Archive for the ‘VC executive recruiting’ Category

A Challenging CEO Can be a Positive Leading Indicator for Success: Comparing Behavioral Traits of Private Venture Technology CEOs to CEOs Across all Industries

Tuesday, October 14th, 2014

direct-manEverything We’ve Heard and Seen Suggests that CEOs of Fast Growing Technology Companies are Different

We’ve all heard private venture technology boards and executive teams grouse about CEOs with comments like, “He’s too maniacally focused.”  Or, “It’s hard to sway her once she’s put a stake in the ground.”

Think about Steve Jobs (and it’s easy to forget that for a few halcyon years beginning in 1976 Jobs was the co-founding CEO of a fast-growing, private venture technology company bringing disruptive technology to market).   It was no secret that he was a challenge with his “join or get out of the way” style. (1)  Mike Elgan, respected journalist, blogger, columnist, and podcaster, attributed Jobs’ success partly to his “mastery of the art of being a prick.”(2) One can say that Jobs took things to the extreme, but no one can argue that he wasn’t successful.

Brad Stone, author of The Everything Store: Jeff Bezos and the Age of Amazon, says that Jeff Bezos (another garage entrepreneur who founded Amazon in 1995) thrives on confrontation and can also take things to the extreme with comments like, “Are you lazy or just incompetent?”(3) Bezos, driven by his total commitment to improving both customer service and Amazon’s performance, says that one of the things “about entrepreneurs is that they are inherently stubborn individuals.  They’re the natural leaders who like to take charge and have things done their way.”(4)

Jobs’ and Bezos’ behavioral traits are almost diametrically opposed to those esteemed in CEOs across other industries leading larger, older companies.  In a study of the leadership of a particular kind of successful Fortune 500 company (those that transitioned over time from being “good” to “great”), humility was identified as an important CEO behavioral trait.   Psychology Today goes on to say that “while self-centered arrogance and disregard for others may lead to some short-term success, it is quite plausible to think that humility in one’s…approach to leadership is crucial for long-term success as a leader….”(5)

Clearly, founding and leading a fast growing technology company to short term success (i.e., a great exit for its stakeholders) requires a different set of behavioral traits in its CEO than those possessed by a CEO of a larger Fortune 500 company.   While those of us in private venture technology may find CEOs irksome, if not downright maddening, their behavioral traits, like those of Jobs and Bezos, may actually be requisites to founding and quickly building successful technology companies.

ProfileXT Validates that CEOs of Private Venture Technology Companies are Unique

While we in private venture have either observed or heard how difficult it can be to work with CEOs.  Profiles International’s ProfileXT has confirmed and objectively measured the behavioral traits that set private venture CEOs apart.   (See Summative’s White Paper, Improving the Candidate Evaluation & Selection Process for more details.)  The seven behavioral traits assessed by the ProfileXT are below. Underscored in yellow are those that distinguish venture-backed CEOs, by the greatest margins, from CEOs across all industries.

CEO comparison chart

 

 

 

 

 

 

 

 

 

 

 

Profiles International defines and interprets these behavioral traits and the variances observed between private venture CEOs and CEOs across all industries, in part, as follows:

  • Manageability – Lower scores reflect a working style that emphasizes individualized thinking and a willingness to question inefficient practices. This kind of person is not usually willing to blindly do the accepted thing.
  • Accommodating – The high Accommodating person holds group harmony and compromise as important guidelines for behavior.  On the other hand, the low Accommodating individual is willing to express disagreement and defend priorities without compromise when necessary.
  • Objective Judgment – High scores describe an individual who will trust observable facts in his or her problem-solving processes.  Low Objective Judgment describes a person who is willing to follow a hunch or listen to their intuition before acting.
  • Numerical Ability – High numerical ability is often associated with being confident when calculating numerical data. Often, decisions may be made quickly based on such data without having to refer to calculation tools since the work is often done mentally.  Alternatively, low scorers will often rely on calculators or other aids and may not be comfortable with positions that routinely use numerical calculations.
  • Attitude – Lower scorers are willing to question the intentions of others and the feasibility of outcomes. They tend to avoid appearing naïve.  High scorers tend to have a positive and accepting outlook regarding people and outcomes.
  • Decisiveness – A person with a high score will make decisions with the information currently available so processes do not become to mired in deliberation. This also reflects their willingness to risk failure or misjudgment for the sake of timelines. Someone with a low Decisiveness score will require as much information as possible before making a decision.
  • Independence – A person with high Independence prefers to take responsibility for accomplishing goals autonomously. Someone with low Independence prefers to turn to others to guide their performance.

