It’s common practice for an investor to measure a potential deal based on the strength of the management team involved.
BOOST&Co investment terms can last anything between 3- 5 years, so working with the right team is crucial for relationship success.
Lance Mysyrowicz, partner at BOOST&Co, gives us his views on what he looks for in a management team as well as the pitfalls to avoid when structuring your team ahead of growth capital investment.
1. Why is it important, as an investor, to work with a good management team?
I think it’s important to work with a good management team because in business you will have some good times and you will have some bad times and you need to be able to work well together in both circumstances and have trust in both circumstances.
2. What qualities have you found most impressive in management teams you’ve worked with?
The most successful management teams have a balanced view of the performance of their business. They don’t let arrogance or short-sightedness blind them when the business is doing well and they work carefully through their plans to turn the business around when it’s not doing so well.
3. What is the most important thing for you to see in a management team?
I like to see a team with more than two people making the decisions regardless of who owns what part of the business. I like to see that people are listened to no matter the shareholder status and that there is a deep trust amongst the members of that team to make key decisions.
4. What don’t you want to see in a management team?
Having an entrepreneur tell me that their business is the best ever without any real reason as to why they believes that. We see a lot of businesses every year and they can not all be the best in their field. So they have to have some degree of humility about what they have achieved and what they are going to achieve. This also creates a much more credible story even if the entrepreneur has been highly successful in the past.
5. Do you assess young and old management teams differently? How?
Yes I do. With older management teams I look for the other things they have going on in their lives to help me determine how much this deal actually means to them. I also try to assess whether they have the energy and passion to drive this business forward for the next 5-10 years. Another key thing is what they have learnt from their prior experiences and how this can be used to improve their current business.
With young management teams, I look at their hard work and dedication and whether they surround themselves with people who have the experience to guide them through uncertain times or high growth scenarios.
6. Give us an example of a deal you have done based primarily on the qualities of the management team?
I recently dealt with a management team who had an extremely ambitious acquisition strategy; they wanted to build up a company that was three times the current size of their business by acquiring two businesses at the same time. The way they negotiated this acquisition demonstrated their maturity to do business in a tough and difficult environment. They paid attention to the pointers I had given them and were accurate in what they told me about their own business. From this, I was able to form an opinion and predict the direction of the deal.
7. What staff members typically make up a strong management team?
A typical management team has someone to lead the company, a CEO or MD, it has a finance person and a sales person. In some cases, it also includes a strong technology person if the company is heavily technology lead. With each member, you want to be able to build individual relationships so that you can assess the team dynamics.
In my opinion, the sales person the most important part of the team because there is no business without selling. It’s also the least dependable department because it relies on other people’s decision to buy as opposed to something that the company itself controls. In a sales person, I look for someone with credibility, experience and who pays attention to detail.
On the technology side, I look for a detailed knowledge of technology but a higher level understanding of where the company fits within the ecosystem and the technical advantages and disadvantages that exist today. I also look for their ability to deal with a team; whether they can lead a team and inspire people to work to short deadlines.
Finance is a really important and often neglected role in an organisation. The main attribute for the finance person is the ability to stand up to the CEO or domineering presence in the organisation with their professional opinion on the company finances.
8. What is the biggest challenge you have faced dealing with a management team?
Getting them to see my point of view. My point of view is informed by the sum of my prior experiences. Management teams are equally informed by their own experiences and that can make it difficult to meet in the middle. But it’s important for both sides to show a level of empathy for each other so we can learn from each others experiences.
9. How does cultural diversity affect a management team’s performance?
Very good question. The first thing to point out is that BOOST is a highly diversified company with women making up the majority of our team and we’re all the better for it.
The number one thing that still shocks me in management teams today is where the team is dominated by a bunch of macho guys who invariably speak about themselves and their organisation as if they’re stuck in the 70’s. That does not prevent me from doing business with them, but I do feel that management teams who haven’t evolved with the times show a real blind spot in their industry and you have to ask yourself, what does this say about the way they’re addressing their market?
I also think that, from my own personal experience, the balance of females in an organisation is always for the better. If only because it avoids having to talk about football on a Monday morning.
10. Can you determine if a company is ready for funding based on the management team? How?
Yes. All of the elements of the team should be in place so that the team dynamics are established well ahead of funding. If it’s almost ready, it needs to have identified gaps in its management team and ideally have a game plan to fill those gaps over the next few months, weeks or years.