Hair On A Deal

In a perfect world, everything about a potential investment will be confidence inducing. The team will be great and reference well. The market will be huge. The technology will be well developed. The price and terms will be attractive.

But the world is not perfect. There will always be things about a potential investment that create heartburn. A term that I have heard used over the years to describe these imperfections is “hair on a deal” as in “there is a lot of hair on that deal.”

A little hair is OK if everything else lines up. A lot of hair is not OK and can be a deal killer.

The news that WeWork has postponed their IPO plans for now is an example of when too much hair gets in the way of a deal.

There are a lot of things to like about WeWork. They have popularized a new form of work space, a new business model for it, and have they have built a global brand around shared workspaces.

I expect the company will eventually get public.

But right now there is too much hair on that deal and all the work they did over the last few weeks to clean it up was not enough, at least for now.

So the lesson for entrepreneurs is that you really need to have your house in order when you go out and raise capital. The more eyebrows you raise with investors, the worse it gets. And hair can get in the way of an otherwise financeable opportunity.

#entrepreneurship#VC & Technology

Comments (Archived):

  1. Matt A. Myers

    I’ve decided to avoid the VC and finance industrial complexes – I’m going to raise how crowdfunding was meant to support projects, organizations, and build one-to-one, grassroots supporters that are passionate – and maintain relations with everyone along the way, capturing their feedback, excitement, and Pay-What-You-Want financial contributions for access to every tool.For the longest time I was planning to do freemium model, however now what would be considered free and premium will all be Pay-What-You-Want: it will be hard for competitors to beat, and it will mean the tools provided actually provide value to the community and professionals in those communities – and will allow a counterbalance to prevent rent-seeking behaviour that scaled SaaS companies are evolving towards, seemingly to appease their VCs for exit valuation or their own greed of extracting as much as they possibly can from society.

  2. KB

    Softbank pulling back so significantly in January identified a fair amount of “hair” for me.

  3. Donna Brewington White

    Eagerly looking forward to the “case study” version of the WeWork IPO attempt. Invaluable lessons there.P.S. Was it just my phone or did typing a comment prove troublesome. I eventually just typed it elsewhere and cut and pasted.

    1. sigmaalgebra

      Disqus has pigged out on JavaScript and made a mess out of the standard HTML multi-line text box control. If do much editing of a post, about have to do just what you did, use some other software to write the post and then use copy and paste to submit to Disqus.When for some post I give up on Disqus, I just return to my usual, heavily used tools for typing everything else — my favorite text editor, 200 or so editor macros, and a just terrific spell checker, by FAR the best I’ve seen.Disqus very much needs just to return to the standard HTML multi-line text box control.A LOT in HTML was VERY well designed based heavily on decades of polishing user interface controls back to IBM 3270 terminals, DEC versions on character terminals, etc. Billions of people understand these basic HTML controls VERY well.There is in all the world’s collection of millions of JavaScript programmers hardly enough to fill an SUV that can make changes in the basic HTML controls and not make a MESS.For the Web pages of my startup, I followed this thinking: I used just the standard HTML controls billions of people understand and ALL significant Web browsers handle correctly and just the same. My users can use just fine any Web browser up to date as of about 10 years or so ago. I wrote not even one line of JavaScript although Microsoft’s ASP.NET Web site object library wrote a little very standard code for handling cursor positioning — optional for my Web site.Too much JavaScript, and nearly all uses of JavaScript are TOO MUCH, has made a MESS out of the Web.Violins, pianos, and orchestras are similar: At their best, they can make fantastic music. But can get nearly all that music from just the 100 top composers, would you believe just the top 50? Can do quite well with the top 20. Nearly everyone but the top 100 make just noise. Same for nearly all fields of creative work.

