Archive for the ‘Risk’ Category

Inadvertence is sin

February 20, 2008

During my career spanning over a couple decades, I’ve come across several carelessly drafted legal documents. It takes painfully close combing and sanitizing to weed out the malcontent and a pair of wide open eyes to build in seemingly innocuous omissions before presenting a clean set of documents for clients to sign on.  Often on my way back home after such clean up efforts, I meditate over its outcome had the slip up gone undetected.  But then it takes a callous client to sign a document before it’s sufficiently vetted.

Here we have one such outcome. SET India, (of which SONY Japan is a 61% majority holder) which operates channels like Sony, MAX, SAB TV and AXN, recently asked its minority shareholders (32%) to infuse fresh equity of $40 million (Rs 156 crore), which they turned down. Now they are considering suing SET India terming the capital call illegal. The capital is to finance SET’s commitments to the upcoming Indian Premier League tournament, for which the company has won the broadcasting rights with another agency. 

I say this is the silliest of omissions on the part of minority shareholders. Silly because, they got into bed with a monster not expecting to get screwed.  This is normally the route taken by majority shareholders to buyout minority holders on the cheap. This is precisely why in most JV agreements, you’ll find a clause that mandates unanimous shareholder approval BEFORE critical decisions are taken on proposals for major new investments. There will also be mitigating covenants like “all dissenting shareholder(s) be protected by a call/put option at pre-agreed premia or should be exempted from participating in the fresh round [with] or [without] anti-dilution guarantee or that a new class of shares be issued to raise fresh funds without altering the rights/status of dissenters”. 

In this agreement between SET India and its minority shareholders, I suspect inadvertence. They will go thro legal hell.  Deservedly.

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Enough of musings

November 20, 2007

How many times have you wondered “I want to crack it, but can I?”

It was the great Dutch post-impressionist painter Vincent Van Gogh that said “If you hear a voice within you say ‘you cannot paint,’ then by all means paint, and that voice will be silenced.”  

This is one sure way for the little dash between the two dates in your tombstone matter a whole lot more to others. Embarking upon something that you wished you could do, but never could get started, takes a lot of courage.  You need that one spark. These are times when you wished someone from behind egged you on, got you started.  

Here’s to the crazy ones. The misfits. The rebels. The trouble-makers. The round heads in the square holes. The ones who see things differently. They’re not fond of rules, and they have no respect for the status quo. They guard well their spare moments. They are like uncut diamonds. Discard them and their value will never be known. Improve them and they will become the brightest gems in a useful life.  

You can quote them, disagree with them, glorify, or vilify them. But you just can’t ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, others see genius. Because the people who are crazy enough to think they can change the world, are the ones who do. 

Go ahead and take that shot.  Canadian Ice hockey player Wayne Gretzky said “one hundred percent of the shots you don’t take don’t go in.”

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What are you waiting for?

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Missing out on so near, not-so-obvious

October 23, 2007

Monotony kills creativity and puts blinders on new opportunities, no matter how close and within reach they are.  We are too busy executing routine life commands that we fail to notice what lay near the edges. The few who do notice, capitalize on the opportunity and turn out to be successful. We readily dismiss their enterprise and alacrity by saying “they got lucky”. We hate to admit our preference for routine, love for all things predictable.  Yet we don’t recognize our resistance to go near the edge, to experience the random and see what lay beyond. The laziness element that cultivates and firmly entrenches the “why risk” attitude deeply inside us, denies us the opportunity to chip away and sculpt our warped destiny that comes “with-the-package”.  We take the same boring road to the end of our lives. This has been amply illustrated by Richard Wiseman in this Forbes article “Seeing the Gorilla”.  (Thanks, Ben !).  Excerpts –

“The human brain is amazingly good at detecting what it wants to find. When you are hungry, your brain focuses on finding food. When you are thirsty, it looks for liquid. The problem is, your brain can become so focused on seeing what it expects to see, it misses things that are obvious but unexpected. Lucky people tend to have a somewhat relaxed view of life. They are less concerned with mundane details and more prone to look at the bigger picture. Ironically, by trying less, they see more.

So there you have it. Opportunities do not haphazardly fall into the laps of lucky people. Instead, those people are unconsciously doing all sorts of things to increase their chances of attracting good fortune. They are looking at the big picture, opening their minds to the unexpected, breaking routines and connecting with others. It is hard work and the hours are long, but the rewards make it all worthwhile.”

I’ve gone down that road and can personally vouch for this.  Have you…?

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VC misfits find it tough

July 30, 2007

I was expecting it to come any time. Matt McCall is saying it now. A trend where people that flocked to private equity from mainstream industry getting fatigued, disillusioned and seriously planning to quit.

The business of Private Equity / Venture Capital is to “invest” and not to “deliberate” endlessly. Hence it is a space for Foxes – people with an investors’ mindset and NOT for hedgehogs – that of an investment professional or engineers. A Fox knows many things but a hedgehog knows one big thing. While an investment professional will analyze a startup idea to death, the Engineer will debate endlessly on technology. Between the two, any viable project gets crushed and that stymies the passion and drive of the founder.  

Investors judge an early opportunity by instinct more than facts, because if you wait for complete facts to arrive someone else would’ve eaten your meal. They know a good team when they see one because they look for winning traits and not specific skillsets. “Back-a-winner” is the name of the game. Unfortunately many VC firms hired brilliant engineers at the investment desk and their fixation with technology deferred ROI considerations.  An investor would never forgive that.

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Timing a risk

July 18, 2007

Good friend Ben Casnocha, has this thought provoking post on Risk and Entrepreneurship.

Ben Says –

“I think a misconception about business entrepreneurship is that it entails a tremendous amount of risk at the outset.

Particularly when I talk to folks from non-entrepreneurial cultures overseas, their stereotype of entrepreneurs is crazy people who bet the farm and max out their credit cards……”

To that, I had offered the comment below –

The best of entrepreneurs demonstrate an impeccable sense of `timing’ their risks than `assuming’ them. If you wait till you get the complete facts as are requried to make a decision, someone else would’ve eaten your lunch. And if you show haste, you’ll be done in by competition. It’s all about practised gut feel and succumbing to the intuitive epiphany.

What if Bill Gates had accepted IBM deal to buyout his OS. He declined the deal then (timing) but later chose to license it out…now that’s how Microsofts gets made – by timing the risk.

It could be a disaster if you bet the farm early on; but it’ll be a catastrophe if you don’t when you have to. 

Do you agree?

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