In my previous management role for Viatel Inc., a telecom startup company, I encountered
an unusual capital raising situation where the company sought funding on a monthly basis. That meant that the company had to speed up the due diligence process that would normally take months to close into fewer than 4 weeks at each funding round. In fact, a Fortune Magazine article on the company stated that Viatel was “burning (cash) as if straw” for every round raised every month. (Fortune Magazine, February 17, 1997.) True, it had to raise every month capital, since, if it failed to do so every month, it was always desperately near to shutting down. Anyway, this experience taught me how to prepare my role in the company, essentially as CLO, and even, in practice, as COO, to facilitate the potential investors’ due diligence process and get that funding right afterwards. This frenetic fund raising environment helped me develop the “Snap Count” Management System.
For the non-cognoscenti, the “Snap Count” is the verbal, numerical utterances shouted by a Quarterback to time the offensive line and the center when to deliver the ball. Yet, though this process is timed in seconds, there has been considerable orchestration prior to the snap count. In seconds, the QB has studied the defense. He also memorized countless plays and that snap count is tailored for that situation. Each member of the offensive line is fully prepared based on countless repetition during practice for this particular snap count and play. Part of the snap count is informing the offensive line in matter of seconds, after the snap count, hours of training that comes crystalized into a completion of a play that moves the team forward to its final objective – the end zone. Once that snap count is completed every player executes his role.
For me, the snap count is a perfect analogy for my fund raising process. I apply the cloud with organizational schemes that increases efficiency. It begins with a potential investor requesting due diligence. That initiates the snap count. I had certain parameters: to effect the due diligence in such a way to be completed within fourteen days. That would leave two weeks for negotiations and closing – both processes in which I participated. What does the Snap Count brings to the table? Speed to execution. And why is that important?
The need for speed brings another, well-known phrase: sh*t happens. Even if you prepare for any foreseeable event during the due diligence process, anything can happen that might have the whole deal fall apart. One example: the overall economy will tank and your term sheet becomes valueless since the investment firm has backed out of the deal. I have noted that Wall Street investment firms keep a strict and fast calendar for IPOs that are aggressive for that reason. And I have been involved with IPO preparations where the IPO becomes shelved when the particular market sector crashes. So sh*t happens. It also happens when a key member of the management team decides to leave abruptly or, worst yet, gets involved in a serious car accident.
Investors are, by nature, skittish. They look for reasons to say “no”, as I have stated an earlier blog. Part of the rationale for the Snap Count process is to reduce that “no” risk by closing the deal quickly and efficiently. In the case of Viatel, I noted that if the investment would not close timely, it would be fatal to the company. The details are not described herein on how to achieve the snap count, but, like an offensive line, it is all about carefully thought out preparations: each due diligence element must be cleared beforehand. Nonetheless, I use a systemic process that would apply to any company in any industry entitled the “Snap Count” Management system. I always urge companies to follow that fast Snap Count process or “sh*t happens”.