When talking to Baltic businesspeople about their need for investment, I am reminded of Tom Cruise in the film Jerry Maguire, when he shouts “show me the money.” The crisis has certainly heightened the demand for cash and, as a foreigner working with British companies and investors who want to work in the Baltics, I am increasingly approached by local businesses looking to find someone to sink money into their businesses.
The requests currently tend to come from two types of business. The first are established businesses who are suffering as a result of the crisis. They have falling sales and cash flow issues. They see investment as a way of propping up their failing companies. Too often they have no plans for the money, other than keeping the doors open, and no plans for taking the business forward.
The second are start up businesses. These could be based on a new technology or invention, or could simply be for the development of an idea. Again, those seeking the investment really don’t have any clear idea of how they are going to use the money to develop an internationally successful company and as a result offer the investor a return.
There still seems to be a perception amongst many Baltic companies looking for investment that foreigners have more money than sense, and that they can be tapped for cash as and when needed.
I remember one example from a few months ago in Latvia when I met with a scientist who was looking for about 200,000 euros to help him develop some technology. During the meeting he kept telling me that this would be an excellent investment, but any investor would have to be able to move fast and give him the money quickly. He told me he had no business plan or strategy for his product, but the real shocker was, he also refused to tell me exactly what his technology was, in case I or the investor stole his idea!
Western companies and funds do and will invest in good companies of all sizes, and the Baltic as a region has a lot to recommend it, however the mindset must shift. Companies seeking investment need to understand and articulate what they need the investment for, and it needs to be based on fulfilling a strategy which will make the company international and valuable.
The company should also be thinking about the other value that they can extract from the investor, remembering that usually business angels or funds will have considerable experience in the sector they are operating, and will have many potentially valuable contacts.
n the UK it is well understood that you often get greater value from the experience of the investor, than simply the cash they bring. That has to be doubly true here, where the longer international experience is more valuable.
This understandable wish for involvement in the development of the business can also go down badly. I have seen local companies disengage from detailed discussions with investors if the investor suggests a change of strategy, or, heaven forbid, criticizes the current plans of a business. But the company must understand that any investor is inundated with people who want his money, and if he cannot impact the business he invests in, why should he risk his money?
Having been critical, I should also point out that there are some excellent companies here who do understand the full value of an investment, and who have been successful in raising money, and then utilizing the contacts and experience of the investor to take their products all over the world.
Western investment from experienced investors is potentially worth so much more than cash, and if Baltic businesses truly wish to become internationally successful they need to recognize this, and look at investors as a key strategic element of their business, and not a temporary solution to cash flow issues.