Are entrepreneurs increasingly seeking to partner with PE? From World Entrepreneur of the Year...

At the start of June, I attended EY’s annual World Entrepreneur of the Year event in Monaco – a week-long, wall-to-wall assembly of some of the brightest, most innovative minds from around the world. These are the people driving disruption – finding fresh avenues for growth and new, improved business models in an uncertain, rapidly-changing landscape.

It’s a remarkable event, with entrepreneurs from all over the world coming together, sharing insights, building relationships. Entrepreneurs know they can’t just do it alone, and this is a great opportunity to make connections to help them get even better at what they do, even as they inspire the rest of us.

Being the private equity (PE) guy, I was getting introduced to the entrepreneurs as someone who can advise on funding and growth strategies. The conversations I had made clear a few things I’ve been suspecting for some time. 

1)    There’s a growing openness to PE 

First, I found a much greater openness to PE as a source of capital – and, most importantly, a growing recognition that PE isn’t just about capital, but also a valuable source of strategic advice and tactical support.

This is a continued evolution of shifting perceptions of PE – but the change has been especially notable in the last couple of years. Whether it’s market volatility or geopolitical uncertainty, there’s a sense that public listing can be less of a reliable route to growth and may not be for everyone. 

Not only can PE firms use their expertise to help navigate this uncertainty, but they can also help growing businesses create greater value, open more channels, and even diversify into different geographies.

There’s also a growing understanding that PE can help with two other big challenges for growing firms: picking the right technologies and finding the right talent to enable sustained growth.

2)    Technology remains a focus  

Many of the on-stage presentations and panel discussions were framed by the theme of technology continuing to impact industries. This is nothing new, but now – just like established businesses – even tech-led entrepreneurs are looking to continually innovate and adapt their business models as technology evolves and customer expectations shift.  

In recent years, entrepreneurs have increasingly started to recognize that private equity partners may already have the tech toolkits and expertise they need to strengthen their own business models. 

This makes PE firms’ wider portfolios’ tech capabilities a distinct and highly-sought-after part of their value offering. They are no longer being seen simply as sources of funding, but as sources of valuable strategic advice that individual entrepreneurs simply can’t build at sufficient scale.

3)    Finding the right talent is more crucial than ever

In a highly competitive global talent marketplace, even entrepreneurs who have already developed unique products, captured niche markets or accessed new geographies find acquiring talent to be a challenge. The people who will have built up the business to $50 million are not the same kind as those who will build it out to $500 million, and then to $5 billion. So, the question is, how do you attract the right kind of talent?

EY’s Entrepreneur of the Year country award-winners have a moniker that can give them an edge when it comes to attracting talent. Yet, even for them, talent wars across all sectors can be aggressive.  

Here, PE firms have a role to play in offering their portfolio companies access to a wide range of contacts, helping identify the best talent and accelerating onboarding processes.  As much as EY’s World Entrepreneur of the Year is a great forum for making connections and inspiring new ideas, so too can PE firms’ portfolio and networks help businesses get connected to other organizations that can drive fresh growth with their technical expertise and advice.

From private equity to positive equity

My conversations with various entrepreneurs highlighted how businesses are increasingly seeing PE as a way of strengthening their value proposition. More and more, PE firms are being perceived as partners for good, rather than purely transactional. This is a critical change for the evolution of PE – the value-add is becoming much more about long-term value.

Not only has WEOY 2019 given entrepreneurs an opportunity to engage in invigorating discussion, it’s also provided a vital networking forum for successful peers. And while I left convinced these are the people who will be inspiring the next wave of growth with their innovative approaches, it was also clear that the old idea of entrepreneurs going it alone is no longer the case. In a complex landscape, collaboration, partnership, and the advice and support of third parties will be key to successfully seizing the upsides of disruption.