My CEO Life

My CEO Life is the blog of Simon Baker, the ex-CEO and Managing Director of the REA Group. He is now building a new business called Classified Ad Ventures. This blog looks at real business problems and provides real solutions - ones that any manager around the world can follow and implement.

I had a strange experience the other day.  I was talking to a CEO that I have mentored on and off over the last 3 years.  I, along with others, have provide him with a range of advice and guidance on how he can potentially grow his business.  This advice and guidance is based on years of experience and if given with all the best intentions, especially since none of us are being paid.

During the discussion he turned around and started blaming me and the others for the poor performance of his business.  While I have never claimed to have all the answers, i was a little taken aback.  Was all the information we have provided him wrong or was something else at play?

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I invest in around 12 different companies and at any point in time one of them seems to be raising money.  When a company raises money they are either in a position of running out of cash and need a new injection to survive, they are on a rapid growth path and need new cash to accelerate growth or in some instances they need capital to fund an acquisition (and thus accelerate growth).

Capital raising is always a fun process.  You need to get the balance between valuing the company as high as possible to avoid too much dilution while at the time providing the new investors with upside.  However the balance of power is often driven by your current cash position and just how desperate you are to raise money.

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It seems yesterday’s post had a few technical problems (well human technical problems) and the core part of the article didnt actually make it to posting. So I thought i would repost the article again.

Recently we closed down some of our businesses. These closures were pure because the business model and products that we were working on were just not working. That is life. Things work and things don’t. However, what was interesting for me was that one of the blogs picked up that we had closed some of our businesses and many of the comments were negative and critical of us failing. It was then that I remember the Thomas Edison quote of “I failed my way to success”.

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Recently we closed down some of our businesses.  These closures were pure because the business model and products that we were working on were just not working.  That is life.  Things work and things don’t.  However, what was interesting for me was that one of the blogs picked up that we had closed some of our businesses and many of the comments were negative and critical of us failing.  It was then that I remember the Thomas Edison quote of “I failed my way to success”.

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I am a serial investor. To date, via the fund I manage, we have invested in 11 different Internet businesses. These investments range from a hundred $100k right through to $2m. We have been lucky, the investment of $6m has grown to be worth north of $20m in just over 2 years.

We invest in Internet businesses that are generally in the classifieds or editorial segments, are in their early stages (but not at pure start up phase) and are in emerging countries.

Some when we invest, what do we look for?

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Many of the companies I invest in have the stated goal (or internally hoped for goal) of floating – that is IPO’ing or listing on a stock exchange.  Now in theory this makes sense as it provides a liquidity event for all shareholders and a market for the company’s shares.  However, having been the CEO, Chairman and a Board Member of a number of small listed companies, the reality of being listed isn’t always as good as hoped for.

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I thought I would follow up from the article yesterday on the optimal board structure with an article today on how I think a good board should operate.  To often I see a board that is either ineffective or, at worst, dysfunctional.  In fact one of the Board’s I serve upon now is highly dysfunctional and more time is spent on internal “BS” than in driving the business forward.

So what does a highly functional Board look like?

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For those unaware I invest in a number of different companies and one of the consistent topics all businesses have is “what is the best board structure”?  Now often the Board is made up of shareholders or the founders.  Now in the very early days of the business this is critical however as the business grows, you need to expand the Board structure to get the right skill sets involved and to challenge some of the mind sets of the shareholders.   This posting looks at what i think are the right ways to look at Board structure.

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It is believed that Leonardo Da Vinci coined the phase “simplicity is the ultimate sophistication”.  At its core, it is challenging all of us to keep it simple and for many this is a real challenge.

How often do you sit through a meeting in which you walk out the other end going “what was that all about”?  It happens all the time when looking at new businesses.  I often ask the person doing the pitch to explain the business in 30 sec – a minute maximum.  If they cant, how will they ever explain it to a customer!

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As mentioned yesterday, i had an interesting discussion with a property portal from Russia that was looking to raise money.  As part of the discussion they sent through a P&L with their projections for the next 12 months.  This was all to help me understand how they expected the business to grow and what their capital requirements would likely be.  The problem with this was they were cutting it way to close and in my expectation, they would run out of capital in the middle of the year.

Therefore, the question that all investors ask is, do you have enough capital to either reach profitability or to deliver enough results that demonstrate great progress and will ensure more capital can be raised?

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