It is no surprise that private venture CEOs display a more independent streak when compared to their peers in other industries.  It is in their nature to speak their minds and take calculated risks.  Looking for low scores in Manageability, Attitude, and Accommodating may seem counter-intuitive, but Profiles International’s ProfileXT now empirically validates that low scores in these behavioral traits are highly desirable for private venture CEOs.

Peggy Thompson, Summative’s Managing Partner and Founder, knows that CEOs with low Accommodating scores are better able to focus on priorities vital to success when making decisions. “CEOs do not have the luxury of accommodating and validating every idea and suggestion. They only have a short window to get the right product or service to the right market.  If they take the time to accommodate and explore everyone’s ideas and suggestions, they could miss that window.”

Instead of focusing on maintaining a hopeful outlook and creating a harmonic environment, a good CEO has to quickly question and accurately assess everything in their fast moving world.  A high Attitude CEO will, for example, trust the pipeline reports of a newly hired Vice Presidents of Sales before that trust is merited, where a low Attitude CEO has a healthy amount of vigilant skepticism that is imperative in order to ask the tough questions about the pipeline.  Otherwise they risk forecasting numbers that they cannot deliver.

Summative has seen the benefits of high Objective Judgment scores in private venture CEOs since they have to quickly make decisions using, in part, intuition to position a company correctly in the market place, bet on the right go-to-market strategies, grow revenues, and outperform competitors without the benefit of a lot of time or historical data.  When working with a company that is defining or entering new markets and seeking to outperform competitors, a low scorer on Objective Judgment will struggle because (s)he doesn’t have the ability to include observable facts and past history in the decision making process.

Peggy has found that Numerical Ability is a reflection of intelligence.   “CEOs who score high on Numerical Ability are smart leaders with an aptitude for working the numbers.   They are quick on their feet and can quickly analyze numbers.   This is essential in an environment that often lacks a deep accounting and finance bench.”

The Unique Behavioral Traits of Private Venture CEOs Can Make Great Things Happen

ProfileXT can be used in the recruiting process to validate that CEO candidates possess the unique behavioral traits required to grow successful private venture technology companies – even if those behavioral traits may, at times, present difficulties for boards and executive teams.   Although Peggy’s heard countless stories about how difficult private venture CEOs can be to work with, she has personally seen the benefits these CEOs deliver to fast-growing technology companies.

“In my first few years recruiting for private venture technology companies, some of the stories I heard about early-stage CEOs made me cringe.  Now, I just smile and reassure stakeholders that CEOs’ ‘unique’ behavioral traits – which are very different than those of big-company CEOs – are likely what will drive the success of the company.  When those traits are channeled with a high degree of intellectual and emotional integrity to the benefit of the company, great things can happen.”

(1)     Austin, Ben, “The Story of Steve Jobs: An Inspiration or a Cautionary Tale?” WIRED, July 23, 2012, http://www.wired.com/2012/07/ff_stevejobs/all/ .

(2)     Elgan, Mike, “In Defense of Steve Jobs,” Cult of Mac, October 29, 2011, http://www.cultofmac.com/126863/in-defense-of-steve-jobs/.

(3)     Anderson, George, “Is Jeff Bezos a Horrible Boss And Is That Good?” Forbes, October 22, 2013, http://www.forbes.com/sites/retailwire/2013/10/22/is-jeff-bezos-a-horrible-boss-and-is-that-good/.

(4)     Bulygo, Zach, “12 Business Lessons You Can Learn from Amazon Founder and CEO Jeff Bezos,” KISSmetrics, https://blog.kissmetrics.com/lessons-from-jeff-bezos/.

(5)     Austin, Michael, “Ethics for Everyone,” Psychology Today, July 2, 2013, http://www.psychologytoday.com/blog/ethics-everyone/201307/surprising-trait-successful-business-leadership.

 

Update: Executive Recruiting Strategies In the Midst of Private Venture’s Growing “Perfect Storm”

Tuesday, July 15th, 2014

In last year’s “Rules of the Game Changing in Search for Private Venture Executive Talent,” Summative concluded that that private venture is in the midst of a “perfect storm” when it comes to recruiting top talent to lead venture-backed technology companies.  Over the past year, the storm has grown in size and strength, creating an even more challenging executive recruiting environment.  Summative’s recent observations and our analysis of newly published industry data (see For Our Time-Constrained Clients:  Highlights and Analysis of Venture Capital Trends 2014) provide insight into the underlying causes.

