Swimming with Asian Sharks - Business Secrets from the Pacific Rim

Lessons from a Mastermind Group

Mr. Princeton actually managed to pull in six people, two of whom were doctors, one who had a doctorate in human resources and one with a doctorate in marketing. The others in the meeting either had domain knowledge of the different segments of the pet industry, such as clothing or food, but all had an interest in seeing Bean Pet succeed. Organic pet food was only a small part of the meeting; the main theme of the meeting was the liquidation of last season’s inventory.

Explosive Growth vs. Organic Growth

Bean Pet consists of many smaller divisions: pet clothing, pet food, brushes, and accessories. The ultimate goal was to figure out in what direction to take the company and whether to raise funds or grow organically.  Investors like explosive growth because there is no point investing if you only yield a gradual return in the case of organic growth. Investors, specifically venture capitalist companies, have a very short lifespan, usually at most 10 years, which in reality is more like eight years. The goal of a venture firm is to spend the money in the firm to make a return before the firm expires. As a result, approaching a venture capitalist at the six-year mark is unwise because it only gives you the entrepreneur two to four years to make the return before feeling massive pressure from the investor.

Venture capitalists are sharks. The rule of thumb is: if you are given the lump sum of 10-20 million, are you able to spend it all on growth within one or two years?  If you are not able to spend it all in that time, obviously you spend it in the way that makes the company explosively grow and you will reach their expectations. However, if they gave you money and you are unable to spend all the money or your growth is still very linear, then they failed in the investment.

Organic growth relies on gradual customer acquisition, word of mouth and strategic advertisement, gradually building the brand and the image of the company. The decision to build a personalized brand or simply use products from other companies also is a tricky matter.  If you promote someone else's brands, as in a supermarket model, you may end up doing a lot of brand building for free for the manufacturing company, whereas if you build your own products and brand them yourselves, you must have access to this type of skill, which is both expensive and time-consuming.