Posted by The Bowdoin Group on February 22nd, 2021
What is one of the top concerns keeping Private Equity partners up at night? Talent.
Great executive talent is one of the most important factors driving portfolio company performance, and during an unprecedented era of uncertainty, there is even more pressure and competition on PE firms and executives to staff their management teams with top-tier leaders.
With the success of their portfolio companies at risk, the strategy behind attracting and hiring the best is top of mind, with investors knowing they must execute on a coordinated approach around talent. Without the right strategy, it is possible to tap networks when a new CXO is needed, but that is not enough in an increasingly tight talent market.
In this virtual panel, hosted by our partners at Hunt Scanlon, The Bowdoin Group’s Jim Urquhart (Managing Director, FinTech) led a dynamic conversation with Todd Markson (Operating Partner at Bain Capital), Ishan Manaktala (Operating Partner at SymphonyAI), and Susan Clark (General Partner at TCV) around what PE firms are doing to attract and hire top executives in an uncertain market and how C-level candidates are making moves in their careers during a pandemic.
Here are three top themes that came out of the conversation around how PE partners are finding and recruiting executive talent:
- There are two types of CEOs: Those that run companies and those that change companies. The three panelists aligned on this point, where there is a clear difference in executives across the board when they’re considering talent for their portfolio companies. Are they going to affect change? Or will they continue with the status quo.
- Executives should highlight impact, not situation. When trying to get the attention of PE operating, investing, or talent partners, executives who want to introduce themselves should highlight how they moved the needle or how they grew/improved their organization in their previous roles, rather than a laundry list of the company’s key stats.
- Diversity, equity, and inclusion are a core part of the growth strategy. At the board level and at the executive level, PE firms are partnering with search firms and are digging deep into their networks to develop diverse pipelines, track DEI metrics, and work to improve these processes over time. It’s clear that building diverse teams across their portfolios will help drive better outcomes for everyone.
You can find the recording below:
If you have questions or want to learn more about our expertise in PE and Venture Capital executive search, learn more about our capabilities here.
You can find the transcript below:
JIM URQUHART: All right, well, why don’t we—why don’t we get started here. Welcome, everybody. Thanks for joining us. Thanks to our silent hidden partner Mike Hawkins over at Hunt Scanlon thanks for co-hosting, co-promoting this and giving us the platform to have this hopefully fun and insightful chat about talent landscapes within the PE-backed community. I’m Jim Urquhart. I’ll be moderating. I’m from Bowdoin Group, Bowdoin Group’s a premier executive search boutique. We focus on helping early and growth stage technology companies build and scale their leadership teams across FinTech, enterprise, B2B, digital health and life sciences.
So that’s us, why don’t I go around the horn? I’ll let—I’ll let the folks introduce themselves. Susan, why don’t you begin and let’s kind of just talk quickly about who you are, where you’re at, and maybe a—you know, 20, 30 second kind of snapshot of your background.
SUSAN CLARK: Certainly, Susan Clark here. I am a general partner with TCV. I own portfolio operations, which means that I have a team of which we partner with our companies on bringing enterprise software best practices across the portfolio. A little bit of background started my career out coding, then went into business consulting and effectively love transforming and growing businesses.
JIM: Awesome. Thank you. Ishan, you want to go next?
ISHAN MANAKTALA: Sure. Ishan Manaktala, operating partner at Symphony AI. Those of you who probably don’t know Symphony AI, we’ve been around but three years. Single LP fund, managing a billion dollars of our managing partners capital. Exclusively invest in B2B enterprise software, where we believe AI will be the largest driver to value creation. Our operating team is much like Susan and Todd on the panel, focusing on value creation, be it value creation in product in good market, within cost transformation. Been at the fund since it started about three years back, prior to this was at Symphony Technology Group, which is our sister private equity fund. And then prior to that, most of my background was in sales and trading within financial technology, both on the buy side as well as the sell side.
JIM: Excellent. Last but not least, Todd?
TODD MARKSON: Hi everyone, Todd Markson, an operating partner at the Bain Capital Tech Opportunities Fund. Bain Capital Tech Opportunities Fund, it was created a little over a year ago with about $1.3 billion in committed capital to basically fill an end to end Bain Capital technology platform across all stages of investment. All the way from seed venture to minority growth into leverage buyout.
The Bain Capital Tech Opportunities Fund looks at investments in kind of application software, infrastructure and security, healthcare and IT, FinTech, internet and digital media, where we have deep expertise and thematic perspective. I run the operating partner group here, the portfolio group with a colleague. You know, we are focused specifically on the Tech Opportunities Fund, although we collaborate with the other portfolio group members throughout Bain Capital, to really drive value creation and work hand in hand with our investors, our co-founder, our founders. My background started off as an entrepreneur out in Silicon Valley, then spent some time in consulting most recently BCG in their technology in the market practice. And then was an executive at a KKR-backed EdTech company, started off as a head of market and then moved into G-strategy and chief operating officer. And then most recently, obviously, with Bain Capital Tech Opportunities Fund.
JIM: Excellent. Well, thank you all for joining and being a part of this. So, a couple quick notes, and then we’ll dive in on some questions. So, I think I speak for the panel when I say we would really love some Q&A from the audience. So obviously, we’re in different times, so we can’t physically see you, but know that the chat function is up and running. So, shoot your questions over real time, you know, we’ll try to weave them in as we can. But certainly, we’ll try to leave a good, you know, 10 to 15 minutes at the end to, to hear from you all and get some responses from the panelists. So why don’t we start generally, I’ll go kind of keep with you, Todd. And we’ll go kind of reverse order back around get the—Can you talk about how you think, just generally speaking, and kind of describing your own views on cultivating talent ecosystems, talent networks, you know, how do you do that? And how do you kind of keep it top of mind when you’ve got certainly plenty to do on any given day?
