6-23-09
Regarding too much ambition, I frequently encounter people that consider themselves business people who seem to have greatly misplaced ambition and loyalty.
I was attending a “meet the money” event in Texas about a year ago. At this conference, there were 5 popular venture capitalists (sitting on a panel) and about 50 capital seekers who had been prepared to make a presentation by the sponsor. The sponsor drew straws to see which three capital seekers would be able to get up and make a 15 minute presentation about their capital needs, their business plan and to sway the venture capital providers into another meeting.
The second lucky presenter was an boisterous, 25′ish black CPA, dressed in an Uncle Sam constume, complete with a white beard. His 15 minute presenatation was an ongoing dissertation about how he deserved to be rich, his business plan would make him rich and the venture capital providers should invest several million dollars in his plan so that he could live the life he wanted. During the speech, we were able to gather that he wanted to build a nationwide tax preparation service to compete with H&R Block to serve poor black communities around the US. He was very dramatic about how much this service was needed, how underserved his customers were, but he provided no solid support for his words. There was no discussion of statistics, how he would execute, what the management team would look like, what the budget was for startup, no mention of competition and his competitive set. Nothing to sink your teeth into, except he deserved to be rich. After 15 minutes of this, everyone in the audience was laughing so hard that tears were running down their cheeks. He was very entertaining. He did not get the money.
While I was working as a technical expert on recycled products and waste management for the US EPA in Dallas during the early 1990′s, I was in charge of a program we called “Meet the Money”. This program was designed to allow environmental entrepreneurs to meet with people who wanted to invest in “green” technologies, businesses and products. We conducted this conference every 6 months for over 2 years. Many excellent investments were presented and funded, but it continually amazed me how some of these entrepreneurs would present 10 minute presentations about their products, services or businesses and offer these private equity providers, these savvy investors a passbook savings return rate, if the project met its targets. These presenters were ambitious about their making money from the venture, but were lax about how their investors were going to make money.
Both of these examples are real life scenarios where the capital seekers were “out of touch” with what the investors wanted. Private Equity Investors want good, solid returns from innovative ideas with hard working management that has skin in the game (their own money invested).
When a capital seeker quotes me a passbook return rate and says “It is better than what you are getting in the bank”, I just laugh and say, when you can prove that these returns will produce around 30% without leverage, call me and we will start to talk. People are funny, especially with my money.
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Thanks for reading.
Paul A. Thomas, Principal, RIA
Farpoint Advisors and Managers
558 Ambler Avenue
Abilene, Texas 79601
325-695-1329
paul@farpointadvisors.com
