Shortage of Talent in Private Equity

Shortage of Talent in Private Equity

 

To put it mildly, 2020 and 2021 have been unconventional years, and their major impact on the recruitment of PE professionals is consequently no surprise.

The first observation is that the post-pandemic market is flooded with assets and that the valuation of some companies has never been so high.

The investment and transaction volumes are high, and new, less conventional players are expanding the Limited Partner (LP) pack.

While the size of funds tends to increase, the number of investors in the syndication tends to decrease, which can lead to even more complexity.

Also, a significant portion of investments has been driven by technology in a variety of fields such as software, biotech, IoT and deep tech. PE and VC firms are increasingly looking for subject matter experts to join their ranks.

From an optimistic point of view, more and more companies are asking us for diversity, equity and inclusion. Although it is a laudable—and necessary—goal, these criteria make the search in an already limited pool even more difficult.

So how do PE or VC firms manage to support their recruitment efforts?

For associate level roles, firms have traditionally hired investment banking analysts from bulge-bracket and elite banks. They usually won’t need assistance from an executive search firm to do so.

When it comes to more senior roles such as Director, Principal, Vice President or General Partner (GP), PE or VC firms will be tempted to onboard professionals working in other firms.

Can they do it themselves? If they have the time, they definitely can, as the PE/VC field is a small world. Is it an easy and linear journey? Hardly, for the very same reason.

As an example, your competitor could also be your Partner in a syndicate, and it can make the relationship more complex.

This is where an executive search firm can bring you value, positioning itself as a “buffer.”

In addition, retaining the services of a search firm can be beneficial in many ways, such as:

  • Empowering the branding and improving the attractiveness of the role;
  • Expanding the access to passive candidates thanks to a living database. We are in the field: Two weeks ago, I had lunch with a PE professional, discussing the strategy of SFO (Single Family Office) or MFO (Multi-Family Offices) in Tech;
  • Finally, providing trusted advisory services.

 

This obvious shortage of talent is not exclusive to PE/VC firms: it also affects their portfolios. For PE-backed businesses, CEOs and CFOs are constantly in high demand, especially in this post-pandemic period. In this frantic race, the delay in finding them is challenging, and there is one principle that PE/VC and executive search share: “time is of the essence.’’

 

This article was first published on CFR Global Executive Search

 

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