Leadership traits that will ensure PE-backed tech businesses defy the negativity

Ruby Sheera

August 9th, 2022

Leadership traits that will ensure PE-backed tech businesses defy the negativity

Leadership traits that will ensure PE-backed tech businesses defy the negativity

It is an uncertain time for private equity firms and the fast-growth businesses they back. Concerns that the debt market is drying up, that LPs have already allocated funds for the next two years, and that tough times are around the corner, are causing ripples around the sector. Not to mention the threat from Russia, and the leadership vacuum here in the UK. It feels like a cycle of negativity, and it was telling that new Chancellor, Nadhim Zahawi’s announcement about reviewing the corporation tax hike and injecting growth into the economy was a rare moment of positivity in recent months.  

But despite this backdrop, there is lots to be positive about, particularly amongst tech-focused private equity firms and their portfolio companies. With plenty of dry powder to deploy, cash shouldn’t be a problem, while the need for innovative, tech-driven solutions to societal challenges has never been greater. It’s at times like this that the best businesses – and the leaders and leadership teams running them - come to the fore.

Having the right people at the helm is never more important than during choppy waters, and it will be those tech leadership teams that are able to balance two key factors, spanning domain and situational experience, that will sort the good from the great as we weather the current economic storm.

Having the confidence to maintain focus - growth vs. profitability

Against this context, you could say there are two types of companies: Those who maintain their focus, irrespective of what is going on in the background, and those who become distracted by white noise and try to control the uncontrollables.

It is tempting for leadership teams to think that they need to change course, or do something different, but it is the leaders who hold their nerve, trust in the strategy, and keep beating the drum that will deliver results. That means ensuring there is clarity around the value creation plan and metrics, absolute understanding of the revenue generating levers to increase ARR, and then the commitment to keep driving those whilst championing the needs of the customer. Leaders need to have think of alternative ways to protect the business, preserve key KPIs and accrete value. 

These capabilities are a product of having situational experience in the leadership team, in the form of individuals who have been through similar market conditions before and can remain focused on what is important throughout the ebbs and flows of the growth journey and economic cycles. The question is: will leadership teams in fast-growth, tech-enabled businesses have experience of similar market conditions? Tech companies overall fared well during the pandemic, and the sector has enjoyed years of high growth, so many tech leadership teams may be unprepared to handle a less positive outlook. Consequently, those leadership teams with the relevant situational insights from other sectors, or previous market conditions, may see themselves at an advantage.

Owning the customer experience

SaaS businesses have transformed how customers capture revenue for the better, shifting the focus from winning customers, to keeping and maximizing them, through delivering such a great experience and so much value, that they never want to leave. You only need to visit most bricks and mortar shops today to realise that physical brands are struggling to keep up when it comes to delivering a personalised and compelling service. And as belts get tightened, this SaaS business model will make the difference, setting tech businesses apart and providing a more reliable and efficient way of driving revenue growth than chasing after new customers.

This is where leaders with domain experience will be critical. Domain experience means they bring understanding of the revenue model, specific nuances of the customer base, or previous exposure to the product category. With this knowledge under their belts, these leaders are well-versed in the importance of tracking the right data, mapping the customer journey, and giving every customer what they need, at the moment they need it. They also innately understand the importance of communicating this philosophy down the business, so that every single employee takes ownership for the customer experience and is trained and incentivized to go above and beyond. Finally, they understand the challenges of doing this in a business that is growing rapidly, by retaining the core philosophy and culture even with constant employee onboarding and churn.

Balancing situational and domain experience in your leadership team

Sustained business success, particularly in fast-growth, PE backed businesses can never be achieved by a single leader alone, and even more so during times of uncertainty. It requires a team of functional specialists, with the right combination of situational and domain experience and expertise, plus complementary behaviours, to work together seamlessly, despite external pressures. We will see over the coming months which businesses have this balance in their leadership team, giving them the clear-thinking and resilience to not just survive, but to thrive, despite the negative backdrop.

Ruby Sheera,

Managing Director

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