Can you sell Ice to an Eskimo? (I)
Selling is the single and most valuable skill set in life. Selling your future husband / wife that you’re the right life partner, the interviewer for your dream job, your boss for that promotion, that key client that you have the right solution, etc.
Being Asian American, being “salesy” as a young entrepreneur was very difficult for me to accept but a necessary step as a young fund manager.
Coming from Lone Star, that was a rude awakening — I didn’t know how good I had it. At Lone Star, bankers answered on the first ring, service providers would pull all-nighters to address our mere musings, limited partners fawned, etc. Life was good — I was everyone’s best friend and I could do no wrong. People laughed at my lame jokes… I was never selling — people were selling me.
When I left to start Parallaxes, that all changed. Bankers who jumped to answer my calls, wouldn’t even answer. Service providers wanted me to put up a deposit and provide a personal guarantee prior to providing any service.
I had to pitch limited partners that I was a trustworthy steward of their capital that could make money for them with an attractive risk adjusted return. Convincing potential sellers that the transaction I was proposing was fair and that I was not stealing the asset from underneath them. Employees that I was a good steward of their careers. Service providers that the working capital / services extended to me would be repaid. Talk about rejection / what a rude awakening!
My saving grace — this wasn’t my first time. I’m thankful that I had experienced rejection many times before — what a blessing on hindsight!
If you ever want to be a senior investment professional, you’re going to need to do this. Yes, I know you want to hide behind those analytics and process management skills but the life blood of any investment management organization is (a) raising capital and (b) deploying capital. No, it is not underwriting or asset management — those are table stakes. Before you can become a rainmaker — start by (a) being a mist maker and (b) building real relationships
What I Wish I Knew: I would be best friends with the investor relations (raising capital) and business development (deploying capital) personnel at your firm
Yes, some of their projects may appear to be nuisances and takeaway from your capacity as an investment professional but they are the heart and soul of the firm. You are nothing without either of those functions — if you aspire to raise your own fund, you need to invest as much effort into these functions as you do on your investments
I generally synthesize sales (for both capital and deals) into four motivations almost like Maslow’s hierarchy of needs: (i) Vision, (ii) relationships, (iii) outcomes and (iv) ideas
(i) Partner with me and we will change the world (to conform to our vision)
(ii) Partner with me because I have your best interest at heart
(iii) Partner with me and I will make you rich
(iv) Partner with me as I will enrich your life (with ideas)
It’s way easier to do (iv) vs. (i) so let’s start there, we’ll cover (iii) and (iv) today and hit (i) and (ii) next week. The overarching team is — be a friend
Let’s start with deals since that’s likely where you’re most familiar — aren’t you frustrated of being part of broadly auctioned processes where basically everyone and their grandma gets a book?
(iv) Ideas: If a banker brings you an interesting / actionable idea for your firm, isn’t he now close to the top of your list of calls to return?
Often, private equity executives don’t treat bankers well — fail to return their calls in a timely manner (if even), provide poor feedback after taking up valuable time of the bankers or stringing the banker along. Just being prompt / responsive, investing 10 minutes to think about feedback (vs. this isn’t for us) and setting expectations (I don’t want to waste your time — we’re only interested at this level) is appreciated and puts you close to the top of the list should the right situation arise
When I was at Lone Star, I invested time to meet VPs and Directors at various banks to cultivate relationships. These individuals are at a key inflection point in their careers — they need to demonstrate the ability to bring in business. I would take the time to ask how their processes were going and suggest Sponsors that might make sense for particular transactions (and if they didn’t know the Sponsor, I would make it my business to get them an introduction through my network). I was trafficking in ideas, making them more valuable to their firms. How many bankers have a brand name Sponsor calling his peers to recommend the banker? You’ll fast become very popular at a relatively low cost (it also allowed me to broaden my network in the Sponsor community). If you take interest in getting someone to the next level, he / she would be tough pressed not to take interest in you
At the end of every call, I would encourage you to constantly ask your counterparties, “how can I be helpful?”. Start taking an interest in others — it might not be a near-term payoff but I promise you that you’ll have many friends on the street
(iii) Outcomes: Translating those ideas into dollars in your pocket takes time but can you imagine if said banker (whom we’ve now built a tight knit relationship) has to recommend two comparable offers (one from my firm) to his client whom he might lean towards in a toss up?
Increase the amount of goodwill you have — you can never have enough friends. Has a banker ever sought to get some level of interest from you as he prepares for a sell side bake off? Tell him you’re happy to serve as a reference to the seller, give him feedback if the transaction might make sense for your firm, offer him insight relative to other processes that might be ongoing in parallel, etc. Make him / her successful
This same pitch goes to the management team that you’re courting — can you make accretive introductions for them? They’re thinking of hiring a new CFO or a Head of Corp Dev? Is there someone in your network that might make sense for them? Demonstrate value to them and they’ll sing your praises to other management teams
You need to develop real relationships, as the old adage goes, “you only get as much as you put in”. Seek to make your counterpart more valuable (ideally rich). Happy investing (in relationships)!