Interests:
When considering whether to invest in, acquire, or advise a business, we typically look for several key factors that provide insight into the company’s potential for growth, sustainability, and alignment with our goals. Here's a breakdown of some of the factors I evaluate:
1. Financial health.
- Revenue growth: Consistent year-over-year growth is a strong indicator of a business's viability. I look for businesses that show steady or accelerated revenue growth rather than stagnation.
- Profit margins: Healthy profit margins indicate that the business is generating revenue and effectively managing its costs.
- Debt levels: A manageable level of debt is acceptable, but businesses that are over-leveraged without a clear repayment strategy are a red flag.
- Cash flow: Positive cash flow is critical for covering operational expenses and enabling future growth without relying excessively on external funding.
2. Market potential.
- Industry trends: We prefer businesses operating in sectors with growing demand, such as technology, healthcare, education, and sustainable products. Businesses in stagnant or declining industries, like traditional retail or print media, are less attractive.
- Competitive advantage: I look for businesses that have a unique selling proposition (USP) or a competitive edge whether that’s through technology, intellectual property, brand loyalty, or economies of scale.
- Scalability: A business that can easily scale operations to increase revenue without a corresponding increase in costs is highly attractive.
3. Management team.
- Experience and leadership: A strong management team with a proven track record of success is essential. I prefer businesses where the leadership is knowledgeable, adaptable, and forward-thinking.
- Vision and strategy: We like businesses that have a clear vision for the future, supported by a solid strategic plan. A management team that is simply focused on the short term, without a long-term growth strategy, raises concerns.
4. Business model.
- Revenue streams: Diversified revenue streams are a plus. For example, businesses that rely on just one product or service are more vulnerable to market shifts, while companies with multiple revenue sources are more resilient.
- Subscription models: We are particularly fond of subscription-based businesses, as they provide recurring revenue and predictability (e. g. , SaaS companies, membership services).
- Cost structure: A business with a well-optimized cost structure and the ability to reduce costs through operational efficiencies is more attractive. We avoid businesses with heavy fixed costs that cannot be adjusted easily in downturns.
5. Customer base.
- Customer loyalty and retention: A business with a loyal customer base, high retention rates, and good customer satisfaction scores is more valuable than one with high churn rates.
- Market position: we prefer businesses that have established a strong market position and have built meaningful relationships with their customer base. Companies that are new or struggling to gain a foothold are more risky.
6. Legal and compliance.
- Regulatory compliance: Businesses that operate in heavily regulated industries must demonstrate a strong compliance record. Noncompliance can result in penalties, lawsuits, or even closure.
- Legal liabilities: We avoid businesses that are facing significant legal challenges, whether it’s intellectual property disputes, labor issues, or environmental violations.
7. Cultural and ethical alignment.
- Mission and values: We are drawn to businesses that align with our values and interests, particularly in education, sustainability, and healthcare. Businesses that exploit loopholes or engage in unethical practices are a hard no.
- Environmental and social responsibility: In today’s world, businesses that are proactive about reducing their environmental footprint and contributing positively to society have a better long-term outlook.
Businesses I Like:
- SaaS companies: Predictable recurring revenue, scalability, and growth potential.
- Healthcare technology: Innovations in telemedicine, medical devices, or healthcare services with clear demand and future growth.
- Online education platforms: Businesses like Udemy, Coursera, or institutions offering online degree programs, especially those focused on high-demand skills and professions.
- Renewable energy companies: Clean energy businesses, such as solar or wind companies, that contribute to sustainability and have high growth potential.
- Consumer goods (with ethical and sustainable practices): Businesses like Patagonia, combine profitability with responsible environmental and social practices.
Businesses I dislike:
- Brick-and-mortar retail (without an online presence): Traditional retail businesses that have not adapted to e-commerce and rely solely on foot traffic are on a decline.
- Tobacco or alcohol: Businesses that do not align with my personal values, particularly those contributing to addiction or health issues.
- Print media: With the rise of digital media, traditional print publishing (newspapers, magazines) is struggling to maintain relevance and profitability.
- Fossil fuels: While energy is a profitable sector, we avoid investing in fossil fuel companies due to the environmental impact and the global shift towards renewable energy.
By thoroughly analyzing these factors, we can determine if a business is worth investing in or advising, ensuring alignment with both short-term objectives and long-term goals.
Background: We are a nonprofit organization, based in California, which sponsors a post-secondary institution headquartered in Utah. We are currently in the process of acquiring 40% equity in a college of medicine and are seeking to expand our educational portfolio further. We are very interested in exploring the potential acquisition of a Swiss-based private institute for higher education.