Martin Babinec has been in
your shoes.
As the founder of privately
owned human resources outsourcing provider TriNet Group
Inc., he loved being in charge of
his business his way.
But when times got tough, he
realized that he needed the help
of outside investors. And with
that help came the natural concern for any entrepreneur when
outside people come in.
“As you’ve probably seen,
oftentimes, when there is a
change in shareholder, the CEO
is the first to go,” he says.
But Babinec remained president and CEO of the company
through the time when initial
investors took a small portion
of his company and, eventually,
when two separate investors
took controlling interest. Along
the way, TriNet earned a spot in
the Inc. 500 Hall of Fame for its
fast growth, and Babinec, who
recently stepped down as president and CEO but remains
chairman, learned how important it is to share realistic
expectations with both his
investors and his 435 employees to earn their trust.
Smart Business spoke with
Babinec about how to keep running your company while
accepting outside investments.
Look at alignment, not valuation. Typically, when you’re a management team and you’re trying to
raise funds, you’re trying to raise
those funds at the highest possible valuation. But therein lays a
major trap that you can fall into
because if you don’t have the
alignment, you’re not going to
achieve anything you want.
Having the right alignment means
a lot more than the value that
investor is giving your business
at the time of the investment.
All financial investors have one
objective — return on investment. But the question where
they do vary from one to another
is what is the time frame for liquidity, and that’s what you have
to understand. They all want
maximum ROI, but their time
horizon is really a key picture.
Carefully evaluate potential investors.
Part of what you ask
about as you meet with those
potential investors is, do they
share your values?
As an example, how important is integrity? They’ll all say
integrity is important, but you
have to go about ways of validating where does that really
lie on their priorities.
We specifically looked at which
of the investments didn’t work
out, what were the circumstances
and what did the leaders of those
companies have to say in retrospect. In any relationship, you are
going to be tested much more
when things don’t go according
to plan, and so what happens
when things don’t go according
to plan is the true test of the
people you are dealing with.
Another subpoint underneath
this is how consistent they are.
Were they consistent throughout the relationship? If it was a
relationship that was several
years, was there zigzagging on
priorities and what they stated
as goals or were they consistent
in the agenda?
