What does a desert rally have to do with financing?
What does a desert rally have to do with financing?
In a recent presentation, I explained structured finance using the analogy of a rally race. The company owner was the car’s owner, management was the driver, the team of experts was the navigator, demand was the fuel, and the financier was the sponsor…
Most entrepreneurs think of financing as fuel: we get the money, and the project gets underway.
The financier, however, sees things quite differently.
He isn’t watching the starting line, but rather what happens at the 120- and 300-kilometer marks:
- if the permit is delayed,
- if the market changes,
- if cash flow doesn't go as planned,
- or if reserves simply run out.
A solar power plant or energy storage project is a good example of this, because there are so many variables involved. But in reality, this isn’t specific to any particular industry. The same is true for real estate development, an industrial investment, or even traditional corporate financing.
The bank doesn’t finance technology.
Nor does it finance a business plan.
Funding isn’t just the fuel to get you started; it’s the strategy for reaching the finish line.
The key to success is often not how good the idea is, but rather:
- who bears the risks and how significant they are,
- how predictable the operation is,
- whether there are reserves for tougher times,
- and whether the project will “reach its goal” even under adverse conditions.
Financing is not about selling a product, but rather strategic structuring:
aligning the entrepreneur’s vision with the investor’s risk expectations.
Because in the end, it’s not the one who starts the fastest who wins—but the one who completes the entire race.
#financing #projectfinance #corporatefinance #energy #investment #riskmanagement