C Students-Again –

If you’re a general partner, this month’s Cover Story is a wake-up call. For the third year in a row, your investors have said you’re no better than C students. I’d be mortified to get a “C,” but it doesn’t appear to bother many of you. If it did, presumably you would have tried a little harder and showed some improvement. To be fair, some of you did try, as evidenced by a few more A’s and B’s in certain categories, but as a group you’re barely getting by.

I’ll grant that you don’t have control over how you’re graded in some of these categories, like Management Fees, for example. No one likes to pay fees, so unless you’re charging less than the industry average, you’re going to get dinged on that. But there’s no excuse for the big fat C that you received for Communication. Take a look at the chart on page 42. When I look at it, I see someone who just doesn’t care. Someone who was more than happy to take an LP’s money but won’t do them the courtesy of keeping them informed. The teenager who ignores his parents until he needs some cash doesn’t know any better. What’s your excuse? I’m too busy? I forgot? Or are you going to blame FOIA-related disclosure issues?

If you think you can keep up this childish behavior without any repercussions, you may be sadly mistaken. Take a look at Figures 1 and 2 on page 34. Close to 90% of the LPs who took our survey chose not to re-up with an existing manager in the past year. That’s nearly 20% higher than last year. And 98% of those who took the survey invested with a new manager in the past year.

It’s not just about the money. If you don’t believe that, look at what happened to Mayfield (see story, page 3, September VCJ.) Sure, Mayfield is going to be fine in the short term, but it’s going to have to work that much harder to make sure it doesn’t alienate more of its LPs in the long term. And it all could have been avoided, as one LP said, if Mayfield had just shown “a little humility.”

It’s time to grow up. Call your LPs and let them know how their money is doing. Better yet, cut out the scores from this year’s Report Card and tape them to your computer monitor to motivate you to be more than just a C student.