Ad Scheepbouwer: If you don’t get it, stay away from it
Don’t be fooled by multi-coloured spreadsheets and tales of success if you are looking to invest in a company, says Ad Scheepbouwer.
You won’t catch me in a DIY store of a Saturday. Nevertheless, I did try to purchase a stake in one not too long ago. The figures looked promising and when I heard the company was coming up for auction I and a number of others made a bid.
Unfortunately, or so we thought at the time, the bid wasn’t high enough. A few years later – I had forgotten all about it by then- the company collapsed. I had been saved by not getting something I wanted.
For me this was a lesson in humility. One of my business axioms is that you should never invest in a business you know nothing about. I have told others often enough. Don’t be fooled by multi-coloured spreadsheets, tales of success, fast cars and expensive women: If you don’t get it, stay away from it! It couldn’t be more simple but on that occasion I didn’t keep to my own rule.
Return to sender
I have only looked at sectors I know, or could possibly learn something about, ever since. It’s not that I have to know everything at a glance. I like to learn and don’t mind doing the work, sometimes until the small hours. But if I come to the conclusion that I don’t understand the company plan and probably never will, it’ll be ‘Return to sender’ the next day, with the requisite apology of course.
Ever since I started out as an independent investor, people have come to me for advice. My banking contacts also like to refer entrepreneurs to me with business plans that need a closer look. What do I think? they ask.
I usually think all sorts of things. I look at the man or woman’s enthusiasm for an idea, and the originality of the plan. But I don’t usually think much about the possibilities for earning money. If you have to start from zero turnover and zero customers, it’s not so easy to rake in the first hundreds of thousands, let alone the first million. You have to have something to build on.
And even then, things can go disastrously wrong. Laws may change, the economy may collapse, people could go elsewhere and clients could go broke. But these are entrepreneurial risks and will have to be dealt with as and when. To me, the most important question is this: can I conjure up a mental picture of how this company is going to conquer the market? If I can I will continue reading the plan.
What else do I look out for? For starters, whether or not the company is able to ensure the commitment of talented people and what the prospects of the sector are. Another aspect is the growth of the internet: will the company suffer or will it boost business? The opportunity for growth is the decisive factor. If growth is on the cards, I am happy to come on board.
18 months ago, a business relation mentioned Fox IT to me, a fledgeling IT company which springs into action every time cyber criminals tot hackers are threatening internet security. As cyber criminality is a growth industry itself, Fox IT has its hands full. They came to me to ask how to manage their growth. It currently stands at 70%. That is marvellous but a well-known trap at the same time.
I have, by now, met several of the staff. I met them chatting among themselves in the canteen: proxies, dos-attacks, malware, keylogging, a command & control server were some of the terms bandied about. For one short moment I was filled with doubt.
Had I wandered into unknown territory again? I asked them what they were talking about. They stared and after a few long seconds one them put my mind at rest: ‘It’s nothing. Something may be up somewhere, that’s all.’
Ad Scheepbouwer is an investor and former CEO of KPN
This column first appeared in Het Financieele Dagblad
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