Focus on Why!
Investors today when they do their due diligence appear to me to put a lot of emphasis on the quantitative side in their initial screening of a manager. The problem is, that they often overlook what is behind the numbers…namely people!
And managers often fail to appreciate that what they need to communicate to potential investors is not “What they do or How they do it” ….but “Why they do what they do !”
Building a personal connection with a potential investor/manager is paramount to having a fruitful relationship. But managers are often afraid of opening up and be vulnerable because analysts nowadays will use anything they find outside the “norm” as an excuse not to invest. So a manager needs to look “perfect” in order to have the best chance to get an allocation. Or at least that is what most people think.
My own story
After more than 20 years of dealing with the process of investor due diligence, I’m not so sure that pursuing perfection benefits investors or managers. Because at the end of the day, we are all human and this means we are not perfect, so why pretend that we are.
Let me share a personal story with you. In October 2011, I had a very important on-site due diligence meeting lined up. If successful my firm would be in a good position to get its largest investment to date. We had prepared for this meeting for weeks and the pitch was well rehearsed. We were ready to deliver “the perfect” due diligence presentation.
The meeting started as they always do with some social interaction to “get to know each other” before we launch in to our corporate presentation mode. But after one hour I get a call from my wife, which at first sight annoyed me as she knew how important this meeting was. My wife told me that our 9-year old son at the time had collapsed in school with a cardiac arrest and was in a coma being prepared to be flown to the children’s hospital in Zürich. I could hardly breathe, let alone deal with having to be “perfect” towards our guests in the office.
I just left as quickly as I could
I did not think twice, I had to get to my son as quickly as possible whilst he was fighting for his life. For those of you who don’t know, only 5% of people who suffer a cardiac arrest survives. Luckily I did not know this fact as I rushed out the door. To say the least my exit from this hugely important meeting was far from perfect, but it was honest and they got to see how I as a person dealt with the most stressful situation imaginable.
“To say the least my exit from this hugely important meeting was far from perfect, but it was honest”
To make a long story short, after 3 weeks in intensive care and having to undergo open heart surgery, my son had managed to fight his way back to a stable state and could begin his road to recovery. And a further 6 weeks later, we were informed by the potential investor that we indeed had been approved to received a sizable allocation from them.
A blessing in disguise
So what could only have been described as the worst possible circumstances and anything but a perfect due diligence meeting turned out to be the best day in my life. First and foremost, my son survived against all odds and our business was blessed with an allocation from an investor, who can only be described as much more interested in understanding and connecting with the people behind our firm instead of just looking at numbers. What happened that day allowed us to connect at a much deeper level because they had a chance to see behind the curtain and observe first hand how we dealt with a real emergency!
Why is this relevant to Top Traders Unplugged? Because by being part our community you get a chance to get to know the managers from a different, less polished, perspective. You get to hear first hand about their failures and not only their success stories.
But let me just end with a question for you:
- What are you looking for when doing your manager research? Perfection, Numbers or getting to know the People?
Leave a comment below, I would love to hear from you.