  4. jason wright

    Why ‘hair’? I don’t get it.My understanding is that (when all the tinsel and distraction has been put to one side) what makes WeWork’s model interesting is that it converts what was once a fixed cost to a variable cost for the client business, and WW has achieved this at scale, but with massive expenditure and annual losses. Most of the *potential* value of this business exists far into the future. Where’s the discounted cashflow analysis for growth in the far future? If WW is the last mover in this market then the IPO will be cheap, but only ‘if’.WW’s great achievement to this point has been to convince private finance to back it. I wonder if Masayoshi is having heartburn?

  5. Tom Labus

    Five years ago, they would have gone out without the disent. Timing can make the difference Lots of stuff gets overlooked when you hit it right.

    1. JLM

      .We (We Work) has been a head fake since the beginning. It pretends that it is a SaaS or Real Estate as a Service company when it is engaged in the most elementary real estate arbitrage.There is no such thing as a REaaS company. It does not exist.This is an outrageous deal that a third grader could suss out.https://themusingsofthebigrhttps://themusingsofthebigr…Some mountain has to be the biggest in the world and some deal has to be the crappiest deal in the IPO world. We (We Work) is that deal.JLMwww.themusingsofthebigredca…

  6. Mike

    This probably applies to all kinds of deals or agreements.Not following closely but from a few recent posts I noticed their operating losses more or less tracking with revenues over the last few years. I wonder if this raises concerns over long term profitability, or at least pricing for the offering. You would expect to see some economies of scale kick in to their benefit, brand etc?

  7. Richard

    We all love hair except on a deal

  8. Pointsandfigures

    Warren Buffett likes to say great deals come together with a minimum of effort. Things are basically aligned ahead of any negotiations.If you get too much heartburn and have to jump through a lot of hoops don’t do the deal

  9. Richard

    On the plus side, at least all this ignorance – missing the valuation mark by 30 billion -is in private (large investor) sector

  10. Conrad Leonard

    The founder is a cult leader, plain and simple. Even cult leaders can come up with good business models but I wouldn’t give them my money. In the end it’s all about them.

  11. sigmaalgebra

    ForSo the lesson for entrepreneurs is that you really need to have your house in order when you go out and raise capital.For an IPO, definitely YES! But for a seed or Series A round, likely NO — there, if everything is “in order” then likely don’t need, want, or will accept equity funding!

  12. jason wright

    The House of Saud will eventually come to an end. Its members will emigrate on mass to various places around the world. There they’ll live off their foreign investments and returns in perpetuity. They should be planning for it.

  13. Matt A. Myers

    My assumption was these investments are exactly a mechanism of that, where they don’t necessarily even care if the value goes down to 1/5th current value; although heads might roll (literally) if SoftBank misrepresented to them in order to get their funds.

  14. JLM

    .The House of Saud will be dragged into the future kicking and screaming and, eventually, will become a modern nation. While MBS is a thug, he is a modern man and will mellow with the passage of time.Being a modern nation does not mean it will be a “good” nation, but they will become rational in acting internationally in accordance with normal means of conduct.Saudi Arabia will join the world and become more “modern” as it relates to domestic policy in a slow and tortuous manner, but they will.JLMwww.themusingsofthebigredca…

  15. creative group

    jason wright:There are those who refer to it as the House of Fraud. Many protecting interests will cover for them.Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENTANT

  16. jason wright

    They’re definitely hedging. The publicly stated rationale is that the country’s oil reserves will eventually dwindle, but it’s probably much more for the reasons we agree on. Every empire falls. History shows that. Probably an entropy thing. It’s impossible to keep the sand castle upright forever.

  17. Patrick

    I don’t agree with your ‘positive assessment’ of MBS, but I hope you’re correct.In the meantime, they should face consequences for what they’ve done.

  18. JLM

    .I did note he was a THUG, no? He is a cruel man, a murderer, a thug. But he is the ruler of the House of Saud.He is as much of a thug as many others with whom the American President is forced to meet with — Xi, Castro, the Shah, Putin, and the list goes on.JLMwww.themusingsofthebigredca…

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