I was recently asked to do a talk for Wholesale Investor at their Venture Investment Summit so I thought I would include excerpts from my transcript here and elaborate a little more on some points.
What are you focussed on [as an investor]?
You want to look for companies that thrive during or after a recession. Some easy choices are anything to do with construction. All governments will be spending money on infrastructure projects as this is an easy way to get money into the economy that will also give a reward back to the country (unlike a stimulus package, which is only one way). So, I will be looking at construction related industries, from building materials, planning and approval companies to development sites that will likely have expedited development approval permits.
Another great industry is mining. As you would have noticed, precious metals have been booming in the current environment. When there is instability in the share markets, investment in precious metals spikes. As such, mining companies see an increase in profitability that has not been previously forecasted. This is a great opportunity for mines to be able to upgrade their technologies and equipment. There is a lot of pressure on mining operations to "green" up their sites, and there is a huge amount of new technologies that will increase yields or reduce costs. So, I will be looking at support companies around mines, new technology, wholesale equipment and HR services.
How are you supporting existing investee companies? How can investors support their investee companies?
Obviously the current environment has put a lot of strain on the business community, particularly emerging companies that are going through a capital raise. My advice to these companies has been to push on, do not stop or hold up your capital raise.
At the outset of corona[virus], we saw a lot of investors pull back interest and capital out of the market. These were mostly new investors or ill-educated ones, who are scared of this type of turmoil. However, about six weeks in, we have seen the real investors start to make their move into the markets. These are the sleeping dragons. Generally, they are quiet in a steady market and slow to move on any new relationships; however, in a downturn they become agile and hungry. These are the types of investors that you want in your business, they understand that this is when significant money is made. The benefit to you, if you can capture some of these guys, is that they are what is known as "smart" money. They come with more than just cash; they come with expertise or networking connections to help supercharge your company.
Are you still looking at new opportunities? If yes, what sector are they in?
Absolutely, as I am a professional investor, I cannot get involved fast enough in such a variety of industries at the moment. However, if I had a finite amount of money, I would be focussing on the mining and construction industries.
What is your thesis on a post-coronavirus world? How are you preparing for that? What guidance would you provide to other investors?
I cannot help but see opportunity everywhere on the best of days, but right now we have such a unique opportunity. I would like to take a moment to definitively drive a difference between the current environment and a recession.
Recessions have been guaranteed since the invention of money. In one of my past articles "Diamond Tiaras and the First Great Depression," I speak in detail about the timing and likelihood of recessions. Recessions are a rebalancing of wealth and they bring great opportunity.
What we are seeing right now has never been seen before in history. This is not the first time the world has dealt with a pandemic and this is not the worst of them, by far. However, because of the modern age of technology, we are seeing global acceptance of technologies that have been, until now, on a slow roll-out. The corporate aspect of industries have evolved tremendously in the last few months and I cannot speak for everyone, but within my companies, efficiency has increased by almost 300%. There is opportunity and danger in this. I have been counselling the companies I mentor into using this time to modernise their practices. Online meetings are now the social norm so ensure your company is technically complaint with all of the new changes. The lift in productivity of companies is now measurable and the expectation of deliverables will be measured by this. So, make sure you do not get left behind in the new speed of doing business.
As for investment opportunity, I am looking at all of the new changes. Virtual meeting spaces are an easy pick: how is this going to impact the co-working revolution? Also, is this the death of cash? These are exciting times. The long-term impact of corona[virus], in my opinion, will almost be sci-fi in nature with how fast it will move us into the future and the speed with which more technologies will be built on the back of this.
What are the criteria you are looking for in companies?
Multi-dimensional business models. We are in the age of entrepreneurs. I like to see multiple sources of income and an ability to modularise the business. Whether that be to create offshoot enterprises or bolt on additional facilities to pick up additional market share.
What do you look for in a founder?
Now, there is a difference between founders and managers. In founders, I like to see the ability to pivot, identify opportunity and always be looking at the next five things that could affect the industry they are in, be these opportunities or threats. A founder needs to be part-dreamer in today’s world of business. And to balance this out, they need to have an amazing general manager, someone to ground out the optimism and speculation of the founder and steer the ship daily.
I hope you guys have found this interesting. Please have a look at my website if you would like to read more in my articles or would like to get in contact with me.
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