In 2022, we saw a significant increase in the number of deals by private equity and venture capital firms within the life sciences, medical, and healthcare sectors. This all points toward positive growth, but the biggest challenge PE and VC firms face is seeing a quick return on investment (ROI). In my experience working with private equity and venture capital firms, a quick ROI comes down to having the right Chief Executive Officer in place. I have worked with hundreds of PE and VC firms and their portfolio companies to develop and build out leadership teams that drive growth and deliver results. When finding the best CEO, sometimes PE and VC firms over-index on previous experience instead of focusing on more essential attributes. While past experience is an important component of a candidate’s background, there are many more factors that determine performance and fit, such as:
Exercising a change-oriented and agile approach to leadership.
Engaging and motivating high-performers to deliver results.
Implementing organizational structures that are impactful and stable, but not overly siloed.
A proven track record of driving growth in revenue, operations, and profitability.
Post-Great Resignation, PE and VC firms need to be more strategic and competitive to attract talent. As the candidate and job market begins to cool, candidates are becoming more risk-averse, which means persuading them to make a leap to a start-up or portfolio company will be more difficult. Last year, around 75% of the searches we worked on in Life Sciences were for privately held companies. Even though every search is different, there are a few similarities that these CEOs all have in common. Let’s take a closer look at the specific leadership qualities that made them successful.
Grit, Risk, + Disruption
To successfully achieve results and drive the performance of portfolio companies, leaders will need to have both grit and resilience. Oftentimes, before having an effective leader in place, portfolio companies’ goals and visions of success can remain relatively diverse and inconsistent across departments and teams. Great leaders will reframe what it means to “win” for the entire organization and will make several key moves early and intentionally. This type of leader is able to easily inspire those around them to get things done. A leader with grit will empower teams to be curious, placing disruption, persistence, and reward at the very core of the company culture. These types of CEOs deliver results quickly, by unifying stakeholders around these goals and relentlessly strengthening teamwork, collaboration, and trust.
Balance of Emotional Quotient (EQ) and Intelligence Quotient (IQ)
One of the most challenging traits to find in any CEO or leader is an innate balance between EQ and IQ. These leaders are open to coaching and exhibit more empathy toward team members, while maintaining the ability to drive businesses forward with clarity. They equally value EQ and IQ, and often intentionally align their personal and professional values to influence their career trajectory. Their intense passion for the companies’ missions, products, or teams allows CEOs to invest more deeply and personally, delivering more impactful and meaningful results. This translates to CEOs strategically appointing and surrounding themselves with talent that share these same values. Ultimately, the delicate balance of EQ and IQ at the leadership level enables the CEO to simultaneously instill both agility and stability across an organization while authentically connecting their purpose to their leadership position.
“Their intense passion for the companies’ missions, products, or teams allows CEOs to invest more deeply and personally, delivering more impactful and meaningful results.”
Proactively Support the Board by Committing Them to a Bigger Picture
To successfully lead within a privately-backed portfolio company, a CEO must own the strategy around growth for the short and long term. This includes supporting and leading the board of directors with a forward-looking perspective. Instead of setting agenda items with immediate actionable items, the best CEOs will be able to tap into the board of directors as an advisory and visionary outlet. By developing personal relationships with board directors beyond the boardroom, CEOs can better leverage their expertise and seek support through the robust portfolio offered by each individual director. Great CEOs will enable the chairman or board president to effectively lead and run board meetings, task forces, and special projects in order to help the board best support the business.
Confidence + Influence
In order to create sustainable growth and stability, confidence and influence are critical. This confidence is shown in the way CEOs lead, communicate, manage others, or interact with the public and external vendors. A leader who is naturally confident will influence and persuade the team around them organically, with little effort. A strong and confident CEO will gain stakeholder buy-in much quicker, which will lead to more efficient growth and transformation. They will achieve results much faster without the use of heavy-handed communication or negotiation tactics. This is useful not only at the board and leadership level but also when dealing with the public. CEOs at start-ups often face ridicule and skepticism from the public and will need to strongly defend their position. This demonstrates consistency and resiliency to the public while fortifying their role as a confident and intuitive leader to internal teams. Persuading a CEO or senior executive to make the leap to a portfolio company is a very challenging mandate. Here are two recommendations I typically make for PE and VC Firms to attract these unicorn leaders.
How to Persuade a CEO to Make the Leap
Persuading a CEO or senior executive to make the leap to a portfolio company is a very challenging mandate. Here are two recommendations I typically make for PE and VC Firms to attract these unicorn leaders.
1. Focus Your Messaging and Employee Value Proposition (EVP) on Purpose and Passion
Considering a CEO role for a portfolio company is a conscious and intentional decision for a candidate. It usually comes at a time in their career when they are looking to make a dramatic shift and a much larger impact on the industry or world around them. Instead of initially focusing on the perks, benefits, or compensation associated with the position, drive your recruitment marketing efforts and outreach with messaging that appeals to their emotional intelligence. Articulate your purpose and mission to gain emotional buy-in first. A candidate can more readily visualize themselves leading an organization they believe brings value and aligns closely with their sense of purpose.
2. The Best Candidate May Not Always be the Most Qualified
One of the biggest traps that PE and VC firms fall for is placing too much emphasis on the career history or pedigree of a new CEO. When I hear from some PE and VC firms that they “only want to see candidates that have worked at a Fortune 50,” I often have to remind them that career history is only one aspect that makes up experience. This demand also limits the talent pool immensely and isolates plenty of qualified candidates. It’s similar to saying “we only want to see candidates that have blue eyes.” It’s important to always remember that the best candidate will be the best cultural fit for the role and the organization. Cultural fit is one of those things you can’t force, train, or develop and usually comes down to asking yourself the following, “Do you enjoy how this person thinks and views the world, and would you want to be more closely aligned and connected to them and their ideas?”
Whether you are actively recruiting for a start-up or portfolio company or just assessing how your own skills and traits match up with those mentioned above, I would love to hear from you. Remember that a strong relationship with a trusted search advisor is a must for any senior leader.
Jake Vander Zanden
Partner
(949) 541-5000
jake@mbexec.com
Jake Vander Zanden serves as a Partner and leader of McDermott + Bull’s Technology + Life Sciences Practice.
Jake spent over 25 years as a turnaround and growth leader completing business transformations as a senior executive at companies like Allergan, Medtronic, and more. He has lived and worked throughout Asia, Africa, and Europe, and managed businesses in all the major regions of the world. Jake’s success has come from his ability to quickly and continuously develop high performing teams and guide their achievement of company changing initiatives, regardless of country, language, culture, or product group.