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Yesterday I attended another fantastic event at the London Business School, “Venture Capital for Private Investors“, organised by our private investors alumni club. Speakers included former Apax Partners Chief Investment Officer Adrian Beecroft, founder of the first European Search Fund (more on this later) and serial entrepreneur Simon Webster and Alex Hoye, a fantastically successful entrepreneur and angel investor.

My main question was how to get started in angel investing, particularly if you lack startup experience and have nothing to offer but a little capital. Alex’s advice was great: you have to get started to build up experience and connections, and since you are likely to screw up at the beginning, just get started with an amount that you can afford to lose! On a more serious note, he added that it’s important to team up with more experienced angels through consortia and learn that way.

Simon Webster started Europe’s first Search Fund and it was the first time I heard about the concept. It started in the US, at Stanford University, and in a study of all the Search Funds started by Stanford Grads, the annual returns over the years was an impressive 37% (20% when the top 3 funds were excluded), and 100% of search fund founders were men! So it is time for a high flying lady to step up and get into the field….

which is why I need to elaborate on what a search fund is, for those of you who don’t know. The concept of a search fund is that an MBA seeks investors who will fund him to spend a year or two finding a suitable acquisition target, with the aim of buying the company. Once a target is found, there is an additional financing round, the company is bought, the search fund founder takes over the company and runs it, with the aim of growing it substantially and then preparing it for exit.

According to Stanford GSB, “the search fund is an investment vehicle in which investors financially support an entrepreneur’s efforts to locate, acquire, manage and grow a privately held company. The model offers relatively inexperienced professionals with limited capital resources a quick path to managing a company in which they have a meaningful ownership position”.

You have to have a lot of guts to convince investors you are going to be a CEO of a company (typical size of the targets is $3-10 million in revenue), but apparently some seasoned investors are ready to back ambitious MBAs. The initial investment is small as the salary is generally very low, until a target is found. I had never heard of the concept but was intrigued to hear about this short cut to the CEO role.

If this interests you, check out the excellent info on search funds provided by Stanford GSB. Or if you want lighter reading, this article in growth business magazine on the secret of search funds is very useful.

Last week, I talked about my utter disenchantment with Rajat Gupta, former global head of McKinsey and ex-Goldman board member now accused of passing on insider trading secrets (a charge he denies). Unfortunately, this week we already have to move on to our next case study: Jon Corzine, former Goldman CEO, former governor of New Jersey, most recently CEO of the brokerage firm MF Global.

MF Global filed for bankruptcy on Monday. The bankruptcy filing revealed MF Global held assets estimated in value somewhere between $100-500m (the wide range should raise eyebrows even before you read on), as opposed to liabilities of $1bn. MF Global used to be a brokerage that earned its revenue from commissions on futures trades executed by customers. That wasn’t enough for former Goldman CEO Corzine. He decided to turn MF Global into a mini-Goldman and used its balance sheet to buy up $6.3bn of government debt of European periphery states. He refused to listen to concerns raised, absolutely convinced that the European leaders would not let the periphery states go down. When European leaders instead agreed on a 50% haircut on Greek debt, MF Global faced a huge loss.

After announcing a loss for the quarter and forced to disclose their holdings to regulators, customers started pulling out money, MF Global frantically tried to sell part of its business to avoid bankruptcy. During the sales negotiations, it emerged that up to $700m of customer money were unaccounted for (which raises speculation if MF Global used customer money to finance its losing trades – which would constitute a shocking breach of financial services regulation). The sales negotiations flopped and MF Global filed for bankruptcy on Monday. Up to 2,500 people might lose their jobs as a result, with 700 jobs estimated to be lost in London.

It is a shocking tale of arrogance, hubris, lack of accountability and, to be honest, competence. I cannot believe how little some executives have learnt over the last three years of financial crisis that the world has witnessed. And what were the board members of MF Global doing? Did they voice concerns that Corzine chose to disregard? I am sure we will find out more in the coming weeks, providing us with valuable lessons on the complete failure of a leadership style based on overconfidence and greed.

Unfortunately, these still seem to be qualities that can get people to the top in some organizations of the corporate world. The ideal of the aggressive alpha-male as the visionary leader is a major obstacle to women breaking the glass ceiling and is also the cause of some of the spectacular frauds and corporate failures we have observed over the last years. With luck, the example of Jon Corzine will teach boards to look for different qualities in future leaders for their organizations.

