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Collaborating long-term with CEOs, leadership teams and investors to accelerate company growth and value

by Randall S. Hancock and George E. Pohle, Vention Growth Partners
July 10, 2017

Technology-enabled trends are disrupting markets, transforming business models, and shifting financial value in today’s Accelerating Business Environment. Working with privately-held growth companies over the past several years, we’ve recognized that…

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Photo by Gian-Reto Tarnutzer on Unsplash

Failure is self-correcting; it is success that can kill you!

by John M. Connolly
July 11, 2017

I am pleased to announce that in addition to my responsibilities as senior advisor at Bain Capital Ventures, board member of multiple companies and venture investor, I have become a board member of Vention Growth Partners, a group of experienced board members and advisors focused on helping CEOs, senior leadership teams and boards accelerate growth and value. Vention Growth Partners was co-founded by Randall Hancock and George Pohle, two talented executives with whom I have collaborated to build and grow companies over the last two decades.

As part of my collaboration with Vention Growth Partners, we are launching Perspectives of a Growth-Focused CEO and Investor to share my experiences from 30+ years as a serial CEO, board member, entrepreneur and investor. Please share your feedback, including ideas for additional topics you’d like us to address or discuss.

One of the most important lessons I’ve learned is that while failure is self-correcting, it is success that can kill you. Let me explain.

New ventures need to gain market traction with compelling offerings quickly to build and learn from their customers, drive revenues, and gain credibility with investors. This initial success enables them to secure the additional funding required to continue growing. Like any game that you can win or lose, if you fail to create sufficient demand quickly for your offerings, your new company fails and the game is over. Your only choice with this outcome is to move on, my friend — you were not ready to play such an important game.

But what if you succeed? Companies that have achieved annual revenue of $25-50 million typically run into tremendous turbulence and indecisiveness as they try to grow beyond this stage. While market demand and business model may have been proven, companies frequently haven’t developed the breadth and depth of capabilities required to accelerate growth to the next level. The startup marketplace is littered with unfortunate examples.

So what exactly happens? Why do so many companies struggle to get beyond this level of growth?

Many growth companies sell themselves into trouble, acquiring new customers faster than they build the capabilities to serve them. In many instances, it’s easy to drive sales, but it’s hard to deliver sustainable growth and value if your organization is not prepared for it. At some point companies discover they’ve outgrown their existing capabilities, and may not have the right CEO, leadership team, go-to-market model, product management, technology infrastructure, operational processes, human resources or financial reporting in place to achieve their next stage of growth. In fact, weakness in one or more of these areas is the most significant reason for failure.

As a result, the early signs of failure start to seep into the company — customers defect as satisfaction plummets due to inconsistent service, salespeople become cautious about making promises that cannot be delivered, overworked employees start looking for new opportunities, and revenue growth comes to a sudden halt. I know from firsthand experience how painful it is for all stakeholders when they haven’t thought enough about how their company’s capabilities need to evolve with growth. It’s just too easy to become intoxicated with initial success and forget what is going to be required to achieve tomorrow’s goals.

For example, I was once recruited to become the CEO of an established business services firm whose growth had plateaued at $40 million in annual revenues. The company had been spun out of a large information company and acquired by a well-known U.S. private equity firm. While the new PE investors saw tremendous upside opportunity, they realized that the previous parent had not invested sufficiently in the business to enable its next stage of growth. Equally important, the then CEO didn’t know what to do. In fact, the sales team’s effectiveness in driving new business had outstripped the company’s ability to deliver value consistently to its customers, creating operational issues across the company.

Upon arriving at the company, I discovered a leadership team made up of middle managers who had been put into senior positions. While the team had deep industry knowledge and relationships, none of them had been part of a growth company before, and thus lacked growth mindsets and experiences. They tended to think tactically rather than strategically, aimed for incremental rather than aggressive growth, and simply didn’t know how to scale the company beyond its current size.