Funding events continue to far exceed exits across all industries, including software.

Number of Deals – All Industries

2014 updated graph 2

Number of Deals – Software

2014 updated graph 1

IPOs were up in 2013 (81 venture-backed IPOs).   But, the big increase in the time to exit via IPO suggests that many were mature companies that had been waiting their turn at the public market for months, if not years. 

While the average timeline to exit via acquisition has improved for venture-backed firms, 2013 M&A activity was down 20% from 2013.

Timeline to Exit
2014 updated graph 3

(NOTE:  Discrepancies between the data in the tables found in Summative’s Rules of the Game Changing for Private Venture Executive Search and the above tables are the result of revisions made to historical numbers by the NVCA.)

The trend of more private-venture technology companies being funded than exiting (injecting fewer “easy decision” executive candidates into the supply pool than required to meet demand) and longer timelines to exit (keeping top operating executives locked in place) continues.  “Easy decision” candidates rolling out of recent successful exits, if they are indeed willing to step back into another private venture company at all, are in high demand, pursued by the hottest, most competitive companies in the industry.

New in 2013 was the capital that flowed back to investors thanks to the improved IPO market.   This resulted in an increase in seed and early stage investments.   In 2013, the number of early stages deals funded was 2,031, up from 1,738 in 2012 and 800 (the 10-year low) in 2003.   According to the NVCA, “In 2013, 56 percent of the financing rounds went to seed and early stage companies, compared with a more typical range of 33 percent, reflecting increased investor confidence in growth trajectory of emerging companies.”

Some speculate that this increase in seed and early stage investments will lead to a Series B crunch:  too many pre-B companies chasing after too few Series B dollars.   While others in the industry believe this may be overblown (see WilmerHale 2014 VC Report), it is safe to say that recruiting for pre-B companies will be more challenging than ever when astute, non-founding executives recognize the increased risk of raising a B-round.

Based on these updates, here are just a few of Summative’s recommendations (with more to follow in subsequent posts) to maximize recruiting results in 2014 and beyond.

The Pursuit of “Easy Decision” Candidates

“Easy decision” candidates are being inundated by calls from recruiters and pursued by the industry’s top “easy decision” companies.   “Easy decision” companies are those that:

    • anticipate an IPO in the next three or so years
    • have delivered disruptive, differentiated technology to a hot market
    • are backed by proven, tier one investors
    • are led by a CEO with at least one previous great exit

Recruiting an “easy decision” candidate is a highly competitive war – even if the hiring company is an “easy decision” company.  Prepare for battle by targeting “easy decision” candidates early and aggressively with a high-touch, personalized campaign to engage and interest them.   While it’s important for “easy decision” candidates to know that the hiring Board or CEO is highly interested in pursuing them as a candidate, it’s also important that they understand the search process will engage a number of top candidates – like them – from across the country.

Continue to Widen the Top of the Candidate Funnel

As discussed in Rules of the Game Changing for Private Venture Executive Search and Improving the Candidate Evaluation & Selection Process, the top of the candidate funnel must continue to be widened to include up-and-coming talent and candidates with profiles not typically contemplated in recent years (e.g., executives on the forward trajectory of their career with no prior early stage experience).   Leverage a knowledgeable private venture recruiter with the intuition honed by years of experience to quickly identify the real gems among the larger volume of candidates entering the funnel.  Accurately assess non-“easy decision” candidates by using smart interviewing techniques, completing multiple back-door references, and having finalist candidates take Profiles International’s ProfileXT, an online assessment tool that reveals how a candidate’s aptitude, behavioral styles, and interests compare to some of the top performing executives in private venture.

Customize the Recruiting Process for Each Stage, Each Profile

Recruiting is different at every stage of a company’s life cycle.   The candidate profile for each functional area of a company is different at every stage of a company’s life cycle.  Therefore, there is no such thing as a “one recruiting methodology fits all” in private venture.   Customize the recruiting process for each search in relation to the stage of the company and the profile of the candidate.  For example, candidate objections and their due diligence on the hiring organization vary by the stage of company.   With the anticipated Series B crunch, if a hiring Board must go outside of its own network to recruit an executive to a pre-B company, be prepared to diffuse the question, “How will the company raise its Series B?” early in the process.

