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May 27, 2009

Towards better LP meets

"Super LP" Chris Douvos has some "crowd sourced" suggestions for GPs on how to organize better annual LP meets.
* Sometimes it's hard to get a really good sense for company progress, especially during the staccato sprint through 30 company slides in 15 minutes. Sure, the EBBS (Earnings Before, ahem, Bad Stuff) margin at one firm is up 23 basis points from last year, but how is that company doing? Sometimes the torrent of numbers crowds out the analysis and handwriting atrophy that arises from all the typing we do prevents us from scribbling notes as fast as we once did. A couple of folks suggested using a consistent green/yellow/red rating system for portfolio company assessment. The slides could even break out the ratings along critical dimensions: strategic positioning, team development, execution, progress to exit, etc.

* I love fund CFOs and I appreciate that they should get some airtime, but there are some who do little more than recap the data from the most recent quarterly report. Assume we read the QR; please peer instead into your crystal ball to tell us something about expectations for the fund going forward. The best such discussions explore what you need to believe to get the fund to a given return threshold.

And a good annual meeting can improve intimacy. In addition to the obvious information gathering, the tone of the meeting and what is not said can be as important as what is said. When I was surveying folks, a handful of LPs wished out loud that some of their GPs had showed some humility and had taken more responsibility for their portfolio struggles, rather than blaming "the environment." Even in the best of times, the markets can be a humbling place, sometimes favoring the lucky, but mediocre investor at the expense of the unlucky but good one. A bit of candor and self-reflection goes a long way towards creating durable goodwill while obfuscation and buck-passing makes people crabby. Don't be afraid of bad news; it's an opportunity give your partners a peek behind the curtain. After all, we're in this together

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in