TODD: Yeah. You know, ultimately, at our—at our core, here at Bain Capital, we—you know, we’re business builders, we’re constantly thinking about talent. It’s at the core of kind of what we do. You know, Bain Capital grew out of Bain & Co. and so we have sort of consulting DNA. And so, we are constantly looking at businesses from how do we create value? How do we drive this company to greater heights? And most of the professionals, frankly, throughout the firm come from a consulting background. Strategic, analytical operating background. So, given that kind of makeup, you know, we come with, we believe, a differentiated ability to both tap into the networks, from our prior experiences. Where we know colleagues and know people within the industries that we’re investing in, to bring them to bear and to constantly one, get insights into those industries, but also to curate that talent, cultivate that talent. And when there’s the right opportunities, bring that talent into our portfolio. You know, we also bring that experience to identifying and working with talent in the portfolio companies. And we believe we have a good lens and understanding who are the high fliers, who are the people that we think are great talent, that we can both mentor and grow within the portfolio companies or in other portfolio companies within Bain Capital. But I’d say at the end of the day, you know, a significant portion of my role, frankly, as an operating partner is cultivating talented individuals, both within and outside the portfolio. You know, with the goal of attracting and retaining them. They’re the core of what makes our companies grow and be successful.
JIM: Excellent. Ishan, do you have a view on that?
ISHAN: Sure. So, Jim—it’s somewhat differentiated in unique as a PE fund. Our single LP status allows us to go across a really large value creation opportunity, where everything for us starts with an idea. Ideas get incubated through a six month very vigorous value creation thesis. Once ideas are incubated, we then will acquire portfolios into the incubated entity. We tend to be very vertically-focused and within verticals uh focused on solving high value, high urgency, use cases. In this ideation to incubation process, we typically have a very large network of entrepreneurs and residents and consultants that help us in validation of the set opportunity. And the set opportunity has a positive validation. It’s these EIRS and consultants that get significant CXO roles at our portfolio companies. Other than that, we constantly kind of cultivate a talent ecosystem, either by looking at portfolio companies that we have exited, keeping in very one-touch with the CXOs at those port-Co’s, folks that have worked with—we obviously have faith and confidence in them. And then ensuring that we are incredibly well networked out uh within the ecosystem within what goes, what are, what’s the competitive landscape. Looking at market maps, looking at movements of key executives. A lot of it also tends to be what can we do opportunistically.
JIM: Love it. Susan, do you want to offer your thoughts and also maybe kind of double-clicking on best practices or certain kind of, you know, hygiene around doing these things in a more scalable way that you’ve kind of either developed yourself or maybe picked up along the way?
SUSAN: You know, as far as if we look at an individual company, and say, even a new acquisition, um, you know, there’s certainly the CEO’s view on existing talent. And what we ask that CEO to do is to leverage the best practice we have, which is—and it’s not only at TCV, it’s quite broad, as far as the best practice goes—but a non-nine box to really assess and look at the potential and performance of the individuals within that exact team. So, we’ll have a CEO do that process. And then concurrently, we’ll also have our internal team assess that exact team. And so, we’ll do a little bit of a data sharing and comparison to see, you know, and ensure we’re really looking at—through the lens of both that operator at the company as well as at the PE firm—how is the strength of the talent. And then once we’ve done that, I think it’s coming up with a game plan on those that can scale. And unfortunately, some may not. So, that’s the best practice that we use to assess talent. But certainly, at the end of the day, you know, not only cultivating the existing talent we have. And looking for opportunities, especially those rising stars, that we can promote continue to challenge them. Either within the portfolio company—or obviously, we’ve got a broad portfolio base that we can place execs. With the goal of retention of those-of those key players.
But also, outside, we all have individual networks. And what I saw both at my prior firm, and at my current firm is—unless you have someone that’s really bringing that those siloed networks to the forefront, and putting it as a priority that we need to reach out to them on an ongoing basis. One of the things that we did pre-COVID was if we were going to go have some execs from our firm in a certain city, perhaps we would meet with those execs that we were cultivating that relationship with. Obviously, during COVID, not an applicable activity. That being said, it is that constant touchpoints to ensure that you stay on their radar, and vice versa. So, it’s definitely a concerted effort and one that that a firm needs to commit to putting the time and effort to not only pull together what that list of prospects and great talent looks like, but also how do we how do we kind of build that and ensure that we’ve got them keeping TCV and whatever form you may be a part of as top of mind.
JIM: So, you beat me to it. I think that’s a great, you know, example of—I mean it’s probably obvious in some ways that if portfolio company A needs a new CFO, then you know, who do we know? And how do we think about finding that that type of executive? But if there’s not that immediate need, you know, how do you keep people warm? How do you kind of nurture those relationships? And what kind of time do you dedicate? And being that it’s so important? I guess, shifting back to Todd, you know any views on that? And then you can also take the view—the stance of, you know, how do you—how do you leverage a platform that you all have? But how do you leverage your personal brand? You know, to be able to cultivate talent?
TODD: Yeah. Yeah, I mean, from a platform perspective, you know, we obviously at Bain Capital have multiple funds across the full spectrum from venture all the way to leveraged buyout. And we have a large portfolio group that’s been around for many years. So we are, you know—we are talking across funds and amongst the portfolio group. Oftentimes about star talent—about, you know, talent in the network. To reach out and find, you know, find that sort of the top folks we can bring into the portfolio. So that’s something that is an active dialogue on almost on a daily basis, you know, exchanging sort of open racks, exchanging talent that’s reached out to us that we know and, you know, finding the right opportunity at the right time. So that—from the platform perspective, you know, that’s something that’s extremely advantageous and is—you know, is fulsome. And I think that’s also an attraction for talent as well, knowing that if they come into Bain Capital and portfolio, there are multiple opportunities—whether it’s within the portfolio to grow, or, you know, across the portfolio. And so, you know, keeps—obviously, they perform well … keeps them with opportunities going forward.
From a personal brand perspective, you know, obviously, I’m tapping into my experience, like to my decades experience mostly in tech. From—as a co-founder, one is—one of the ways given where we’re focused in the Bain Capital Opportunities Fund, you know, on founder led businesses and tech, you know—I’ve been there and done that a bit on that side of the table. And so that’s helpful from a sales perspective, but also from attracting talent, knowing what to look for and knowing that sort of orientation. They need to, you know, run through walls and do a job that is, you know, intense and all that. And then I bring, as well, sort of my experience of BCG, looking at Fortune 500 companies, you know, and bringing best practices from that to there into companies that are trying to scale and build those best practices that they need to succeed. And then, you know, finally, just as an executive PE-backed environment, you know, I bring that experience to bear. And sometimes I’m advising the executives, what is it like now to be a partner with a private equity fund, because it is a different environment than being a private company, or being a company without investment. Or being public companies. It is a different environment. And so, a lot of times, I’m helping them think through what is it—you know, what are the differences. So that’s—you know, I can tap into the co-founder, sort of role, the sort of Fortune 500 best practices experience, and then the PE-backed company to help talent, you know, think through this opportunity and succeed.
