The Exchanges

Q Why don't you take me back to your background that led you into this path of fundraising?

A I started my career as a cash register salesperson at IBM. If you want to learn how to sell, there's an area where you actually figure out how to sell, because the cash register that IBM were selling back in the late eighties were way more expensive than the NCR, the Casio cash registers. You had to go door to door and try to figure out who's going to buy them and why. Fortunately, IBM had an exquisite training program. They trained us and trained us and trained us. Eventually, I got pretty good at selling cash registers. I did well enough to make it to business school, and then when I got to business school, everybody was going into banking and consulting. I guess somewhere in my life, I just want to be different than this. Instead of following that path, I just said, why don't I just stick to a career in sales? Then I went into sales and trading at Merrill Lynch, then a couple other Wall Street firms. Then one day I had an opportunity to move into fundraising. A friend of mine from business school had told me about this job of going around to talk to pensions and endowments to invest in venture capital and private equity. In the late nineties, I'd made the jump. There were very few of us in the industry at the time. From there, I quickly said, rather than being a placement agent, I should join the industry as a placement agent at Bank of America, then Chase. I moved into bein…

AI assessment note: “Then one day I had an opportunity to move into fundraising.”

Q If you circle all the way back to your early training at IBM, what were some of those seminal lessons you learned in that fantastic sales training program that have carried all the way through?

A The two things that I learned, the custom tailored sales calls. For any IBMer in the late eighties, they would know the custom tailored sales call. This brings us back to, not a surprise, the custom tailored sales call is establish rapport, Establish credibility. Generate interest. Gain attention. Discuss needs and qualify. Present solution and qualify. Handle objections and close. For 30 plus years, almost every conversation I have fits that structure. It's a habit. Anybody I ever meet, that is how I will structure a conversation. It's habit for me now. The other thing that I took with me is that sales can be a trained skill. I sat next to very introverted people. Who were exquisite salespeople. I sat next to people who I considered to be pretty average horsepower. Very strong salespeople. I sat next to a very good looking, very charming people who couldn't cut it as salespeople. And that is a really important lesson. It's a learned skill. It can be a learned skill. There are a lot of people who are naturally good at it. Usually they're doing the same things naturally. Somehow they learned it because a lot of these things are about life. How do people get along with other people? You can learn it very quickly. That was a lesson that I've taken with me in my entire life, that it's a trainable skill. Anybody who's ever worked with me We'll smile and go, yep, I've heard of all th…

AI assessment note: “The two things that I learned, the custom tailored sales calls.”

Q you would describe your investment management tech, request a demo at ridgeline.ai. And now back to the show. A lot of what you're describing gets to this dynamic that inevitably you're trying to put yourself on the same side of the table to form a partnership, but there's always this different tribe, GP, LP dynamic. How have you gone about trying to broach that and meet people where they are?

A Now we're talking about persona play. There are two basic ideas that talk about developing a relationship, and this is any relationship. How do you get past a guarded relationship? One is you put on a persona that you think that they want. If somebody's intellectual, you put on an intellectual persona. They trust you more. That's what they're looking for. Remember, I like you, I am like you. That doesn't necessarily mean that's true. There are other people who are boisterous, but they're looking for a patent fund, and they want the person to be intellectual, even though they're boisterous. You need to know what you're auditioning for. Because it's not a sales pitch. It's not an interview. It's an audition. The idea that you're walking in, they know what they think they're looking for. So try to beat it. That's the persona. Some personas, they just, aw, shucks, Midwestern kind of thing. Well, there are plenty of hedge funds. You walk in, aw, shucks, people are like, okay, this guy just out of the eye of the tiger. They don't hustle. Some people go, oh, you're the one I trust. Everybody else is really slick. You have to gauge your audience of what kind of persona do you think? Now, that's tough, but if you know somebody in advance, or if you had one meeting with them before, and that's what I always ask somebody. They say, I'm about to meet this person. What kind of person do the…

AI assessment note: “Now we're talking about persona play... you put on a persona that you think that they want.”

Q What's a better way to go about it?

