Don’t Overlook Return on Hassle

I’m a big proponent of being a specialist and not a generalist. It all has to do with the concept of return on hassle. Sure there’s trying to maximize your return on investment and that’s pretty self explanatory but do you ever stop and think about return on hassle? It’s one of the main reasons I choose to be a Limited Partner in areas I am not an expert and focus my time deepening my knowledge on real estate (where we serve as a General Partner) and staying current in the markets.

Here are three factors I like to consider to minimize hassle and maximize return on my LP investments:

1. The right team: Explain things in plain English and try not to use jargon. This isn’t my space. Make it easy for me to understand why we are going to win together. In my experience, the right team also makes a best effort attempt to make it easy for their investors to subscribe / fund, stay updated, and receive distributions.

2. The right technology: I tend to prefer sponsors who use platforms like Carta and Juniper Square but are also always available to walk their investors through the process. There are a few platforms I won’t name that we have found more cumbersome to use.

3. Updates: Not all updates are going to be sunshine and rainbows. I like teams that report honestly and tell you the good, bad, and ugly.

All this sounds simple but it is hugely important. We are constantly thinking about how to maximize return and reduce hassle for our investors and every GP should be doing the same.