Private advisory · Business model & capital
The investor was offered a US$10 million business.They invested at US$96 million.
Sometimes the problem isn’t the business. It’s the way the business is designed.
A founder was preparing to raise capital and came to Nathan before approaching the investor.
He wasn’t asking Nathan to raise the money.
He wanted Nathan to look over the company and make sure he hadn’t missed anything.
Nathan and the founder put the entire business on a whiteboard.
The first conclusion was straightforward.
The underlying business was worth approximately US$10 million.
But there was a problem.
The business model wasn’t structured in a way that made sense from the perspective of either the customer or the investor.
Rather than trying to improve the existing model, Nathan looked at the business from a completely different angle.
He turned the business model on its side.
The underlying capability hadn’t suddenly become more valuable.
The way the business created, captured and presented value had changed.
That produced two very different propositions.
The original model
US$10 million valuation
The new model
US$96 million valuation
The founder presented both business model options to the investor.
The investor chose the second.
They invested at the US$96 million valuation.
US$10M
Original business model
US$96M
Investor’s chosen valuation
Investor invested at US$96 million
Key lesson
Sometimes a business doesn’t need more capital.
It needs a different strategy.
Sometimes the founder doesn’t need another adviser telling them how to execute the plan they already have.
They need someone willing to question the plan itself.
Nathan’s role in this situation wasn’t to help the company raise US$10 million.
It was to ask whether the company was actually being presented and structured in the most valuable way possible.
The answer was no.
Changing the model changed the value.
What this demonstrates
Nathan’s value isn’t simply knowing more information than everyone else.
His value is seeing the situation differently.
He can look at an existing business, identify what is actually valuable, understand what customers and investors will respond to, and restructure the strategic proposition around that value.
This is why people bring Nathan into consequential situations.
He doesn’t just help businesses execute their existing strategy.
He can look at the business differently and find a more valuable way to play the game.