One of the great many chasms that every single PE manager worth his salt has to go through is to figure out the delicate balance between the role of an investor and a manager without becoming disruptive.
How deep does one dive in ? How strong does the understanding of the organizational DNA have to be ? How strong should the technical/domain knowledge be ? For a relationship to blossom into one based on deep trust and commitment, the PE investor needs to move beyond the role of an investor who can bring in generic perspectives and become a trusted confidante; Being a trusted confidante automatically means ability to add value to the technicalities of the business/organization as also to the "mental orientation" of the promoter. May be the investment manager needs to ask himself if he can hold fort should the promoter vanish for 6 months which would mean answering the following questions for oneself:
How deep does one dive in ? How strong does the understanding of the organizational DNA have to be ? How strong should the technical/domain knowledge be ? For a relationship to blossom into one based on deep trust and commitment, the PE investor needs to move beyond the role of an investor who can bring in generic perspectives and become a trusted confidante; Being a trusted confidante automatically means ability to add value to the technicalities of the business/organization as also to the "mental orientation" of the promoter. May be the investment manager needs to ask himself if he can hold fort should the promoter vanish for 6 months which would mean answering the following questions for oneself:
- Do I understand the business in granular detail ? Sales structure, organization, productivity, sales cycles, supply chain, mark-ups, commercials, quality issues, customer expectations
- Do I understand the organizational DNA ? Is it driven by individuals or teams ? What are the motivation levels amongst lower rung employees ? How strong are the company's processes and systems when compared to its peers ?
- How is the market place evolving ? What are competitors doing that we are'nt ? What stage of the curve is the industry going through- early growth, heavy competition, consolidation or mature growth ? How well prepared are we for the next phase ?
An investor's role as a manager is like what someone said " it is not that you would, but you could". It is my firm belief that as one starts thinking about these, the value addition on business specifics tends to flow automatically strengthening the relationship that exists. Contrary to popular belief, I tend to believe that being an investor and a manager are not two different roles at different points of time. A good investor needs have a realistic managerial perspective and a strong manager needs to understand the way an investor sees things - you may be running the most salient business on earth, but if you cannot carry along your investors with you, it does not mean much.
~Varadha
(varadha.r1@gmail.com)
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