08 December 2006

If it's in the plan it must be possible

There is an MD that I know who is a strong believer in plans. He is looking for an equity injection at the moment and he was wondering aloud with me whether he had any chance to pick up some angel finance.

His business is doing quite well and one of his revenue streams looks as though it is on the point of a break-through. The problem is that the business is cash-hungry and doesn't break even for 6 months and that is true for every installation in the contract. Since a single contract may account for more than 1000 installations, it is inevitable that a guess about contract profitability is challenging - since even at maturity the contract will have some installations which are relatively new. This is the business that he is hoping that the angels will like enough to support.

The good news is that the prospects are all alpha names and there is no problem with credit worthiness. The issue is that Alpha plc takes some time to make up its mind and two of the contracts that he is hoping to close in the next few weeks have been thinking about his service for more than nine months - that's quite a long sales cycle for a business with limited sales resources.

If all goes well, his business will grow rapidly and it makes a compelling argument in the plan. The problem is that this is an organisation which has not been good at staying on track on its forecasts so I was quite amused to hear him talk up the quality of the plan. I'm glad that I'm not an angel.

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