Skills for startup growth: private equity and the opportunities for business graduates

Looking for career opportunities in an area that’s gathering momentum? Jessica Wax-Edwards, Director at ThoughtSpark, examines the skills gaps impacting PE-backed businesses and outlines how forward-thinking Business School graduates can help overcome them

For Business School graduates, most of whom will already have solid business experience prior to embarking on a further qualification, working with entrepreneurial businesses can be an attractive and challenging option. Such businesses – which are typically backed by venture capital or private equity (depending on their stage of development) provide a lively stage on which the business skills acquired in recent qualifications and training can be deployed in the real world.

The vista of potential organisations is wide. Startups are estimated to represent 1% of all European jobs. But on top of that, accelerated development finance is available from the private equity (PE) sector, which in recent years has been raising record capital volumes to invest in fast growth or turnaround opportunities.

This is especially true in the current climate. The last two years has heralded a global boom in new businesses, particularly in the areas of logistics, delivery and IT. Many other sectors are also entering a new era of development and evolution accelerated by the Covid-19 experience. Digitalisation, new ways of working, new regulatory environments, new product platforms (such as biological drugs or cloud computing), reshoring, environmental standards, and a host of other factors are now gaining real momentum.

With PE the favoured funding source for many new companies – rather than complex and costly flotation on the public markets – investors are becoming increasingly keen to ensure that all the key skills are in place to make the best possible use of their funds. Some of these skills can be provided by the PE companies themselves, by taking a seat on an investee company board. Others, however, cannot – and this is the exciting opportunity for Business School graduates, with their combination of direct business experience and strategic training. So, where exactly do those key opportunities lie?

Skills gaps encountered by PE firms

Typical skills shortages that PE firms encounter in their investments are identified in recent research from ThoughtSpark and Mindmetre. has identified the typical skills shortages that PE firms encounter in their investments. By definition, these skills gaps should be priority areas for PE investors to fill, whether that’s through recruitment, interim staff or agencies. They are also the skills gaps that dynamic Business School graduates may seek to fill.

In the research, respondents from among Europe’s top 100 PE firms were asked to grade the skills they typically encountered in the companies they invested in. The results show that PE-backed firms generally present high skill levels in product development and sales, perhaps unsurprisingly. With exceptions, this is because they tend to be run by owner managers who have successfully built a business to date by creating, selling and delivering value to their initial merry band of customers.

In contrast, skill levels tend to be either mixed or lacklustre in three areas: digital transformation, performance visibility, and financial strategy/ management.

The findings indicate that PE investors should scrutinise digital transformation and performance reporting capabilities in the firms they acquire, filling any skills gaps with either recruited experts (listen up, business graduates!) or third-party providers. Financial strategy and management tend to be core capabilities of the PE investor, and they have traditionally bridged this skills gap through representatives at board level.

But there are a further three areas which score really low for competency at the point of investment: talent management/development, growth management/scaling, and – worst of all – marketing and communications.

These are likely to be the skills gaps that an entrepreneurial Business School graduate could fill. The first step for the investor is to recognise the potential skills pitfalls – and then a willingness to recruit/learn/collaborate in areas that may previously have been considered low priority.

Opportunities for Business School graduates

The rewards can be huge. For instance, McKinsey research shows that organisations that align talent with their value agenda are more than twice as likely to outperform their peers and achieve 2.5 times the ROI in their first year. This skills gap implies that PE investors may well need to insist on a professionalised talent management layer being introduced, that could be linked into the Business School network, and which reports on progress (talent recruitment, development and management delegation) to the investor.

Scaling and managing growth – the next area of weakness – not only requires talent development and empowerment, but also a host of skills that are frequently (according to our respondents) not the natural province of founding management. Performance incentives for board directors – indeed, throughout the company – need to encourage rapid development, but there is also an argument to look carefully at a commercial director position, possibly supported by independent consultants, which reports directly to the investor as well as sitting on the managing board. Again, the combination of real-life commercial experience and strategic management training could be a substantial opportunity for Business School graduates.

Finally, a key part of the growth picture is a professionalised approach to marketing and communications. Rapid growth requires a company’s successes to be broadcast as widely as possible, direct, through social media, through the press, at industry events, and so on. Both marketing leadership and staff need to have experience in rapid reputation building – helping the company to punch above its weight in terms of the sheer noise it is making to its target audiences.

Systematic marketing is required to bring the company’s value proposition to the total available target audience, unrestricted by limitations in the direct sales effort. Inexperienced marketing staff open the door to massive opportunities for wasting money and resources. Unaccountable or poorly measured marketing will not be able to differentiate between cause and effect, again wasting investors’ precious funds. Without experienced marketing direction and execution, scale growth is unlikely to be achieved. As with talent management and growth management, senior marketing staff and/or specialist agency support should have a direct reporting line to the investor, as well as the board, to demonstrate the alignment of priorities transparently and empower efforts towards the single goal of accelerated growth.

Conclusions

The current economic situation makes it even more important that all key operating skills are in place to offer the best chance of successful rapid business development in PE-backed companies. Put simply, any significant operating skills gaps increase the risk of failure. This is a huge opportunity for Business School graduates, especially for those who have cut their commercial teeth in digital transformation, performance management, scale growth, talent management or systematic marketing. Time to get searching!

Jessica Wax-Edwards is a Director at ThoughtSpark Agency, where she manages an international team on projects for clients in the financial services, legal, logistics and technologies industries. She has worked in PR and marketing for the last 10 years, during which she completed her master’s by research and PhD at the University of London. 

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