You're facing an underperforming portfolio company. How can you successfully restructure its operations?

Every VC or investor is well aware of the risk they're taking when investing in venture capital. However, no one likes a write-off and it's necessary to prevent that from happening. If your control measures didn't work and there's a non-performing company, turnaround strategies should focus on short-term quick wins while working on midterm solutions. Quick-wins will often mean layoffs and also changes in sales strategy or go-to-market. In this case, channel sales could help the company "resurrect" but avoiding long sales process. If the runway allows it, hiring restructuring advisors will result on a deeper analysis to prevent that from happening again and potentially find new investors or clients to keep the company on track.

Besides restructuring operations of underperforming portfolio companies, another not so drastic strategy is to pivot the company's business model to better fit market demands. Therefore: examine if there is still a product-market fit. You might explore new revenue streams or target different customer segments. If the company's product isn't resonating, conducting market research will usually uncover unmet needs that the company is well-positioned to fill in. Collaborating closely with the existing management team ensures their commitment to the pivoting process. By combining strategic shifts with operational improvements, you enhance the company's prospects and yet, protect your own investment.

To successfully restructure an underperforming portfolio company, begin with a comprehensive financial and operational review to pinpoint the causes of underperformance. Focus on key areas such as cost inefficiencies, revenue streams, and market positioning. Combine quantitative data—like financial metrics, cash flow, and productivity ratios—with qualitative insights from management, employees, and customers to diagnose operational weaknesses. Develop a clear turnaround plan targeting cost optimisation, talent realignment, and strategic growth opportunities. Regularly track progress using key performance indicators and remain flexible to adjust the strategy as market conditions shift, ensuring long-term stability.

Restructuring a low-performing portfolio company requires a strategic approach focused on identifying underlying issues and implementing key changes. Start with a comprehensive audit to understand operational, financial, and market position weaknesses. Revise the business strategy to better align with current market demands and improve operational efficiencies by streamlining processes and reducing costs. Strengthen the management team either by enhancing current leadership capabilities or bringing in new talent. Maintain open and transparent communication with all stakeholders to manage expectations. Continuously monitor the effectiveness of changes and be prepared to make adjustments as needed.

I start with a thorough analysis of its operations and financial health, focusing on key performance metrics to identify inefficiencies and areas for improvement. Engaging with the leadership team and stakeholders is essential to gather insights and foster a collaborative environment for change. I then develop a strategic restructuring plan that may involve streamlining processes, reallocating resources, and emphasizing core competencies. Evaluating the current talent ensures the right skills are aligned with the company's goals. Throughout the process, I maintain clear communication with all stakeholders, fostering transparency and commitment to drive the company toward renewed growth and?profitability.