JIM: Love it. And you—just picking up on a point that you made earlier, Todd, but I mean it’s—and I want to get your thoughts on this too, Ishan. But you talk to I mean—it’s competitive, obviously, out there. Everyone, I think, is generally aiming at the same select pool of, you know, high caliber executives, for companies. You talked a bit about kind of, you know, from the inside looking out, and, you know—so how are you thinking about, and how do you advise, how are you working with companies to kind of home-grow and groom talent from within to be able to kind of—you know, isolate and identify those high fliers? And make sure they’re on the right track, and there could be the next—you know, the next best thing, if you will?
TODD: Yeah. I mean, we work very closely with the portfolio companies to build, you know, talent recruitment development process. You know, to attract and retain talent. As I said earlier, you know, getting top tier talent to our portfolio companies and retaining them and challenging them to grow is something that is core to our success. If you have the best strategy in the world and invest in a great company, but the talent is not there at all levels, you know, you’re not going to get the returns outside—returns we’re looking for. So, we, you know, spend a lot of time thinking about that. You know, specifically within the Tech Opportunities Fund, you know we’re investing in businesses that still have very nascent kind of talent and HR functions. In some cases, they just have, you know, a couple of recruiters to put out job specs. They don’t have a fulsome, you know, HR and talent flywheel. And so, we often in our portfolio, are you know—one of our first value creation efforts is to bring in a world-class CHRO talent team to build a flywheel. You know, build a comprehensive performance management program so people can understand what they’re trying to achieve, how to grow, you know, L&D programs, you know—the stuff that larger companies, many people take for granted, but at the smaller companies just doesn’t exist in a fulsome way.
You know, and then obviously, we’re, you know, hand in hand in hand with the portfolio companies on a pretty regular basis. And so, we often have our eyes out for great talent. We’re working not just at the C-level, we’re working two, three levels, four levels down often. And so, as we see—you know, as we see people be successful, we—you know, definitely work with them, mentor them, reach out to them and work with the resources within a portfolio company to make sure that those are—you know, keep people we retain.
JIM: That makes a lot of sense. Ishan, any views on that?
ISHAN: So obviously do a lot of similar things in terms of best practices. You know—do things that we fundamentally do at every portfolio company and we do it every 30 days. We’ve got something called a keepers-watchers-goers framework. Who is the top talent that you need to keep? Who do you need to either watch in terms of—they need the extra knowledge; they have the raw talent—how do you kind of get them in the right role set? And the goal is where we tend to make those decisions as quickly as we can in terms of exits. Obviously, do it with the right level of empathy, humanity and so on, so forth. Keepers-watchers-goers framework is something that we do across every portfolio company and keepers-watchers-goers scorecard is shared with CEOs across all port Co.’s. And with the value creation operating partner team.
Jim, something that you interestingly raised in terms of personal brand—obviously, each of us go tap into our network and ensure that we can connect with the right candidates, with the right talent pool.
But for us, we also extend personal brand into that talent pool that all of us are competing for is incredibly limited. We need to have the ability to sell the vision of the fund. To sell the vision of the portfolio company to every candidate out there. Which means starting from the top in terms of chairman of the board, operating partners, CEO, CPO down to the recruiter—everyone needs to have a very uniform message in terms of what’s the vision of the fund. What’s the vision of the portfolio company. Please come work for us. Working for us has either an ABC-incentive structure in terms of financials are in terms of what you can do in terms of building your personal brand. But people need to want to come work for you. It’s an incredibly limited talent pool. And I would say within the recruitment process, about 50% of our job is pitching and selling and only 50% is interviewing the right candidate out there.
JIM: Yeah, that makes a ton of sense. Susan, question from the audience that I want to weave in that I think fits to the next point. So, you know, talk about—as you’re identifying and acknowledging that, you know, every company’s in situation may be different and having kind of unique elements—how do you assess both for like objective skill set and track record versus abilities? Right, like, you know—CEO, candidate one has a track record, they’ve had an exit, it’s pretty obvious. Candidate number two has high ceiling, most of the intangibles that, you know, are going to make them successful but maybe it’s not as binary. And the question from the audience kind of weaves into that: Are the unique skills you look for in CEOs who you found more often than not, you know, within PE-backed firms?
SUSAN: Yeah. You know, I think that there is—I’ve categorized is there’s two types of leaders. Those that run the business, and those that change the business. And quite frankly, when you get hired into a company that, you know, say, for example, TCV acquired; our intent is to grow and bring best practices and ultimately scale that organization. And so, inherently, the thing that I look for from a just DNA cultural perspective is someone who’s not afraid to make changes, who’s decisive, and who’s going to really motivate and lead this organization. Especially if you’re talking the CEO to that next phase of growth. And so, there’s a whole, you know, bunch of other qualifications um that follow, but those are kind of the table stakes. And not only hiring a CEO, but hiring, you know, his or her exact team. So that would be kind of paramount.
And then, you know, as far as when we think about—do you take a risk with someone who hasn’t been a CEO or hasn’t been in that exact role versus someone who’s kind of have it has a proven track record? I mean, you’ve got to look at the exact team in its totality. You know, it’s, it’s not just that one individual. If you’ve got, you know, a bunch of seasoned execs, and perhaps you’re looking for a new CEO, you may be more willing to take that chance. And certainly, what we’ve seen is, you know, there’s a lot of folks that are hungry. And quite frankly, oftentimes you put that person in, that’s wanting to take that chance. Wanting to take that next step. And they’ll knock it out of the ballpark. You know, provided once again, they’ve got, you know, the skills and abilities and that sort of thing.
And then—you know, at the end of the day, what my team and I provide to our execs is a whole host of best practices and experiences and things that we’ve seen, you know, work in other companies. And so, you know—once again, one of those table stakes is the ability to collaborate. And certainly, we don’t want them just to do what we—what we want them to do. We want them to push back and have you know-those—you know, really critically thinking conversations. But that being said, you know, someone who’s willing to collaborate and recognizes the beauty of having an arm of operating leaders and expertise. Versus feeling like that’s, you know, being imposed on them.
