Pitching for investment when yours is a small business, or even a medium sized one, is fraught with danger. At times you feel you are jumping off a building. I was involved recently in a crowd funding campaign where every document was checked and rechecked, since it had to be authentic well beyond anyone’s opinion.
Each bit of insight was full, referenced and a lot more than just a soundbite. And, of course the disclaimer at the bottom confirmed that you could lose everything if the business went belly up.
It almost seemed enough to scare everyone off apart from crazy thrill seekers. And what, you might ask, was the purpose? Well, at bottom, it was to make sure the entrepreneurial spirit did not dupe someone into thinking the business was certain to be a success and that its fortunate investors were guaranteed to be millionaires overnight.
The essence of such “due diligence”, as it is known, is that if you are going to play with, and risk, the money of others, you need to make sure they are sufficiently informed to know what they are getting into.
This, clearly, is a sound strategy based on years of experience. Think of Jordan Belfort in the 1990s, the Wolf of Wall Street, who took, with pleasure, the last well-earned nickel and dime from some innocent person who knew no better. He got 4 years in jail and was fortunate to get out in 22 months.
Since then, the financial regulatory system has tightened appreciably and, as a result, public investment requires a strict adherence to the code of conduct that demands integrity when asking people to risk money.
There’s a fascinating history to all of this: I was listening to Lord Sugar’s protestations over the claims and promises made during the run up to the Brexit referendum. In any of Lord Sugar’s public companies, before his financial advisers sent out an investment prospectus to likely investors, he was obliged to trawl over words, phrases and comments in an extensive due diligence exercise with lawyers and accountants to ensure he and his fellow directors were not misleading anyone.
He was aware that he would have been in serious legal trouble for overlooking even the mildest of unsubstantiated claims. In other instances, custodial sentences have been handed out. The vote to leave the EU was, without doubt, an instance of the entire population of the UK risking, not just the odd person’s pension, but the wealth of a nation for, possibly, a generation. Surely the same sort of rigour should have applied in ensuring that the ‘facts’ were just that…facts?
So as investors in UK plc we did not really get the prospectus for Brexit and, in fact, and in my opinion, there was no requirement for us to acknowledge the enormity of what we were voting for.
We were asked to vote in or out. There were no warnings on the detail of the dangers of voting one way or another. We did not need to know, it appeared, anything about anything.
I am not a great fan of The Apprentice which is more about entertainment than anything else, but it’s good TV. I am increasingly, however, a fan of Lord Sugar whose views I wholly support. Someone, surely, should be held accountable for statements made that persuade a nation to do one thing or another.
We have been lured in politics by sound bites and, dare I say it, fake news. I voted to stay in but for a while I thought coming out would be better. Now, however, I think the politicians, all of them, who were economical with the truth, need to be held accountable.
This is, perhaps, where democracy has its limits. In complex situations which require clever people to get their heads together and work out a solution, the rest of us should be able to trust them to do the right thing.
I realise you cannot necessarily come to a binary answer on a complex situation. ‘In or out’ was the referendum question, but it was not that simple. I always remember some great advice from Sir Tom Hunter and that was…never bet the ranch. In other words, you should never bet with anything you cannot afford to lose. In every business I am involved in that is my mantra.
If we are going to take a gamble we must be able to live with the worst case. And when I say “we”, I mean everyone in the business from top to bottom. It is the fiduciary duty of a director not to gamble with others’ lives.
I fear some in Parliament and others have bet the ranch on Brexit and whilst they may be able to sustain a good life afterwards, no matter the outcome, there are others who will suffer as a result. So, if a general election is sprung upon us, I am voting for Lord Sugar.
