Up here at 5:30am reminiscing on the times I burned money by deploying capital to some really unfortunate businesses lol. VC/PE in Naija is really the ghetto. Thankfully, I learned my lessons the hard way & have become better at avoiding mistakes. Please allow me rant small...

Identifying a solid company, acquiring at an attractive price and managing risks is really all we do as investors. Most deals fail when we fail to do any one of the above three diligently. Let me explain.

‘Solid company’ comprises of 2 metrics- Qualitative and quantitative. Quantitative is in my opinion the easier of the two. Quantitative involves doing your profitability forecasts, cashflows and other financial jargons to ascertain how viable investing in an opportunity is.

The hardest part of this job is the qualitative part which interestingly,is the part that is often ignored by most Investors. It’s the part they don’t teach you in school. It’s the part that drives the quantitative. This part drives those numbers you run on your excel sheet.

Somehow this is the part that even the smartest Investment managers tend to ignore or fail so woefully at.
So what does qualitative part mean? What does it entail?

Qualitative part involves taking a step back and considering the deal from a broader perspective by asking yourself hard questions like:
‘Who the fuck is this guy I’m about disbursing funds to’
‘Why should I trust this guy’
‘Will he use this money to relocate to banana island’

It’s hard to really connect the dots in this aspect.

Sometime last year we got a very interesting opportunity to invest $1m in a biomass project. Everything about this business made sense. I mean, we ran the numbers and they looked juicy. We did our DD & there were no red flags

We were on the cusp of disbursing $1m to this guy’s account till one day when I woke up one morning at 3am and ran some numbers in my head that didn’t add up. The whole thing didn’t just make sense anymore in my head.

To cut the long story short, I demanded a schedule of his customer database to hv first hand discussions with users of this product.
After a lot of foot-dragging, he provided an abridged version of his customer schedule which turned out to be the contacts of his friends & family

The game was simple. He took his time to contact all of them and told them exactly what to say if they get a call from me (The Investor) and boyyyy, they all acted the script so perfectly. Execution was so smoothless. Nah I give it to them

Unbeknownst to me, I contacted these numbers to make enquiries and they all testified to the efficacy of a non-existing product lol. A freaking non-existing product lmao.

I remember this day like yesterday lol. It was a Sunday. Just as I was about closing my laptop to watch EPL with the boys before making my final investment recommendations, something told me to give this excel sheet a final cursory glance.

As I gave the excel sheet a final look, I saw a name I recognized. This was an ex-colleague (See God)...so I decided to make one final call.

To be continued..I want to crash. Apologies for my typos too.

So this ex-colleague and I had limited interactions at my former work place. Immediately I introduced myself, she had an idea who she was speaking with but had no idea this was the long-awaited investor call.

Asked her if she was still at our former workplace and she informed me how she resigned to get an Msc degree in the UK. We had a fairly light-hearted discussion and she told me how this UK Msc contributed immensely to her pivot into Investment Banking.

While having this discussion with her, I checked the excel sheet to mentally register her date of purchase of this product then followed up by asking her when she arrived into the country.

Excel sheet revealed she purchased the item while in the UK & at that point, I knew it was one of 3 things:

1. She bought for personal use & ordered just 1 unit from the UK (Made no sense cos this product was specifically designed for people in emerging/underdeveloped economies)

2. She made the purchase in the UK for someone in Naija or for herself ahead of her arrival to Naija.

3. These clowns were lying to me or someone made a mistake with the purchase date

Now let me explain why the purchase date is important. The purchase date is important cos it’s tied to the bank statement. That is, if you purchase an item on a specific date, there must be a corresponding inflow in the bank statement cos this my guy didn’t sell on credit.

At this point, I reintroduced myself to her and told her the reason for my call. As expected, she swore to the efficacy of the product like every other person and told me how the product has been the best invention in human history bla bla bla.

Asked her when she purchased the product and it was at this point she knew she had messed up. She knew she was supposed to give ‘the investor’ a specific date but only problem now is this investor knows she was still in the UK on that date.

It gets interesting. She tried covering up her goof by telling me how she paid in advance for the item while in UK for usage in Naija (Bullshit of course). Thanked her for her time and didn’t even act like I smelled anything fishy.

Immediately after ending the call, I called my guyman entrepreneur at once to solve the final piece of the jigsaw. Knew I had to speak to him first before she beats me to it.

Called him to enquire how Miss xxx purchased our product and he told me how Miss xxx was part of the people who bought said item during his tradefair. It was at that point I knew the deal was off and that he connived with everyone on that list to misrepresent.

So yeah I think we get the whole crux of this gist now. Deep and very rigorous research about management is very essential. (I swear It’s not in my nature to do long threads like this. This is my longest thread ever )

The purpose of this thread was to talk about how investors identify opportunities & mistakes to avoid but I somehow veered off course to talk about this deal.
Will probably do a post some other time to do a deep dive into the other aspects of ‘solid company’ identification. Selah