JIM: That’s a great point. You know, and I think that, you know, from the executive search we talk to CEOs and executives all day long and I think there’s a common theme around, you know, wanting to have the relationship with the investor base and the board where you can competently like kind of direct —I mean, if you’re going to be the person they believe in as a CEO or a key leader, they’re going to expect you to tell them where you need them and where you don’t. Right? I mean, certain, you know, firms may have investors—may have different, you know, kind of views on that. But I think, largely, if you can have that kind of, you know, comfortable balance and be very clear and direct and, you know, say “I need you to do this, I need help, you know, in these areas.” And you’re going to be confident that the CEO is going to come to you good times and bad, and not just disappear when things are, you know, rocky, that’s important.
SUSAN: Yeah. And I think there’s this—I’m going to go off on a little tangent, but I think there’s this like demystifying of the board, demystifying of the firm. Like, we’re not scary people, or at least I don’t think we are. You know, we’re here to help. And we’re all on the same team. And we all want the same thing, which is to grow the company and really bring it to, you know, just that place that we know we can get to. And so, you know, I think that’s where that openness, that transparency really pays off in the end; you don’t have to hide because that’s why we’re here, we can help.
JIM: That’s great. And I agree. So, let’s shift—let’s shift a little bit toward, you know, think about the diligence mode, when you all are, you know, kind of pre-deal talking to companies and kind of getting into that phase before you’ve actually kind of, you know, close in investments. You know, thinking about that from—you know, obviously, you know, you want to be a good capital partner, you know, and firms need to see you as that, but how do you think—and you know we’ll stick with you, Susan, we’ll kind of go around the horn—how do you show value? And like, what—beyond just being someone who can give a company a pile of money, right? Particularly in this market, where interest rates are low, everybody’s money is green. How do you differentiate and show value—obviously, you know, kind of thinking through the lens of talent and other value add that you can kind of provide to, you know, being a great partner overall to a firm?
SUSAN: Yeah, you know, I think it starts with—number one, you’ve got now a set of resources that are x consultants, but also, you know, quite frankly—in in my team, I have folks that were consultants, but also, we’re operators. So, it’s kind of that ‘been there, done that;’ they’ve been in these roles. And so, you know, my head of talent actually grew and hired, you know, a company—or hired about 650 people and grew a company immensely. So, when we talk about, you know, a company that we just acquired, and they’re like, “Oh, my gosh, how are we going to grow? And how are we going to hire all these people?” And I’m like, “Well, I’ve got someone who’s done it.” And “Oh, by the way I have as well.” So, this is where that is a huge benefit. But just as beneficial are the network of resources that, you know—when someone comes into a company that is backed by a PE firm—what they can take advantage of. And what I mean by that is we run these like CMO roundtables and sales ops roundtables where we bring leaders together to talk about, you know—and we asked them, “What topics do you want to talk about? What do you want to learn?” And so, you know, quite often, it’s less about us teaching them, it’s about them teaching each other on—”Hey, you know, we’ve had this challenge, we couldn’t forecast forever, and now we can and here’s how we overcame it.” And so, there’s a whole host of dialogues that happen outside of my purview. But we initiate them through these roundtables, through webinars and things like that.
JIM: Todd do you want to jump in on that?
TODD: Sure. Yeah, I mean, there is a lot of capital in the market, right? And so, it is highly competitive. And so, you know, just capital in these days—in this day and age doesn’t necessarily get the job done. Now, there are some people willing to pay super high valuations where, you know, we won’t necessarily go. But, you know, oftentimes, we see that us sitting down with the management team in diligence—and we try to engage as early as possible. And it’s not just the deal team, but the portfolio group. You know, we’re engaged very soon after kind of prelim—what we call investment where we sort of align on the opportunity and say, “Hey, let’s, let’s go after this.” You know, our team—portfolio group team gets involved at that stage because we’re looking at the business from an operational lens and we’re engaging with management as much as we possibly can. It differs, obviously, based on the process to, you know, really start to get to know them, one. Get to know their vision for the business, start to think about our point of view on the business and where we can help. And we’re, you know, talking about our value creation plan. We’re talking about our network, we’re talking about the roundtables that Susan mentioned. We’re talking about all the opportunities that they can envision in the future going to tap into.
And so, you know, in many cases, we’ve seen ourselves win deals at lower valuations. Because they’re attracted to that network, they’re attracted to our partnership. Frankly, there’s a kinship there where they say, you know—because ultimately what people need to understand is that partnership is next five, six, seven, whatever—you know, the whole period is years of your life. And you want to work with partners who have an aligned vision. You want to work with partners that you enjoy, frankly, working with. And so there are cases where we’ve seen people, you know, choose Bain Capital, and our tech ops group to be a partner, because they like that vision. And so that’s increasingly important; we spend a lot of time kind of selling that vision to the founders. You know, we highlight talent that we can bring to bear, advisors that we can bring to bear that helped them grow too. You know, a founder is looking to also develop over the next, you know, foreseeable future.
So anyways, that’s—you know, that’s really how we think about this. Is that, you know, there is—yes, coming up with the right valuation of what we think is right. But there’s also very—and increasingly important—what is the plan going forward? How are we going to partner? And do we fit culturally together as a group? And in some cases, there’s—you know, where there’s disconnect, we both mutually agree, “Hey, this is probably not the right go-forward model if we can’t align on vision.” So, you know, for us—you know, showing value, showing that perspective early on in the process is critical to us. And we won’t, you know, as I said—we won’t invest just capital. We are definitely willing to, you know—say it upfront, we will invest capital and we want to be, you know, intimately involved in the business.
JIM: Right. Right. Well, I mean—clear expectations up front, I think, make things easier, you know, over the over the long haul for sure. Ishan, any unique thoughts there? And then maybe we can shift a little bit to starting to get into—how do you start to dili—you know, in and around diligence of the business, diligence of the critical players, the leaders—how do you start to evaluate who you think you’re going to, you know, want to keep and starting to identify holes? And then, you know—I’ll throw out a general kind of question in the group that’s from the from the audience here is— what’s the belief in the value within cognitive assessments, behavioral, you know—is that a tool that you all use during that analysis and that evaluation?
