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Brexit Opportunities

Brexit Opportunities

Brexit Opportunities

Great Britain voting in favor of the Brexit from the European Union took a lot of people by surprise. Much of the discussion in the aftermath of the Brexit vote has been experts saying that Brexit is bad and they have no idea what is going to happen. While this is normal in the case of any market dislocation, as Active Investors, we want to figure out where is the best place for us to look for opportunities.

In 2012 or so, London surpassed New York City as the Global Financial Capital. This is why Great Britain opting to remove themselves from the Global Financial system, will have continued impact on the markets for the near term as well as over the next several years. Being that Global Finance is based on trust, the Brexit vote basically violated the trust of all who had been relying on Great Britain as the Global Financial Capital.

Even as there is talk of alternative outcomes, the Brexit vote will freeze transactions and will definitely remove London as the Global Financial Capital. While normally the fall of number 1 is good for number 2, New York has such strong ties with London linked with the impending US Presidential election I think there will be a reluctance to rush into New York for Global Financial transactions. Hong Kong (#3) and Singapore (#4) look well positioned to take over much of London’s lost Global Financial business. Also look for less established cities like Dubai and others to assert themselves as Global players in financial services supported by technology and growth in the Pacific Rim.

Knowing that Great Britain is the number one foreign investor in US based companies and real estate, anticipate that some of these British investors will be feeling a cash crunch and need to liquidate their US based holdings just to pay the bills back home. As Active Investors, research US based companies with investors from Great Britain and start evaluating potential acquisition targets. Also identify US based real estate that is owned by British investors which may be attractive investments for you.

Great Britain has served as a conduit for US manufacturers to export into the European Union. As the companies that support this will effectively be shut out, you may want to look to establish your own import-export business into the European Union. Estonia provides virtual residency for companies that want access to the European Union so may be a good business opportunity now that established relationships will be broken with British companies.

Another outcome of the Brexit vote is that the dollar is strengthening as investors flee from the British Pound and Euro. As your US Dollars strengthen over the next 3 to 6 months, you will have opportunities to buy distressed companies, real estate and currencies. This provides you with opportunities to convert your dollars into assets denominated in other currencies which provide a hedge in the event the US dollar reasserts its macro-trend and weakens as it has for much of the 21st century.

Due to the Brexit vote, there will be great opportunities for Active Investors to invest in companies, real estate and currencies over the next several months. What opportunities are you most excited about as an Active Investor?

devensoft investment review

Devensoft Investment Presentation Review

Devensoft Investment

Devensoft Software provides a SaaS web based application that companies use to manage the complexities of Mergers and Acquisitions.  Devensoft automates tracking and provides a repository of documentation.  Devensoft allows for the measurement of synergies and financial performance.  Devensoft has been operating its product since 2014.  Sales more than doubled in 2015 and are projected to double twice by 2017.  Devensoft appears to have strong and experienced management. The Devensoft investment opportunity is $1 million in capital.

When I apply the Business Godfather assessment of whether they are an Investable Business for me I look at:

  1. The Innovation Area
  2. Size of the Opportunity
  3. Inefficiency Capture

Innovation Area: Big Idea

With Private Equity and established companies looking for opportunities the M&A market is booming.  Devensoft applies established innovations to a growing niche.  Companies generally have a poor track record of integrating acquired companies.

GREEN

Size of the Opportunity

While M&A activity is booming now, this traditional has been a cyclical market.  While the potential market includes businesses with significant budgets their is a somewhat limited universe of potential users.

YELLOW if general investment; GREEN if Strategic Investment

Innefficiency

Devensoft is clearly creating efficiency and value for clients.  Current Pricing is billed on a per seat basis on an annual pre-paid subscription.  The pricing strategy probably needs to be reviewed in an effort to improve profitability.  Exploring success fees may be a way to gain client commitment and combat commoditization of service.  Devensoft can provide great value as a strategic acquisition but there is danger that the service provided allows most of the value to flow to clients.  YELLOW – RED

Business Godfather Commentary

I would want to see a clear exit strategy as an investor because there is a danger that Devensoft becomes a commodity in a cyclical business which is not attractive.

