Your educational background may be hampering your success as a Partner

You've been trained to be the perfect employee, but can you develop an "owner's" mindset to succeed as a Partner?

Private Equity recruits the best and the brightest out of top banks and universities. These are generally people who are highly diligent, intense, and competitive. When you hand them the ball and point in a direction, they run with it. These personalities are excellent for the first decade of PE. It’s a win-win setup for the Partners and apprentice/employees: The diligent associates/VPs enable the Partners to remain high level on deals, negotiate the key points, and move onto the next deal or fundraising meeting. The mandate to explore every detail, uncover every risk, and boil it up to the top is a perfectly matched task for the junior high achievers. It’s a continuation of what they did in high school, college and banking that made them so successful. And the feedback loop continues to provide external validation that what they are doing matters.

Getting promoted to Partner is the ultimate achievement of a decade+ of work, building on a prior decade of academic excellence. It’s a badge that carries immense peer prestige and is a sign you made it to the top. However, once the adrenaline wears off, it’s actually a strange new world – both emotionally and practically.

PRACTICALLY, you’re now an “Equity-owner” of the GP. You are part of the inner circle of owners who are responsible for sustaining and growing the enterprise. The analyst and associate years were about analytical excellence, and learning to ask the right questions in diligence. The VP years were about learning to frame all aspects of an investment and captain the workstreams, bubbling up key issues to the Partners. The direction was clear. But now, as a partner, you’re responsible for building a business. You got hired for your excellence in execution, not for your track record of entrepreneurial business building. Your firm(s) also offered you deep training in the analytics. Now, with no training, you’re told to build a business? How does one go about building a business?

EMOTIONALLY, you’ve been running at an end-goal for 20 years: get all As, win at sports, deliver perfect analyses, manage an efficient process. Examples were provided, goals were laid out, and all you had to do was grind to get the result! Through intense determination and learning from occasional errors, you achieved, and received feedback that you were excellent.

But now, you’re on your own. It’s time to go see if any CEOs want to take your capital and do business with you. And now you have to convince LPs that you’re the best steward of their capital relative to all the other options. While institutions pursued you from age 15-35/40, you’re now selling products: capital to companies/founders in need of capital, and capital stewardship to LPs needing to allocate dollars. There are no formal instructions. What’s your differentiated pitch to target company CEOs/sellers? How do you market to LPs?

OPTION A: Status Quo Path. Starting at the phone and wondering how to make it ring, or how to fill your inbox with companies seeking capital is a weird moment. Where did all those CIMs and proprietary deals come from that you jumped on as a VP? Many find this a seemingly impossible or low probability task, and turn their attention back to helping on deals, working on add-ons for portCo companies, jumping in to lead the sale of an existing company… anything where they can accomplish something and see a tangible result. Calling bankers to try to find deals, or cold calling a list of potentially interesting companies feels like an enormous waste of time, a fear which is confirmed as you call/email one CEO after the next with no response or a “no thank you, not right now” response. The result is staying stuck in a VP/MD purgatory. It’s fine for a year or so, but eventually the legacy partnership is going to wonder why you’re not sourcing and advocating for deals at the IC… so what’s the alternative?

OPTION B: Design a business plan. You’re no longer an employee. You’re an expert providing a service to clients.
You have two clients:
1. Companies in need of private capital. These are founders looking to (partially) monetize and/or grow, or previous owners looking to sell.

2. LPs – institutions, endowments, high net worth looking for someone to give them best-in-class exposure to private companies.
Your success is a function of delivering value to your two clients. By letting potential clients know you exists,
finding out what’s leading them to consider doing business with someone like you, you position yourself to provide the solution and earn a fee for providing a service.

I'll describe more in the next post what goes into designing and executing an effective business plan.