ISHAN: Sure. So just to kind of answer the formal question—everyone’s money is green. The question is, how do you make your money more green than the other private equity fund that’s bidding for exactly the same deal? We work through that due diligence process very early on in a value creation thesis with the target company. For as we attempt to engineer eight to 10 x exits, a lot of those exits come from us being somewhat unique in having central IP, having a central data sciences team where we look at—how can you supercharge your product roadmap through a AI application journey? How do you move your revenue mix from what may be a 1x multiple on services to a 10x multiple on AI-centric revenue.
Moreover, just like being in TCV, a lot of our operating partners have ‘been there, done that.’ We’re hands-on operators, we understand the journey from transformation, to growth, to value creation, we have the ability to roll up our sleeves and take on one or more than one functional area in that portfolio company. Be it product, go to market—we tend to tend to be all-run athletes. Again, you want to differentiate yourself with the target company by saying, “I’m not going to just be this armchair board advisor, I can actually come in and help you with a bunch of things.” I often joke with the CEOs of my portfolio companies, “Think of me as your chief janitorial officer. Anything that you don’t want to do, I’m here to do it for you.” Right? Such that you truly focus in that growth phase on the two things that, in our opinion, matter. Product and sales, just about everything else is a rounding error as such. So what we’re attempting to do, Jim, is really kind of bringing late stage private equity discipline with early stage venture capital incubation. Such that we’ve got this best in class fund which goes across several growth life cycles—be it transformation growth and or value creation.
JIM: That’s great. Susan, any thoughts there? And I guess also, maybe we can start to level down into you know—let’s assume for sake of argument as you’re going through diligence—you know, you start to come up with some potential, you know, hard truths. Right? Some holes in the team that may need to be addressed, some other kind of potential changes or difficult conversations. How do you manage that and have—you know, have direct conversations? But on the other side, you haven’t kind of quote unquote, “won the deal” yet? Right? So the kind of balance—the balancing act of being direct, and you know, in setting the expectations, but you know you’re probably still to some degree in sell mode.
SUSAN: Yeah. I mean, during the diligence phase, it’s more so focused on what are the opportunities within the business from a value creation perspective. Certainly, we do our assessment of the talent. And if there’s particular call outs that, you know—for example, maybe they’re missing a CRO. And so quite frankly, we’ll pull together a list of potential CROs to kind of surface hey, these are the net—these are folks within our network that are examples of what we would bring to bear in filling that gap. So we’ll proactively do those sorts of things. You know, during diligence, we get a slight preview on the exact team. And if there’s gaps, I mean, those are the more obvious things to address. If it’s an assessment of talent, whether or not this person is scalable, you’ll probably have—we’ll probably have our early read. Now, if it’s a CEO, then that’s something we’ll want to make sure we’re addressing sooner than later. But if it’s within the team, you know, I’d rather get past diligence and do that nine box activity that I mentioned to you. And allow for us—you know, once the company is acquired we then do our deep dives. Which will allow for us to ask a lot more questions and get a lot more insights. You know, the last thing I want to do is do some sort of like knee jerk reaction to the answer to a question incorrectly during diligence, and “Ooh, we need to replace them.” You know, I think we have to have—in all honesty, you know, spend the time develop those relationships and, and really assess, is this person scalable? Do they get what we’re trying to do? Are they coachable? How strong is their team? And so all of those, you know, come into play post-acquisition. And then we’ll go from there.
And there was a question actually, in the Q&A, as to, you know—if you’ve got a differing opinion, of a, say for example, the CRO. The CEO thinks he or she is a Rockstar—you know they’re not, and they’re not able to scale—how do you have those direct conversations? And oftentimes, what we do is show that CEO what great looks like. Or what good looks like. Because, you know, oftentimes—once again, these may be—you know, businesses that they just haven’t picked up and looked around to see what they can get. So that’s oftentimes the, you know, instigation point at which the CE goes, “Oh, okay, yeah, I think we need to scale with someone else.”
JIM: And that makes sense. And some of it can also be, you know—what people have done, and what you’ve done as a business to get to that point in time is usually not going to be the exact same list of ingredients to get to that next threshold. I mean, if you’ve done a lot of more transactional selling, and now you have to move to the enterprise, even a great CRO is not going to necessarily be, you know, threaded for that type of a role if they’re used to selling to a different audience, different style, different motions.
SUSAN: Absolutely. Absolutely.
JIM: Todd, any views on that you want to weigh in?
TODD: Um. Yeah, I think Susan answered it very well. I think a couple things just to add. I mean, first, it’s not uncommon to find holes, especially when we’re investing in that sort of $30 to $100 million ARR business and our—you know, gaps, like we talked about, there is no CHRO. You know, there is no specific C-level in certain roles—where that’s, that’s an easy, you know, approach there—we’re bringing executives we know that could fill that extremely well and bring that to bear. You know, as Susan said, we do have a strong point of view. It is a short and, you know, quick journey and due diligence. And, you know, it’s hard to have a full, full read. But we’ll have a strong point of view. And frankly, in many cases, we’ll talk to the CEO or founder about that. And say, “Look, this is our, you know, early read are we offering wrong?” And partly because we want to, you know, make sure that—going into this, that they you know, we’re not pulling the rug under an executive coming in and—you know, and then making moves post that. So that’s something that we do bring up and kind of, you know, read back our due diligence, read back our assessments to the executive, to the founder before—you know, as we get further along in diligence.
The other piece is, you know, there are—we don’t just look at the gap, we often look at the full executive team and understand, you know, are those the right roles? Sometimes there’s a CMO and chief sales officer and we say, well, “Maybe we’d have a CRO and you know, span both of those.” So, we’re really looking at the kind of the whole ecosystem of you know—maybe we need a chief of staff to help because the team’s not functioning extremely well. And we need a chief of staff to help kind of drive that collaboration and some of the analytics. So there’s—you know, we’re really looking at the whole system and not just sort of a one to one replacement, per se. And I would—the other thing is, you know, oftentimes we are finding, you know, founders raising their hand and saying, “I do want to migrate out of this business over time.” And so that’s something we do find in due diligence. And we want to know, early on that, you know, some of these owners are going to earn, you know, a nice payout from the investment. You know, they built this business to a certain scale and they want to go do other things. And they say, “Look, I know, I can’t run this business, you know, going forward, I would like to over, you know, next year to two migrate out.” And that’s something that we definitely plan out upfront, because, you know, often moving on from a founder or CEO is something that’s really culturally impactful. And we want to make sure that that is done really well. And obviously, we look very much for internal folks to migrate up. Sometimes it takes external, but that that’s a key piece is really getting the point of view of the CEO, how they want to evolve with the business. And that’s often a discussion we have early on.
