Seriously, Read Your Own Emails
One of the reasons we publish content at Permanent Equity is to scale conversations. What this means is that anyone can read about what and how we think before they talk to us and therefore know what we are going to say before we say it. Then when we finally meet, everything tends to be much more efficient.
So I wasn’t surprised when Joe, the CEO of our portfolio company Ad Advance, responded to Mark after he read It’s High Risk to Be Low Risk with a very good question.
Ad Advance, you may not know, is the investment where we negotiated for a worthless preferential term. The basics of the term are that if Ad Advance distributes more than a certain amount of money, then we split the amount pro rata with Joe and Matt (our partners). But if Ad Advance distributes less than that amount, then Permanent Equity gets all of it (which was a structure we put in place in order to confidently pay up for the company’s projected growth).
So Joe read my email and said to Mark something along the lines of “Hey, I got this email from Tim and it’s timely because we recently stumbled across a great potential hire that would help us grow, but if we bring on that salary this year, we may come up short of the preference threshold, which obviously we don’t want to do because then you guys get all of the money. Without this term, we’d definitely make this hire, so would you guys be willing to waive your preference this year so we can make a better long-term decision.”
Mark forwarded Joe’s note to me and I said “Darnit. He’s throwing my email back at me. We need him to unsubscribe.”
“Alternatively,” Mark said, “you could read your own emails.”
But the facts of the matter are that:
Joe’s request made absolute sense.
We want to be great long-term partners with all of our portfolio companies.
We did have a business deal that facilitated our initial investment.
So after talking about it we replied to Joe and said, “Make the hire. If we come up short of the preference threshold because of this investment, we’ll reduce the threshold by the amount in question but only if we can add that same amount to next year’s threshold. This way you’re protected to make the investment now and we’re protected if the investment doesn’t pay off.”
Joe agreed and we’re moving forward. The learning is just because something made sense at one time, doesn’t mean it will make sense in the future and when opportunities present themselves, be pragmatic about taking advantage of them. And if things are going well, remember, don’t be afraid to take more risk. Advantages are rare in this world, so when one shows itself to you, press it as far as you can.
