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Twitter and Why 'You Kids Get Off My Lawn' Is Bad for Private Equity
Private equity may be enjoying a tentative renaissance, but even its most passionate adherents have to admit that the industry has been struggling with an image problem.
That's because private equity takes the "private" part all too seriously. While venture capitalists frolic in public and successfully argue that their work is a worldy good, private equity recedes into a faceless, nameless realm of shadowy, out-of-touch, rich old fogies. The industry might as well outfit its practitioners with watch fobs, three-piece suits and cigars.
peHUB would like to suggest some image rehab. Let's start with Twitter.
We can hear the derisive chortles already; we know, you're not 14-year-old girls. But don't let the the winds around Mt. Olympus deafen you to what's being said. When used correctly, Twitter isn't about "OMG what are you going to wear tomorrow?" It's not about social networking and it's not about disclosing confidential deal info.
Twitter is an excellent way to stay on top of your industry, whatever your industry is. You don't have to have a populist cause or a populist industry. There are gazillions of prolific venture capitalists using it. And if the derivatives powerhouse CME Group can be so successful on Twitter that it attracts 755,000 followers to its tweets, then there's no excuse for private equity to hole up in the fetal position and whine about how hard it is to get people to understand what it does.
Twitter is about news and what it means. It's great for linking to articles, but it's better than that, because you can hear what smart people think about those articles. Mostly, it's about taking a step into the agora, the marketplace of ideas. You don't have to talk about your own deals. You can talk about the industries you invest in. You can hear what others think of those industries. They might drive you crazy, you might disagree, but at least you are armed with ideas other than those you pay for.
And the best part is: It's short. No matter how busy you are, you have time to scroll through some tweets once a day or even twice a week. It takes less time than reading a lot of magazines and newspapers – who by the way are all on Twitter. You can get a Twitter feed of the best stories of the Wall Street Journal, the New York Times, Bloomberg, Financial News and of course peHUB without clicking around the Internet all morning or getting all mucked up with newsprint.
Despite all the excellent reasons for being on Twitter, our exhaustive search turned up very few private equity investors who get it. The ones who do are very useful, and peHUB is giving them giant gold stars.
First, there are the biggest pension funds, who know the value of transparency and engaging with the public: LPs par excellence Calpers and Calstrs.
There are those PE firms who use Twitter to update followers on recent developments and announcements, almost like PRWire. The Riverside Company, a lower middle-market firm, is one; another is Bain Capital. London's LDC tweets more conversationally about European PE.
A great anonymous tweeter about PE is Private Equiteer, whose feed is packed with interesting links about the business of investing.
When it comes to individuals, there are really only two. One is Bain Capital's Steve Pagliuca, who uses Twitter well but last tweeted in mid-April.
But our biggest Twitter gold star goes to Rich Lawson, who co-founded brand-new $1 billion mid-market private equity fund Hunstsman Gay Global Capital with billionaire philanthropist Jon Huntsman and former Bain partner Robert C. Gay. Huntsman Gay's team includes former Citigroup CFO Gary Crittenden.
Lawson talked to peHUB about Twitter. Like us, he is a zealous convert who says that Twitter's openness has helped his business: "We've had a number of interesting feedback responses about dealflow. I'm actually surprised by who follows Twitter. We've been in meetings with intermediaries at Wall Street banks and brokers and companies that were quite aware of Twitter." He agrees that the information gathered on Twitter can affect deal pricing: "There's a much greater ability to bring intangibles to the table in what is a 'highest-price-wins' mentality."
His parting thought: "Twitter is ideally suited for working with businesses, or investment banks or lenders that have ideas. How is it that no one else is doing this?"
We know exactly why and so does Lawson: People are afraid of breaching confidentiality or running afoul of securities laws. These problems can be avoided by using common sense. Observe the chatty, chirpy, newsy world of venture capitalists on Twitter and how they behave: they talk up their deal announcements, they link to interesting stories about reform legislation or new startups or new technologies; they cheerlead for their portfolio companies. In short, they act like human beings.
Still, Twitter can be bewildering. Below, our own tips for getting used to the service.
1. Create your own ecosystem. Sign up for Twitter and then find someone you want to follow – like, say, Lawson. Look at who he's following and check out their Twitter streams. See if you find those people interesting, then follow them yourself. Read their tweets for a while to see how it's done.
2. Engage. If someone says something interesting, hit the "reply" button and add your two cents. If you like what they said but don't have anything to add, hit the "retweet" button. This shows others that you care what they have to say. It will also spur them to follow you and respond to you, which will build your presence and put you in the path of more information.
3. Be aware of the mechanics. Twitter can look bewildering at first, like some kind of Martian wire service. It's actually really easy. Here are the main things to know: the "@" symbol means a reply to someone else. This is known as a "handle." For instance, to reply to Calpers write "@Calpers." The other thing that shows up is the hashtag, or "#." This is Twitter's way of indexing itself. If you are having a conversation about the Dow flash crash, write "#flashcrash" at the end of your post and that will make it searchable to others. Links are usually shortened using services like bit.ly or ow.ly to save characters – remember, you have only 140 to use.
4. Observe the etiquette. Tweet only what would be interesting to other people. Even if you're complaining about onboard Wi-fi, that's okay; others out there will doubtlessly have an opinion on it. But the worst use of Twitter is pure self-promotion; if every tweet is about how great you are, people will unfollow you. Always add links and observations to other Twitter users. Be generous with your compliments and tactful about your disagreements.
Here's an excellent Minimalist's Guide to Twitter to get you started.
Not convinced? Already a convert? Tell us why in the comments.