More to follow in subsequent posts…

 

 

For Our Time-Constrained Clients: Highlights and Analysis of Venture Capital Trends 2014

Tuesday, May 20th, 2014

We at Summative know our clients are incredibly busy delivering products, building companies, and hiring executives.   We also understand that the state of the tech industry and private venture impacts not only our clients’ ability to raise their next crucial round of funding, but also to attract their next great executive leader.   So, here, for our time-constrained clients, are highlights and analysis of the 2014 NVCA (National Venture Capital Association) Yearbook.  Additional data sources were incorporated and are footnoted below.   Percentage calculations year over year and quarter over quarter add further insight into the numbers to show the industry’s movements and statistical trends.

Short and Sweet

2013 High Points:

  1. Increase in IPO activity by 65%. (a)
  2. Record high set for percentage of seed- and early-stage deals.
  3. Slight upturn in investments – overall held steady at healthy levels.
  4. Software investment continued to increase with 37.3% of the market. (b)

2013 Low Points:

  1. M&A deal activity decreased by 20%. (c)
  2. Commitments decreased by 15.3% from 2012. (d)
  3. Ventured Capital under management decreased slightly at 3.6%. (e)

2014 1Q Highlights:

  1. M&A deal activity was at 105, up 22% from 1Q13 with “the highest average deal size since 1Q 2004” of those reported. (f)
  2. “Thirty-six venture-backed IPOs raised $3.3 billion during the first quarter of 2014, a 50 percent increase, by number of new listings, compared to the previous quarter.” (f)
  3. “The level of dollar commitments during the first quarter of 2014 [of $8.9B] more than doubled the comparable period in 2013 – strongest since 4Q 2007.” (g)
  4. “Venture Capital dollars invested in Q1 2014 reaches the highest quarterly total since Q2 2001 (according to MoneyTree).” (h)
  5. “Dollars invested in software companies reaches $4B for the first time since Q4 2000.” (h)
  6. “Seed and early stage financing numbers are down from the previous quarter, but expansion stage dollars invested are up 34 percent. This was to be expected when you consider the domination by seed and early stage deals in 2012 and 2013” (Bobby Franklin, President and CEO of NVCA). (h)

 

