I just recently heard the interview with Meghan Reynolds, Partner and Head of Capital Formation & Talent at Altimeter Capital. Meghan acknowledges that venture capital is hard, driven by outliers, and rarely do we have a home run, but often many failures (large and small). She has a pretty simple and brilliant framework for communicating bad news:
“I have a very specific framework for bad news. You get out quickly and you address very clearly what I call P.I.E. or pie, which is:
- What is the problem that you’re dealing with, person, company, market change, interest rates, you name it — that’s the P, what’s the problem?
- What is the impact of that change? There’s fraud in the portfolio company, the impact is that company is going to zero or there is litigation or you name it … That’s the I, what’s the impact?
- And then E, what is the investor’s exposure? What can I expect to happen to my fund as a result of this problem?
And that is simply putting into people’s hands an answer to the question that they are inevitably going to get to the constituents that they report to.” — Meghan Reynolds, 2025
Perhaps some background:
The SEC requires companies to proactively disclose any problems within financial products that could materially impact investors’ decisions. This involves a thorough assessment of the issue’s significance and timely communication through appropriate channels, ensuring that disclosures are clear, specific, and provide investors with a comprehensive understanding of potential risks and impacts. You might not be SEC registered, but you are certainly SEC regulated.
Regulation S-K outlines specific disclosure requirements, including the necessity to discuss significant risks and uncertainties. Companies are expected to detail known trends, demands, commitments, events, or uncertainties that are reasonably likely to have a material impact on their financial condition or operating performance. This encompasses any problems within a financial product that could influence investment decisions.
In instances where unforeseen events, such as cybersecurity breaches or public health crises, materially affect a company’s operations or financial standing, the SEC provides additional guidance. For example, during the COVID-19 pandemic, the SEC’s Division of Corporation Finance issued guidance emphasizing the importance of disclosing the pandemic’s impact on operations, liquidity, and capital resources. Companies were encouraged to provide transparent and specific information about how such events influenced their financial products and overall business.
Furthermore, the SEC’s Compliance and Disclosure Interpretations (C&DIs) offer clarifications on disclosure obligations, assisting companies in understanding when and how to report material issues. These interpretations stress the importance of evaluating materiality from the perspective of a reasonable investor, ensuring that all significant information is adequately communicated. There is even guidance for AI and for China-based companies.
That all can get quite complicated, and very quickly so. And I hope your General Counsel is up to speed to have your back on the legal and regulatory front. But Meghan’s framework is simple and effective. I like it. And I’m going to stick to it.