We recently interviewed a very interesting company. I was quite excited about this as their pitch was very good. The idea was also interesting and based on the face value of the company, it seemed very investable. I and my partner compared notes after the meeting and this is when I re-visited the question of “what makes a company investable?”
The Perfect Company
In many ways, the company was perfect. The business model was proven, the technology was simple and the early traction and conversion figures were fantastic. The management team was formed of highly competent people, even including someone from Private Equity background. They had answers to all of our questions.
Is it investable?
My partner was the first to declare that this company is not investable. We both agreed on the problems this company had but I settled with the conclusion that “this company is almost investable”. So, what exactly was wrong with this seemingly perfect company? At the top of the list was, we saw very little passion. There was plenty of talent but it seemed as if the team was gathered as a marriage of convenience. The early numbers were fantastic but none of them seemed to be too bothered about it. Perhaps they are more used to much higher numbers and were playing it cool. The other problems such as potentially high churn rate and competition were all relatively simple problems to address, compared to the lack of passion.
It may be the case that this company will find the investment they are seeking and I do wish them all the best. We, however, value passionate teams quite highly because in most cases, it is their passion that wins the investors and the customers. It is usually their passion that solves the seemingly impossible problems. Although an over-enthusiastic management team can be a headache, lack of passion for the product they are trying to sell, is a huge risk to the investors. This is why I and my partner continue to seek businesses with passion. You can buy the technology and talent. You can even make a successful business from a borrowed idea. What you must bring to the table, that is your own, is your passion.