Hi Reader!
I finished 'Bad Blood' this week - the story of the Theranos scandal. Incredible reading - Elizabeth Holmes' dedication to ignoring and or hiding data that very clearly showed her technology didn't work was something else.
I also pondered the impact of LinkedIn adding leaderboards to their daily puzzle games. The visibilty of that data changed the whole dynamic of how people approach their 'daily fun' - certainly including me.
Enjoy the rest of this week's newsletter!
GC
Imagine: Your portfolio company’s sales leader just showed you a pipeline report with 47 active opportunities worth $12M.
Here’s what I learned from spending time with Asad Ali, who’s spent 20 years training sales teams and teaching behavioral psychology. The conversation revealed something PE firms preparing for exit need to hear: the metrics that make CEOs feel good are often the exact metrics that tank valuations during diligence.
Let me explain what I mean... and why this matters if you’re preparing for exit.
Why “Wins” Might Be Killing Your Multiple
Here’s a question Asad asked that stopped me cold:
“When was the last time you celebrated a deal being disqualified?”
Most sales cultures don’t. They celebrate closed deals. They track “opportunities in pipeline.” They measure “close rates on qualified leads.”
And that’s the problem.
When you measure close rates, reps protect their close rates. How? By keeping zombie deals alive (makes the pipeline look healthy) and disqualifying anything risky (makes their percentage look good).
The result? A bloated pipeline full of deals that will never close, and real opportunities getting tossed because they “might hurt my numbers.”
For PE firms preparing for exit, this is poison.
Strategic buyers aren’t stupid. During diligence, they’ll ask: - “What was the last activity on this deal?” - “What’s the next step planned?” - “When did you last speak to the decision maker?”
If your team can’t answer these questions instantly and consistently, the buyer sees risk. They reprice the deal. Or they walk.
The business impact: I’ve seen deals get repriced by 15-20% when buyers discover that a “$12M pipeline” is really $3M of legitimate opportunities plus $9M of wishful thinking. Sometimes they walk entirely - nobody wants to acquire a sales team that can’t tell truth from fiction.
What to Measure Instead
Asad’s framework is brutally simple:
Don't measure volume. Measure clarity.
The two metrics that actually predict sales success:
1. Last activity completed: not “we sent an email 6 weeks ago,” but real, substantive engagement
2. Next step planned: with a date, a person, and a purpose
That’s it. If your reps can’t articulate both of those things for every “active” deal, it’s not active. It’s dead weight.
Dead weight in your pipeline during exit prep is, in essence, dead weight on your valuation.
Why “Use AI” Isn’t a Strategy
Here’s what’s happening right now in portfolio companies:
CEO sends mandate: “Everyone use AI to be more productive!”
What actually happens: Jeff in sales has his own ChatGPT account. Sarah in marketing uses a different tool. BDRs are using some power dialer with AI features. Nobody’s talking to each other. Nothing’s integrated. Data is everywhere and nowhere.
Then you hit exit prep and discover: - Client data in 14 different AI tools - No corporate licenses (compliance nightmare) - Zero governance on what’s being uploaded where - Buyers asking “how do you ensure data security?” and getting blank stares
This isn’t a technology problem. It’s a business problem.
Asad said something that resonated: “The best organizations have corporate licenses for their AI tools. They don’t let individual reps all have their own ChatGPT accounts and have Jeff run wild.”
For your portfolio companies: Before you tell your CEO to “leverage AI,” ask them: - What’s the business outcome we’re trying to achieve? - What specific process does this make faster or better? - How do we govern this so it doesn’t become a security/compliance liability?
Technology and AI are not business cases in isolation. They must be used in the pursuit of value - and that value needs to be articulable to a strategic buyer in 12 months.
Glitter Metrics: When Shine Replaces Substance
Let me tell you what Asad and I discussed about “glitter metrics.”
These are the numbers that look impressive in a board deck but crumble under buyer scrutiny:
- “We have 200 active opportunities!”(How many have had activity in the last 2 weeks?)
- “Our close rate is 73%!”(On what? Cherry-picked deals your rep chose to keep active?)
- “Pipeline is up 40% YoY!”(Or did you just stop disqualifying bad fits?)
Glitter metrics exist because humans like data that makes them look good. Sales reps do it. Sales leaders do it. CEOs do it.
PE firms fall into the trap too - basing valuations on company “glitter metrics” that don’t truly represent business value.
The cost of this during exit: - Deals get repriced when diligence reveals the truth - Sales cycles extend 3-6 months while you scramble to get real data - Strategic buyers walk away when they can’t validate the “sales machine” they thought they were buying - Your team loses credibility in every subsequent buyer conversation
What Buyers Actually Want to See
Not complicated. But it requires discipline:
- Single source of truth: One place where sales, finance, and ops all see the same numbers
- Leading indicators, not just lagging: Not just “revenue” and “conversion,” but “customer effort score,” “adoption rate,” “friction points identified”
- Investor-grade forecasts: Built on real pipeline health, not aspirational thinking
- Attribution that makes sense: Can you actually explain which activities drive revenue?
These aren’t “nice to have” for exit prep. They’re table stakes.
When a strategic buyer sees clean, consistent data with clear attribution and honest pipeline health, they see lower integration risk.
Lower risk means a higher multiple (that's the goal!)
That’s it.
Here’s what you learned today:
- Celebrate disqualification - Fast “no’s” are more valuable than slow “maybes” polluting your pipeline
- Measure clarity, not volume - Last activity + next step planned tells you more than 100 “opportunities”
- AI without governance is liability - Corporate licenses and clear use cases, or don’t bother
- Glitter metrics cost millions - Shine looks good until diligence, then it costs you 15-20% of your valuation
If you’re preparing a portfolio company for exit in the next 6-12 months, the time to clean this up is now - not when you’re under LOI pressure and buyers are asking questions you can’t answer.
Want to stress-test your sales data before buyers do? Let’s talk about what investor-grade actually looks like for your specific situation.