PS#060: The Investment Committee – Building Consensus
At the beginning of this series, I emphasized that there were two ways to prepare for the investment committee (“IC”).
The first way was by building the appropriate set of materials.
We discussed this in detail over the past two issues, discussing the overall purpose of the materials and the structure/framework that I like to use for my IC materials.
Today, we are going to discuss the second way and the softer side of the process – building consensus.
In a lot of ways, this is the harder and the more important part of the process. The materials set the foundation for your recommendation, but telling the right story is what will ultimately seal the deal for investment committee approval.
Let’s get started.
A dual approach.
If you’re just joining us, I recommend at least reading the first issue of this series to help set the context and foundation for today’s issue.
In that first issue, I highlighted two important aspects of the investment committee…
They require either unanimous or majority approval
They are often not “in the weeds” on deals and will need clear, concise communication
In order to achieve the first point, we need to make sure that we have really excelled on the second point.
To do so, I recommend a dual approach of formal and informal communications for keeping your IC members informed and up-to-date on deals that you’re trying to take to IC for approval.
Let’s discuss what each of these mean in a bit more detail…
Formal communication.
For most firms, there will be regularly scheduled (usually weekly) partner meetings.
In these meetings, investors will discuss top priorities, KPIs, current deal flow, upcoming meetings, fund operations, diligence, market conditions, theses, and, of course, potential investment opportunities (for more info check out this post).
That’s a lot for a firm to cover, which means clear, concise communication is super important.
Depending on the firm, the meeting structure and topics may vary, but all of them will prioritize discussing the top investment opportunities.
This is your first, formal chance to discuss your potential investment.
You’ll typically be given an opportunity to pitch your investment and present it to the senior investment professionals of the firm. This may not be a formal IC meeting, but if not handled properly, your deal can get killed. These meetings are designed to help the firm figure out how to best prioritize their time and resources (i.e., which deals to focus on).
It’s your job to convince them that this is an opportunity worth prioritizing.
Once again, that means it’s all about preparation.
You’ll only have so much time to make your case. Make sure that you come prepared with the right details and plan for moving this opportunity forward. I’ve included my strategies for preparing and presenting opportunities in the posts below…
These strategies plus a clear, concise presentation style will help you move your deals forward in more formal settings. However, that can’t be your only approach, which brings us to informal communication…
Informal communication.
While properly presenting your investment opportunities in formal situations is important, it may not be sufficient to get a deal approved.
The solution?
I recommend meeting with IC members individually and informally throughout the process.
In these one-on-one meetings, you can have a much more candid conversation about the opportunity. The informal nature (and the added time) will allow you to dive into more detail (getting them further up to speed) and create space for any constructive criticism, feedback, or suggestions for the process.
Remember, these are experienced investment professionals who have seen a lot over their careers. They are focused on making the best investments for their fund. Take their feedback seriously and make sure to include their concerns in your diligence process.
As an added bonus, these conversations will give you another opportunity to demonstrate your skill set as a young investor.
Alongside the materials we discussed, this dual approach to presenting investment opportunities will help you navigate the politics of your firm and receive approval for your investment opportunities.
In the next issue, I’m going to share a few of my lessons learned from the many investment committee processes I’ve experienced over the course of my career.
