25-Oct-2022
How Executive Search Boosts Venture Capital Funds

Source : Source : https://huntscanlon.com/how-executive-search-boosts-venture-capital-funds/

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.” “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.”