Cora Fernandez
Becoming Investable

So I started my investing career in 2001 when I joined a company called Ethos Private Equity, at the time, and I think it probably still is, the number one private equity investment firm on the continent. I started in 2001 and the people that worked there, the partners and the founders were legends, in my view, in terms of investing and their approach, very highly regarded individuals, the likes of Andre Roux, Peter Schmidt, Shaun Zagnoev, Gary Boyd, Eugene Stals, Nadine Rechenberg, Claudia Koch, those guys. For me, I feel like I was taught by the best, very early on.

The number one thing, if you're going to require funding, is to develop a five-year or three-year view, at least, of where you see the business going, in numbers. So you start by saying, how am I going to grow the business going forward beyond this situation I find myself in, and how do I translate that into numbers?

Everybody should be able to read the management accounts. I'm not saying that you should read the international financial reporting standards. No, the management accounts. What is the red profit? What is the revenue? What is the balance sheet? And the big-ticket items in the income statement are, how is the top-line growing? The profitability, the profit margin. You are sorted. Leave the rest to the specialist, but you must know those things, understand and see where they're going.

It is one that sells something that is unique and that you can see that the customer base is going to be solid for a very long time. Because remember, in the end, after all these other fancy things, without customers, there is no business. There'll be shareholders, but no business. So through the lens of the customer, what is funky, unique, and sustainable that the customers will like and there's a reason why customers want this. So that's the one thing.

We tend to talk about scale when we talk about venture capital, IT and tech, then we use 'scale'. When we talk about the boring businesses, the ones that I like, then we talk about growth expansion. It's actually roughly the same thing, it's just that somehow, and I think people might not agree, but it's just that when we talk tech, we talk scale. 

Most investors, especially in the private markets because it's listed and you can see the price - that rand value per share is X - the market is determinant. But when you are not there and you are here, where we are, when you're buying and selling unlisted businesses, the common view is that it's overpaying. I don't agree with that view. 

The number one mistake that I've come across, I'm sure people have others but for me, it is when the entrepreneur comes and they make unsubstantiated claims. "We are the only...", "We are the best" - so selling a narrative in the pitch that it's exclusive, that nobody else is doing what they are doing. That is the biggest one. Remember that people that are investors, they've been around for a long time and we hear this stuff all the time. 

The first one is when the entrepreneur can't answer questions around or has incomplete views about the competitive landscape. It tells me that you are not respecting your competition and that's a death sentence. So as soon as you're like, "No, they don't do that...", I get worried.

I think the first thing is for the entrepreneur to start running numbers at least three months or a year forward numbers ahead. This will help you see, based on your budget, what is the cashflow telling me? Because some people write on a statute budget, they just look at, what have I done this month? What did I plan to do? Try and project it forward. Why that is important is because it's going to tell you when you're going to need cash or when you're going to run out of cash.

That's easy. If you can't gel with the shareholder, that is probably the most important thing to say no to. The starting point if someone wants to come and invest in your business is you should have a view or a sense of, what is it I'm looking for in a partner? If you need to bring in someone, you need to have a view of what the person should do bring to the table, not the cash.