Details: The VC Outcome for 2013 and 1Q 2014

  • Fundraising continued to be challenging in 2013, but 1Q 2014 results paint a brighter picture.
    • In 2013, capital commitments of $16.9B showed a decrease of 15.3% from the previous year. This was due from the following:
      • “Lack of recent distributions caused by the tight exit markets
      • Lackluster returns by many venture funds over the past decade compared with the prior decade
      • A challenge for the largest alternative asset investors to place money in many of the smaller funds in this asset class because of scale”. (i)
    • “The amount of new commitments each year by venture capital funds continued to be less than the amount they invested in companies.” (i)
    • Massachusetts had the largest amount committed at $5,474.8MM in 24 funds with California trailing close behind at $5,315.9MM in 58 funds. (j)
    • “The level of dollar commitments during the first quarter of 2014 [of $8.9B] more than doubled the comparable period in 2013 and marks the strongest quarter for venture capital fundraising, by dollars, since the fourth quarter of 2007 when $10.4 billion was raised for venture capital investments.” (g)
  • Investments held steady with a slight upturn.
    • “In 2013, $29.5 billion was invested in 3,382 companies through 4,041 deals.
    • The number of deals is 4% higher than 2012 counts, but is essentially the same as 2011.”(b)
    • The software sector held the lead in 2013
      • Taking 37.3% of the market in total dollars (b)
      • A 28.5% increase from the 2012 investments in software. (k)
    • “2013 had the highest percentage of seed- and early- stage deals ever at 55.7% of all deals. This surpasses the prior record of 52.6% in 2012.
      • This certainly would challenge the suggestion that the industry’s attention is single-focused on later-stage companies.
      • With the rule of thumb that a healthy venture capital industry invests in 1,000-1,300 new companies each year, the 1,334 first fundings in 2013 is very much in that range. Not surprisingly, 83% of those first round invest­ments were made at the seed and early stage”. (b)
      • In 1Q 2014 – although there was a decrease in early stage funding (down 64% in dollars from the previous quarter), there was an increase in expansion stage funding (34% in dollars) and Later-stage funding (15% in dollars) indicating the movement of these companies to the next stage of funding. (h)
    • California led the way in dollars invested at $14.8B with Massachusetts as a far second with $3.1B invested. (l)
    • “The number and reach of corporate venture capital groups increased in 2013, along with the visibility of this group. These groups provided an estimated 10.5% of the venture capital invested by all venture groups. They were involved in 16.9% of the deals – the highest level in five years.” (b)
    • Growth equity is a growing, relatively new (since 2000) asset class that requires further analysis.
      • “In 2013, NVCA identified 342 growth equity deals in the United States. This compares with 406 in 2012, but is very much in line with the past several years.
      • A disclosed $12.3 billion in equity investment was reported for 2013. This does not count the approximately 105 deals for which no dollar equity amounts were disclosed.” (m)
    • “Quarterly venture capital (VC) investment activity in Q1 2014 rose 12 percent in terms of dollars but fell 14 percent in the number of deals, compared to the fourth quarter of 2013.” (h)
    • “Dollars invested in the Software industry experienced another significant increase in Q1 2014, capturing $4.0 billion and further distancing it by more than three times from the second largest industry, Biotechnology.” (h)
  • The number of IPOs increased significantly (65%) year over year.
    • In 2012 if you take out Facebook alone at $16B, it leaves you $5.5B raised by 48 IPOs.  In contrast, in 2013, there was $11.1B raised by 81 IPOs. (i)
    • Part of this increase is from 2012 legislative success with the passing of the JOBS Act and the start of FDA reform. (n)
  • M&A deals decreased (20%), but the average price of exits are holding with a slight increase (3%).
    • In light of the decrease of deals – “total proceeds fell 27%”.  In 2013 – only 25% of the companies reported the price of M&A deals.  In the future, it is expected that only the transaction value of the largest M&A deals will most likely be publicized.  (n)
    • “Observers have wondered why, given the huge amounts of cash on the balance sheets of technology and Biotechnology giants, more acquisitions are not occur­ring. We did see a flurry of acquisitions in early 2014, perhaps signaling an increase in that kind of activity.”  (n)
    • In the first quarter of 2014, there were 105 M&A deals (f), compared to the first quarter of 2013 with just 8 deals. (p)
  • In 2013, Venture capital under management decreased to $192.9B (i) which was a decrease of 3.65% from 2012.
    • This is a continued decrease from the high of 2006 at $288.9B, signifying a 33% decrease from the height. (e)
    • “The peak capital under management that year was a statistical anomaly caused when funds raised at the height of the 2000 tech bubble were joined by new capital raised post bubble.” (i)
  • The industry is consolidating shown in part by the downward trend in firms and capital managed. In 2013, the number of principals per firm was down to 6.7 principals in 874 firms. (i) Although this decrease is slight year over year, it is a significant change from the high of 2007 (8.7 principals) (r) with over 1000 firms (q).
    • In general, principals should see an increase in capital managed. (i)
    • “This is because the bulk of the capital being commit­ted today is being raised by larger, specialty, and boutique firms.  Contrary to some popular misconceptions, only 43 firms managed more than $1 billion. By comparison, 277 firms managed less than $25 million.” (I)

____________________________________________________

(a)  2014 NVCA Yearbook, page 72 – figure 4.02.

(b)  2014 NVCA Yearbook, page 31.

(c)  2014 NVCA Yearbook, page 77 – figure 4.07.

(d)  2014 NVCA Yearbook, page 28 – figure 2.02.

(e)  2014 NVCA Yearbook, page 19 – figure 1.02.

(f)  1Q14 Exits Release NVCA, page 1-2.

(g)  Q114 Fundraising Release NVCA, page 1.

(h)  14Q1M Press Release NVCA, page 1.

(i)  2014 NVCA Yearbook, page 9.

(j)  2014 NVCA Yearbook, page 30.

(k)  2014 NVCA Yearbook, page 45.

(l)  2014 NVCA Yearbook, page 32.

(m)  2014 NVAC Yearbook, page 85.

(n)  2014 NVCA Yearbook, page 10.

(o)  Q113 Fundraising Release NVCA, page 1.

(p)  Venture Backed Exits 1Q2013, page 1.

(q)  2014 NVCA Yearbook, page 20 – figure 1.04.

(r)  2014 NVCA Yearbook, page 21 – figure 1.06.

 

 

Growth Hacker Marketing, John Price, Vast, and Trilogy Knew Then What We Need Now

Friday, December 6th, 2013

I had a great meeting with John Price, CEO, Vast.com Monday.   John retained me way back in 1996 to recruit for Trilogy Software, the magazine cover darling of Texas high tech at the time.  It was my first shot at recruiting for an early stage, fast growing technology company.  As detailed in this WSJ article, John and Trilogy understood the value of great, smart talent.   They also understood what it took to attract great talent in a highly competitive market. 

