RE: Cash16 Aug 2018 10:56
Re fonzoo’s comment I give you seeing 2020 post from 8th August
I thought I would contact the ever informative and knowledgeable Colin Barden at Semicast following his meeting with SEE management the other day, Colin has Kindly given me permission to post his response on here. He met with Ken, Jack, James Palmer and Sophie and his comments below are a response to some questions I asked him about funding for the growth he / we expect...
Colin Barnden..
"To build an office block: You need land and detailed architects plans. This is expensive. Then you need to dig a big hole. This is hugely capital and labour intensive and having dug said big hole, you are "below" where you started. You connect utilities, do a site survey. This is maybe 3 years work already and a lot of investment. You then bring in labour and materials and in a space of a few months an entire building just "appears". It becomes weather proof, you fit out the interior, it is "built". The labour (and huge cost) goes on to something else. You have an office block. You find paying tenants. Your running and maintenance costs are substantially below your income, you make a profit. Lifetime of the building is decades and the initial investment is paid off many times over.
Early investors make a lot of money in return for patience and risk taking.
For SM, the "office" is built. This was announced quietly with the first DW for Fovio. Actually SM announced the first "tenant" in OEM4 but the implication was that Fovio is production ready. The huge upfront expenses are mostly complete (no more big hold to dig), or huge engineering resources needed.
Yes there is R&D just as there is maintenance on a building, but the company has moved from R&D and engineering (phase 1 in my tweet the other day), into finding "tenants" (Go-to-market strategy, or phase 2) and is heading for operational profitability (phase 3).
Cenkos and CG are there to show the path to phase 3, not to sell the company. To continue the analogy, one tenant says "I like being based in your block, you must sell me the entire block". Landlord says two words, the second is off. SM is owned by its shareholders, it doesn't get sold because someone says I want what you have.
SM has announced five auto DWs and as Veoneer shows, others in the pipeline. There are clearly other T1s working to launch SM based DMS too (see other tweets). If SM need more cash they can borrow it based on announced DWs to date. OEMs like Daimler and BMW are probably reliable payers and the banks will know this.
There's only one flaw in this analogy. An office block is "capacity limited". Fovio isn't. It is a platform, like PayPal, Facebook, Netflix, Amazon etc. The limitation is in how many customers there ARE not in how many you can SERVICE. One day the investment industry will catch on. And none of this really matters about what L
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