An inspirational evening at Hub Venture Labs in Westminster

Last week I attended a fantastic evening on social enterprise at the newly opened Hub Labs in Westminster. The Hub Labs are a fantastic shared office space for startups in London, particularly social enterprises. They are located on Haymarket, very close to Piccadilly Circus and McKinsey’s Jermyn Street offices.

The format of the event was fantastic and I really recommend anyone hosting a networking event to do the same: when we arrived, there were free drinks and people could mingle freely for a while. Then the presentations started. But there was no powerpoint, no long talks. Instead, the organisers had chosen 10 speakers to give a 5 minutes presentations each on what their organisation/startup does. This way, you hear from many interesting people, enough to know who you want to talk to afterwards and don’t get bored listening to a long presentation. There was no powerpoint. People just got up from their chair, talked and sat back down.

Notable speakers included

It was fantastic to see the buzz in London among people who want to make their communities better places to live.
I got to meet Servane Mouazan after the session and want to share a few inspirational stories. First, I found out she does Capoeira, and upon my comment that one must be really fit to do Capoeira, she replied
[quote]you GET fit by DOING Capoeira! It’s an important little change in your mind that you can apply to everything![/quote]
Unfortunately she shattered my only excuse left for lying on the sofa chilling out while saying I am not fit enough to do capoeira or martial arts. But more importantly, afterwards she showed us some of the women entrepreneurs Ogunte supports, and there were lots of impressive and innovative enterprises. You can find some examples here.
I especially love the BUZZBNK co-founded by Theresa Burton (who also happens to be a London Business School alumn). It is crowdfunding venture, which means it brings together social enterprises and backers and fans who can make a loan or otherwise fund the initiatives in their community that they want to see happening. Check out their website to check out some of their projects!
There were so many interesting people, but I have a baby at home so I had to take off after a couple of hours. The evening reminded of what a great place London is and how many fantastic and energetic people live here. Things are happening!

Former McKinsey head Rajat Gupta hands himself in to the FBI

Today is a sad day for McKinsey alumni. We’ve been hearing about former global McKinsey head Rajat Gupta in relation to the Galleon case for a while now, but today it got serious. Rajat Gupta has turned himself in to the FBI and is facing charges that could lead to a maximum prison sentence of 105 years, although since Galleon founder Rajaratnam was sentenced to only 11 years I would not expect a higher sentence.

If he turns out to be guilty, it’s a really beating for everything young hard working McKinsey consultants are taught to believe in. Rajat Gupta was supposed to be a role model who grew the firm considerably and raised its global profile. He was chairman of The Global Fund to Fight AIDS, Tuberculosis and Malaria and of the India AIDS Initiative of the Gates Foundation. He was also appointed the special advisor on management reform to UN Secretary General Kofi Annan. He was everything Harvard Business School students and young McKinsey consultants were supposed to aspire to; a successful business man who was using his influence to make the world a better place.

And then we find out he was supposedly selling insider secrets he acquired from his board seats at Goldman Sachs, P&G and American Airlines? For money, of which he should have had more than enough? I’d really like to understand what could have motivated such actions. He has pleaded not guilty and we will need to see what his trial brings to light, but at least we can see a case of a severe error of judgement.

The whole case has also made me think of all the failed male role models in business we have seen in the last years – Madoff, Rajaratnam, Anil Kumar, Rajat Gupta, rogue traders Jerome Kerviel and Kweku Adoboli. You hear a lot about how women are only x% of CEOs and y% of billionaires, but the truth is, we are also 0% of rogue traders and close to 0% of fraudsters. I am not happy about it. Trust me, as a McKinsey alumn, it makes me really sad and also angry, because people like these are destroying the McKinsey name on any alumn’s CV. But I guess we see here the flipside of male ambition and greed, which leads to many success stories, but also to stories such as Rajat Gupta’s. I do hope he is innocent, but another senior McKinsey figure under arrest is bad news for all alumni.


IBM Names Ginni Rometty as First Female CEO

Great news for women in business! This is a very high profile appointment. Ginni Rometty will be IBM’s first female CEO in its 100 years history. She previously headed sales, marketing and strategy at the company.

Full news report here.

There is an interesting discussion on the Huffington Post on the increasing number of Women CEOs in recent years. Is it going to make workplaces better for women? Are the women CEOs actually going to wield their feminine powers to transform their organizations to improve work-life balance and meritocracy? I would hope so, but I would not want to put additional demands on women in leadership positions. It seems like when they don’t reach the top, women are told they are not assertive and outspoken enough, and as soon as they do, they are told they are too bossy and authoritarian.

Let’s just let them be CEOs for the moment. Let’s just say well done Ginni Rometty, and you show them!