This article is the eleventh in an ongoing series on Deal Leadership. To learn more about leading a deal efficiently, download this free eBook today: Lead, Follow Or Get Out Of the Way -The Art and Science of Deal Leadership or purchase our books at Amazon.com.
We’ve all experienced pedantic people try to make their points by browbeating the listener. And we’ve all been frustrated by repetitive or long-winded people who just cannot get to the point. We just tune them out. They are not effective, whether in person or in writing. Diligence reports are the same - they won’t help anyone if they go unread. And they will not be read if they are long and cumbersome. The extra length not only takes more time to wade through, it obscures key take-aways and impedes understanding. Producing a shorter report requires a bit more work and a bit more discipline, but it really makes for a better result. A short report can be supplemented with appendices, if needed, for that small subset of people who want more detail on a particular subject.
Experience has taught us that there are a few keys to getting a good short report done on time:
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Using a structured report template
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Making expectations clear
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Repeatedly stressing brevity
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Starting early and leaving time for revision
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Having a deal lead understand their role as an editor
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Seeking rewrites and revisions
As an English major with a law degree and experience with corporate communications, Christopher brings just the right skill set to help deal leads whip these reports into shape. Let’s see what insights we can glean.
Christopher, a lot of people really don’t enjoy writing and tend to procrastinate when faced with a writing task. How do you get a group of investors to produce a tight report on time?
Focus on the deliverable. From the very beginning, before a Launchpad investor has even joined the network, we describe an individual’s involvement in diligence as “doing a bit of research and producing a couple of paragraphs.” Stress the deliverable throughout the process.
But people are still going to procrastinate, aren’t they?
Yes, with volunteer efforts, some slippage and procrastination is inevitable. No one is going to be pulling all-nighters to get their diligence report section done. But, it can be minimized with the careful application of a little peer pressure. If an organization has a culture of not letting colleagues down, as ours does, people will generally step up and be professional. Especially if you set clear expectations that it will get done. As noted in Forks In The Road: The Importance of Interim Checkpoints, that can be part of the value of creating the report in a shared workspace like Google Docs. People can see who is producing and who isn’t. End of day, the report will be as late as its latest section, so calling each co-author and asking them if they have everything they need will make a big difference.
When is the right time to get people writing? Is diligence ever done?
Diligence is never done, but it does approach a point of diminishing marginal returns pretty quickly. At some point additional work is not going to bring new insights or further de-risk the investment. These companies are early stage, so, for example, until they try their proposed go-to-market strategy and see if it works, you just cannot know. So you have to have some tolerance for ambiguity and press ahead in the face of uncertainty.
And there can be real value in just putting pen to paper. As we all know from writing difficult correspondences, sometimes you don’t really know what you are thinking or feeling until you actually sit down and begin to write the letter. Diligence is like that. Get people drafting early so they can figure out where their thoughts are and whether they have gaps that will require additional research. If everyone leaves it to the last minute, you will have a patchwork quilt full of holes.
How much editing is required? Does the deal lead do it all?
The deal lead is responsible for overall production of the report, but I usually work with the deal leads to help with the editing. The goal is not to substitute your judgement for that of the team member, it is to stress brevity, force clarity, ensure consistency of quality, and eliminate basic typos and formatting mistakes. You want it in the words of the team members, but a little polish and clean up usually works wonders in terms of making it professional. Ninety percent of the editing we do is to push authors to make it shorter and boil it down to the bottom line.
Do you recommend online collaboration on drafts or having teams email pieces of the report in for the deal lead to assemble?
Collaboration has a lot of advantages in that it allows people to see each other’s work, and it forces people directly into the constraints of the template. You can make it work with people emailing sections, but you invariably get more words than you want. Then you have to assemble and boil down and edit yourself. And, then you need to re-circulate to make sure that you have not paraphrased it incorrectly. Try as hard as you can to push people to give you their deliverable in the final form you need. Transforming it yourself is a thankless task.
Does every team member have a section to write?
Not necessarily. Most sub-teams will have more than one member, and a sub-team lead will do the initial drafting and circulate it for comments to other sub-team members. This is essential when a team is divided. Our report template contains an important section at the end which allows each individual member of the overall diligence effort to add their “bottom line”. For example, they might write “I am really impressed with this team and I am planning to invest” or “I think there is a market here but it will cost more than the team thinks so I am not going to invest at this time.” We look for as much participation in that section as we can get, and not surprisingly, it is one of the most useful and appreciated sections of our reports.
What happens to the report when it is done?
We “publish” it out to the full Launchpad investor network in connection with a termsheet and a request for soft-circles. And we archive a copy of it on our organization’s internal website for future reference.
How about all the ancillary materials collected in the dropbox folder?
We circulate the formal items like appendices with the final report, but we put the remaining secondary materials and working papers in an archive and store it for 18 months. Start-ups and their markets move so quickly that there is really very little benefit to lots of old research materials and notes. We like to let the final report speak for itself, but we view the rest of the materials as very perishable and we delete it after 18 months, and usually the company has raised another round by then anyway.
Want to learn more about leading a deal efficiently? Download this free eBook today Lead, Follow Or Get Out Of the Way -The Art and Science of Deal Leadership or purchase our books at Amazon.com.
