Variety is the Spice of Life When it Comes to Operator-Investor Interactions

June 24, 2020
5 Minutes
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In SaaS businesses, operating results are earned every single day; and good businesses are made, not found. Writing here about building organizations, learning from the experience, and appreciating the ride.

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This blog typically focuses on sharing observations from the twenty years I spent operating small-scale SaaS businesses. This post takes a different tack. It reflects more recent experiences, as I’ve transitioned over the past 18 months into the role of SaaS investor. That pivot has offered an exhilarating (and often humbling) opportunity to work with SaaS operators in a new way and from a different perspective. One of the things this experience has revealed is the need to be intentional about how investors and operators engage with each other. Failure to do so, I’ve learned, under-utilizes this potentially invaluable relationship and can lead to stale interactions. On the other hand, even a little bit of intentionality can drive more efficient and effective collaboration among company executives and board members / investors to the benefit of company performance. Below is a brief intro to the model we’ve adopted in recent months and how we’re using it to raise our game on this front.

We noticed that virtually all interactions between portfolio company executives and members of our investment team could be categorized based on two core questions. (1) Who is the owner / person responsible (portfolio company or investor) for leading a given activity or deliverable? (2) How much interaction does the exchange require? From these variables, an obvious 2x2 matrix emerged, as follows:

Because its useful shorthand to name quadrants of a 2x2 matrix, the following terms quickly attached themselves to each box.

And just as quickly, we realized that this simple schema neither represented reality, nor provided a model that meaningfully improved our communications. But, with a few tweaks, it became valuable quickly. The trick was understanding that a binary notion of ownership makes perfect sense for artifacts or deliverables but makes less sense in connection to in-depth discussions about complex topics. To recognize this reality, the 2x2 morphed into something a bit more complex; and the following model came forward:

This was a game-changer for a few reasons. First, it became easy to plot virtually all our interactions / exchanges somewhere within this model. Below is a small example with just a few of the items on which our operators and investors / board members collaborate or exchange information:

Second, this framework established some shared language, through which we gained immediate communications efficiency. It became simple, when discussing an initiative or a deliverable, to identify the box it was believed to occupy…and to quickly uncover and address any areas of misalignment. When discussing a potential topic or project, it has become common for us to rely on shorthand such as, “I think this is a Box 4 topic, do you agree?” This has squeezed-out some previously existing room for confusion. To avoid all doubt, we use the following numbering system:

But the biggest benefit by far has been to raise our awareness of the amount of time and energy spent in each box…and our sensitivity to wasting time in the wrong box on a given topic. For example, in the first few months after an investment, we spend a good deal of time in collaborative discussion (Box 2: Shared Strategic Planning). That makes a ton of sense for many reasons, particularly during a period where there is a lot of shared learning around complex topics and where planning occurs through a collaborative and iterative process. But that can be really time consuming. And, as the company moves into more of an execution mode, it becomes advantageous to migrate operator-investor interactions more into boxes 4–7. When recently asked by a portfolio company CEO about a particularly thorny product-related issue, I reflexively suggested that we get in a room to discuss. Instead, he responded, “In this situation, it would be more valuable for me to hear a summary of your lessons learned on this topic, can we just make this a Box 5 presentation from you guys?” I was happy to comply; since we are all aligned around optimizing company performance. This kind of directive request helps us to arm operators with whatever support they need to succeed in the market.

This whole approach reminds me a bit of the balanced eating plate graphics that we learned about in Health class as kids. The general concept is timeless, even if the exact categories and proportions will forever be a subject to ongoing examination and debate.

In both scenarios, what’s most important is that there is (1) a healthy balance, (2) a framework for making good, intentional choices, and (3) a useful check against simply defaulting to the part of the plate — or the type of interaction — that satisfies our craving in a given moment. Finally, as the saying goes, variety is the spice of life. Our experience is that the same is true when it comes to interactions between operators and investors — a little planning and a bit of balance / diversity leads to more efficient and effective interactions that are also just generally easier for everyone to swallow.

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