As detailed in our white paper, “Rules of the Game Changing in Search for Private Venture Executive Talent,” we in private venture are once again in the same position Trilogy found itself in the late 1990’s.   There is a greater demand for smart, proven talent than there are proven, “easy decision” candidates available.   While the dynamics of this lack of supply today differ from the 1990’s, the implications are the same.   We must widen the top of the candidate funnel and do a better job of attracting, assessing, and selecting high potential executive talent.

During Monday’s meeting, John also introduced me to a great eBook/audio book, Growth Hacker Marketing:  A Primer on the Future of PR, Marketing, and Advertising, by Ryan Holiday.   It’s an easy, must read or listen for every private venture executive and investor.  Ryan Holiday expands on the earlier notion of guerilla marketing by emphasizing the value of getting the product right from the beginning, and the important role great marketers, with a strong sense of product, play in that process.  Ryan uses many b2c start-up examples in Growth Hacker Marketing, but with creativity and imagination the principles can be applied to b2b companies – perhaps even b2b companies going to market through an indirect channel to IT decision makers. 

I welcome your thoughts.

Thanks, John.  And, congrats on your incredible success to date and to come with Vast things! 

 

 Growth Hacker Marketing

Recruiting the Right Executive is More Important than the Product, Market

Sunday, October 13th, 2013

Some Stool Legs Carry More Weight

Carpenters build three-legged stools knowing that each leg is essential to the stool’s success.  If each of the three legs isn’t equally strong, the stool will crumble under load-bearing weight.

Most investors and CEOs believe that the success of a private-venture technology company is also built on three equal, load-bearing legs:  1) viable, clearly differentiated products or services; 2) a large, well-timed market; and 3) strong, smart executive leadership.   They believe that if all three legs aren’t equally strong, the company could fail under the weight of unanticipated challenges (e.g., the product doesn’t scale; the targeted market’s adoption rate is slower than planned; an essential VP Marketing leaves the company to step into his first CEO role).  

Summative’s experience and observations suggest otherwise.  We believe it’s the executive leadership that is the most important factor to the success of a private-venture technology company.  

Over the years, we’ve seen clients launch complex technologies that initially failed.   We’ve seen others work to define new markets that never materialized.  But, instead of crashing under the weight of these failures, these clients went on to become hugely successful.

Their secret?   Great executive leadership.

One Case in Point:  OpenPages’ Executive Leadership Overcame Disintegration of Market

When Summative recruited Michael J. Duffy to lead OpenPages in 2000, the peak of the dot-com bubble, the company was in the then hot content management space.   Within months of Mike joining the company, the bubble burst and most of OpenPages’ targeted market evaporated.  At that point, many companies would have failed.   Many companies did fail. 

Not OpenPages.

Instead, Mike worked closely with the Board and his executive team to identify a new market opportunity for OpenPages’ existing IP.   In 2002, they re-launched OpenPages in the nascent Sarbanes-Oxley compliance market and then went on to become the leading vendor in the much broader GRC (governance, risk, and compliance) market. 

Thanks to his leadership, Mike, playing the role of strong war-time general, successfully led the company from a disintegrated market to a much bigger market that they were able to define and dominate.  This culminated in a great exit via acquisition by IBM in 2010.   

Products can fail.   Markets can evaporate.   But, exceptional CEOs like Mike can compensate for market and technology weaknesses by bearing a greater weight of the company’s ultimate success. 

Rules of the Game Changing for Private Venture Executive Search – Part 5 of 5

Monday, August 5th, 2013

Making Sure You Conduct a Competitive Search

Competing successfully for executive talent has never been more challenging for venture-backed technology firms. Understanding the forces that drive how executive recruiting has changed in the past several years is a first step.  Adopting the guidelines for executive recruitment described in this whitepaper will help investors, clients and candidates set their expectations for how to work more effectively with their executive search firms.

At Summative Executive Search we have a proven methodology for helping our clients open the funnel much wider to attract top candidates. We manage the search process transparently, effectively and efficiently for everyone involved while leveraging new techniques and technologies to quickly and accurately assess candidates.  Most important, we make sure that each resulting match delivers an optimum fit for both client and candidate, satisfying everyone’s wants and needs.  By focusing exclusively on searches for venture-backed technology companies, Summative offers investors, clients and candidates a unique resource for meeting the challenges of recruiting in today’s environment and achieving success.

This concludes our series.  We welcome your thoughts and feedback.

Rules of the Game Changing for Private Venture Executive Search – Part 4 of 5

Monday, July 29th, 2013

Quickly Assess Candidates at Each Stage of the Search

Once you’ve opened the candidate funnel, you must have the bandwidth and experience to go beyond the traditional interviews and back-door reference checks to quickly assess and identify, at every stage of the search, those candidates with the most promise.  Some companies, for example, think they can simply post a notice on LinkedIn to find a suitable pool of candidates.  But, they quickly become overwhelmed without the resources or insight and experience to sort through responses once they start rolling in.

