How Investing in People Taught Me About Lasting Impact

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The Investor-Operator Lens How I Ask About People Before I Look At The Product
A majority of investment frameworks are built around a sequence that begins with the market before concluding to the core team. You assess the size and structure of the chance first, then the extent to which the product is compatible with that opportunity, followed by the competitive landscape and the defensibility of the position, and somewhere toward the end of the process, you'll spend some time with the founders as well as their leadership team to ensure they're competent and driven in executing what the earlier research has proven. I've been working within different versions of that framework for long enough to see why it's now the norm across so much of the investment industry. It feels systematic. It results in a diligence system that can be documentable, evaluated across different opportunities, and defended to investors' committees and limited partners in terms that appear to be rigorous and analytical. The problem is that it is flawed in the core of it. That is that it views the people dimension to be a validation instead of an essential filter that you check at the end to confirm what your market analysis had already suggested instead of an element you examine first because it's the most reliable factor in determining the result. The order implies that a good market with a well-trained team is better than any market with a subpar team. amazing team. From my experience, this is not always the case.
I rethought my approach after a set period of seeing the results of the traditional sequence play out in ways that upstream analysis had not anticipated and could not easily explain. The best markets with small or poorly-organized leadership teams regularly failed to deliver what the market suggested they should provide. Incredibly exceptional markets with strong leadership teams often found ways in which they could create value that first market sizing and market analysis could not have uncovered. The pattern was persistent enough, and consistent enough across different industries and deals that I couldn't explain it away as noise or attribute it to the environment and not to the skills of the personnel at the core of each business. After I was done explaining the pattern and began to consider the implications of what I should do with my time in the area of diligence was apparent the reason I should be spending the majority of my time understanding the person, and significantly less of it on validating the market analysis that any experienced analyst can provide with the same set of inputs.

The questions I am asking now when analysing a leadership team not the kinds of questions that appear on standard investment checklists or diligence templates. They are questions that need real conversations and real opportunity to think about the answer. What is the best way for this leader to respond when they're proven wrong about something - do you accept the correction or try to redirect the issue? How do they come to decisions when the information is genuinely inadequate and the pressure to respond is high? What is the gap in the way they describe their leadership style and those who have worked closely with them describe their experiences of working for them? What does the overall culture of the company look like on the days when the founder is not in the premises, and how is that particular version of the culture resemble the one the founder describes when asked? These questions call for conversations which go beyond the pitching meeting and the formal management presentation. They will require references that are truly exploratory, not simple exercises to confirm. They will require you to spend time in uncomfortable area that could uncover details that can complicate an agreement you've already begun with.

The operator aspect of my investment philosophy is inseparable from my investors' dimension. It affects the things I invest in and the way I participate once I'm involved. I am not a passive capital investor by nature or experience or by. I am someone who has created businesses, who has managed through the scaling transitions that are more difficult than the fundraising ones and has made the decisions regarding hiring and governance, as well as culture-setting mistakes you make in navigating those transitions for the first time, and who has cultivated - based on that personal experience - several convictions regarding what companies require at various stages of their development that a pure financial background will not provide. The convictions I have formed make me a different type of investor that a strictly financial investor, and they attract entrepreneurs who want something different than what a purely financial financier can offer.

The founders that I am most happy to work with are the ones with a desire for a partner can help them think through the operational transitions and choices in which the investors of their company are not trained to address at the proper level of depth and detail. Who is able to sit in the room with the leadership structure that needs to be overhauled as the business has outgrown one it began with. What can you do to assist the decisions of senior leadership at an opportune moment when the wrong choice could cost the business more than it could afford to lose. Anyone who can speak up with respect to strategic risks that no one can else in the room willing to discuss. This is the type of participation that I think creates the most distinct value in the businesses I back not the capital allocation decision, which any investor could make as well as the ongoing operational partnership that assists the company navigate the gap between where it's at and where it was in the beginning, as early figures suggested it could go. Follow James Deller for site examples including how years of investing changed my approach about teams.