JIM: Right. Well so I guess there’s those different examples, right, where you’ve got, you know, a—you may have a company that’s on your radar that you’re talking to, that’s very—you know, with a self-aware founder, CEO, who knows that he or she needs to move out of the business or be in a more functionally appropriate role for the next turn. Other times, it may not be so obvious. And to your point, Susan, just in this analysis—you know, those deep dive conversations sound like at a minimum they take time.
JIM: So, what—and kind of a question to everyone, you know, how—knowing that it can take time, and there are some different kind of, you know, things and inputs you need to gather, you know—how do you come to that assessment that someone, you know, maybe isn’t the right fit? Or, you know, to scale? Or they’re in the wrong role? Like, how do you identify that? And then, how do you kind of make that decisive? You talked to your point earlier, Susan, about just being decisive, right? Like, how do you then, you know, make those moves? And, and even though it’s probably an uncomfortable, and maybe we’ll create some ripples, you know, getting out of the way and moving forward?
SUSAN: I think there’s a couple things, one is going back to my laundry list of like—what does it take to work with an operating team and within a growth equity or PE firm? You know, oftentimes, sometimes we come in, and—not oftentimes, but there are occasions where there are execs that are just resistant to change. Who, you know, either electively or mutually decide that, “Hey, this is not, you know—I’m used to running a business not having so much, you know, quote, unquote, ‘help.’” That, you know, they may just elect to—to not move forward. You know, in the case of other execs that—I’ve got, you know, for example, a sales and marketing lead, that will partner with that individual. And, you know, not only during the due diligence phase, but obviously also after, in the deep dives and kind of coming up with this game plan on where we’re going to take that organization. And ultimately, that individual needs to own it. It’s not our plan, it’s their plan. And so, there’s recognition of do they get it? And are they, you know, on board with—this is where we collectively think this, you know, we need to take this, this go-to-market organization. And, you know—and there may be, once again, signs that individual isn’t in for the long haul. Or just doesn’t get it. And so, you know, unfortunately, that’s where we have to have those direct conversations. And, you know, at the end of the day, these are all people. So, all of this is done in a very respectful way. You know, we have a reputation to—you know, we’re all about people. And so how we bring people, in how we mentor, coach them, we need to be as caring with how, you know, we exit them. Um, if that ends up being the case. So, you know, all along there’s got to be—all of it needs to be done with a ton of respect for the individual.
JIM: And that empathy is a huge piece. I think that makes a ton of sense. Question from the audience. How—and, Ishan, we’ll start with you, but maybe get a quick input from everybody—how to operators who maybe are, you know, in transition, you know, executives who are, you know, in between things or soon to be—you know, what are best practices about getting on your respective radars? Like, how do executives approach you and do it in a meaningful, impactful way such that you’ll kind of you know, stop and pay attention and be willing to engage?
ISHAN: So obviously, direct reach outs—as far as we go, a directory check out isn’t just kind of sending us your LinkedIn profile or your resume. Give us ideas, right? Tell us where you believe a vertical is sub-vertical problem statement—there is a unique way where you potentially know how to solve for it. Where is the opportunity landscape? And then we’re also very open to ideas around, have you looked at company ABC, it’s trading at XYZ multiple. And we believe that there is tremendous value creation that someone like you with your investment thesis around being product-centric, being AI centric, you can truly transform this and I’d love to kind of partner with you on it, right. Other than that, it could be looking at very specific portfolio companies. Portfolio companies obviously have a lot of press out there. The press could be a new product release. It could be a new round of funding, right? Identifying within a portfolio company where you believe you can add a uniquely differentiated value set. I think most of us are very, very open towards new ideas, towards executives that believe that there is a value creation thesis. But engage with us on something which is quantifiable and something which is idea and innovation driven.
SUSAN: One thing I’ll add is that there’s a bunch of search firms that target private equity, growth equity. For all the reasons that I mentioned earlier, it’s a particular DNA of an individual that fits within those environments. And so, yes, the direct reach-out works. Yes, please do your homework before you reach out. And provide some context while you think you’d be great within, you know, TCV. But just as important, I think it’s, you know, finding those search firms that have a pulse on multiple companies that are firms that are hiring and getting on their radar.
JIM: Any thoughts Todd?
TODD: Couldn’t agree more. Yep. Do your homework, directory chats work. I always find—I’ve in fact found executives, you know, through that or maybe the next level down. But it’s the ones that really stick out that have said, you know, “Here’s my specific sales get I understand that’s probably what you’re looking for your portfolio. These are the companies that, you know, intrigued me and are interested, you know—might be interesting.” You know, and then I can sort of very easily say, “Okay, well, boom, if that’s the company, you know, and that’s a skill set, let me look and see what are the opportunities there.” If it’s, you know, “Here’s my resume.” Now I have to do the work—you know, and I get lots of them—I do the work to figure out their background, figure out where exactly they fit, and that—you know, that just is less likely to succeed. I agree on the search firms as well. You know, but ultimately, you know, it’s also about, you know, just being—doing well in your role and we’ll, generally speaking—we’ll look at so many different companies. And we often ask about talent. So, you know, that’s another way is— you know if you’re in the target segment, you know, just being kind of—continue to do really good work. And we’re often talking to the executives there and saying, you know, what talent is great. And hopefully they, you know, teach people up as well. So, it’s often a network that helps tee you up. And if you have a strong network, that’s going to be even more powerful.
SUSAN: One additional note to get on our radar. I’ve noticed—I get a crop of resumes that are like, “I ran an organization of 100 people.” And it’s just kind of a laundry list of what their organization looks like versus how did you improve it? How did you grow it? How did you, you know, move the needle? You know, how did you expand it? And so that’s a huge, you know, differentiator and just, you know, resume viewing that will cause me to pause and look at yours, versus kind of dismiss it?
JIM: And that’s all—
SUSAN: It gets back to are you a runner of the business? Or are you a changer of the business?
