Maintaining longevity and relevance in an ever-changing financial industry is a hard won accomplishment; enjoying longevity coupled with consistent success is by no means a stroke of luck. It requires acumen and consistently successful practices. When asked how I’ve maintained these achievements, I refer first to the top management teams we’ve discovered or developed, and then I point to factors I refer to as “The Rule of the Ws.”
Our consideration of any proposed equity financing at Beechtree Capital, LLC, includes asking the initial “Five Ws”:
- What is really the proposal? What is its essence? The kernel? The “silver bullet?” Say it in one sentence.
- What is the specific industrial sector in which you’ll participate? Be precise. What is the relevant market, its dimensions, contractions, prospects for expansion, etc.?
- What’s missing in this industry segment? This is a constant question. What’s needed in the competitive landscape that the proposer can provide? Then, what’s missing every day in every proposed management and corporate action? Never ask, “What’s wrong?” Always ask, “What’s missing?” This opens the door for creativity, positivity and deeper thinking.
- Why this and why now? Why does this proposal merit consideration over any others? How does it fill the gap in the industry? Why and how will it overtake competitors? Why is this the correct timing for the innovation or other key ingredients of the proposal? The trash heaps of history are full of great ideas that were simply too early for cultural or industry acceptance.
- Where’s the A-level management? Adequate won’t do. How available is Triple A management? And at what cash and equity cost? Can the proposers provide or find such management? Can we? Within the proper time frame?
If all answers to the initial “Five Ws” are solid, and I mean very solid, then we move on to the rest of the “Ws” that follow when a proposal passes our initial assessment.
Once a company is underway, the most important remaining “Ws” are “What if?” and “Why not?” First, “What if?” I dislike the “What’s wrong?” approach. I prefer positivity at all stages and creative thinking. With the only constants in the capital market being fast-paced innovations and technological change, and with countless other factors outside of our control, there is wisdom in continuously asking, “What if?” This approach stirs keeps management teams on their toes. I often say my key role in a company’s development is being the Holden Caulfield of the group — I sit near the top of the hill and try to prevent team members from falling off ledges. Constantly asking “What if?” helps make hidden pitfalls visible.
“Why not?” is actually more involved. When ideas are presented my rule is that no one is permitted to shoot them down without a thoughtful explanation. Simply saying an idea is crazy or will never work is not allowed. These no substance responses are negative and foreclosing and can shut down a creative strategy session with a resounding thud. In contrast, the “Why not?” approach is enlivening and brings forth spirited thinking. “What if?” and “Why not?” move teams forward and into deeper alignment.
Finally, while knowing how management succeeded is important, learning why they did is more informative. You can find the answers to “how” in dozens of MBA management textbooks. Asking “Why?” invites independent, expansive thinking. Inject this question in an accepting and challenging environment and you’ll evoke innovation, not just in products, but also from the team. If you ask management “how” they succeeded, they’ll give you a bunch of stock answers that any business school instructor could spout. Ask them “why” they succeeded, they’ll tell you about their aspirations, the competitive landscape, timing, the team that lived and breathed the project and became unified because of it. You’ll learn the more human aspects of success that can be valuable in future company and community building. The “whys” are the inspirational answers that map the road to success. Leave the “hows” to the professors.
So, that’s the “Rule of the Ws.” In a career marked with a lot of wins, they’ve held true for me every time. As I wrap this up, let me leave you with an example that simply states this entire philosophy: When my football coach told me he wanted to see more dirt on the front of my jersey than the back, the “what” was easy to grasp. The “why” won the game.