Capital Reallocation Visualized
Capital Reallocation Visualized
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Happy Wednesday folks!
We are thrilled to have you join us for another edition packed with valuable content for small business owners, deal makers, and investors alike.
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Capital Reallocation Visualized
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Industry: Software and tech-enabled businesses
Business Profile: Sticky B2B customer base
Size: Minimum $1m EBITDA or $5m ARR
Geography: The US & Canada preferred
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Capital Reallocation Visualized
To celebrate Berkshire Hathaway’s Annual Shareholder Meeting that took place in Omaha this past weekend, we wanted to share a chart detailing how capital was (re)allocated for Berkshire Hathaway from 1964 to 1969.
This chart makes reallocating capital look very easy. The eloquent transition from textiles (low ROI) to insurance and banking (higher ROI) in a span of just 5 years.
It hides the true reality of reallocating capital though. Things like laying off staff, shutting down factories, closing vendor accounts, and canceling projects. Not to mention, the immense trust required from investors. Investors signed up to be owners of a textile manufacturer, and you’d have to communicate why shrinking that entire operation and allocating the cash to insurance/banking instead is better.
You also risk capsizing the original ship, and perhaps overestimating the strength of the new ship. None of this is easy and requires a skilled operator to execute and communicate the plan. Reallocating capital results in short-term pain, but owners and the stakeholders that remain can benefit immensely.
And it’s not just failing old textiles manufacturers where capital reallocation proved to be a wild success. Tech startups often “pivot”, meaning they change course from the original idea to something completely different. This, in a sense, is a form of capital reallocation. Lots of short-term pain and immense trust are required from investors. All parties involved signed up for the original idea/vision, and convincing everyone to pivot to something new is no easy feat. But again, if pulled off can leave owners and remaining parties all in a much better position.
As a business owner, ask yourself:
How is capital and resources currently allocated in your business(es)?
Is there a better use of capital, and if so, is it worth reallocating?
If you’re an owner interested in working with Atlasview or an intermediary with a deal to share — feel free to reach out and contact us. We will respond within 24 hours, and we can have an offer on the table within 7 days.
We are happy to pay referral fees for any deal referred and successfully closed.
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Atlasview Equity is a private equity firm specializing in software and tech-enabled businesses. We combine patient capital with proven operational strategies to deliver predictable results for our stakeholders.