Acme Government Services
Over the years, we have missed a huge number of opportunities. Some of these have been real losses – companies we didn’t or couldn’t afford to invest in which turned out to be very successful. Other deals were unsuccessful and thus represent “bullets dodged.” Other investment opportunities are still “floating” and may later prove us to be either right or wrong! These stories demonstrate some great mistakes! To protect the companies and other investors from our frank commentary, however, we have described them all under the fictitious name “Acme.” Clear investment mistakes are shown in Red, bullets dodged in Green, with “not sure yet” situations in Blue.
Acme Government Services (AGS) delivers informational e-mails from local/state governments to 50MM consumers with data like “Here’s Where to Vote” or “How to Get a Dog License.” Even when we first met them, they were growing at 30%, i.e., a growth rate like Facebook. Clients included the U.S. Congress, FDA, CDC and the U.K. Parliament; all entities that need to “message” various constituencies. We did not invest.
- Assessment: We didn’t believe in the thesis. How can you make money selling e-mail services to government entities? They are required to bid everything down to the lowest cost, etc.
- Outcome: Acme is a global success. They sold a significant interest to a large fund, followed two years later by the rest of the company, at a good return to investors – perhaps 3X invested capital. They have continued strong growth and are the leader in this business on a world-wide basis.
- Learning: This was a missed opportunity. We learned we need to be more open to businesses with a “network effect”. In this situation, once one government entity signed up, Acme was able to sell others more easily; in the U.S. and abroad. Often, they did this on a “sole provider” basis – with none of the bids we were afraid of.