Saturday, November 12, 2011

What kind of business vehicle?

Vehicle 1

A Board Meeting is coming up on Monday, and its making me think hard about business vehicles.

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No, not that sort.   It would be nice to trade up from the Fiesta, but they’d never go for it…

Vehicle 2No, the vehicle I’m thinking about looks a bit more like this

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Back in 2006, my academic advisor and I were debating the principles of new business formation. 

Classically, you start with a market need, a product or service that can fill it, a business model that can profit from it, buttressed with good people and abundant funding.

As an exercise, though, what if you built the structure ahead of the product?  Put together a process for transforming undeveloped ideas into refined ones, add people with good generic skills in a few key project and financial management roles.  Qualify a good list of supporting service providers, from legal and regulatory through laboratory and fabrication.  Then find something to apply it to.

In short, build the vehicle before loading the cargo.

It’s a lot like building a house on spec: take undeveloped land, manage a project to put a house on it, sell it onward.

But there’s a danger to that analogy too: market conditions.  What if the process succeeds, but the buyers aren’t there?

I suppose, having built the house, we could live in it, rather than let it lie fallow or sell it at a loss. 

Similarly, having  created a prototype product, validated it, and run it through regulatory approval so that it’s ready for market, we could simply start selling it.

Take that a step farther: should we be making revenue shipments?

And this is the core of the thinking – maybe the whole idea of building a great product, then giving it to someone else, is flawed.

It’s all about what the business should be when it grows up:

A. A vehicle, creating and selling a portfolio of assets needed to make the product: it’s formula, test results, CE Mark, and patents.  License revenues are reinvested into building the next spin-out prototype.

B. A company, manufacturing a product to sell through distributors.  Profits are reinvested in market development and product improvement.

Either way, it’s a sustainable business, one run as a process irrespective of the product, the other focused on product without leveraging the process.

I’ve been thinking about how the business would develop under each scenario.

We’d need more people and plant for Plan B, producing higher revenues but lower percentage profits. 

We’d be more flexible and profitable under Plan A, but its risky to depend on repeated success of early stage projects. 

Plan B creates jobs and tangible assets to float on a stock exchange; Plan A is a partnership that deals in intellectual property.

I haven’t figured this out yet.  We definitely validated the model, creating a successful vehicle.  The question now is whether to drive it or trade it in.

Thursday, November 10, 2011

My brief life as a consigliere

Consigliere

The assignment was simple – to convey an “offer they couldn’t refuse” and secure a cash for  shares ‘win-win’ exchange.  But I couldn’t close it.  Robert Duvall might have – I’ll study his moves all weekend to understand where I went wrong.

The phones started ringing before 9: a client struggling with a ‘pay or vacate’ ultimatum from their landlord.  This isn’t a situation that I have resources to solve (nor was that my role), but the folks I work with were willing to help.  Initially we talked about covering the rent with a loan, but shifted to a discount share offer to keep the balance sheet clean.  Terms were set, subscribers lined up, we were good to go.

I went in and laid out the terms, a good deal under the circumstances: cash immediately in exchange for 0.5% of the share offering at 50% discount.  I’ve taken worse offers to secure services or supporters that were critical to the business, and know that sometimes you have to be practical in giving some to get some.

But they refused.  No counter-proposal; no discussion.

What went wrong?

I’ve learned that “Time kills deals” – the longer you talk about terms, the more doubts can overwhelm the early enthusiasm. The close has to happen in days.

I’ve learned to “Stay in the room” – given the chance, people will shop around in search of something better.  Car dealers tell you that their offer ends once you leave the showroom, knowing that you’ll go next door to ask if they’ll beat the offer.

I’ve learned to “Guard the exits” – currency is hope: if there’s one offer, there are probably more.   Heartless as it sounds, the alternatives have to be methodically extinguished ahead of time.

But I haven’t learned enough.

It all sounds heartless, I know, but three times, now, I’ve negotiated good, equitable deals that fell through. In each case, our work was leveraged to stimulate a better offer, rather than refused outright.

The job of a  consigliere is to make an offer that sticks, to close the deal.

Maybe its time to bring out the horse’s head.

Transiting west

Packed up a few clothes and a lot of Sinterklaas treats, powered down the apartment, and headed off to the Eurostar.  I’m dragging generally, uncharacteristically, and not just my suitcase.

It was a pretty good couple of weeks in Maastricht.  I’ve got IND back on track (still no approval, but working on it) and all of the banks back in line (What, really, do these institutions do for us besides create friction and expense?).  We made good progress developing the new anesthesia stimulator that I’m building with folks over at the University.  I got back to the PT and to exercise, so am feeling a bit lighter on my feet.  The Christmas lights are being lit.

Still, the inburgering is hanging out and the college is not being helpful.  Travel keeps me out of class, but not out of touch.  I do reading, e-learning, exchanging Dutch emails with Dutch friends.  But I don’t have conversations, and can’t find a path either to have occasional Skype calls with a Dutch-buddy or to stay in sync with my class.  Walking in for a few days each month is more disruptive than instructive.  I’m pushing a bit harder and will see what we can work out, but inburgering is clearly a program that requires physical attendance.

The Eurostar tossed their annoyance onto the pile, as Belgian trains refused to honor “Any Dutch to Brussels” tickets unless  the passenger had an actual paper ticket issued in Brussels.  If you travel with a printed confirmation, they will ask you to buy a 1-way ticket (no penalty, just the 13.70 euro) and seek reimbursement from Eurostar later.  Beware.

Overall, I’m just feeling tired and frustrated, short on patience and behind on task lists. I’m not good company. It will pass, but I feel like just shutting away from the world for a week to read books and eat cashews.

Tuesday, November 8, 2011

A disquieted week

How long can you stay on the road without crashing?

Conversations among international businesspeople generates lots of advice, rules of thumb that make life on the road work.  One good bit of guidance  holds that two weeks of airplanes, hotels, and meetings is a practical limit: travel loses its charm, meetings become simply tiring, and and resentment builds against the treadmill beneath the schedule.

Similar ups and downs accompany expatriate life.  There are many days that settings, people, language, and events are wonderful and stimulating.  There are some days that the same things are tiring, pedantic, frustrating, and difficult.

This week it has just been cumulative.  Work has been unrelenting: we are working through some critical phases, I’m worrying the details, and there’s nobody to talk with.  Some folks are inappropriate; others are long-distance.  This leads to a sense of separation, then alienation.

I’m feeling a long ways from family.

Time with friends is spent catching up, not making plans: I’m becoming a drop-in everywhere.

Corporate colleagues jet first-class while stand in the rain,  waiting for buses.

I’m seeing an older face in the mirror.

A lot of expat friends seem to be headed home, closing blogs and moving on.

In the end, I feel more ranger than wizard, more janitor than miracle-worker, more of a visitor than a friend.  ‘probably a sign that I need a break, a re-balancing, better connections with people.

Maybe a sign things have to change.