Startups and early stage venture backed technology companies simply don’t have the HR department of larger organizations to help them identify and recruit executive talent.  Relying on the instincts and expert judgment of a smart recruiter to help manage candidate assessment is an obvious solution.  But, after opening up the funnel, it’s also important for recruiters to leverage new techniques and technologies that facilitate faster and more accurate assessment of candidates at every stage of the search process.

For example, the quality of inbound candidate leads generated via LinkedIn is greatly enhanced when combined with a hosted recruiting management system that prompts each candidate to respond to a handful of questions specific to the executive candidate profile.    Our experience validates that even the most senior, successful executives respond favorably to this approach, assuming the job description in LinkedIn is well written and includes messaging appealing to them.  Now a recruiter, with instincts gained from extensive experience managing executive searches for private venture technology companies, can quickly assess a much larger pool of inbound candidates.

Once candidates progress beyond the initial client interviews, objective and sophisticated assessment tools that measure their thinking and behavioral styles can be incorporated into the recruiting process.  Assessment tools that were once available only to larger companies with big HR departments and budgets are now in the cloud and reasonably priced, making them far more accessible to private venture technology companies.  But, assessment tools use benchmarks based on big company executives.  Comparing private venture technology executive candidates to big company executives adds marginal value, at best.

Benchmarking executive candidates against real world private venture technology executives, however, adds incredible insight previously unavailable to investors and CEOs.  Summative has had some of venture’s most successful executives complete Profiles International’s ProfileXT to create benchmarks for each functional role. Now investors and CEOs can see how a candidate’s thinking and behavioral styles, particularly candidates who are  not “easy decision” candidates, compare to some of venture’s most successful operating executives – CEOs, VPs Sales, VPs Marketing, and CFOs – who have led hugely successful, fast-growing technology companies.  ProfileXT also provides interviewing suggestions to maximize the impact of the interviews that follow.

Next in the series: “Making Sure You Conduct a Competitive Search”

Rules of the Game Changing for Private Venture Executive Search – Part 3 of 5

Monday, July 22nd, 2013

Beyond the Typical Talent Chase:  New Guidelines for Private Venture Executive Recruiting

As the founder of Summative Executive Search, I’ve spent more than 15 years as an executive recruiter in the private venture technology community. From what I have observed, far too many investors and clients still look at executive recruiting with eyes fixed on the rearview mirror—and most search firms have not changed their approach to the new realities of recruiting.  This is confirmed by a recent National Venture Capital Association (NVCA) study on best practices for finding a new generation of venture-backed leadership. It states, “Despite the sea change in the venture capital landscape over the past decade, firms haven’t significantly changed their approach to evaluating senior-level talent.”

Bottom line: A conventional recruiting approach of presenting the typical set of candidates with primarily successful early stage experience to clients is no longer sufficient.  Based on our experience, we’ve identified a few key guidelines that investors and clients can use to achieve better search results.

Open the Funnel to a Larger Pool of Top Candidates

First and foremost, recruiters need to reach a larger pool of candidates. That means executive recruiters have to get more aggressive in creating outbound and inbound marketing campaigns targeting to specific candidate pools and engaging messaging.

All retained executive search firms do old school outbound candidate lead generation:  emails, LinkedIn InMails, and phone calls into their network and a subset of their in-house database.   The better search firms use researchers, who are private venture knowledge experts, to augment their existing network and database with a new candidate pool, cross calibrating candidate suspects using a variety of information sources including LinkedIn, ZoomInfo, Crunchbase, Hoovers, TechPulse, and others.   The best search firms, after investing the time to really get to know their client’s business and market opportunity, create unique, compelling messaging to engage the best of all candidates.  Inbound candidate lead generation capitalizes on the latest social media tools to further expand the pool of candidates.  We’ve seen LinkedIn generate hundreds of candidate suspect leads, executives searching and ready to consider a career move.

But, increasing the volume of candidates isn’t enough.  Investors and CEOs must once again open the candidate profile, like they did in the dot com bubble, to include smart, up and coming executives that may lack early stage experience, but have achieved success at larger enterprises.  We saw it work in the late 1990s.   We’re seeing it again now.   The key is to properly assess such candidates.

