Gah! It's been a few weeks since I last posted, but I've got an excuse: it's annual meeting season. Now in good times, the meeting circuit can be like a Saturday night in LA (or so I'm told). Folks caravan from house to house, party to party, over the hills and though the canyons. Gentle sea breezes caress the travelers as the complicit stars wink from their high perch. The venues are different, but the guests are the same. We hear stories of heroic exploits in far-off lands . . .
But in bad years, the season can be more like the Odyssey. Adrift on a storm-tossed sea, we find each port more perilous than the last, the gods conspire against us, our hosts are full of treachery and guile, we grow haggard and dispirited . . .
Needless to say, this year feels more like the latter. I thought about trying to write an Odyssey parody, but before I could say, "sing in me, Muse," it hit me that maybe I could offer (with help from friends) something more interesting: an answer to that perennial GP question, "how could we make our annual meeting better next year?" So I informally canvassed some LPs and collected thoughts on best and worst practices. I'll share those below, but I'd love more good ideas. The GP you help may be your own . . .
Better annual meetings are marked by high levels of information sharing and candor. After all, we're not just investors, we're Partners, right? I've talked in the past about Partnership with a capital P and at the heart of such a relationship is an open and honest dialogue between peers. An annual meeting can't in itself be the be-all/end-all, but it can help set a tone for the relationship. To that end, here are a handful of crowd-sourced ideas that might be worth considering (some sublime, some miscellaneous):
- Breakout Sessions: The most tedious meetings sometimes feel like interminable lectures. The presenters drone on, often reading slides verbatim (engendering the too-common, "I flew here for that?" reaction among investors). As an alternative, some LPs suggested devoting a chunk (if not all) of the annual meeting to topic-focused breakout sessions with a GP or two leading an interactive talk among a manageable subset of people . . . something akin to college discussion sections (but without the ill-tempered, Gauloise-puffing grad student).
- Portfolio Company Speed Dating: One VC fund has a biennial "science fair" at which LPs rotate among breakout rooms, checking out different technologies and talking to entrepreneurs. Other VCs schedule days for portfolio companies to have rapid-fire meetings with BigCo biz dev or M&A teams. Why not use those as a model for a couple of hours of few-on-1 meetings between interested LPs and portfolio company managers? Think of it as the "speed dating" alternative to the meat market that is the pre-dinner cocktail party.
- Simple Scoring: Sometimes it's hard to get a really good sense for company progress, especially during the staccato sprint through 30 company slides in 15 minutes. Sure, the EBBS (Earnings Before, ahem, Bad Stuff) margin at one firm is up 23 basis points from last year, but how is that company doing? Sometimes the torrent of numbers crowds out the analysis and handwriting atrophy that arises from all the typing we do prevents us from scribbling notes as fast as we once did. A couple of folks suggested using a consistent green/yellow/red rating system for portfolio company assessment. The slides could even break out the ratings along critical dimensions: strategic positioning, team development, execution, progress to exit, etc.
- Year Over Year Accountability: Too many company discussions take place in a vacuum. Sure, we like to hear about metrics, but some LPs asked for those metrics to be contextualized relative to last year's expectations. Maybe gross margins at firm X grew 36 basis points, but what if you said last year that you expected them to grow 50? Or to grow 25? There's some interesting discussion fodder in that delta. Sure, we all dust off last year's notes (I gotta admit that I'm just getting around to typing up notes from last October,) but it would be helpful to take more of a longitudinal view, rather than a snapshot.
- Management Team Videos: Some folks are big fans of meetings where CEOs are present, but in lieu of a live presentation they show edited 3-5 minute videos of portfolio company teams describing the voodoo they do. That way, attention can be focused on the most critical topics while avoiding the too-frequent CEO presentation that rambles on for twice its allotted time. Don't get me wrong, I love portfolio company management teams, they just happen to be more fun at the cocktail hour than up on the podium.
- Traveling Light: I've had annual meeting road trips for which I've packed an empty duffel bag just for all the binders I'm sure to collect. Offering to FedEx meeting materials back is a huge help (and here's a cost saving tip: we'll probably still be on the road when those binders arrive, so you can save a few bucks and send the packages second day). Some people even send CD-ROMs or USB keys. To that end, my buddy Du (the SuperDuperLP) even suggested a green twist: BYO (bring your own) USB to give to a staffer for instant download. Saving postage and saving the Earth. Brilliant!
