What Scaling Tech Companies Deepened My Conviction About People About Culture

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The Investor-Operator Lens The Reason I Inquire About People Before I Look At The Product
Most investment frameworks are built on a structure that starts with the market and concludes when the people. You look at the size, and structure of the potential first, then the degree to which the product is a good fit within that opportunities, and finally the competitive landscape and the viability of the investment, and around the middle of the process, you'll have to spend an hour with the founders as well as their leadership team to make sure they're qualified and committed and able to execute the plan that the earlier analysis has proved. I was a part of that framework for long enough to comprehend why it has become standard practice across so much of the investment world. It's systematic. It produces a diligence process that can be documentable, evaluated across different alternatives, and justified to investment committees and limited partnerships in terms that are logical and thorough. The issue is that it is flawed in the core of it. That is that it views the people dimension as a validation step instead of being a primary factor - something you look over at the conclusion to confirm what your market analysis has already indicated instead of one you consider first since it's the most important factor in predicting the outcome. The sequence implies that a top-performing market with an experienced team is superior to unprofessional markets with an extraordinary team. Based on my experience, this tends to be exactly reversed.
I changed my strategy after a time that I was able to observe the results the standard sequence unfold in ways the upstream analysis did not anticipate and could not readily explain. Great markets with leaders who were weak or poorly organized frequently failed to deliver the value that the opportunity suggested they would deliver. Poor markets with exceptionally talented teams were able to generate value that initial market sizing and the competitive analysis had not captured. The pattern was persistent enough and consistent across different sectors and types of deals that I couldn't explain it as a blip or attribute it more to the circumstances rather than the excellence of the personnel at the centre of each business. Once I got over the nitty-gritty and figured out the implications for how I should spend my time in the area of diligence was apparent The point was that I ought to be focusing the majority of my time understanding the individuals, and significantly less of it on validating the market analysis an experienced analyst could come up with given the same data.

Questions I ask when evaluating a leadership team are not the kinds of questions that appear on the standard investment checklists or diligence templates. They are questions that require real conversation and time to consider the answers. What do they respond when they're demonstrably incorrect about something? Do they take the corrective action or seek to redirect the issue? What decisions do they make in the event that the information is incomplete and pressure to act is high? What is the difference or a gap between the way they describe their leadership style and how those who have worked closely with them describe their experience of working under them? What does the culture the organisation actually look like on days when the founder isn't inside the building? How much does the version of its culture compare to what that the founder speaks of when asked? These questions demand conversations which go far beyond the pitch meeting and formal management presentation. They need reference checks that are genuinely exploratory rather than simple exercises to confirm. They require the desire for a time spent in uncomfortable areas that could reveal some information that could complicate the terms of a deal that you've already started to pursue.

The operator aspect of my investment strategy is inseparable from my investor aspect, and it shapes both what I invest in and the way the investment process is involved. I do not consider myself a passive capital supplier by nature or through being trained. I am someone who has established businesses, who had to navigate the scaling changes that are more difficult than fundraising ones and has made the management and hiring as well as the culture-setting mistakes you make in navigating those transitions for the first time, and who has formed - through this personal experience - the convictions of the requirements of organizations at different points in their development. These are beliefs not something a simple financial background doesn't produce. This makes me a different type of investor in comparison to a purely financial investment and draw entrepreneurs looking for something different than the kind of investment that a solely financial investor can provide.

The founders I work best with are the ones seeking a partner who assists them in thinking through the operational challenges and decision-making which their investors aren't trained to address at the appropriate level of depth and specificity. Who sits in the room to help when the structure of governance needs to be revamped because the company has outgrown the version it started with. Who can aid in making a senior leadership decision at time when the wrong decision could cost the company one year of money it would not be able to lose. Anyone who can speak up regarding strategic risks that no one anyone else in the room is comfortable raising. That is the kind of participation that I think creates the greatest value for the businesses I back Not the first capital allocation decision, which any investor could make an investment decision, but rather the ongoing operational partnership that assists the company navigate the gap between where it is now and where the early numbers suggested it could go. See the James Deller for more examples including how building high-performance teams has shaped my thinking about building well.