Caveats

This Presentation Review is my opinion based on extremely limited information – a 1 page write up and 5 minute presentation.  My assessment might change if I had conducted more thorough due diligence.  I provide this assessment for educational purposes in applying the Business Godfather Investable Business Analysis.  Entrepreneurs are always swimming against a universe of people who may not fully understand their true business innovation and that may apply to me.

Rx Investment Review

Cyber RX Investment Presentation Review

Cyber RX Investment Review

A Cyber RX Investment – Cyber RX is an online measurement and analytical tool that helps companies quantify and manage their cyber security risks and improve their cyber security readiness.  The Cyber RX product allows for a quick assessment of a company or organization’s cybersecurity readiness based on the NIST cybersecurity standards and best practices.  The Company owns a trademark and has submitted a provisional patent application in May 2015.  Cyber RX appears to have strong and experienced management.

Cyber RX seeks $2 million in funding for product enhancement and sales and marketing.  

When I apply the Business Godfather assessment of whether they are an Investable Business for me I look at:

  1. The Innovation Area
  2. Size of the Opportunity
  3. Inefficiency Capture

Innovation Area:  Big Data

Cyber Security is an absolute growth area as more and more companies and organization use Big Data approaches and more and more companies and organizations fail to protect the Big Data systems they have created.

GREEN

Size of the Opportunity

Although Cyber RX cites the potential size of the cyber security market as projected to be $61 billion in 2019, Cyber RX is initially only addressing assessment and evaluation of systems which is a much smaller piece of this market.  The real opportunity is in the remediation and ongoing monitoring of the security issues unearthed by the assessment.  The better business opportunity is in using the Cyber RX tool to support a services business.  This approach would hamper the ability of the business to scale but would provide more predictable means of growth, funding and profit.

YELLOW

Inefficiency

The Cyber RX product purports to conduct a full assessment in hours rather than weeks and months.  In this case the benefits flow to the user and the cost is borne by the company.  It is not clear how much of the inefficiency Cyber RX is positioned to capture.  Pricing of the tool will likely get commoditized.

RED

Business Godfather Commentary

Cyber RX is in a growing industry but likely must rely on services to fuel its growth and profitability.  Cyber RX looks to be a strong business but not one that necessarily needs outside investment.  My recommendation would be for Cyber RX to pursue an organic growth strategy fuelled by the founding members sales efforts rather than spending too much time pursuing funding.

Caveats

This Presentation Review is my opinion based on extremely limited information – a 1 page write up and 5 minute presentation.  My assessment might change if I had conducted more thorough due diligence.  I provide this assessment for educational purposes in applying the Business Godfather Investable Business Analysis.  Entrepreneurs are always swimming against a universe of people who may not fully understand their true business innovation and that may apply to me.

Opportunity Cycles 6-14-14

Understanding Opportunity Cycles

Understanding Opportunity Cycles help Active Investors invest their resources more effectively. Opportunity Cycles are a familiar shape as they are used in Gartner’s Technology Hype Cycles, Cycles of Emerging Market Investments, Product Adoption Cycles, Trader Emotional Roller Coasters, and Investing Mania Cycles among other things. (See Understanding Opportunity Cycles image) The reason they are so common is they reflect human emotion which follows predictable patterns. Opportunity Cycles help Active Investors invest their resources more effectively.

Generally the best time to enter as a Buyer is during the 0 Innovator Creator or the 1 Early Adopter Stages. This allows you to take advantage of the 5 Essential Rules for Active Investors especially related to Buying Wholesale and Escaping Retail and Pulling Out Your Crazy Meter. Most people will tell you you are crazy for investing at this stage which may be true but is also a good indication that you are maximizing your potential upside.

People get most excited at Stage 2 Retail Demand Satisfaction and everyone thinks this is a great idea and is trying to form THE NEXT … This is an ideal time to Sell your position at least partially to reduce or eliminate your risk.

Even if you sell out in Stage 2, you may have an opportunity to re-enter in Stage 3 often referred to as the Trough of Disillusionment.

As the excitement builds a second time heading into Stage 4, it is definitely time for you to fully exit your position and look for another business in which to be an Active Investor.

No businesses last forever. Understand where you are on the Opportunity Cycle and make sure you are thinking about positioning yourself for the next Stage.

If you are interested in learning more about how the Business Godfather can help you be a more effective Active Investor send me an email HERE.