As investors, we realize the only real power we have in a relationship is before we write the check. In those blissful months of pitching, due diligence and term sheet negotiations, that entrepreneur is your best friend. They are willing to pick up the phone whenever you call and supply whatever you need – right away.
Of course, that dance comes to end after the check has been cashed and the entrepreneur has focused their attention on getting customers what they need or securing the next round. Your check was the carrot and that carrot is long gone.
Here are the top 5 frustrations of every investor:
1) Just Do it!
Problem: It doesn’t really matter what fancy tools and graphs exist for collecting information from your portfolio companies because the real challenge is just getting them to DO IT!
Solution: The best time to lay out your expectations for post-funding reporting is BEFORE you write the check. Detail these expectations in the terms and make sure everyone is on the same page with what metrics are to be reported back and what tools to use, when and how. This will lay the foundation of a good working relationship.
Check back with us because our big Automatic Portfolio Reporting enhancement is coming soon!
2) Can I get a price check on Aisle 2?
Problem: Okay, let’s say you’re lucky enough to get that quarterly report with “updated” financials and a blurb about “rah-rah everything is fine”, “rah-rah don’t look too hard because you might find something”, “rah-rah we still believe Google will buy us.”
Then there is the topic of what is being reported. How do you even know this information is correct? You don’t.
Solution: You didn’t become a private equity investor to play babysitter. The only way to really scale a portfolio and analyze the information you’re getting is to compare it to publicly available data.
For example, if your portfolio company is reporting massive user growth but their website’s publicly available analytics say website traffic is down and users are abandoning after a shorter and shorter amount of use time – Houston, there could be a problem.
Utilizing publicly available data to compare to company-reported metrics is the wave of the future. Work smarter, not harder.
Again, check back with us because our big Automatic Portfolio Reporting enhancement is coming very soon!
Problem: Okay, it’s been months or maybe a year plus and you haven’t heard anything from your portfolio company, so you follow-up to find out there has been a change in management, or worse, a “pivot.”
Solution: The fact is that there is no solution to things going badly with an investment, but what would have been nice is to maybe have access to more timely information so that you can make better informed decisions. Utilizing social tools like Google Alerts to keep up to date on press regarding the companies you invest in is a great way to keep up with things outside of what may or may not come back to you as the investor.
We are addressing this head-on. Check back with us because our big Automatic Portfolio Reporting enhancement is coming really soon!
Problem: Yikes, you are getting weekly email updates that are pages long detailing out the CEO’s breakfast choice as it’s related to his peak mid-morning performance and meditation schedule.
Solution: Fish or cut bait, man.
Bring in only the data you need. Automatic Portfolio Reporting is almost here!
5) Clean-up on aisle 2!
Problem: You rocked your term sheet and clearly outlined reporting expectations, and your portfolio company probably needs another round of funding before too long, so they are supplying you with timely and accurate financial reports.
You’re basically the Master of the Universe. The Master, who now has to figure out what to do with all this information – whoops.
Solution: Seamless and easy portfolio tracking is a must. Ideally the goal is a place where the company can supply the relevant information and the investor can get access to it. Then that information can be used to create different data sets that can be compared to other data and build into reports.
Such a place already exists with tools that enable this and we continue to make it better every day.
Happy Funding, Everyone. See you on the other side of profitability.
We will tackle this topic from the entrepreneur’s side in our next post. Stay tuned.