The three chairs

I have watched the same capital event blow up from three different chairs. Adviser, founder, and the person in the C-suite trying to hold it together.

Each one misreads the other two, and the misreadings are pretty predictable.

The adviser sees a transaction. One of many. It has a structure and a timetable and a completion date, and after completion the adviser is already onto the next one, which is exactly why they tend to be brilliant at process and slightly oblivious to what the morning after actually feels like. There isn’t a morning after, for them, just another heavy night.

The operator, the CFO, sees a deadline instead. Everything bends toward the date. Reporting, diligence, the story you’re telling investors, your sleep. And the trap is the mirror image of the adviser’s, because you can get so fixated on reaching the line that you barely think about what the business is supposed to be once it has crossed it.

The founder sees the finish line. I understand why, and it is the costliest of the three mistakes. When something has taken years and cost that much to reach, of course it feels like the destination. It never is. It’s a change of constraints. New investors, new lenders, new owners, new regulatory requirements, covenants that weren’t there before, a board with different expectations, and fairly often the same problem you thought the deal had just solved, only it’s wearing a different suit.

I go on about the three chairs because that gap, the space between how the three of them see the same event, is where the damage happens. It is where things get mispriced. It is where a decent business quietly gets taken apart while everyone is congratulating each other.

Three people, three native languages, each with its own colloquialisms, and no one hands you a dictionary.

You want someone in that room who can hear and speak all three at once. Ideally someone who has actually sat in each chair and can speak the language rather than translate it badly on the fly.

Because when nobody can, the deal still completes. It just completes worse, and the person who spots that usually spots it far too late to do anything useful about it. That gap is the most underpriced risk in the whole thing, and it happens to be the part I like being in the room for most.