How Executive Search Boosts Venture Capital Funds

September 27, 2022 – Among 400 active French investment funds, 14 percent are venture capital funds whose role is to finance emerging high-potential start-ups in innovative sectors. The significant increase in unallocated liquidity in recent years means a substantial choice of investors for start-ups looking to raise funds. Thus, VC funds are now focusing on non-financial aspects in order to stand out and attract promising start-ups, and are turning to executive search firms to improve returns throughout the life cycle of an investment.

In the field of VC, a candidate’s “soft skills” are not valued in the same way as they are in other investment professions. “Historically, VC funds have focused on personality, empathy, intuition, and entrepreneurship,” says Paris-based Capucine Elkaim, senior consultant for EMA Partners International, in a recent report. “They have also attached significantly more weight to the candidate’s knowledge of the fundraising industry or new technologies, rather than their technical financial skills.”

EMA Partners, a global partnership of executive search professionals, however, says that the increased competition within VC markets has resulted in the best recruiters identifying those candidates that have a broader, multidisciplinary skill-set. “Top-performing candidates have an ability to assume multiple roles and can intervene in several areas including strategic marketing, planning, finance, teams, products, growth models, operations, and business development,” said the study.

Finding quality candidates with these multiple skills can be challenging, simply because such people are rare. So it is that EMA Partners recommends that an executive search methodology be employed for assignments like this, to ensure all suitable candidates are identified and engaged.

Talent assessment of a target start-up before providing the capital

Before deciding to invest in a start-up, the VC fund must conduct due diligence in order to estimate the target company’s chances of success. While it is necessary to assess the soundness of the financial plan and the business strategy, misreading the target’s human capital component can be extremely dangerous.

“It is a well-known fact that 90 percent of start-ups end in failure,” said EMA Partners. “This is mostly due to poor leadership, poor communication, and the lack of a shared vision. Thus, assessing the leadership competencies of existing team members is key.”

The best executive search firms offer assessments (leadership advisory services) to highlight the strengths and weaknesses of the existing team and how well they align with each other. “This includes identifying any development needs and whether people have the necessary skills, competencies and motivations for the position they occupy in order to execute the growth strategy set for them,” said the report.

Recruitment for the “scale-up” of the start-up

EMA Partners cited Roxanne Varza, director of Station F and identified by Forbes as one of the 40 most influential French women, who believes that “the top 10 employees are really the most important.”

Related: Leadership Dilemma Unfolding at Private Equity Firms

“It’s therefore vital to undertake a more comprehensive recruitment process for the senior leadership team of a start-up through an executive search methodology,” said EMA Partners. “This will ensure that those appointed possess the appropriate leadership skills, experience and expertise as well as personal motives that are closely aligned to the job.”

Leadership Pipelines

Some funds appoint executive search firms to provide consulting services around their and their portfolio companies’ leadership pipeline. This involves the regular assessment of the leadership team, at all levels, aimed at identifying each individual’s career concepts and motives, decision styles, complexity motives and emotional behaviors. “This process allows top management to understand which managers are currently suitably positioned, ready for promotion to the next level, or are currently not well positioned, and needing development or redeployment.,” said the report.

Coaching leaders

“Finally, once the investment has been made, the ambition of accelerated development may make it necessary to involve a coach or mentor to support the leaders of the business,” said EMA Partners International. “Engaging an external professional coach will help develop any shortfall in leadership skills to enable growth, clear vision and strong organizational objectives. In addition, such coaching can help identify and overcome any conflict amongst the senior team that might impede the success of the business.”

PE Executives and Portfolio CEOs Identify Vital Attributes for Success in Turbulent Times
Building a strong executive team is one of the most important skills for a CEO, PE executives and portfolio CEOs told Summit Leadership Partners in a new survey. The difference is how the leaders choose to reach those goals. In a new Hunt Scanlon Media “Talent Talks” podcast, Summit Leadership’s CEO, Dan Hawkins, discusses the pros and cons of talent due diligence vs. organization assessments post-transaction. He also addresses how PE portfolios can accelerate the talent component of their value creation plan.

EMA Partners International founded in 1988, partners with multinational corporations, governments and not-for-profit organizations across a variety of industry sectors and functional areas. It has more than 40 offices on six continents, and the firm continues to expand globally.

Ms. Elkaim joined EMA Partners France in 2016. She was recruited to develop the banking, finance, and private equity practice but also intervenes as a consultant for other sectors including software, luxury industry, telecommunication, FMCG, and more. Previously, she spent 12 years in the investment banking industry as a financial engineer as well as an originator within different departments such as equity derivatives, commodities, energy, and structured financing where she covered various geographical areas including Spain, Russia, Middle East, Eastern Europe, Turkey, and South Africa.

Related: The Quest for Venture Talent

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media

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