Noise and Living Water: the Difference Is Whether It Reconciles
Only the small share of voices that can be reconciled counts as living water.
Founders often ask us: there are so many views in the market — whose should I listen to?
Our position first. We believe only the small share of voices that can be reconciled is living water; the rest is noise. Why? Noise shares one trait. It has no denominator.
The Glacier Quality Wall in the Institute sets out four lines, each written in a form that can be checked: financing efficiency that can be tested, transaction quality that can be delivered, maximum economy of the management team's time, the noise in the market minimised as far as possible. The first three are about how we work. The fourth is about whose trouble we block. That one is the hardest, and the easiest to read as a courtesy. It is not a courtesy.
Noise is a voice without a denominator
During a raise, how many pieces of advice does a founder receive in a day? A dozen is normal. At that rate it is seventy or eighty a week, close to seven hundred over sixty days — about two hours a day just to digest them. But most of that advice gives a conclusion and no denominator: the valuation is high, without saying high against whom; the lane is crowded, without saying how many deals actually close in it in a year. A conclusion without a denominator cannot be reconciled. What cannot be reconciled can only be judged on feeling. Emotion costs the most.
How do you shut noise out? Get one party to price first. The first duty in investing is safety, not odds — before anyone has bid, everyone watches, because whoever moves first carries the pricing error alone. Once a credible enough institution puts a number on the table, everyone else's question shifts from "is it worth it" to "is there still allocation". Noise is not argued down. It is pressed down by a single act of pricing. So our real work is not to persuade everyone at the table at once. It is to find the one party willing and able to price first. Find that party, and the room goes quiet.
Our people can grow in number. Our deals cannot
Reducing noise comes back, in the end, to our own capacity. The capacity of a boutique investment bank is not a headcount. It is a total quantity of attention. People can grow in number, because new people bring new attention. Deals cannot grow with them, because that would mean dividing again a promise already made. We take twenty to thirty mandates a year, half new and half existing clients coming back for the next round; split across three partners, each of us is holding only a few at a time. Taking on few is not a posture. It is arithmetic.
The counter-argument deserves its strongest form. Some will say more voices are a good thing — listen to enough houses and a consensus emerges. That holds, but it is not the only truth — when consensus forms quickly it does save time. But judgment in hard tech does not grow inside consensus. It grows in laboratories and on production lines. The tidier the consensus, the more likely it is one sentence retold many times. And each retelling thins the information by a layer. So far as we can tell, retelling produces no new information.
Listen for living water amid the noise. That line is written on the Quality Wall, and it is a discipline, not a poem. The test for living water is crude: does the speaker have an account in hand, and will they put the denominator and the ruler on the table together. Those with an account, we listen to. Those without, we note down. As for our own side, there is only one thing to do. Put our own account on the table first.
(For the full Quality Wall, see "Glacier Quality Wall" in the Institute.)