JIM: Right. Right. And I won’t claim this as my own, but I talked to an operating partner at a very well-known PE firm who said that a lot of the outreach that that he gets is kind of—he blanketed under like, “Look at me, I’m a really good Swiss Army knife.” Right? And, you know, “I can do all these things.” But if, you know, if in certain instances, he needs an Allen wrench. Like he needs to know that people can do those specialized, you know, unique things that differentiate them from a—you know, a jack of all trades. So, it’s all really useful feedback. Weaving in some comments that have come in through the chatter here from the audience. I think—at least, I think most of you have commented on the importance of kind of balance, right? I mean, you know, even if you have a star CEO, but there’s, you know, leaks along the executive team, like—there’s importance around having a balanced team, finding synergy, being rounded. So, can we—you know, Todd, I’ll start with you. Can you talk about how do you think about ensuring that there’s a complimentary balanced team? And then with one further addition, how do you think about that from a diversity, equity and inclusion perspective and making sure that that’s at the forefront?
TODD: Yeah. So, I’ll just start with a second point. I mean, diversity, you know, DnI is extremely important to us. It’s a core strategy of ours, a core focus of ours. You know, going forward. You know, we want to do—you know, work with our portfolio companies and make sure they understand that that’s critical. We highlight that upfront. You know, we are looking—you know, obviously, we have control over the board. So, we’re clearly looking for, you know, DnI on the on the board level, clearly an executive level when there’s openings there. You know, we’re working with our search firms to require a diverse pool so that we have opportunities to look across that. And then we just often we’re—start with tracking. And seeing where the current companies are in terms of their diversity and really sort of setting that as the baseline. And then over our whole period, hopefully, improving that. So that’s something that’s critical to us, and we’re strong believers in diversity of thought, and perspectives is going to grow a company, there’s all sorts of research on that. And so, you know, that’s something that we’re very strong about and encourage, you know, significantly.
In terms of kind of the, you know, the executive team and kind of the, you know, how it works—I think that’s something that people miss often. Is—they’re looking for individuals, who’s the best CRO, who’s the best, you know, CMO or CTO, and it really needs to fit within the ecosystem of the executive team. And I’ve seen executive teams that have individual talents that are phenomenal and on paper, excellent, but they just don’t work well together. And if that happens, then the company is not going to be as successful as it can be. So, for us, we’re really looking for—you know, as an example, we were looking at a business, you know, we were going to bring in a CEO—that person, the CEO, did not have deep product talent and recognized that. So obviously, we needed a more visionary individual in the product group who could help, you know, [unintelligible] in the future. We also knew that they were, you know—the CEO is very sort of, you know, very straightforward person. You know, could execute extremely well, but also needed that vision within the technology as well. So, you know, now when we’re going out and searching for some of those other roles, we really needed— those roles to bring that vision to the table. To complement the execution capabilities that the CEO had.
So, you know, it’s understanding who those individuals are, it’s understanding what their strengths and weaknesses are, and then building around it. And then it’s—on that—it’s a lot of work. Right? It is making sure that the executive team has regular touch points, that you’re tracking the relationships amongst them, that you’re making sure that they’re collaborative. You know, you can see that during executive team meetings that you join and board meetings and other such, you know, touch points. But that’s—it’s something that is I think, often, you know, under seen, I guess. And something that you need to work on extremely—you know, a lot. So.
SUSAN: One best practice—just to dovetail on what Todd just said—there’s a whole set of best practices that ultimately, I used at my last firm as well as this firm around executive effectiveness. Because to your point, Todd, you may have the most robust, well-staffed exact team, but there is a lot of legwork that needs to be done to ensure optimum effectiveness. So, Patrick Lencioni, has, you know, a whole host of books and tools and things like that. Quite frankly, haven’t found anything better on the market. And those are things that, you know, we bring to the attention of our execs. So that they—because once again, at the end of the day, if you don’t have an exec team that’s effective, the organization sees it. And so, the more that we can perfect that, logically the organization will be better run. And then on the diversity note, that’s another area where—you know, huge initiative for TCV. We actually just recently pulled together a best practice on how our companies can have an effective DEI program. And obviously, there’s—you know, everyone’s at a different level in that regard. But, you know, have had one webinar—and actually we’re going to have an unconscious bias training session for our companies coming up. But, you know, once again it’s—we can do things once and then, you know, avail those to the portfolio. So that they can up the ante in how they’re looking at diversity, because, you know—the results show companies that are diverse perform better and it’s just the right thing to do.
JIM: That’s awesome. Just—and as a quick side note there, at Bowdoin Group, we’re using a firm called QPS, Quantum Power Skills. It’s done a really good job helping us—to your point about unconscious bias—just identifying, eliminating, you know, how do you from a tan-an account—a talent pool, excuse me, perspective. How do you think about, you know, asking questions and opening up, you know, kind of untapped pools of talent that can obviously promote the DEI perspective. So, it’s been really enlightening from how we’ve been thinking about it. Ishan, thoughts from you on that?
ISHAN: Sure. So, we’ve actually done a lot of thinking on diversity and diversity as it pertains specifically to innovation. And we look at diversity on two dimensions. Is there an inherent trait of diversity? Or is there an acquired trait of diversity? Our research shows that these two dimensions of diversity—as long as there is a significant, uh, difference in thought—you will get exponential innovation. So, is there diversity in background? In thinking? In an approach to solving a problem? And is there diversity in your risk-taking ability? And if you have those four or five traits across these two dimensions of diversity inherently could simply be—do you kind of have minorities? Do you have women? Do you have LGBTQ? Right? And then the acquired traits of diversity, which is, can you mix a product and services team? Can you mix a late-stage founder with—or a late-stage operator with an early-stage founder? We call that an acquired trait of diversity. And as long as these traits exist, we believe that it’s naturally far more conducive towards innovation. And then that innovation obviously has a certain amount of enterprise value creation. Because at the end of the day, we—a lot of our kind of rolling end goal is obviously benchmarked against quantifiably what do we do in enterprise value creation?
SUSAN: And FYI, I just put a book recommendation out there for all panelists and the chat. Just a great read on the topic of diversity and inclusion.
JIM: Thank you Susan.
SUSAN: You bet.
