If you are a regular viewer of the Dragon’s Den series, you cannot help but notice the happy, chubby face of Nick Jenkins, a British businessman, best known for his online greeting card business. This serial investor is worth at least $232 million, thus, bringing him to par with some of the top businessmen in this world.
Jenkins is famous for his astute look at various business proposals and his in-depth analysis of how some of them are best relegated to paper alone. Jenkins also invests in startups and has also served on the Impact Ventures UK investment committee, which invests in social entrepreneurs that use innovation to solve social problems in the UK.
An assessment of how he chooses which businesses to invest in underlines his investing principles. This famous entrepreneur sticks to certain basic mantras that have only helped him identify the right opportunities but also earn from them. His key investing mantras have been summed up below:
Have a checklist to choose how to invest
Mere investing is not enough. You must be aware of where to put your money, when to invest, and how to invest your earnings. If you want to gauge the quality of an investment option, first look at its management team. Good management can work wonders as it turns around loopholes into opportunities. Also, with so many kinds of similar businesses vying to gain your attention, it makes sense to identify the winning team and then put your money into it.
As Jenkins famously remarked, “I look for a really driven team who’s got skin in the game, who’s got good, strong commercial instincts and good values but who also people I would quite like to work with.”
To cull out what is good and get rid of the banal necessitates good instincts, which come from expertise and experience only. Also, if it is a product business, it helps to identify customers’ attitudes towards the products, and if the customer would show recurring interest in the same.
Numbers matter, which is why one must look at the gross margins of the business. This also means that the underlying profitability must be good and continuous. This is possible only when the business is scalable and adaptable to frequent changes in demand of the addressable market.
Do not put all your money in one investment
As the famous adage goes, “Do not put all your eggs in one basket”, the idea is not to put all your money into one business or investment opportunity alone. You should allocate your money in a way that not more than 20 per cent of your money is put into one investment. Also, putting money through a syndicate helps as it helps you look at the business from their point of view. If other investors are not willing to put in further money or continue investing in the business, it’s a sign that the business is not investable and must be shunned before you lose your money because of it.
Novelty is the key to deciding your investments
You must be aware of when to give up on your investment. To ensure good returns, you must not only be able to identify good investment opportunities but also be willing to weed out the non-performers from your portfolio. Throwing hard-earned money even after a bad show highlights your desperation to hold on to unwanted investments, thus, defying the logic behind investing your money. You must be ready to look hard at the numbers in any business and then make a judgment. It may not be easy to bite the bullet but the hope of something good will come out of bad will only exacerbate your chances of earning decent returns on your investments.
Also, treat every investment as a new investment. Irrespective of how huge the addressable market is, ask yourself this question, “What lies in this business for me or why should I even consider this business worth my time and money?” You must put your money where your mind is, so train your mind to follow facts and figures, and not succumb to the emotions of putting your money in an investment just because it looks good on paper. The guiding motto should be “Look at every investment as if you hadn’t previously been involved.”