Invested Investor Thoughts: Revenue is vanity, profit is sanity, but cash is reality
Peter Cowley founded Camdata, an electronic engineering, product design and turnkey development company, in 1984. To date, Camdata has delivered over 17,000 products and revenue of more than £16 million. Now a tech entrepreneur, angel investor and speaker, Peter has personally invested in 67 startups, is chair of the Cambridge Angels and President of the European Business Angel Network (EBAN).
Dear 29-year-old Peter,
You have had some entrepreneurial experience at University and in Bavaria, but this is the big plunge, the high risk, with which you will not only “cut your teeth”, but many other bodily parts, as well as your pride. The Camdata journey you are about to embark upon continues even now, 34 years later, with your, as yet unborn, youngest son running Camdata as a lifestyle business. And you will go onto found another dozen startups, with varying levels of success.
Within six years, Camdata will suffer a painful failure, followed by a cautious phoenix, the sale and buyback (within just six months), followed three years later by buying your acquirer and then a competitor.
The journey will give you decades of gradually greying hair which, when you undertake an unforeseen metamorphosis into an angel investor, will provide invaluable experience and anecdotes to help the many hundreds of entrepreneurs you will meet, and act as a catalyst for the Invested Investor publishing project.
Some of the things that I know now, that would have prevented mistakes and heartache, and probably led you to better, although less interesting, outcomes are:
Grasp opportunities – whether being an entrepreneur is nature and/or nurture, you have always been comfortable with risk, albeit conducting more and more analysis as you age, before taking the plunge.
Luck is also important – having £70K of personal credit card debt to help finance building three houses in late 2001 could have bankrupted you.
Build a great team – you have hired juniors who have become great leaders, but you have also made mistakes by hiring fast and firing slowly.
Don’t skimp on skills within finance – letting a bookkeeper allocate cost of sale transactions onto the balance sheet, leading to a large unexpected write-down was very painful.
Follow macroeconomic trends – not foreseeing the 1990 recession and hence downsizing earlier may have saved the business.
Understand Lifetime Value – ensure it is a multiple of the fully loaded Customer Acquisition Cost, especially when mainly making capex sales. By the way, despite analysis, you will get it wrong with ZedCam – CAC using Google AdWords equalled LTV for nearly 2 years, before you realised and shut down the business.
Financial leverage using debt works in both directions – with a rising asset price, the reward is large; when falling, the pain is even larger.
Revenue is vanity, profit is sanity, but cash is reality – memorise this adage.
Choose your advisors and Non-Executive Directors with care – and renew them as the company grows
Regretting and FOMO (Fear Of Missing Out) are futile – you will need to learn that these are destructive character traits
The saying that “what doesn’t kill you makes you stronger” is quite true, and building a business takes courage and, at times, blind faith and perseverance.
By the time you get to my age, you will find that that your many, many “war stories” are of more use than you could possibly have imagined in helping young entrepreneurs. So, go for it, take the risks, make the mistakes and you will find incredible satisfaction in helping build multiple companies, as an Invested investor.
Peter (your future self)
Article published by Frog Capital