JIM: I fully echo your point, Ishan, about like, you know, diversity in the broadest sense. Right? And to your point about diversity of thought and bringing in different paradigms and kind of mindsets, I think can ultimately create—that’s one of the things we’re learning from QPS is that the statistics around, you know, organizational effectiveness and overall kind of success metrics when those things are put in place firmly. I mean, it’s-it’s—you know, it’s very obvious when you start to see it. So, I know we’re getting short on time here. I want to weave in a few more audience questions here. There was one a moment ago—hopefully I get this right. But, you know, when you’re talking about the power of networks, right, and being able to leverage those as investors and as kind of, you know, partners within the organization—how do you trade between—you know, when you think about like, having a need a CEO or a CFO or something—how do you trade between the decision that kind of go—maybe the potentially quicker or easier route through network? Versus, do we want to test that person against the field and do a comprehensive search? Susan, do you want to start on that?
SUSAN: You know—what we do like to do kind of an assessment of what’s out there. Even if we feel like we’ve got a great candidate in—kind of in queue. We do like to do our due diligence. Just to do a sanity check. You know, we’ve got a search going on right now. We think we’ve got the candidate, but, you know, as we’re courting and having discussions in that regard, we’re obviously, you know, looking at others because there’s no guarantee that we’re going to make a match. And, you know, I think it just gives us extra confidence and, you know, conviction on ultimately, you know, whomever we choose.
JIM: Todd, any view?
TODD: Yeah. I mean, I think, you know—first of all, you know, looking within our network, you know, is sometimes not necessarily easier. Because it is about the right fit, the right role, the right timing for that executive. And so even though we may have a great, you know, individual that we’ve identified, it’s, you know, is this the move they want to make at this time? And so, it’s not always sort of the quicker and easier path. So, with that being said, we always generally do start there. You know, if you know someone, can trust them, you know, know how they operate. And that de-risks the decision significantly. Where versus going in and getting someone that, obviously just interview and have a few hours with through the interview process, but you know, don’t fundamentally know in depth.
And so, you know, we obviously start there. I do think, you know, we go to search, often, if that’s not successful. If we can’t find the right person or the network for the right—you know, either there’s not the right timing, the right person. Or, you know, very specific roles where just our network is not strong and the search firm has depth, you know, in that specific space. You know, for us, tech, and then obviously, the specific role that we’re looking for that may be unique. And, you know, we try to curate the search firms that we work for—work with, who have experience in $30 to $100 million tech companies. And have been there and done that and can hit the ground running. You know, and then even that in specific roles. So, we’re highly targeted in the way that we deploy search firms. Because—and, you know, once we build up an experience with them, we go tend to go back. So that’s kind of our approach with that.
JIM: Excellent. Well, I know we’re a minute over here. So, I want to be respectful of everyone’s calendars here. Maybe we can go around quickly, you know, parting thoughts from vogue, any sort of—you know, maybe we can end on a bright note, what are we optimistic about in 2021? Any sort of trends or, you know, kind of parting, you know, sage advice that you would throw out to the folks who are listening in? Susan, do you want to start?
SUSAN: Certainly. Um, at the end of the day, all of our companies are firm—it’s all about people. And I think that’s where, you know—we are putting such importance on that fact. On not only, you know, cultivating the existing set of folks that we have within our ecosystem, but cultivating, you know, more. And new folks. And certainly, it’s one where you don’t necessarily need to have private equity experience to get in the door, but a willingness and aptitude and interest in learning how to do it. So, there’s a lot of a lot of piqued interest out there and just joining the ranks and getting as part of, you know, your career remit, you know, growing companies in an expedient way. So, I’m optimistic with the interest that, you know, we’ll have opportunities.
JIM: Awesome. Ishan?
ISHAN: So, for those who are interested in the private equity space, the advice that I would give is: One, in a post-COVID world, even assuming everyone’s vaccinated, we are back at work, none of us are going to go back, in my sense, to work five days a week. Our candidate pool is going to massively increase because our thinking has now changed to words. Yes, we can work with candidates in remote locations. Two, there is a Silicon Valley favorite word, which is called pivot. Private equity funds, much like anyone else, we pivot multiple times. Folks that are out there who have a level of depth in domains, subject matter expertise—try and augment that with some level of all-drowned athlete type skills. Because whereas that is paramount once we can make these set pivots that every portfolio company, at the end of the day there is the single most important skill that at least we look at in terms of hiring across our portfolio companies—be it an associate all the way to the CEO—is are you going to be a hustler out there? If you’re a hustler our doors are always kind of open to you.
JIM: That’s great. Todd, bring us home.
TODD: Yeah. So, I—look I’m optimistic. I think it’s a great time to be both an investor and to be an entrepreneur, founder, you know, a person who’s leading a growth company. You know, there’s first of all a ton of private equity capital in the market right now looking to be deployed. So, people are investing in businesses that are showing strength. And obviously as terrible as COVID was—and it has been hugely impactful. It has disrupted many industries and given a lot of opportunities for new ideas to come to the surface. And as Ishan said, there’s new ways to work. New ways to address customer pain points. New ways to address business pain points that, you know, have just changed. And so, you know, I think there are unique business models that are coming to the forefront through this. And that will sustain. Obviously, some of this didn’t benefit from a COVID bump, but others are here to stay. And so, I think it’s a really exciting time to be on our side of the fence, which is deploying capital to really interesting businesses and working with great talent. And it’s really good to be on the other side working in growth companies. Because, you know, there’s really just opportunity now where the stead old ways of doing things are no longer necessarily the case. So, go disrupt. Go, you know, break through the walls. And, you know, and reach out because we’d like to give you money. Again.
JIM: That’s—I’ll take some of that, we’ll sidebar that, but that’s—all very well said. I’m very optimistic and confident about—I think there’s just a renewed and even a heightened sense of empathy in the market now. We’ve all gone through something very tough and it’s quite a shared experience. And I think, you know, certain markets, you know, have benefited from a—you know, a significant acceleration. I mean look at the state of technology—and I’m thankful that we’re able to still withstand and even thrive in this kind of environment. So, you know, hopefully that’ll continue forward. But um—but anyway, thank you to Susan, Ishan and Todd, thank you much for joining us and spending your time—
SUSAN: Thank you.
JIM: And I hope whether you’re a—you know, a listener who’s an investor, an operator, a search professional—you know, whatever, hopefully you took something away from this and can carry forward. So, thanks all—
SUSAN: Thank you.
JIM: And we’ll talk to you later.
TODD: Thank you guys. Appreciate it.
ISHAN: Thank you.