Thursday, May 10, 2012

Modern technologies. Modern Choices.

When doing the work of attracting Investment into Enterprise, things always a get a bit awkward when the dynamic shifts from "I have this opportunity, and here is why I think it will work for you..." to "Yes, I'm interested in pursuing this".

It's like the jolt you get when shifting gears on a bicycle.

The usual way in which this shift gets made is with a term sheet.  This sets up discussions about pricing and valuation that lead to much "wringing of hands and gnashing of teeth" as the hot-button issues around control get hashed out.  In time, agreement is reached, a term sheet is signed, due diligence begins and the transaction proceeds towards closing.

This is a proven, effective protocol when executing under the business-investment-as-financial-asset-construction paradigm within the industry-standard, Capital Markets ecosystem.

When executing under the partnership model that I am promoting, the tasks are the same, but the path forward is a little different.  Due diligence gets divided into Alignment of Interests and Fact Checking.  Alignment of Interests comes first.

I like to start by putting the principals in direct communication.  After all, it's their interests that I am working to align.  Conversations are arranged, and information is exchanged, to flush out all the points of alignment, and also to get any points where interests do not align "out on the table".  Some misalignments are so large that it will be impossible to get any kind of deal done around them.  So it feels right that we identify those early.  Others may become less problematic in the context of a larger understanding, so it feels good to keep the dialogue open.

There will be lots of conversation, much of which will repeat the same information.  That is part of the process, for at least these reasons:

  1. Recognition. People need repeated exposure in order to build recognition and familiarity.  That's just how it works.
  2. Socialization.  Institutional Investments have to be socialized within the Institution. As new contributors join the discussion, old ground has to be re-covered.  This can be tedious, but it has proven effective at protecting people from their own enthusiasms. 
  3. Negotiation.  In the course of aligning interests, the parameters for acceptable profit sharing also get worked out.  This always involves a lot of back-and-forth, and round-and-round.
When, over the course of extensive discussions, alignment does emerge, a document is produced to memorialize the key money points.  Fact Checking proceeds in parallel with document construction, as the transaction progresses to a close.

In this partnership process, the parties make extensive use of computers, the Internet, email, the World Wide Web, cell phones, texting, Social Media and a still-evolving set of information and communication technologies ("ICT") to conduct a dialogue among diverse participants, in real time, from remote locations, that converges towards a deal. 

Modern ICT enables the modern choice of partnership investing.  

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