On the quest to answer this question, in a previous post I gave some insight first into what one might expect of a company as it goes through its maturation process, from start-up to market leader. Org structure transforms from swiss army knives to forks, knives, spoons, and salad tongs. Processes – to include the innovation process – become important, documented, and scalable.
So back to the question. You’re a post product-market fit entrepreneur in a rapidly growing company, picking up big logos and looking for $XXmm to scale your company. What should you expect out of a good growth equity investor? Depending on where you are in the maturity process, you should expect your investor to:
1. Give an honest assessment of C-level staff. Wait…what? While that might be uncomfortable to hear, it’s absolutely necessary. Other than the ‘99 New York Yankees, no team ever made it to the World Series with a second baseman who couldn’t make the throw to first. Often, not always, CEOs rely on us to identify gaps among the team that have been allowed to persist, the reasons for which are to be expected – personal relationship, individual that hasn’t grown with the role, a lack of capital at the time of hire, etc. Part of our job as investors is to discretely shine a light on gaps within the C-suite team, and then…
2. Work with management to address talent gaps. Beyond working with the CEO to assess C-level staff, a good growth equity investor can be hugely helpful in working with the CEO to address those gaps, either through training or hiring. Let me be clear – we, at SSM, think that it’s management’s job to build the team and the culture, and a big part of that is hiring and training the workforce. You’re the leaders, we’re a resource. But good investors with a long track record have a wealth of best practices and industry connections that might be useful in training existing talent or identifying new talent.
3. Quickly identify, and then bring recommendations to refine the processes and metrics that are most important for the scalability of the business. It’s working with CFOs on drilling down into churn metrics, customer, or unit economics, working with Chief Sales officers to improve the depth and definitions within the pipeline, working with the CEO to help see the forest through the trees. Sometimes it’s at the board level, establishing committees and communication patterns that add value to the team as it scales. Expect good growth investors to bring best practices from their breadth of experience.
4. Provide customer introductions. In my previous article, I suggested that this should be less of a focus area for a growth investor compared to a venture investor, but you should still expect your investors to be both well-connected in your industry and also an ambassador for your company. If those two traits are true, customer introductions should be a given.
5. Guide / assist with the exit process. Expect your investor to be capable of making introductions, either directly to potential exit options, or to good investment banks who can run an excellent process. You should further expect good growth investors to help provide an honest assessment of what the company is worth in the market.
Finally, it should be said that we understand not all growth investors are the same. Some provide a greater service level / value in each of the areas above, and some are certainly more operational (we might say “in the weeds”) than SSM. But we at SSM think that you should also expect your growth investor to be approachable, empathetic, and transparent.
About SSM Partners. SSM has partnered with talented entrepreneurs for more than 25 years. The growth equity firm invests in rapidly growing companies that have proven and differentiated software, technology, or healthcare business models. Starting with a relationship built on trust, SSM offers its entrepreneur-partners a thorough understanding of the growth company lifecycle and a collaborative approach to building great businesses. Learn more atwww.ssmpartners.com.