Investing in Relationships

I recently went one on one with Pat Hedley, an investor, advisor and author of Meet 100 People. As the founder and CEO of The Path Ahead, Pat identifies high growth companies in which she invests and takes on either formal or informal advisory roles. Since 2016, Pat has invested in over a dozen innovative private companies, more than half led by women. Prior to her current role, Pat spent 30 years with global growth investor General Atlantic, most recently as managing director.

Adam: Thanks again for taking the time to share your advice. First things first, though, I am sure readers would love to learn more about you. How did you get here? What experiences, failures, setbacks or challenges have been most instrumental to your growth and success?

Pat: The most instrumental factor in my success has been the growth mindset instilled in me by my parents, immigrants from Hungary who came to the U.S. in the 1950s. Neither one knew the language, had much money, or a support system. They struggled, translated failure into learning, and worked incredibly hard to give my sister and me opportunities for success. 

I studied computer science at Dartmouth in the 1980s because I wanted a skill that would ensure employment and while I never coded after college, studying computer science taught me how to solve problems. I worked as a consultant at Bain before attending Harvard Business School and then spent nearly thirty years in private equity at General Atlantic. During my time there, I was presented with many, what I call, ‘blank sheet’ opportunities, new roles for which I had no experience or real preparation other than a strong belief that I could always learn and find experts to help me. Those ‘blank sheet’ opportunities allowed me to reinvent myself, expand my network and grow my skill set. In the last few years, I’ve been investing independently and advising growth companies, taking all that I’ve learned and helping companies grow. It’s been a great journey so far.

Adam: You wrote a book on networking called Meet 100 People. What are your best networking tips? And what are your best tips on networking in the age of sheltering in place and social distancing?

Pat: Many people don’t have the right perspective when it comes to networking. They think of it as a short-term transactional way to extract value, rather than as viewing networking as a process of discovery, a way to learn, share experiences and add value, thereby making a long-term investment. Meeting new people is like going on a treasure hunt. Everyone has gems of wisdom and expertise to offer. It is your job to find what can be mutually valuable and build a relationship based on common interests and a real connection. My best networking tip is to rethink networking and view it as an exercise for discovery. The more people you meet, the more you learn about yourself, the more opportunities will present themselves to you and the richer your life will become.

Continuing to meet new people doesn’t have to be hindered by social distancing. Connections are more important now than ever, and the prevalence of Zoom and other video tools makes it easy to interact with people, even if not in person. Don’t delay having coffee or lunch with someone just because you can’t be with them physically. Virtual meetings, while not perfect, offer the opportunity to meet and share. People are available and yearning for connection, especially now. 

Adam: What are the most significant changes that you believe COVID-19 will have on the world and the world of business? What advice do you have for leaders and for entrepreneurs trying to understand how to best navigate the changes and changes ahead?

Pat: COVID-19 has accelerated some important trends that otherwise would have taken much longer to become widely accepted such as online learning, telemedicine and work from home. Video tools, collaboration software and online platforms have existed for many years but have had slower traction. COVID-19 has shown us what is possible in a more physically distributed society and has greatly enhanced the use of these tools, all of which will continue to improve. 

COVID-19 has significant implications for many industries including travel, commercial real estate, healthcare, retail of all kinds and entertainment, to name just a few. I’m convinced people will gather in groups and physical spaces once again, but there will be a longer interim period until that can take place. Companies will be rethinking when, why and how often people need to be together in one physical space. Working from home has proven productive for many, so distributed workforces will become even more common. We already have a ‘gig’ economy, I suspect that will increase over time. Creators will be well-rewarded as their content can be shared to masses not just those in their physical vicinity.

I think it is incredibly important for leaders and entrepreneurs to be well-informed – to read, attend events (virtual conferences) and talk to others. You can only see what is coming when you have information to guide you. At one conference I heard a speaker say that his firm acted early in January to prepare their online learning platform when they heard from counterparts in China how severe the situation in Wuhan was. So, when schools moved online, they were ready for the high-volume demand. Finding the canaries in the coal mine, those who might be early warning systems who can alert you to potential problems is essential. The only way to do that is to be well-informed with a diverse set of advisors, colleagues and well-networked knowledgeable people. Guard against operating in a silo or information vacuum. Be open to hearing differing perspectives.

Adam: What are the best lessons on investing you have learned from your thirty-year career in private equity and from your subsequent career as a private investor?