What Causes Most Public-Private Partnerships To Fail Prior To They Start - And How To Fix Them
The public-private partnership has an image problem that's, much of the time that they have earned. The history of these partnerships includes many projects that were launched with real enthusiasm and a lot of political capital behind them. They used up significant public and private assets over a prolonged period of time and ultimately delivered outcomes with only a slight reference to what was promises when the partnership was launched. The academic literature and postmortem reviews that governments and institutions undertake following the fail-overs are extensive and they concentrate mostly, on the contractual and structural aspects of what went wrong: the misaligned incentives, the inadequacy of risk allocation between the private and public sectors, the governance structures that were conceptualized in theory but didn't work in practice, the procurement frameworks that were able to pick the wrong things. What this research tends overestimate, systematically and in a way, is the cultural and operational dimension – the fact that public institutions and private organizations are in fact different types of entities, formed in different ways by incentive systems, operating on very different timescales and are accountable to a variety of stakeholders, and measuring success in ways that are far from being the same in all respects but also different in nature. When you bring those two kinds of organizations together by forming a formal partnership but not undertaking the necessary work upfront and explicitly, to know and manage these differences you're not forming an agreement. It is creating the right conditions for a slow-motion collision which will be obvious at the lowest possible time.
I've participated in advisory work supporting institutional modernisation initiatives, many of which have involved public and private partnership structures with varying levels of complexity. The most dependable conclusion I can draw from this knowledge is that the partnerships that were successful - those that in reality achieved their goals and maintained an effective working relationship between the private and public sectors throughout and throughout - did not differ from those that did not because of the sophistication of their legal structures, the precision of their risk-management frameworks or the experience of the leaders who led them. It was determined the fact that those from both sides of the table had done the work understanding how the other side operated before the formal partnership arrangement was reached. What that means in practice is gaining a better understanding of the decision-making processes in each institution as well as the accountability structures that make it difficult for each party to agree to and how quickly you can reach agreement on the definitions of success that every party will measure itself against, as well as any points that could cause tension between those definitions. Any of this knowledge is hard to create. It is all but put aside in favor of visible and immediately documents-able task of negotiating contracts and drafting governance frameworks.

The common public-private partnership model starts with an initial plan and then a the signed agreement, with very little concentration on the issue of whether or not the two organisations involved are in fact able to work successfully over the length of the agreement. Legal teams negotiate the contract. Finance teams model the economics and risk allocation. The communications team is responsible for preparing the announcement for the moment of signing. The implementation team starts preparing the tasks. At some point in the process then comes the discussion about cultural and operational compatibility - on whether the employees needing to work day-to-day across the border between the two organizations share enough common ground to make an effort that is truly collaborative rather opposed to antagonistic - fails to occur in any formal manner. It is commonly assumed but without explicit mention, that the formal agreement establishes the foundation for collaboration and that any operational or cultural disagreements will be handled informally whenever they arise. That assumption is almost always untrue, and the cost is likely to rise in proportion to the ambition and the complexity of the partnership.

The practical implication of this analysis is that one of the most profitable investment a private-public partnership can undertake - before the legal structures are agreed upon and before the governance structure has been agreed upon, or before any announcements are made the partnership is in what I think of as operational alignment. That is, particular, structured, facilitated work that identifies the points between the two organizations' assumptions about operating differ, and to be able to define how those divergences will be addressed before they become operational difficulties during the process of implementation. These divergences that are crucial typically are the same across different kinds of partnerships. In terms of speed and authority, they tend to be among them. Public institutions are structured to take their decisions slowly, with multiple layers of scrutiny and approval, based on reasons that are entirely legal and are often mandated by law. Private firms - and particularly technology firms that have been designed on speedy iteration processes and quick decisions - typically see that speed as a major roadblock to progress. there is no consensus about why the pace is what it is and what would really be needed to alter it, the anger generated by the private side can poison the working relationships long before the collaboration has found its footing.

Success metrics and what qualifies as progress are an additional and a contributing factor to divergence. Public institutions are often evaluated on compliance with process standards, equity of the outcome among different stakeholder groups, as well as the avoidance of visible failures that attract political or media attention. Private partners are typically assessed by their efficiency, the amount of progress they have made towards targets, as well as financial Return on Investment. The measurement frameworks can be integrated with one another, but doing so requires an intentional approach rather than just good intentions. Those partnerships which do nothing to improve that type of design will come across, at critical junctures, with two parties who are measuring the same collaboration in genuinely differently and therefore coming to incompatible conclusions about whether it succeeds. The relationships I've seen are the ones in which the misalignment was assumed to disappear over time. The ones that succeeded were those in which the misalignment was made explicit, from the start, and when creating a shared accountability system that accommodated both parties' legitimate measurement needs turned into an actual work instead of an option on a wish list of things that a person could be able to.}