A The better way to go about it is to match the level with the class of investor. If you're an associate and you get to do other things, great, but you should be paid like an associate. If you're a vice president, you should get paid like a vice president. When I'm looking at the vice president, we're equal. If I'm in the Navy and you're in the Army and we're the same rank, we should be paid the same. You're doing something very different than what I'm doing. I'm on the water, you're on the land, but we're equally important. Same thing with a partner. If the partner is doing all this other stuff, that's great, but you're a partner. Pay them like a partner. Pay them like a deal partner. Because the whole idea is that even though the incentive structures are, that you can actually vary them some, anybody who opts into an alternative business knows what exactly the compensation structures look like. You're just opting into these classes. There are people who do that very well, and the reason why it's important is basically retention. Here's the problem, and this happens a lot. The person who sits at the top, when they get really good, and you're not paying them as much as the other partner, Other people can pick them off. Happens all the time. When that happens, for that person who's good, it's a very expensive mistake. It also creates more of a harmony, culturally. The whole idea o…

AI assessment note: “The better way to go about it is to match the level with the class”

Q onset that allocators might be cynical coming in. There's a lot of no's that they're going to say before they say yes. Also that it's a endowments. They want to feel special. Everyone who's across from you has a different bias or a different way of approaching this. How do you take that framework in the meeting and then try to figure out how to best present what you're doing?

A I'll give a taxonomy of the general investors. The problem with all frameworks is that they're all wrong, but sometimes they're useful. Obviously, there's only a certain percentage of the time this is right, but the percentage is higher than zero. I have found that pension plan investors, people who don't have a lot of upside, if I make 10 times money for you, you don't get paid anymore. Your job is hard because you work in an environment that can be bureaucratic, political, disrespectful. Can be. Not all pension plans are this way. Generally, respect is what they're looking for. Respect who they are. Respect their opinion. Respect their needs. Respect their requirements. When somebody says, here's the forms you have to fill out for reporting, don't roll your eyes. Smile and say, I respect you need this. I got it, and I'll take care of it. I'm sorry. Our investment committee can't meet this week after all. Just respect it. At the core of their culture, If you don't respect it, you're not respecting what they do. What they're doing, pension plans, are there to serve their constituents, which tend to be people who serve the public. There's corrections officers, and policemen, and firemen, and garbage men. So that's respect. If you're talking to sovereigns, you better have something strategic. You better have some reason why it benefits the country. Better look through and say, he…

AI assessment note: “I'll give a taxonomy of the general investors.”

Q In those different boxes, and you're building out a team to serve in this role, how do you think about aligning those people with the objectives?

A It is true that a service provider Is going to be motivated differently than somebody who is a salesperson. A salesperson is going to say, hey, I have attribution for bringing this money in. A service provider says, look, I'm actually here to make sure everybody is happy. Therefore, you need to create an alignment. The investor relations providers is fairly easy. You just pay them the same way you pay everybody else. With the salesperson in that job, You should vary their compensation. That will make them feel better. Most people And this is not terrible. In fact, it's awesome, in some cases, give that person carried interest. So here's what happens, Ted. You literally will not find a sales organization that's a high-performing sales organization that doesn't have some sort of volume incentive. You never find a service organization that does anything but pay people on a group. But somehow, someway, the alternatives industry doesn't actually figure that out. What they do is they break up the investor relations job into three different buckets. There's the service providing analyst job. They have to do the DDQs, do the reports, do the presentations. It's a real analyst job. Then there's the vice president or director's job, which is the transactor. They're the person who has to help the GP find the deals or get in front of the LP, sometimes represent the GP without them, but the …

AI assessment note: “With the salesperson in that job, You should vary their compensation.”

Q How did you think about the positive application of persuasion in the process of raising capital?

