I meet a lot of people these days who tell me that all was going very well with their investments or their business until the credit crunch happened. There is no doubt a lot of truth to this; Amano is an example of a great business which was a victim of the credit crunch. However, I do think that the recession is a very good excuse to hide many a folly.

A lot of the investments I have made over the last few years have come undone by the economic downturn. However, if I was being brutally honest, many of those businesses had deeply flawed models. The recession merely put them out of their misery.

Most fund managers simply benchmark their performance against an index such as the FTSE 100 or the S&P 500. If the index is down 40% - but they are only down 30%, they can claim that they have outperformed the market by 10%! This is no comfort for you as an investor if you are paying someone to be down 30%.

I think angel investors need to take the same approach. The fact that an investment has failed simply because the market has declined is of little comfort to angel investors. In other words, a business that relies predominantly on benign economic conditions is perhaps not the best business to invest in.

Some of the businesses that I have invested in are still doing well. Of course, things are harder than they were – but the management teams have found a way through this turmoil that we are in.

Equally, I think investors (I, for one) am using the recession as an excuse to explain our failures. I would rather blame this thing called the credit crunch for my lapses in judgment than my own inability to spot something which was actually flawed at the outset.

As the title says – recessions can be great for playing the blame game!

Related posts

• Canada: It rocks! (3)
• Which structure? (2)
• Talking to a Bank (2)
• Business Angel Blog in North America! (0)
• What should you earn? (2)