Turning your business into a highly valued and saleable asset, by design, not by chance

Turning your business into a highly valued and saleable asset happens by design, not by chance

Clive Butkow, Kalon CEO was interviewed by Robert Jewell and the a4e Team.

This newsletter is based on an interview I had with Clive Butkow, the Chief Executive Officer of Kalon Venture Partners. The interview was aired on Impact Radio 103FM on 10 June 2019. You can also listen to the interview by clicking here.

Clive is the former Chief Operating Officer (COO) of Accenture South Africa, and has 28 years management consulting experience. Clive led sales for Accenture’s Technology business, cultivating an entrepreneurial mind-set, which helped grow Accenture into one of the top emerging market companies.

Robert: Clive, let’s address my first question: Are entrepreneurs made or born?
Clive: The question is really about nature, which is to be born, and nurture, which is the environment which you grow up in and which has a dominant influence on success.
Most successful entrepreneurs which I have worked with have been born into an environment where they get exposed to good mentors, risk taking, to entrepreneurial thinking and exposed to the idea that failure is okay.

Robert: Kalon invests in people, not ideas or products. Why this approach?
Clive: The A team with the B idea will make money, the B team with the A idea will not make money! What I like to invest in is not an individual but a team. This is because there is not one individual who has all the skills to grow an entrepreneurial business.

Robert: What are the key attributes you look for in high growth technology companies to invest in?
Clive: What we look for in technology companies are the following:

  • The team: You need to have the best team on the plant for this particular idea.
  • The technology: It needs to be 10x better than anything else currently in the market at the time that we make the investment. You then need to keep on innovating to keep ahead of your competitors and build a moat around the castle!
  • The business must already have traction. We don’t invest in start-ups or ideas. We invest in businesses with a few million in revenue. They must also be growing because this means that they are solving a customer pain point in the market: The dogs are eating the dog food!
  • Whilst the current market may be a niche local market, there must be substantial targeted addressable markets not only locally but also in Africa and the rest of the world. It must also be a growing market.
  • From the entrepreneur I want to see tenacity and perseverance. They just don’t give up. If there is a wall in the way, they will get over it, go through it or go under it, but they will find a way.
  • Lastly, the terms must be fair to both the investor and the entrepreneur and meet the needs of both parties. So often I find that a business with no revenue values itself at R200 million whilst I will value the business at R20 million. By being fair to both parties you create a win win situation as opposed to a loose loose situation.·

Robert: There are various strategies to pursue growth. What would be your advice to entrepreneurs wanting to pursue a growth strategy?
Charles: I have a mantra: “Grow your company where it is birthed”. So often I find South African businesses who have come up with the idea locally and then immediately want to expand internationally. This is the wrong approach. If a company can’t get it right locally and establish a footprint and traction locally, it is not going to get it right internationally.

Robert: Clive, what is the involvement of Kalon Business Partners in the businesses which you fund? What do you bring to the table?
Clive: We are the entrepreneurs behind the entrepreneurs. We bring 4 types of capital to the table:

  1. Financial capital: Entrepreneurs often think that this is the most important, and we think it is the least important.
  2. Mentorship capital which we think is the most important form of capital: When an entrepreneur has a question, we share with them our experiences. Very important is that the entrepreneur must decide what action to take. We don’t make those decisions for them.
  3. Relationship capital: We are able to use our connections to open doors for the entrepreneur. We help them to close deals and grow their businesses much faster.
  4. Human capital, finding the best team on the planet: You need the best people to supplement your weaknesses and to compliment your strengths. We use our networks to help you find the best people for your team.

Robert: What you are really doing Clive is to give our listeners and readers hope. So many entrepreneurs think it is all about the money when in fact is more about the ideas, the team, the resources, the expertise, etc.
Clive: For me a bad business with the right money is still a bad business. Money does not create a good business. Your number one priority for your business should be solving the problems that your customers have. Do that well and the money and capital will follow.

Robert: Kalon Business Partners invest in businesses and have an exit strategy. Many entrepreneurs don’t have a future strategy, never mind and end game or exit strategy. What is your take on this?
Clive: Everyone entrepreneur should have an exit strategy. This does not necessarily mean that you are going to sell your business for millions. If you want to give surfing lessons for 3 hours a day and earn a bit while doing so, or you want to have a corner café, that is also okay. It is okay to have a small business if that is your strategy.

Remember however that a successful exit for a business happens by design, not by chance.

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