As a result, the company faced many of the typical hurdles challenging companies seeking to break out from the $25-50 million revenue range. Its technology delivery platform, which had evolved piecemeal over time, was not built for the global scalability that growth required. Lack of dedicated client services resulted in increasingly unhappy customers. There were no clear product roadmaps, as offerings were developed by IT without any formal product management function. An undervalued human resources function was unable to fill open positions. Led by a controller rather than CFO, finance took a retrospective rather than prospective view, providing timely updates on financial performance but not the predictive financial models needed to support critical decisions. Moreover, informal planning had resulted in vastly differing opinions about the company’s path forward, preventing company-wide alignment and execution around a cohesive strategy to achieve their next stage of growth.

The board brought me in as its new CEO to address the many growth challenges the company faced. Working closely with the board and existing leadership team, we made the difficult changes required to get the organization to the next level. These included:

  • Upgraded Leadership Team. Hired an Executive Leadership team responsible for key business areas, while successfully retaining most of the existing leaders as the next-level of management. New roles included General Managers responsible for the P&L’s of three businesses, an experienced CFO, a new head of Product Development and Management, and a senior Chief People Officer.
  • Cohesive Strategy. Partnered with the combined leadership team to develop a cohesive strategy for moving forward, with explicit agreement on strategic priorities, performance targets, and roles and responsibilities.
  • Enhanced Capabilities and Processes. With a strategy in place, we began the heavy lifting work to build scalable capabilities and processes. This included putting in place dedicated client services and product management groups, developing a new scalable technology platform, upgrading recruitment and training programs, enhancing the company’s offshore process capabilities, improving budgeting and financial reporting, and identifying potential acquisitions.
  • Outside Assistance. Brought in a few selected advisors to provide leverage during the company’s transition. With so many priorities needing to be tackled in parallel, these advisors partnered with individual leaders to address the agenda we established quickly and effectively.

Failure was not an option for those of us who came together as a team to restart the company’s growth. But achieving this success took enormous focus, thoughtfulness and collaboration to make difficult decisions and execute effectively against our targets and priorities. Understanding what it was going to take, and getting the commitment of the board, leadership team and entire organization, was really hard but eventually made the difference between success and failure.

Because of these concerted efforts, the company’s growth and value began to accelerate once again. Improved capabilities raised client satisfaction considerably, resulting in higher retention rates. Gaps identified by the strategy development process resulted in three targeted acquisitions in a single year, enabling the company to solidify its global leadership position. And a reenergized sales and marketing team helped drive top-line growth to 40% annually, achieving $110 million in revenue in just three years. The company’s accelerated performance enabled the sale to a strategic buyer for more than 20 times EBITDA and 5.5 times revenues.

Growing a company from zero to $25 million requires skills and mindset built off scrappiness and commercial aggressiveness. To be sure, you still need to be scrappy to get to $100 million, but you also need a formal approach to driving commercial success. So, the next time you are focused on how not to fail, you may also want to make sure that your success doesn’t kill you.

About Us. John M. Connolly is a serial CEO, entrepreneur and investor who currently serves as non-executive chairman or board member on multiple growth companies. John was managing director and head of the operating group at Bain Capital Ventures for over six years, and is presently senior advisor. John is also a board member of Vention Growth Partners, a group of experienced board members and advisors focused on helping CEOs, senior leadership teams and boards accelerate growth and value.

Perspectives from a growth-focused CEO and investor | 1 Comment

Collaborating long-term with CEOs, leadership teams and investors to accelerate company growth and value

by Randall S. Hancock and George E. Pohle, Vention Growth Partners
July 10, 2017

Technology-enabled trends are disrupting markets, transforming business models, and shifting financial value in today’s Accelerating Business Environment. Working with privately-held growth companies over the past several years, we’ve recognized that CEOs, leadership teams and PE/VC investors need a new model for collaborating with senior advisors on a long-term basis. As a result, we recently launched Vention Growth Partners, a collaborative platform composed of senior advisors and board members focused on partnering long-term with companies and investors to accelerate growth and value.

