You claim to invest in companies as an active partner to founders and management – the people that will make your investment successful at the end of the day. Right? Good for you!
Still, your Due Diligence is largely a numbers game, dozens of slides filled with quantitative and qualitative analyses. In-depth descriptions of the business model, customers, market trends, legal matters, investment needs and an array of other financials. And in the end, a single slide where you conclude that the team is “highly experienced with excellent track-record”.
You are not alone. What we have learned from a decade of working with successful and high profile Private Equity and Venture Capital investors is that almost everyone is doing this. But you can do better.
First of all: complement your traditional suite of Due Diligence with a Management Audit.
If you’re looking to invest in a company, use professional advise in order to understand;
Sure, you can find out yourself by trial and error and through the passing of time, and you probably already have a gut feeling of the status of the current management team. But do you really know which members are task- or people oriented, and is the team balanced in this respect? Do you know if the team complement each other or is totally unbalanced in terms of motivational drivers? And, no – your Management Incentive Program will not motivate everyone, so please do everyone a favour and dig deeper than that.
Doing a Management Audit will prepare the company and its stakeholders for the journey ahead, help avoid pitfalls and unlock potential. “Sounds good, but the management team won´t be up for it” you say. From our experience, they are always up for it. But in the unlikely event they are not, as a serious investor you have two options:
So next time you’re contemplating an investment – consider the people who will execute on your mutual plans. And if you already have your dream team in place – assess and learn for the future.
We have already done this for 50 plus companies – where do you stand?