Executives with early stage experience who may not have been part of a high profile exit should always be included in the candidate profile  While investors may simultaneously invest in 10 companies and achieve success with three or four profitable exits, operating executives must invest themselves in one technology venture at a time.  Just because intelligent and talented early-stage executives haven’t been part of a great exit in their initial company experiences doesn’t mean they won’t be successful in the next one—provided that these individuals have learned from their experiences and that the reason for the less than optimal exit was beyond the executive’s sphere of influence.  Assessing not only the candidate, but also the real drivers behind the executive’s previous unsuccessful ventures is essential.

Next in the series: “Quickly Assess Candidates at Each Stage of Search”

Rules of the Game Changing for Private Venture Executive Search – Part 2 of 5

Friday, July 5th, 2013

Conventional Wisdom Made Sense—For a While

The conventional wisdom of targeting candidates with extensive early stage experience for executive positions once made sense.  That’s why it became conventional wisdom.  Recruiting an executive with prior experience in the trenches of a successful startup mitigates risks and increases the odds of future success with an early-stage company.  Venture capital firms intuitively understand this, and executive recruiters react accordingly.  But, this has resulted in a high stakes chase for what turns out to be a shrinking pool of top executive candidates—a desperate war for talent.

Summative’s research suggests why this has occurred.  As illustrated in Figure 1, newly funded companies far exceed those exiting the market in recent years.

White Paper Figure 1 Graphic

In addition, the average timeline to exit for venture-backed firms has increased while exit prices have decreased. Many serial venture operating executives who were once highly motivated to roll the dice for an equity pay-off promise are now growing venture weary and increasingly risk averse. They seek the career stability and higher compensation plans that larger companies offer, thus further shrinking the candidate pool for private venture technology companies.

White Paper Figure 2 Graphic

In effect, we are in the midst of a perfect storm when it comes to recruiting top talent to lead venture-backed technology companies.  More companies are being funded than exiting, and proven private venture operating executives aren’t rolling back into venture-backed companies like they once were.  As a result, the executive search turns into a game of musical chairs.  With fewer players circling more empty chairs, the recruiting process becomes a lengthy and frustrating exercise that yields less than optimal results. It’s no wonder that many investors and venture CEOs today feel frustrated in their search for experienced executives to run their companies.

Next in the series: “Beyond the Typical Talent Chase:  New Guidelines for Private Venture Executive Recruiting” and “Open the Funnel to a Larger Pool of Top Candidates”

Rules of the Game Changing for Private Venture Executive Search – Part 1 of 5

Friday, July 5th, 2013

The rules for recruiting top talent to private venture technology companies are changing.   But, haven’t we been here before?  This is the first post of a five post series extracted from Summative’s white paper, “Rules of the Game Changing for Private Venture Executive Search.”  We’ll examine how today’s private venture executive recruiting environment resembles the heady days of the tech bubble.  We’ll also discuss how we can change the rules of the game to gain a competitive edge by capitalizing on the experience and tools that weren’t available to us in the late 1990’s.  I’d love to get your thoughts.

Private Venture Executive Recruiting Must Evolve to Meet New Challenges

The rules of venture-backed executive recruiting have changed dramatically over the past few years as the demand for executives to lead venture-backed technology companies has outstripped the supply of candidates.  The reason?  More companies are being funded than there are companies exiting.  And, the executives who are rolling out of successful exits are less inclined to jump back into another venture-backed company.

So, the conventional wisdom of focusing recruiting efforts on “easy decision” candidates—those proven executives rolling out of successful exits—no longer works like it may have in the past.  And venture investors and CEOs who admonish executive recruiters to focus on “easy decision” candidates are at a competitive disadvantage.

The situation today is analogous to what we experienced in the late 1990’s. During the dot com boom, the number of companies being funded far outpaced the number of “easy decision” candidates.  To succeed, we had to recruit smart, aggressively driven sales and marketing executives from larger technology companies to lead the growing number of startups.  At the time, we relied mostly on instinct to help our clients assess the ability of executives from larger companies to successfully transition to the startup world and its unique demands.

To paraphrase baseball’s legendary Yogi Berra, the recruiting situation today for venture-backed firms looks like “déjà vu all over again.”  Except that now executive search firms have had the opportunity to hone their judgment skills over many more years.   Also,  new technology tools – tools that weren’t available just a few years ago – can now assist executive recruiters and their clients in conducting more successful searches.    The rules of executive recruiting have changed and private venture technology investors and CEOs who understand this can gain a competitive edge in their quest to recruiting game changing executives to their companies.

Next in the series: “Conventional Wisdom Made Sense — For a While”