A There's so many positive ways to think about persuasion. I believe that persuasion is desire minus fear. So what people want minus how scared they are. So many books on persuasion talk about how to stoke desire, how to get people interested. I think that that's very credible, very real. But I find that most of successful communication table stakes are actually to get past people's fears, their insecurities. There are doubts. There are cynicisms. The positive way you can use persuasion is that when you're in a meeting, this simple rule that I use, you meet someone who's very cynical. There are some people who just believe that the glass is half empty. That's their mode of operation. But then there are some people who are cynical, and you can hear charge in their voice. You can feel it. When that happens, it means they've been burned. It means they're scared of something. Like, ah, I use this service, and it never works, or I go to the airport, and I know I'm going to have a difficult time with whatever service it is, and, or, because you've had a bad experience, or even worse, you've had an experience that's been harmful to you. When you're trying to sell something to somebody, try to persuade them, and all of a sudden they meet you with cynicism, I'd say 99% of people try to talk about the positive side of life, and talk about, All the great things, and try to convince you, and…

AI assessment note: “I believe that persuasion is desire minus fear. So what people want minus how scared”

Q How do you think about the potential outside of the organization? Trends and styles that go in and out of favor?

A One of the things that is frustrating is that so many people fight the tape. They fight the wave. When the wave comes in, and what you're hoping for is to catch a good wave in, and get balanced, and surf it in. So you have no one to turn the surfboard into the wave. If your strategy's out of favor, if it's not in vogue, then what do you do? You raise less money. It's a little bit of the serenity prayer. God give me the serenity to do except I cannot change, and give me the courage to change what I can. The fundraiser needs to have the courage to change what they can to maximize what the outcome is. The cosmic joke of it is, Is that that's when firms usually make the best investments, because it's the hardest to get money. But if they got good fundraising, they'll raise materially more money than someone who doesn't have a good fundraiser. So when the market moves and the tide comes out, those who are the strongest swimmers end up making the most advancement. And when the tide comes back in, they just then catapult forward. Who are those groups? Those are the megafunds. When 2009 came around, there was a set of very large funds. The market went into a nuclear winter, but those mega funds already had great fundraisers and they were going out and servicing clients and making sure that they knew what was going on and the global financial crisis and doing this. The other folks are j…

AI assessment note: “If your strategy's out of favor, if it's not in vogue, then what do you do?”

Q How do you think about, in the context of asset management, building that trust to get people comfortable?

A This is the part where I caution people, because there are simple techniques to do that. There's a beautiful book by Robert Cialdini, in 1986, Ethical Persuasion, A Power of Persuasion. I've never met him, but he has been a guiding light for most people in persuasion for generations. And I believe the book is written to protect people from people who are trying to sell you things. It articulates six different ways that people do that. These six different things, when you look at them, what they are, are ways for people to get past insecurities, or to learn to trust you. So, no particular order. The first one is authority. But authority, if I happen to have a PhD in science, and I'd say something about science, or I'm a medical doctor, I have authority. And so, I say something, then people, ok, I trust you. Next is consistency. If I'm always behaving a certain way, then I know that the next time I say, I'll behave that way again, oh, I trust you. Then another one is liking. I like you, you like me, I am like you, and you trust what you like. You trust what you're attracted to, and that's part of the human condition. Another rule was reciprocity. If I do something for you, then you'll tend to do something for me. Reciprocity Tends to be at the core of all ethics. If people didn't do things back for people, then we wouldn't be able to have community. If you think about how many ti…

AI assessment note: “are ways for people to get past insecurities, or to learn to trust you.”

Q When you have the potential to play these different personas, how do you maintain your authenticity and stay being true to what you're trying to present and not acting something to persuade somebody?

A It is probably the most important lesson I had to learn. It's completely okay if you make them the center of your attention. The idea that I can meet you where you are, see you, and I have tools and ways to actually make you feel ok. And it's not inauthentic. We do it all the time. When you're the boss, your jokes are a little bit funnier. People laugh a little harder. When you're the LP, the GP tends to be a little less aggressive with you. That's approval. That's also a submission of control. You can be authentic about it. Authenticity starts with, I'm here to serve you and your needs. I'm meeting you where you are. Parenting is a little bit this way, too. One of the best things I've ever heard about parenting is that we parent our children the way we wish we were parented. Nine times out of 10 is the wrong way to parent. Fortunately, sometimes it is. One of the things you say about selling and persuading is that people tend to talk to people the way they want to be talked to. That's pretty self-centered. If I'm talking, I should talk to you the way you want to be talked to. I don't think that there's anything inauthentic about that. If I'm just being utilitarian about it. It is if I'm just saying, all I care about is the end. I don't care about you. People will see through that. Not always. That's what a fraudster is. These tools, the DAO fundraising, the idea of presenting …

AI assessment note: “Authenticity starts with, I'm here to serve you and your needs.”

