Assessing carbon offsets; rating and new market

#Intangible 13/05/2021

London-based Sylvera has raised $7.8 million from powerful investment funds to develop a methodology to assess carbon offsets and bring transparency to the entire market.

This is of great interest to me because one of my clients is a startup that creates entire plant ecosystems through big data and drones (dropping seeds) and gives companies the possibility to offset excess carbon with official carbon offsets.

I think it’s great to be able to value these kinds of intangible assets, improve market transparency and improve the environment as well.

The way this company is going to develop the methodology is through geospatial data, machine learning and proprietary climate data. They use satellite imagery, run it through a bunch of algorithms that analyse what’s going on in the imagery, and then generate a standardised valuation of the project under the microscope.

The funding for this new round is led by Indexa Venture, and existing investors include Seedcamp, Speedinvest and Revent.

App overload, poorer quality of work

#Intangible 27/10/2021

Apps came to allow all kinds of companies and freelancers to work more efficiently and economically; we can build a tech stack adjusted to almost any budget and also over time a whole series of companies have emerged that, through plugins or simple connections for the user, allow us to build the entire technological «infrastructure», whatever our size and complexity.

App overload

But a problem has arisen, a big problem. Switching from one app to another in our daily work causes our concentration to be constantly interrupted and consequently our productivity and the quality of our work because our mental energy is diluted.

One thing I have noticed over the last few years is that a large percentage of these apps are unnecessary. I give an example in the financial area; practically everything can be done in Excel and a good accounting program, but now we have an app to calculate the cap table, another one to calculate cash flows, another one to visualize, an another one to make documents, another one to make documents ….. not to mention the dozens of channels for constant communication. All of this can be done in a single program, a basic excel, but of course, it requires more conscious (and manual) work on our side.

We need to reflect on this issue because we are in the attention economy; those who have the discipline and method to cut through the noise and work with the essence are the ones who will have a great competitive advantage over the rest of the professionals and the companies to which they belong.

Image via The Hustle

Leadership style arround the world

#Intangible 09/05/2023

In this Linkedin article I found a very interesting synthesis of the leadership style around the word in a graphical way:

leadership style arround the world

His author, an «Ethics and compliance officer» of a multinational company, based on the book «When Cultures Collide» summarize it as follows:

1/ British managers are diplomatic, casual, helpful, willing to compromise, and seeking to be fair, though they can be ruthless when necessary. Unfortunately, their adherence to tradition can result in a failure to comprehend differing values in others.

2/ American managers are assertive, aggressive, goal and action oriented, confident, vigorous, optimistic, and ready for change. They are capable of teamwork and corporate spirit, but they value individual freedom and their first interest is furthering their own career.

3/ French managers tend to be autocratic and paternalistic, with an impressive grasp of the many issues facing their company. Opinions of experienced middle managers and technical staff may be dismissed.

4/ Swedish management is decentralized and democratic. The rationale is that better informed employees are more motivated and perform better. The drawback is that decisions can be delayed.
5/ German managers strive to create a perfect system. There is a clear chain of command in each department and information and instructions are passed down from the top. Nonetheless, considerable value is placed on consensus.

6/ East Asian countries tend to have a Confucian hierarchy, where the group is sacred and leaders are seen as benevolent.

7/ In Latin and Arab countries, authority is concentrated in the chief executive, and family relations are very important, with ubiquitous nepotism.

Emilio Ibañez, based on Richard D. Lewis book

This is a universal truth; different cultures can have radically different leadership styles, and when you have to work with them you have to understand them. In my experience with global SMEs (not big multinationals) as Fractional CFO or advisor the same things happens and it affects to comunication and the way I relate with the team I am working with or the team I am developing (leading it).

What is the value of my creative company?

#Intangible 19/09/2023

Of all the work I do, valuing companies in creative environments is undoubtedly what I like the most. A little further down we will see what «valuing» in this type of company means.

What do you want to know the value of a creative company for? Fundamentally for three things:

/ To look for partners because they need capital, but without losing control and knowing what they are worth,
/ To sell it, and
/ To chop up internally generated creative processes that can be sold to another company, because otherwise they die.

#1 The first question you may be asking yourself is, what is a creative company?

Without resorting to any manual or agreed definition, in my experience, a creative company is one that innovates by creating new solutions. It doesn’t have to be in the technology or digital sector, although it is increasingly common for it to belong to these sectors to some extent, it can even be a traditional company, there is a bit of everything.

Creativity, along with time and energy, are the great scarce resources. All three have always been scarce, but creativity is increasingly important in a more technological, interconnected, automated and noisy economy; where everything is industrialised and packaged, it will be more necessary than ever.

We are talking, for example, about digital creative agencies, sensory experience agencies, talent ecosystems, databases applied to new uses, branding in different environments, emotional intelligence, design in all its aspects (including graphic design) and new industrial processes.

One of the great paradoxes of the new economy, of the new economic paradigm that we are living and will live in until the end of our days, is that craftsmanship will be increasingly important; in the assessment processes, greater understanding is required of market risks, of the uncertainty of ideas and of the symbolic languages that define the meaning of solutions; that which they call narratives, but which is mythology 2.0.

In an increasingly robotised business environment and processes, more understanding is required of the qualitative, of the intangible… that is why the ability to create value for companies comes increasingly from the intangible or from these traditionally called «imponderables» that we try to weight in numbers, in economic and financial value.

#2 The second question you may have asked yourself is; what do you mean by «how much is it worth»? Its financial value.

Everything can be valued financially, everything has a value. What is different is the degree of uncertainty in that valuation; on most occasions it can be done quite accurately, but there will be times when the degree of uncertainty is so high that its reliability will be low or we will have to leave it at an «approximate notion».

In the end, everything has a material correlate, because we materialise everything, either directly or indirectly.

The valuation of creative companies, until now, had to choose between two opposite extremes that cannot provide an answer to what is needed:

(i) Yuppie world of startup valuation.

ii) Traditional corporate world

The valuation of the former often lacks rigour or does not correspond to real expectations (or the uncertainty is so high that it should not be valued at all). The traditional valuation world is much more rigorous, but it is not capable of valuing creative companies except in phases of maturity because the financial statements are stable, in which case we begin to talk about another type of company.

Between these two extremes, a whole window opens onto an exciting world that requires technical rigour, but also knowledge of other areas and, in turn, a creative capacity in financial valuation itself.

A creative enterprise is worth its lifetime cash-generating capacity (the free cash it leaves), computed at present.

Creative businesses in the 21st century require an advanced knowledge of accounting. This is the first point; accounting is a language and like all languages, it requires a deep knowledge that, corresponding to an established body of rules, must have been used, constructed and analysed in many different circumstances and challenges. We are not talking about making the usual entries. There is so much more.

Just as there is a creative strategy, a creative framework, and a financial framework must be developed; creativity and innovation should have (at least analytical) accounting recognition.

Here the creative enterprise is losing a lot of value because the value it is creating is not reflected.

The uncertainty of the model itself, of the solution. In an interconnected economy, with the capacity to absorb new proposals, global competition, we must value thinking about multiple scenarios, thousands of them; the future is open and, beyond limiting it, we must test it and see what can happen. Valuation models must be open and adopt advanced statistical techniques.

#3 Some final questions

We have to ask ourselves questions like: how does it reflect my company….?

… its research and development process?

… its ecosystem?

… its community of users who in turn add value?

… the skills and talent of my employees?

Note: I’m developing an index of creative small and mediium companies (her momentum, valuation…) Do you think its intereseting? you can contact me. I’ll be happy to tell you more about it and listen to your feedback.