Why Growing Up Around the Game Taught Me About Building Well

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The Investor-Operator Lens This Is The Reason I Want To Know About People Prior To Looking At The Product
A majority of investment frameworks are built around a sequential process that begins with the market and concludes with the team. You evaluate the size and structure of the opportunity first, and then the degree to which it fits into the potential, then the competition scene and the adequacy of the opportunity, and toward the conclusion of the process, you'll have to spend some time with the founders and their leadership team to make sure they're competent and focused and able of executing this plan that your earlier analysis has confirmed. I was a part of this model for long enough to know why it's now the norm throughout the investment industry. It's very systematic. It is a process of diligence that can be traced, compared across different potential opportunities, and even defended to investors' committees and limited partners in terms that seem rigorous and scientific. The issue is that it is flawed at its root, which is that it treats the people factor as a confirmation step instead of as a primary filter. It is something one can check at the last minute to verify what the market analysis has suggested instead of something you evaluate first precisely because it's a most important factor in predicting the outcome. The sequence implies that a successful market with a savvy team is more effective than one with a weak team. outstanding team. According to my experience, that tends to be exactly reversed.
I changed my own approach after a certain period where I witnessed the results that standard sequence play out in ways that the upstream analysis had not anticipated which was hard to understand. Markets that had poor or dispersed leadership teams have always failed to deliver what opportunities suggested they should deliver. Poor markets with exceptionally talented teams always managed to add value that the initial market sizing, as well as the competitor analysis had not adequately captured. The pattern was persistent enough, and consistent enough across different sectors as well as different kinds of deals, which I was unable to explain it as noise, or attribute it to circumstances rather than the caliber of the personnel at the base of each enterprise. Once I quit arguing about it what the implications of this for how I should spend my time for diligence was obvious it was that I must spend considerably more time understanding the people, and significantly less of it on confirming the market analysis that a knowledgeable analyst could generate given the same inputs.

Questions I ask when I am conducting an assessment of a team's leadership are not the same ones that are found in standard investment checklists, or diligence templates. They need real conversations and real time to properly answer. How does a leader respond when they're clearly incorrect - should they respond to the correction or come up with a solution to redirect the issue? How do they take decisions when the information is genuinely inadequate and the pressure to act is very high? What is the difference when it comes to the way they describe their leadership style as well as how individuals who have worked with them describe their experiences of working for them? What does the overall culture of the business actually look like on the days when the founder isn't present in the office, and how closely does that aspect of that culture correspond to the one the founder is describing when asked? Those questions require conversations which go far beyond the pitching meeting and the formal presentation of the management. Reference checks must be conducted that are genuine exploratory and not perfunctory exercises in confirmation. They will require you for a time spent in uncomfortable territory that might surface data that might complicate a transaction you've already begun to pursue.

The operator element of my investment strategy is inseparable from the investor aspect, and it determines what I invest in and how I conduct myself once I'm involved. I am not a passive capital supplier by nature or through learning. I'm a person who's constructed businesses, been through scaling transitions which are more challenging than those for fundraising in the past, who has made management and hiring as well as the culture-setting mistakes that you commit when you're trying to navigate those transitions for the very first time, and who has cultivated - based on that direct experience a set of convictions about what organisations need at different phases of their growth unlike what a traditional financial background is not able to produce. Those convictions make me a distinct type of investment partner unlike a financial investor who is purely a financial one which is why they are sought-after by entrepreneurs looking for something different than the type of financial investment that only a purely financial one can provide.

The founders I am most comfortable with are those with a desire for a partner can help them think through the transitions in their operations and make decisions which their investors are not in a position to make decisions at the right level of depth and specificity. Who will be in the room whenever the governance system needs change because that the organization has outgrown one it was originally built with. Who can assist in navigating the decisions of senior leadership at the point where the wrong choice could cost the business an entire year it couldn't afford to lose. Anyone who can speak up regarding strategic risks that nobody anyone else in the room is willing to discuss. That is the kind of involvement that I believe creates the most unique value for the companies I invest in not the initial capital allocation decision, which any investor could make but the ongoing operational partnership that assists your company to bridge the gap between where it is today and where I initially predicted it could be headed. Take a look at James Deller for website recommendations including why supporting institutional change shapes every decision i make about people.



