In private equity (PE) and venture capital (VC) backed companies, executive recruitment is complex. Traditionally, the executive search process is focused on finding candidates to align with the company’s goals and visions. With PE or VC-backed businesses, investors can significantly influence the hiring process.
Let’s delve into some of the intricacies of the dynamic between private equity and venture capital investors and the companies they support, and how investors can influence hiring decisions.
Investor influence
Investors put a lot of money into the companies they back. These investments often come with conditions that investors have oversight and control over the business to safeguard their investment and maximise returns. So, investors have significant influence when it comes to crucial executive hires.
Investors need to believe that their investment is being spent wisely. So they’ll steer hiring companies towards candidates they know or approve of, even when they may not be the best fit for the company’s vision.
Decision making dynamics
This means that the hiring process for C-suite executives in an investor-backed company can be complex. While a candidate’s qualifications, experience and fit with the company culture are important, they can be overshadowed by the preferences of investors acting through the board of directors or other governance structures.
Even the most highly regarded candidates with the best track records can be at a disadvantage to those favoured by investors.
Dealing with investor influence
If you’re looking for an executive role in a PE or VC-backed firm, you’ll need to deal with this influence.
Firstly you should build relationships with the employing company’s leadership and key stakeholders at the investing firm. This can provide valuable opportunities and insights.
Demonstrating alignment with the strategic objectives and priorities of the investors can boost your chances too. This means demonstrating a deep understanding of market dynamics, growth potential and avenues for value creation that resonate with the investor’s vision for the company.
Conclusion
The influence wielded by private equity and venture capital investors is undeniable. A delicate balance must be struck between company objectives and investor priorities, particularly when fulfilling key leadership positions. By recognising and understanding this dynamic, both PE and VC-backed companies and executives seeking roles in those businesses can better position themselves for success.
If you’re interested in more insights into hiring in executive search, drop an email to Netan Rosenthal. You can also find Netan on LinkedIn.
faq's
Executives need a deep understanding of the investor, including their priorities and objectives, while considering the company’s long-term vision and growth trajectory. Good communication and collaboration between executives, directors and investors is vital to find the right balance.
Yes. Building strong relationships based on trust and mutual understanding lets executives communicate their perspectives and advocate for candidates who align with investor expectations and company objectives. Open dialogue and collaboration are key.
- Thorough research to understand investors’ specific investment thesis and strategic focus. This includes identifying things like market opportunities, growth potential and value-creation strategies.
- Demonstrate their vision and strategic approach in line with investor priorities, showing clearly how their leadership can contribute to these.
- Use their industry expertise and track record to prove how they have driven value creation and delivered the kind of results the investor expects.