Q So would you come in knowing there are these four things that you have to engage with to get the conversation going? You also mentioned In this Copernicus way of looking at the world, it's not about you, it's about them. How do you think about addressing what the needs are of the prospect?

A When you're in the meeting, there are two things that you're always looking for. First, you were looking for what is the way I'm going to persuade you, and then what are your insecurities? Those are about you. First, let's talk about the persuasion piece. It's one of these things where Aristotle writes about this, that in order to convince somebody of something, you must use logos, ethos, pathos. Logic, logos. Pathos, emotion, so empathy, sympathy, compassion. Pathos. And then ethos. Ethics or your values. But here's the trick. Every argument, if you can win two of the three, you're in pretty good shape. Here's where almost everybody gets it wrong. Everybody focuses on the logos, the logic. That is almost never where you want to start. You have to be logical. But you want to address the person's emotional desires for what they want, and then their ethical or intuitive desires, what they believe they should be doing. That is the key. There are lots of different ways to argue why that is the right thing. Simon Sinek talks about this very beautifully, saying, well, actually, the hind brain governs the emotions and values, and the frontal lobe governs the logic. Therefore, we know that the hindbrain does not have language. The frontal lobe was created to actually interpret feelings from the hindbrain. That's what rationalization is. Rationalization is you take something that is emo…

AI assessment note: “you want to address the person's emotional desires for what they want”

Q That frame of the DAO, how do you think about applying that to the process of raising capital?

A My interpretation of the Dao, and so anybody who's listening to this will go, look, that's not Daoism, and I'm like, yes, it probably isn't. The whole idea of the Dao was, it was all about opposites, balance, about dualities. There's so much about fundraising and persuasion that is about dualities. Things that are completely not true, yet people believe them. The things that people hate, yet they're addicted to. The things that people don't want to do, yet they are compelled to do it all the time. What's the most amazing thing that you would see in so many professions, and you have to watch out for in sales, is something called the Nash equilibrium, which is when, in order for some positive outcome to happen, both people have to cooperate. But if you know the other person's not going to cooperate, then you don't cooperate, and then both people lose. That's a duality. That's the, well, now, on the one hand, I've got this energy that says, hey, look, I want to go be positive, be first, And if I don't think you are going to actually reciprocate, then I shouldn't go positive and be first. At the same time, you will never know if the person is going to react positively, so you have no choice but to be positive and go first. That sounds confusing, but in some ways it really is very elegant in what is a Taoist view of the world, which is it's filled with contradictions. You have to be…

AI assessment note: “There's so much about fundraising and persuasion that is about dualities.”

Q Well, let's dive into being in the room as you walk through and say there's a target. It starts with, how are you going to reach out to them? Let's assume it's not someone you have a warm intro to.

A When you reach out to somebody, if you don't have a brand, if you happen to be one of the big major firms, you have a brand, which helps a lot. By the way, the brand in our industry can be personal brand or institutional brand. There are plenty of fundraisers. There are plenty of individuals or plenty of investors that have an exquisite personal brand. If you don't, then you are always better off getting referenced into somebody. One of the challenges is, This is a pro tip that I should never talk about anywhere. If I want somebody to help me get into an account, that individual's relationship with the person they need to contact, I don't need an intimacy between them. They don't have to be close friends. It does help, obviously. That person just has to be respected. If that person is respected, the second thing that has to happen is that person has to be credible. Let's say I want to have somebody introduce my firm, let's say I'm Lila Sciences, To some potential investor. Well, if that person is credible either because that person happens to be a successful artificial intelligence investor, or that person is somebody who is recognized as credible and smart, but knows Lila's sciences really well. For instance, if I leave a firm and I say, I would like you to meet former colleagues from my firm. Everybody knows I know those people really well. What will happen is they'll say thi…

AI assessment note: “you are always better off getting referenced into somebody”