Why Most Public-Private Partnerships Fail When They First Begin - As Well As The Best Ways To Fix It
Public-private alliances have a reputation issue that's in much of the time and largely, earned. The history of these arrangements is filled with projects that were announced by genuine enthusiasm with substantial financial backing from the political establishment, that drained significant public and private funds over prolonged periods, which in the end produced results that had only a slight recall of what was originally promised when the partnership was established. The academic literature and the postmortem reviews that governments and institutions perform following mistakes are extensive, and they concentrate, for majority of them, on the nature and the contractual aspects of failures: incorrectly aligned incentive structure, the insufficient risk allocation between private and public private companies or the governance structures built in theory however did not work in practice, the procurement frameworks that opted for the wrong items. What these analyses tend to neglect, invariably and ultimately as well, is the culture and operational dimension - the fact that public institutions and private enterprises are fundamentally different kinds of entities, shaped from different incentive mechanisms that operate on different timescales, responsible to various people, and measuring successes in ways that's more than just different in level but are also different in character. When you put these two kinds together in a formal relationship without making the effort upfront and explicit, to identify and manage those differences, you're not forming an agreement. In fact, you are creating the circumstances for a slow-motion collision, which will be obvious at the greatest possible moment.
I've been involved in advising work to support institutional Modernisation initiatives, several of which involve public-private partnerships of various levels of complexity. The most consistent observation I have made from that experience is that the ones which were successful - that actually fulfilled their stated goals and maintained a functioning working relationship between the private and public sectors throughout - were not distinguished from those that failed by the complexity of their legal structures, or the quality of their risk frameworks, or the seniority of the team of leaders that created them. There was a distinct difference in whether the individuals on both sides table had worked to genuinely understand how the opposite side was operating before the formal partnership structure was agreed. What does that mean in reality is understanding the decision-making processes in each institution as well as the accountability structures that constrain what each party can determine and the speed at which it can be reached each party can achieve its goals, the definitions for success that each party will ultimately be measured against, and any points that could cause tension between these definitions. It isn't difficult to build. All of it is frequently ignored in favor of the most visible and easily evidence-based work of contract negotiations or establishing governance structures.

The typical process of public-private partnerships goes from the initial idea to a signing of the agreement with hardly any structured attention paid to the aspect of whether the two entities involved are capable of working effectively throughout an extended period of time. The legal team negotiates the contract. The finance team analyzes the economics and risk-adjustment. The communications team designs the announcement prior to the time of signing. The implementation team begins to plan the tasks. At some point the discussion will turn to operational and cultural compatibility begins - on whether the persons that will be required to share their day-to day tasks across the dividing line between two organizations share enough common interests to make collaboration more so than antagonistic - tends not to be conducted in a structured manner. It is assumed, usually not explicitly stated, the formal agreement sets the necessary conditions for effective collaboration and that any cultural or operational differences will be dealt with formally when they occur. It is nearly always incorrect and the cost of it can escalate in line with the ambition and scope of the partnership.

The real-world application of this analysis is that the highest-value the investment a PPP can make - before the legal structures are in place as well as before the governance framework is agreed upon, before any announcements are made is what I would refer to as operational alignment. This is a specific, organized, and designed work that can be done to highlight areas where the two organizations' assumptions about operating diverge and agree on how these divergences will be handled before they turn into operational issues when the plan is implemented. These divergences that matter the most tend to be the same across different kinds of partnerships. Decision-making speed and authority are often among them. The public institutions are designed to make decisions in a slow manner, with numerous layers of review and approval, based on motives that are purely legitimate and, often, legally mandated. Private companies, particularly technology businesses that are built upon rapid iteration speed and fast decision-making – often view that speed as a fundamental limitation to progress. And lacking a consensus on how the pace works it is and what might need to be changed to improve it, the discontent that can be felt on the personal part of the business can undermine the relationships long before the collaboration has found its footing.

Success metrics and what counts as a progress mark another constant and leading cause of divergence. Public institutions are typically assessed on compliance with process standards, equity in the outcomes among stakeholder groups, and the absence of apparent failures that attract political or media interest. Private parties are usually assessed according to efficiency, measured progress against targets, and financial return on investment. These measurement frameworks are constructed to work in tandem, but doing so requires careful planning, not just good intentions. Those partnerships that do not invest in the right design can end up at situations, between two parties who are measuring the same collaboration in differing ways, leading to an incompatible conclusion about whether or not it is succeeding. My experiences with partnerships that have the greatest failures were ones in which the misalignment was taken as something that would be resolved over time. The ones that were successful were when the issue had been explicitly acknowledged at the beginning, and developing a shared accountability framework that accommodated the legitimate measurement needs of both parties needs became a piece of actual work rather than an item on a list of things to arrive at.}