Pat: There are several important lessons I’ve learned related to investing. The goal of investing well is to find companies that have potential for growth in attractive markets, invest at a good valuation and if you can (VCs and private equity firms certainly do), help increase the odds of success. Lesson one: look at the market and competitive environment. How large is the opportunity? Lesson two: understand how the company is poised for growth and success. What is the secret sauce? Lesson three: evaluate the leader and the team. Would you bet on this individual? A company is only as good as its people and identifying strong leaders is one of the single most important things a good investor can do. 

Adam: How do you currently source and vet opportunities? What advice do you have for fellow investors and what advice do you have for entrepreneurs interested in cultivating investors?

Pat: Many people have asked me how I find opportunities and the answer is simple: I meet lots of people. All of the companies in which I’ve invested have come through referrals. The most important advice I can provide to fellow investors interested in private companies is to meet as many people as you can: entrepreneurs, other investors and the influencers who work with entrepreneurs (lawyers, accountants and bankers). If this seems like a lot of work, it is, and it’s not for everyone. Joining angel groups can be helpful in offering deal flow and a network of similarly minded individuals. Becoming a mentor to young entrepreneurs at universities or accelerator programs also gives you direct access to great networks and potential investments. Alternatively, investing in VC funds gives you access to such deals while allowing others to do the hard work.

My advice for entrepreneurs is the same as for potential investors – meet people regularly. Well networked entrepreneurs have huge advantages over those that are not well-connected. Entrepreneurs should be talking to and meeting with current and prospective customers and clients all the time. They should be meeting with investors, well before they need funding; with more seasoned talent, well before they need to hire at higher levels; and with strategic partners before a potential deal. They should have a formal or informal set of advisors they reach out to for expertise and counsel. 

Adam: What are the best leadership lessons you have learned from your three decades in private equity? In your experience, what are the defining qualities of an effective leader?

Pat: The best leadership lessons I have learned in private equity include the importance of the following: high integrity, setting a clear strategic direction, hiring excellent talent, decisive and consistent execution, resilience in the face of adversity and genuine care for making an impact. 

The most effective leaders that I’ve met have been those who hire excellent people to help them achieve the vision for their business. Then these leaders provide clear direction, remove obstacles and allow their teams to execute and excel. Strong leaders inspire their teams with their vision, passion and commitment. They create cultures that are collaborative where the goal is not personal or even team success – it is achievement of a mission that is larger than themselves. Strong leaders are accountable for results and create a culture of responsibility within their firms. 

Great leaders also know that they and their teams need to grow and evolve. These leaders are continuously looking to improve and are not only willing to listen to feedback but actively seek counsel. They don’t allow themselves to operate in a bubble shut off from differing perspectives. This requires a certain level of humility as well as confidence, two qualities which in combination are rare, but can co-exist. Great leaders know that they will have to shift and adjust their teams as the company grows and they have the courage to decisively make those changes. 

Adam: How can leaders and aspiring leaders take their leadership skills to the next level? 

Pat: The best way to take leadership skills to the next level is to embark on a continuous process of self-improvement. This can mean a number of things including leveraging one’s board of directors, having a personal board of advisors, engaging in executive coaching, spending time with peers to learn from them, attending conferences to expand one’s perspective and continuously learning. An executive I admire greatly said there is one budget item she doesn’t allow to be cut: conferences. Attending conferences are the opportunities for her to expand her outlook, learn best practices and network. 

Adam: What are your three best tips applicable to entrepreneurs, executives and civic leaders?

Pat: My three best tips applicable to anyone are: surround yourself with excellent people, listen carefully and execute thoughtfully.  I find that the most confident leaders are the ones most willing to hire people who are smarter and more experienced than they are. A great leader’s job is to find that talent, provide direction and then let great people perform well. 

Adam: What tips do you have for fellow board members on how to be most effective in their roles? 

Pat: The best board members ask the right questions. They are well-prepared, listen thoughtfully and with genuine curiosity to the issues at hand, and regularly find constructive ways to add value. High-quality board members candidly and respectfully express their perspective and work collaboratively with fellow directors to provide counsel to the CEO and help with strategic decision making and difficult decisions. 

A board role requires a significant commitment of time and dedication. A valuable director brings an extensive network of resources that can be helpful to the CEO including potential consultants, key hires, strategic partners, new clients, etc. My favorite board metric for a private company, especially one in the business to business space, is board influenced revenue. Great board members regularly tap their network to help the companies on whose boards they serve. Another reason to have an extensive network.

Adam: What is the single best piece of advice you have ever received?

Pat: People want to help you, but it is your job to help them help you. It’s important to reach out to others for help, but you have to be thoughtful about what you are requesting. The more specific you can be, the more someone can help or not, but either way it is productive.

Adam: Is there anything else you would like to share?

Pat: It’s never too late to meet new people but it is totally up to you to make the outreach and make it happen.