With changing markets come changing demands on leadership and this is especially true in the venture capital and private equity ecosystem. As valuations and economic forecasts fluctuate, PE firms and Boards are reevaluating their approach to talent acquisition. At best, hiring the traditional way, with a focus on standard executive experience, yields candidates who can handle the hurdles of the past but struggle with the unfolding challenges on the horizon.

We are especially seeing this phenomenon occur when companies in the venture capital and private equity ecosystems are conducting searches for a Chief Revenue Officer (CRO) or sales executive. In our experience, organizations that are more successful in identifying next-gen executives who can best navigate the twists and turns of the road ahead, are those that move beyond the traditional to assess candidates with an additional set of core characteristics:

What does this evolving approach to hiring look like in practice? While traditional and foundational experiences are still essential, there are four key considerations to assess when hiring a Chief Revenue Officer with the right mindset who can make a significant difference in the company’s growth trajectory.

Pace and Expectations

The speed of startups is legendary, but the speed of a private equity-backed company can be even faster. In fact, a study coauthored by PwC found that PE-backed startups increased their workforce by 39% over a three-year period compared to the 2% growth of their non-PE peers. It’s the accelerated tempo of the industry that makes hiring someone from a non-sponsored or traditional company, although tempting, a bit of a gamble.

In these circumstances, candidates from outside the PE space may possess growth-mode experience but lack the capability of handling the industry’s accelerated pace. Before kicking off your search, clearly identify specific goals and timelines with your Board, leadership, and investors. You can then take those expectations to your candidate search and make goals for growth rates clear for the role from the beginning.

A word of warning, though: be sure to balance Board and executive expectations with in-market dynamics. Your executive search can falter if there is a misalignment between talent-market circumstances and your leaders’ assumptions.

Talent Level

When the time comes to hire sales leadership, many companies ask us what level of seniority they should be elevating into the position. Do you hire a head of sales? A director? A VP? Since the executive who ends up in the CRO role will lead go-to-market strategy, it’s imperative to find the perfect experiences so your candidate can hit the ground running.

Additionally, we find that a CRO hire may be more holistic in their view, as well as better aligned with investment criteria and the company’s growth strategy, if they have experienced the above challenges from a PE standpoint. When these leaders are well-versed in portfolio structures, revenue growth strategies, and skillsets required of this ecosystem, they’ll have a stronger command of the fundamentals, making their adaptive strategies more surgical and effective in the long term.

Finally, sales leadership needs to recognize that the talent initially available to them often won’t match what they have experienced in prior situations. In general, the people you hire for executive-level positions require a keen awareness of the talent types and levels needed on their teams. Specifically, your CRO should have the perspective and skills needed to find, hire, and build those people up to their full potential, if they’re going to successfully grow margins and plan for future valuations.

Peer Relationships

In order for any investment to hit its full potential, the leadership team must act as a well-oiled machine. The pace of change and interdependencies across functions mandates a different set of relationships.

By their very nature, many sales leaders are “lone wolfs,” or at the very least inclined to socialize with their own. In larger companies this is acceptable and often desirable – “you stay in your lane; I will stay in mine.” In a private-equity backed environment, this attitude often will undermine the success of the collective whole. Selecting sales leaders with a demonstrated track record of building and fostering accretive relationships across the enterprise must sit near the top of your selection criteria.

Aligned Compensation

Who should be the highest paid individual in an organization? The CEO is a common answer according to investors, boards, and (not surprisingly) CEOs. Nonetheless, it’s important to keep in mind who may have the greatest impact on the business.

That could be a head of product if that’s where the keys to growth lie. Often, it’s a head of sales or revenue leader who drives scaling of the business and benefits from the commission structure, becoming the company’s highest paid individual.

The CRO of a company is usually compensated one of two ways:

  1. On the same executive plan as other C-Suite members
  2. On a traditional commission plan

The option that’s best for your company partly depends on your growth plan. If the CRO’s role is more strategic for long-term growth, then the first option might make the most sense. If the expectations are for quick results and fast growth, then the motivation of a commission plan may be the best choice. As always, the nuances of your specific situation will dictate which compensation strategies are the best fit for your organization.

Alignment on compensation leveling, including equity and commissions across the C-Suite, helps to keep private equity firms competitive. Any executive-level new hire may require a new set of leveling and, of course, a close eye on ROI. 

The Secret to Hiring a Chief Revenue Officer

Hiring today’s sales executive in a growth-equity- or private equity-backed company requires a mindset uniquely focused on the company’s accelerated pace, setting the right expectations, planning for the structure of the team, and being aligned on compensation. Of course, the right candidate needs the right mindset to match. The process can be challenging, but the team at JM Search is well-versed in the unique approaches in recruiting and vetting executives for private equity and venture-funded organizations.

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