Investing at Elevar is a Team Sport

Whose deal is this? Who is the partner on the board of this company? Do you have deal specific carry? What is the path to a genuine partnership? 

All these are fun questions in a world that is rapidly drifting away from the original ‘investment partnerships’, that were constructed to take fiduciary responsibility of managing funds such as ours. Before we get into the meat of this article, let’s explain a few terms for the uninitiated reader:

General Partners – The core partners of a fund are often called General Partners (GPs)

Limited Partners – Limited Partners (LPs) is the term used for investors in funds

LPs often like to understand what is called ‘attribution’ of deals – which partner made which investment – a proxy for determining which partners are truly adding value. At Elevar, though, we are clear that investing is not an individual game. Every Elevarian (not just the partners) has a point of view, biases and perspective, and there is collective wisdom particularly when we trust the instincts and thoughts of different people. 

Investment and fund management is a tough, long term journey – often a 10 year plus journey in which one invests, manages a portfolio and exits investments while simultaneously learning the rules of the game and dealing with curve balls that can affect individual companies or the entire portfolio. And the real, hard learning comes when companies go down no matter how much you rack your brains to save them – the same investments that you once strongly believed would grow and achieve a certain ambition.

More seasoned investors have gone through cycles, seen external market conditions move contrary to investing thesis and emerged from them. They know not to gloat when things are going well, and they know better than to ‘attribute’ the success of portfolio companies to their own personal skills. Because they know well enough that the determinants of success or failure go well beyond themselves.

So what makes a fund management business meaningful and hopefully, successful? Is it picking the right investments? Is it managing the investments and exiting them well? While these are the usual things that are critical, let us throw in a few additional aspects that also influence the way we think about contribution to fund performance, and the construct of the Elevar partnership:

• Fund governance, high quality compliance and reporting management: Given our global footprint, Elevar funds and Elevar are registered with different regulators around the world. Even when jurisdictions have allowed for a lower level of regulation given our fund size, we have chosen a higher level. In a complex world riddled with integrity issues, our goal is to provide a resounding assurance that we will do the right thing and deliver on our fiduciary responsibilities. And that we are constantly and consciously thinking about these things. Fund governance is a critical role, and occupies significant mind-space. If someone on the team takes 100% responsibility to take this up, to be our internal ‘conscience’ keeper and ensures everything stacks up in form and substance,  we believe they are ‘partner material’ as their work contributes to fund performance just as much as a member of the investing team.
• ‘Aligned’ capital for portfolio growth: Companies don’t just grow – they build, and they need capital to grow. In fact, they need aligned capital to grow successfully and live up to their potential. Capital partnerships are not just about raising money for the fund but ensuring there is aligned capital for the portfolio. As a relatively small fund (we chose this strategy consciously to ensure that we keep a concentrated portfolio which we can do justice to at the early stage), this is critical to fund performance. When someone on the team takes the lead on this, they are partner material. 
• Fund strategy: Some strategy roles are about envisioning the future, and some require connecting the dots back to the present and providing frameworks. We are talking about decision making frameworks at the fund level that not only maximize performance but connect that performance back to impact on the lives of end customers on the ground. In other words, strategy that connects (numerically) the two ends of our world – upstream capital markets and low income communities. When someone has the ability to create and own these frameworks where the success and scale of impact feeds the fund returns and vice-versa, they are partner material.

Today, 50% of Elevar’s partnership comprises so-called ‘front end investing partners’. The other 50% are partners who contribute to fund performance by leading the above-mentioned areas – namely Shobha, Amie and Vipul. If today, the investing partners can spend a majority of our time with entrepreneurs and end customers and continue to deliver top quartile returns, it is because of the leverage that the other partners are able to create for us, leaving our mind-space free to do what we do best.

Coming back to the questions we started with – we struggle with concepts like ‘deal specific carry’ and ‘deal attribution’. At best, there may be some linking we can do between geographies and the partners that function in them, but looking closely, it is tough to truly ‘attribute’ success to an individual, because of how we see each other as partners. 

We believe in playing to strengths and working as a team. This is not just a statement. For instance, Elevar entrepreneurs know that it is alright to pick up the phone and chat with a partner who is not the ‘point person’ or ‘person on their board’, if that partner’s strength areas align better with the conversation that is required. They understand that we operate as a true partnership. 

Carry discussions don’t take long amongst the partners (often a few minutes) and there is trust across borders. Most importantly there is friendship, alignment and the ability to have honest and blunt  conversations. 

For us at Elevar, investing is a team sport. This is the ethos we want to treasure, and build on.