I like stories…

Using Tales For Business

These traditional Tales from The Market have been handed down and treasured for generations. Each story has outstanding analytics and has been rated AAA (”a super-good read”) by Shotzy’s Tale Rating Service.

One of the wise elders from the town of Greenwich tells this first tale, introducing us to the magic of The Market:

A fox and a hound waited in a copse outside of a farmer’s henhouse.

“Ooh, I can hear those chickens clucking from here,” said the hound. “Let’s go in there and snatch them all!”

“Not so fast,” said the fox. “If we take them all at once we can’t ever return. But if we take just one, then perhaps the farmer won’t notice and we can keep coming back night after night to get more.”

“That’s a good idea,” said the hound.

The two entered and went to work quickly. The fox grabbed as many chickens as he could, emptying the henhouse.

“Hey,” said the hound. “I thought you said we were going to take only one chicken.”

“That is what I did,” said the fox. “I limited myself to one chicken.”

“Forgive me, my friend,” said the hound, “but that is not accurate. I saw you take at least seven chickens.”

“The one chicken was my limit,” said the fox.

“And the other six?”

“Ah,” said the fox with a smile. “The other six were the bonus I gave myself for staying within my limit. And a very nice bonus it was indeed.”

The moral of this story? In The Market, a bonus doesn’t count. That’s why they call it a bonus.

•

The mouse king needed a ride to the other side of the river, so he called on a large alligator for help.

“Can you take me to the other side of the river?” the king asked. “I will pay you $20 billion from my coffers.”

“That’s a lot of money, even if it is in mouse dollars,” said the alligator. “I’ll take your offer.”

So they set out on the river, which was very shallow, allowing the alligator to crawl more than halfway across. Then they hit a deep spot and started to sink.

“Help!” cried the king. “I can’t swim.”

“Neither can I,” said the alligator.

“But you’re an alligator,” said the king. “Surely all alligators can swim.”

The alligator explained that he had once been able to swim. But the river was so shallow and so rich with fish to eat that he had grown plump and lost the skill.

“What do we do now?” cried the king.

At this point the subjects of the king who were watching from the river bank recognized what was happening. Many began paddling furiously to the sinking alligator. They used their little mouse legs to prop him up and propel him to the other side. Most did not survive the task.

When he was safe on the other side, the mouse king asked, “Why did you accept my offer if you couldn’t swim?”

The alligator said, “I will be honest. I did it for the money. I figured we would somehow make it to the other side. And sure enough, we did make it. You see, I was right.”

“But what about all of my subjects who drowned in the river?” asked the mouse king.

The alligator shrugged. “Hey, risk is a part of every transaction,” he said.

With that, they went to dinner at the restaurant on the other side of the river and shared a very nice bottle of wine. And forgot about the whole thing.

Daniel Greenberg is a writer in New Rochelle. He wrote this article for The Washington Post.
Read more: http://www.timesunion.com/AspStories/story.asp?storyID=901120&category=opinion#ixzz0gT08UYDY

Some what related to my post yesterday about raising money, these guys, Venture Hacks, are worth following – Nivi (bio) and Naval (bio). Their advice is succinct and born from good experience and a strong network of people in the know.

It's Gotta Be A Good Deal

Unquestionably, raising money for your business is a time consuming and often traumatic event for many. I’ve found myself wearing these shoes on many an occasion but i do fairly frequently find the shoe being worn on the other foot. There’s not a whole lot of businesses i invest in; I’m certainly no serial angel, since I’ve usually put money into the businesses where I’m personally involved. But all said and done it’s gotta be a good deal that makes sense.

Last year, one business did capture my interest. It was going to be  a passive investment for me and it had good cash flow prospects – nothing huge but a good solid return from a niche advertising play. Many of check marks were there, addressable market, previously inefficient management team (it was an acquisition play),  a young, hungry and articulate guy to run it, another investor willing to put in money and so on.  The window to buy the business was short (14 days), so the question was, could i complete  the due diligence in time.

Eventually, i chose not to investment but it was a close call. And here’s the interest for me. Why didn’t i invest?  The short period available to size up the business was good in a way because it forced me to concentrate on what was important.

Distilling it all down, there were 3 reasons why i didn’t invest and i think these are useful to any small business trying to raise money. Taking this from the point of view of why i didn’t investment puts a slightly different slant on things.

So, here’s the 3 reasons why your small business will not be able to raise money. Ignore them at your peril.

• The end-customer is missing - the business in question, was an advertising play based around public transport (not sexy but very interesting). A good part of it’s revenue strategy involved getting local government ad dollars and hitting up local businesses along the transit routes. I was put in front of ad agencies who said they could sell this space for sure, politicians who said this was a no-brainer because the sector was so undeserved and sales reps who were sure they could sell the space. At the end of the day, i want to hear from the horses mouth. I wanted to hear from the government media guy that he had dollars and this was a good place to spend them; i wanted to hear from businesses along the route who would switch their spend to this new network. The people i talked were all one step removed from the customer. Show me these case studies or put me on the phone with them and I’m starting to reach for the check book.

• There not enough cash to ramp the business - the business plan called for $230k in cash to take things to break even. It was all too tight for me, as one of the investors. After my information gathering, I hacked away at the spreadsheet and ended up with a figure of $375k-$400k (this would give a 12 month ramp, with virtually zero revenues). If the business ran out of money, i didn’t have the time to fix things or the desire to put in more money myself (remember, most investors are passive and have other things – many things – going on. It’s the old adage for building a business – “it’ll take twice as long and twice as much as you think”). The result of this, was we needed more investment partners but we didn’t have enough time to find one. It’s a shame because if this was recognized earlier i don’t think we would have had a problem finding one. If we had had a third partner, i would have been reaching for the check book.

• The corporate structure was made of Swiss cheese – the paperwork for the NewCo entity that was to purchase the assets wasn’t ready for review. The term sheet with was missing some pretty significant terms. All of this could have been sorted out with some work on my part but that’s not what an investor wants to walk into. When you’re looking at a car to buy, you want it clean with a good polish before you hand over the cash for the keys.