After meeting a fairly promising company last week, my mind re-wound back in time to some of the first meetings we have had with entrepreneurs who since then have gone onto do bigger things (whether funded by us or otherwise). Could'nt help notice the fact that the first instinct after those meetings were overwhelmingly positive. And this had nothing to do with commercials - valuation, terms etc.
And in a large majority of the cases, the feeling was mutual - so it was not the buyer necessarily hankering after the seller or vice-versa. A good number of those have translated into professional, informal relationships far beyond that of the immediate call of duty then. (the transaction).
Curiosity for the other: In a large majority of the cases I analyzed, there was a thread beyond just the meeting that had aroused a curiosity in either. the first meeting of this type (for the promoter) or a strong reference on the counterparty ("Hey, I heard these guys are good", "They are pioneers in their thought process", "Strong team that have made delivered results consistently" or "These are one of the smarter PE guys around", They really build relationships").
Preparation from both sides: The best interactions are those in which the answers and the questions flow freely (none of the "I will get back to you. We have not thought about it " etc.). Even in the rare case of an action item that spills over, the progression happens automatically without any follow-up (no repeated phone calls/e-mails).
Sense of empowerment amongst the team : Rather than a peer to peer interaction, the best interactions are those where there is a lot of cross-firing and creative exchange of ideas. There is no one guy who leads the verbage from either of the teams -
Experience and domain knowledge: This often shines through anecdotal evidence of experiences the entrepreneur/investor have had in the past. The seasoned guys know what they are talking about, do a honest acknowledgement of market realities and have a sense of how to marry the market opportunity with their internal capability. For eg., going after a 1% marketshare in a $ 1 bn market in waste management equipment means nothing; however, saying "We will go after the top 20 government bodies that buy 70% of the total equipment in the country and we are already enlisted as the preferred vendor in 8." means a lot more.
As Neil Diamond's song goes " The first cut is the deepest". It seems like there is love at first sight, certainly in the business we are discussing.
~Varadha
(varadha.r1@gmail.com)
+91 9940670064
2 comments:
Nice blog, Varadha. Will take time to read the rest of the posts.
I think the love or hate 'at first sight' might not always help an investor. Didn't Xerox loose an entire generation of fortune because of the then chief executive's 'hate at first sight' for a computer mouse? And I also feel, how well might have Dhirubhai impressed today's IVY-league-business-school-graduated investors?
Agree Naveen. Everyone makes Type 1 errors as well (risk of rejecting something which ostensibly does not look positve). Human nature, tends to minimize type 2 error (risk of getting into something that could be negative). I guess the better ones learn this over a period of time and strike a balance.
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