- Eat, Drink, Be Chatty: On the networking front, several LPs asked for longer cocktail hours and one even described the cocktail hour/heavy hors d'oeuvres combo as being preferable to an outright dinner. For those who do opt for a dinner, some LPs suggested having the speaker talk during the meal or dessert, rather than having us wait until after everyone finished. Emily Post may protest, but the last thing people want after a day of travel is any more chair time.
- A Wacky Idea: Speaking of dinners, I've got a love-hate relationship with formal meals. Usually the tables are too large and the conversation atomizes into pods of two or three. Most of the time, that's ok, but sometimes, the chemistry is funky (and I always feel bad for the folks stuck talking to a blowhard like me!) What if tables were reshuffled between courses, giving everyone a fresh set of people with whom to chat? It might be a nightmare of choreography, but could be really cool if well-executed, doubling (or more) the number of interactions one could have.
The Not-So Good
Some of the most frequently reported-on worst practices were little more than poor executions of good intentions. Said another way, every vice is just a virtue taken to an extreme:
- A Bad Start: Please don't spend 15 minutes and four slides at the outset of the meeting describing the fund's strategy.
We get it, we've already bought the ticket and we're on the ride; yet
several LPs reported amazement at how many GPs go through the same exact
"what we do" slides year after year.
- The Never-Ending Story: I love portfolio company managers, I really do. But every time one bounds enthusiastically up to the podium, LPs communally draw a deep breath. Will we get a crisp overview of the company and its progress? Or are we going to meander endlessly through a jargon-laden discussions of the product/channel matrix and SWOT analyses of key competitors?. One comrade described it thus: "I want to know enough about each portfolio to be able to ask the right questions, but I don't need a daily flash-report familiarity. That's what I pay GPs for."
- Corollary #1 (Pecked to Death By Ducks): Some funds instead do rapid-fire short presentations; someone mentioned once sitting through three hours of such 10 minute-long CEO talks. After the first few, they inevitably start to blur together. That LP's view on this topic: "thank God for Blackberries."
- Overscripting: Few things are more painful than the verbatim read through of the slide deck . . . just send us the presentation and save yourself the room rental fee. Double demerits for using a teleprompter.
- Biology: The length of time a meeting can run without a bathroom break should be regulated by either OSHA or the Geneva Convention. Sure, one can scoot out for a restroom break, but who knows what you'll miss?
- A Riot of Numbers: I love fund CFOs and I appreciate that they should get some airtime, but there are some who do little more than recap the data from the most recent quarterly report. Assume we read the QR; please peer instead into your crystal ball to tell us something about expectations for the fund going forward. The best such discussions explore what you need to believe to get the fund to a given return threshold.
- Cruelty to Fake Animals: Lastly, we've all got enough fleece to have stripped bare a large herd of polypropylene sheep; no mas, please! (Titleist Pro V-1s, on the other hand, make for swell souvenirs.)
I spend a lot of time talking about the difference between transparency and intimacy: transparency is simply a line-of-sight, but intimacy is about having an intuitive sense for what goes on in the Monday meeting, understanding how the cast of characters lines up on key issues, having a feel for which companies are doing well or poorly, knowing which partner on a roll and which one lives under his own personal raincloud. Transparency is about data, intimacy is about information. Transparency is about investments, but intimacy is about Partnership.
And a good annual meeting can improve intimacy. In addition to the obvious information gathering, the tone of the meeting and what is not said can be as important as what is said. When I was surveying folks, a handful of LPs wished out loud that some of their GPs had showed some humility and had taken more responsibility for their portfolio struggles, rather than blaming "the environment." Even in the best of times, the markets can be a humbling place, sometimes favoring the lucky, but mediocre investor at the expense of the unlucky but good one. A bit of candor and self-reflection goes a long way towards creating durable goodwill while obfuscation and buck-passing makes people crabby. Don't be afraid of bad news; it's an opportunity give your partners a peek behind the curtain. After all, we're in this together.