Aftermath of a deal - Managing the monkey on your back

In continuation of the earlier post, I will try and cover some of my perspectives in terms of what entrepreneur's management of the investor.

• Inducting the investor into the organization:Too often, the promoter forgets that the investor means nothing to the rest of the people in the organization. These are precisely the people who would have to interact with the investor in minutiae like financial reporting, compliance, business metrices, MIS-es etc. I have often found that a town hall meeting equivalent (post the deal) helps induct the investor into the organizational maze and helps in setting a context for what is to follow.
• Creating an atmosphere of credibility and transparency: I have come across promoters who often "massage numbers" before sending them out to investor or simply turn a blind eye to the investor (to the point of exasperation). While this might provide for gratification in the short term, it is important to understand that one needs the investor's buy-in in the medium term (for raising further capital, key strategic decisions etc.) and an acrimonious relationship does no good to either. I have seem promoters who were known for their utter disdain come back to the investor eating humble pie. What goes round surely comes around !
  
• Managing expectations: Post the money exchanging hands, there is no time for bravado. Remember, the investor is as much a part of the boat (sinking or flourishing ?!) and he has as much stake in the upside. If there is a problem, acknowledge it - often a collective reflection (with the benefit of an outsider's perspective thrown in) can help devise simple solutions. The later this happens, the tougher it is to get out of the maze.
  
• Using an investor as a sounding board: I have seen too few Indian promoters push their investors - remember that an investor can bring value to progressive steps like baking in market intelligence/ competitor information, recruiting senior management, instituting processes and systems, because they have the benefit of a wider network and a larger perspective across businesses. Very few boards make everyone of the board members make a case for the value they added at the end of each year (Ala Infosys). A board in which everyone contributes often works wonders (as the investor realizes the rigours of the business and the entrepreneur realizes the expectations of the investor) in driving change towards a collective vision. I recently came across an entrepreneur who wanted me to help him out with the detailing of an overseas acquisition - the risks, valuation, deal and pay-out structure - that is a progressive step and that is the way it is meant to be !
  

Ahhh, all this serious talk is getting too boring. Let us talk about something a little more interesting next week.

~Varadha
(varadha.r1@gmail.com)
+91-9940670064