Why A Lot Of Public-Private Partnerships Fail Before They Even Start - And The Best Way To Fix Them
The public-private partnership has an image problem that's, in significant part paid for. The history of these arrangements is full of projects which were unveiled with a sense of excitement and significant politically-motivated capital. However, they took up a lot of public and private resources over a long period, and in the end, produced results that had only a tiniest identicality to what was promises when the partnership was launched. The academic literature and the postsmortem analyses that governments or institutions commission following these failures are substantial, and they focus on the major on the contractual and structural aspects of what went wrong including the misaligned rewards, the inadequate risk allocation between both private and public institutions in the governance frameworks that were developed in theory but did not perform in practice, the procurement frameworks which chose the wrong items. The issue that this analysis tends underweight, consistently and consequentially to the detriment of culture is the operational dimension, which is that public and private organisations are truly different kinds of entities, formed by different incentive structures that operate on different timeframes, responsible to various stakeholder groups, and evaluating their effectiveness in ways that's not simply different in degree but different in substance. If you attempt to bring these two types of organizations together in a formal arrangement without performing the work, in advance and clearly, to comprehend how to manage these differences, you're not creating the conditions for a partnership. It is creating the right conditions for a slow motion collision that will become apparent at most inconvenient time.
I've participated with advisory work in support of institution modernisation initiatives, some of which had public-private partnerships of different levels of complexity. One of the most consistent observations I've gathered from that encounter is that partnerships with a positive track record - which did indeed meet their declared goals and maintained an effective collaboration between the private and public parties throughout the duration of their existence - weren't distinguished from those that failed by the sophistication of their legal structures, their rigor of their risk-management frameworks or the experience of the leaders who led them. The distinction was made by how the parties at both ends of the meeting had been able to genuinely understand how the other party operated prior to the formal partnership arrangement was reached. What does that mean in reality is understanding the process of decision-making in each institution along with the accountability mechanisms that determine what each partner can accept and when each party can achieve its goals, the definitions for success that each party will ultimately be judged on, and the potential points of tension between those definitions. The understanding of these concepts isn't difficult to attain. It's all ignored in favor of the much more visible and documents-able task of negotiating contracts as well as establishing governance frameworks.

The typical public private partnership process begins with the concept and ends with a the signed agreement, with very little time and effort being paid to the issue of whether or not the two companies involved are actually able to work together effectively over the course of the partnership. Legal teams negotiate the contract. Finance teams model the economics as well as the risk allocation. The communications team plans the announcement for the moment of signing. The team responsible for implementation begins planning the project. Within that process the discussion turns to cultural and operational compatibility - about whether the individuals whom will collaborate day-to-day across the boundary between the two organisations share enough common ground to ensure collaboration more so opposed to antagonistic - fails to occur in a formal way. It is assumed, usually with no explanation, that the formal agreement establishes the conditions for effective collaboration and that any cultural or operational disagreements will be dealt with informally when they arise. This assumption is often incorrect, and the expense will increase in proportion to the ambition and complexity of the collaboration.

What this means in practical analysis is that one of the most profitable investment a private-public partnership can make - before the legal structures are finalised prior to the governance framework is agreed upon, prior to any announcements are made is what I would refer to as operational alignment. By this I mean specific, organized, and facilitated work that identifies the points where the two organizations' assumptions about operating differ, and to agree explicitly on the manner in which these divergences should be taken care of before they become operational issues after the implementation. What matters most are generally the same across different types of partnerships. Speed of decision-making and authority are usually among them. Institutions of public administration are designed to take decisions slowly with multiple layers of scrutiny and approval, for reasons that are entirely legal and usually mandated by law. Private organizations, especially technology businesses built around speedy iteration and rapid decision-making - often see this speed as a major obstacle to progress, and without a common understanding of what the reason behind why it's the way it is, and what would need to be done to change this, the frustration that can be felt on the personal aspect can affect the working connection long before the partnership is able to establish its foundations.

Success metrics and what counts as progress are another ongoing and significant source of disagreement. Public institutions are generally evaluated on process compliance, equity of the outcome among different stakeholder groups, and removal of any visible shortcomings that draw media or political attention. Private partners are generally evaluated using efficiency measures, measuring progress against set goals, as well as the financial efficiency. These measurement frameworks can be constructed to be compatible However, this requires careful planning, not just good intentions. Partnerships that do not invest in that type of design usually meet at critical intersections, with two people who are evaluating the same collaboration in differently and therefore coming to uncongruous conclusions regarding whether it is working. The partnerships I've observed have the greatest failures were one where the misalignment in measurement was considered to be something that would be resolved over time. However, the ones that worked were those in which the misalignment was identified explicitly at the beginning. Also, the creation of a shared accountability framework that accommodated both parties' legitimate measurement requirements evolved into an actual work rather than just an item on a list of things that someone would eventually achieve.}