Investors and growth companies face numerous challenges brought about by today’s fast-changing Accelerating Business Environment, including:

  • Challenged Portfolio Returns. As entry valuations skyrocket and as the cost of money increases, Private equity and venture capital investors are finding it more difficult to achieve target money-on-money returns, and the majority of portfolio companies generate subpar returns.
  • Complex Operating Challenges. Profitable growth and operational improvement have become even more important factors in achieving returns.  Gaps in management skills and experiences widen as companies grow and become more complex, creating challenges in diverse areas such as strategy, go-to-market, product and portfolio management, analytical capabilities, operational excellence, and financial reporting.
  • Limited Investor Time. Focused on investing rather than managing, investors typically have limited time and abilities to support the day-to-day activities of their portfolio companies. While some PE/VC investors have brought on operating partners or non-executive board members, their focus is generally on sharing industry knowledge and relationships, rather than partnering closely with management or acting as semi-executive board members.
  • Non-Aligned Consultants. While external consultants always remain an option, they are expensive and don’t have vested interest in the company’s success. Consultants focus on engagements rather than retainer-based relationships, resulting in high daily professional fees, significant learning curve costs, and no incentives linked to long-term growth and value.

To address these challenges, CEOs, leadership teams and investors need a new model to collaborate on an ongoing basis with senior advisors who bring significant strategic, operational and investing experience to help them make better decisions, improve execution, and accelerate progress.

Vention Growth Partners formalizes an ongoing relationship among senior executives who have worked together for more than two decades. We began our collaboration in the early 1990s at Gemini Consulting, where we helped technology, media and telecommunications clients develop and execute strategies in their converging industries. There we developed shared passion and capabilities working with companies to achieve transformational change and accelerated growth.

We continued working together in the late 1990s at Mainspring, a venture-backed Internet strategy consulting firm founded by John Connolly, that we helped to take public in 2000 and then sold to IBM in 2001. We continued working together as senior executives at IBM, before transitioning into CEO, founder, general manager and operating partner roles in other growth companies and investment firms. More recently our collaboration has continued as we focused on helping CEOs, leadership teams and boards of fast-growing privately-held companies successfully address the critical opportunities and challenges they face.

By working closely with growth companies, we’ve developed a comprehensive view of the critical growth challenges CEOs, leadership teams and investors face as they grow and evolve their businesses. Combining our own experiences and skills with the learnings from working with many growing companies, we have developed best practices, frameworks and tools across a wide variety of areas, including board and governance, vision and strategy, CEO and leadership team, go-to-market approach, delivery model, organization and culture, and financial management.

Why We Exist

Instead of reinventing the wheel, growth companies are best served by adopting and refining best practices to their particular situation across all of these areas.

In addition, we believe that growth companies and investors should actively seek out long-term senior advisors who not only complement their existing capabilities, in order to not only fill skill and experience gaps, but also to serve as catalysts helping them accelerate profitable growth. The best senior advisors exhibit these characteristics:

  • Collaborative. Emphasize ongoing collaboration between CEO, leadership, board, and other team members.
  • Iterative. Share, review and adjust findings to ensure alignment among multiple stakeholders on objectives that are achievable.
  • Transparent. Communicate objectives, project approach, progress and interim “stories” openly and frequently.
  • Objective. Provide third-party perspectives, challenge assumptions, and encourage different viewpoints.
  • Analytical. Use rigorous, fact-based quantitative and logical approaches to making assessments and developing recommendations.
  • Selective. Choose to work with the companies and teams with which they believe they can make the biggest difference.
  • Aligned. Prefer long-term relationships and equity compensation to make sure they align interests with those of leadership and investors.

If you’re a CEO, leadership team member, or investor in a privately-held growth company, we would be happy to share more about what we believe are the most successful practices today’s companies have adopted to accelerate their growth and value.

About Us. Randall S. Hancock and George E. Pohle are the co-founders and managing directors of Vention Growth Partners, a group of experienced board members and advisors focused on helping CEOs, senior leadership teams and boards accelerate growth and value.

Accelerating company growth and value | 2 Comments
Perspectives from a growth-focused CEO and investor
© 2018 Vention Growth Partners, LLC
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