Wednesday, October 24, 2012

If Only I Had Invested In …………?

Did you ever dream of coming up with the next big idea? Ever wish you owned the intellectual property associated with Apple, Microsoft, Google, Facebook, or any number of other successful business ventures? What about early opportunities to invest in such revolutionary and industry changing companies?

You may have your own personal stories about missed opportunities, of investment decisions that could have led to early retirement.

Here is mine.

While a graduate student at the University of Rochester in the early 1950s, my father, Gabe Cohen, became friendly with a young lawyer by the name of Sol Linowitz. Sol had just come back from a trip to Columbus, Ohio, where he had seen a unique demonstration by scientists at the Battelle Memorial Institute. The demonstration involved shining light through a transparent ruler at a metal plate that had been rubbed with cat fur and sprinkled with powder. A piece of paper was then held against the plate and, when lifted up, the paper revealed a smudge. This primitive light bulb experiment led to electrophotography, which eventually became known as xerography.

Sol offered my father the opportunity to invest a few thousand dollars and get in on the ground floor of this new business opportunity. After consulting with my grandfather, my father decided to pass on the offer to invest any money in this fledgling venture based on shining a light bulb through a ruler at a metal plate rubbed with cat fur. Better that my father concentrate on his studies and young family.

In 1959, the Haloid-Xerox company, started by Sol Linowitz and Joe Wilson, sold its very first copy machine. This small Rochester-based company quickly grew to become Xerox—a major international corporation with annual revenues in the hundreds of millions of dollars.

What would have happened if my father had made that initial investment? Would his life have been any different? What about mine? To be honest, I am not sure how much of this story is Cohen family folklore, but it is still fun to think about what might have been.

The questions are: Would you have invested money in Sol’s business venture based solely on the cat fur demo? What considerations should you make before investing in an untested and risky new business venture?

I am not aware of any magic formula that can help you determine when a brand-new untested idea or business venture will prove successful. I will, however, suggest that when you proceed with caution when presented such an investment opportunity. Only invest an amount of money that you can afford to lose and conduct a thorough investigation of both the person making the offer and the potential of the venture. If you are fortunate enough to be able to gamble without sacrificing your personal resources or your family’s finances, go for the cat fur! And, good luck!

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