I have been successful seven out of eight times in business. Those seven successes were the businesses I did with my wife. But that’s not the only reason that business failed. I failed to take in the cost of behavior change. All the people I sold were men, the people in charge who had no idea of the behavior change they were asking of their employees or its cost to productivity.
The people whose behavior would have to change in order to receive new digital information we would be bringing in to a pre web business were all steel gray haired non college females who ran the information appliances that came in on a single dedicated modem line from an insurance company, law firm or car dealership’s first generation version of accounting and information research services. Their time was more valuable than the man who’d bought our information, even those men often made 10 times as much as they did, because in each place, a woman who’d risen up from the secretarial pool was the early, single straw digital pipeline to each siloed industry, and the ones who made sense of it; who figured out how to search Westlaw and Nexus for lawyers, etc.
I will unpack this story in the next post; the point is, if you don’t account for behavior change and your plan calls for it, you are dead in the water. I almost went broke on that business. Four years later, the lesson I learned enabled me to create a profitable web based business bringing searchable databases to the web for customers who could pay a lot; lobbyists and lawyers. We were the first company in our industry on the web by two years. That would not have happened without the earlier failure.
And that’s why I am looking at Ejido Verde as I did when we created Good Capital’s social enterprise expansion fund, which returned 15% IRR, with the three successful companies all having strong Mission Insurance. At Better World Books we had to create a yield management and analysis division, which we brought in the right people to do, and then we had to train the analysts to speak to management and a few other things. It worked; we put in $2 million and our investors got back $7 million, with likely more to come. The founders will tell you they would not have survived without us. And they did not understand the problem or how to solve it. I figured it out, discovered the solution and found the right person to get it done.
Managing behavior change and social risk at Ejido Verde is essential to make sure investors get the success they are looking for.
In the case of Ejido Verde, success requires us working with the company and the community on addressing the behavior and mindset changes needed for the successful creation of community wealth in these marginalized communities. I consider it essential to derisk an otherwise brilliant regenerative and transformative deal that, like our earlier Good Capital deals, has long term Mission Insurance.
