies than from dividends of the profitable companies they were supposed to build. Of course, making money is a key aspect, driver of all such effort - and there is nothing wrong with that! - but it is not everything we, entrepreneurs, are usually looking for (see my previous post “personality profile”).
I believe that business related Entrepreneurship is about building an enterprise that should add value to the society. Within this context, it is about building a company that generates profit, operating within ethical principles.
Dear entrepreneur, remind that making money for ourselves from deficit generating business may be nice, but probably wastes society’s resources and investors’ net worth. Making money as a consequence of a succesful company, an entity that you created and turned into a profitable and self sustained operation, is truly rewarding.
Angels and entrepreneurs should pursue to make money and also build value to society.
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