In this Q&A interview, SPMB Partners Jon Landau and Natalie Ryan share their perspective on the current state of executive recruiting within private equity (PE), highlighting how 2023 unfolded, what 2024 holds, and the talent trends dominating the sector. From culture fit to the surge in AI-focused hiring, we dig into the themes shaping the future of PE talent acquisition.
How did SPMB fare in 2023 from a PE search perspective?
Jon Landau: In 2023, SPMB’s Private Equity (PE) search practice continued to navigate unpredictable and uneven search activity, reflecting the broader industry trend of declining PE deal volumes year-over-year (YoY). Against this backdrop, Enterprise Technology emerged as the predominant focus of SPMB’s PE search engagements last year, constituting about 85% of our total activity in 2023. However, even within this sector, we still contended with the macro factors adversely impacting B2B software in recent years.
While SPMB experienced a 7% dip in private equity search volume in 2023 relative to the previous year, the global PE deal volume witnessed a more pronounced decline of nearly 25% over the same period. Yet, what’s arguably more interesting than total search volume is the shift in functional focus from 2022 to 2023 that SPMB observed, namely…
- Marketing leadership searches saw a sharp decline, with search volumes plummeting by an astonishing 75%.
- Engineering searches also decreased, though less dramatically, with a 46% YoY drop.
- Product Management leadership searches, in contrast, increased significantly (up 240%).
- Post Sales and Chief Customer Officer search volume doubled from ‘22 to ‘23.
- CEO/President/GM, CFO, and Chief Sales Officer search volume remained steady YoY.
Can you discuss why these functional shifts occurred?
Jon Landau: The marked decrease in Marketing searches is not uncommon in times of financial conservatism as companies elect to actively reduce marketing spend and/or headcount. Similarly, in times of financial uncertainty, companies often reallocate funds away from marketing toward functions that can provide the most stability and company-wide lift across an organization. As such, the consistent demand for CEOs, CFOs and Sales leaders within PE portfolio companies underscores the ongoing need for exceptional talent in these critical roles.
Perhaps the single largest business priority for B2B SaaS companies in 2023 was customer retention and expansion. In times of ultra-competitive customer acquisition the last thing a business wants to see is churn of their existing customer base. As such, SPMB’s PE-backed clients invested heavily in both Product Management and Post-Sales / Customer Success leadership hiring last year. Product leadership aligns with PE portfolio companies’ heightened focus on customer retention through product refinement and competitive enhancements amid intensified competition and constrained enterprise technology spending, while Post Sales leadership is ultimately responsible for Gross and Net Revenue Retention.
How are PE firms adapting their talent acquisition strategies in response to evolving market conditions and emerging industry trends?
Natalie Ryan: In response to these conditions, I’ve witnessed private equity firms evolving their talent acquisition strategies to focus on operational excellence and technological innovation. Recognizing the critical need for portfolio companies to gain market share and outperform competitors, especially in a volatile tech market, PE firms are increasingly hiring operational partners or advisors. Examples would include advisors or operating partners with a background as a CMO or CTO. These individuals bring functional expertise to bridge gaps during executive transitions, ensuring continuity and strategic insight, particularly in areas where CEOs may lack depth.
A notable trend in this strategic adaptation is the hiring of Chief AI Officers. This role is central to enabling portfolio companies to integrate AI into their products, workflows, and decisions, enhancing their competitive edge through internal development or partnerships. Moreover, these AI executives play a crucial role in the due diligence of AI technology investments, ensuring a strategic fit and potential for value creation.
PE firms are also engaging in CEO market mapping and leveraging the network effect within their portfolio. I’ve led a couple of these market mapping exercises recently with great success.
Overall, all of these talent acquisition strategies not only deepen their reach into the executive talent pool but also foster a collaborative ecosystem among portfolio companies, enhancing their collective strength and market position.
What role does ‘culture fit’ play in the talent equation for PE firms?
Natalie Ryan: In the world of private equity, aligning culture with talent strategy is paramount. Contrary to the popular criticism that PE firms neglect the importance of a positive workplace culture, my experience paints a different picture. The perception that PE firms prioritize cost-cutting and profit maximization over fostering a positive work environment is not entirely accurate. Yes, PE investments are driven by the pursuit of robust financial performance; however, the PE investors I’ve partnered with recognize the critical role a positive culture plays in ensuring long-term business success and transformation. The essence of sustainable success lies in having leadership that genuinely cares for employees, fostering collaboration among peers and investors alike.
Attracting and retaining top talent becomes a formidable challenge without a positive and enjoyable work culture. Moreover, when a PE firm steps in, it meticulously selects executive talent that resonates with the organization’s values and operational philosophy. This alignment is pivotal in catalyzing transformational change, operational enhancements, and business growth.
Creating a leadership team is akin to assembling an orchestra: all must play from the same music sheet for success. A harmonious culture fit facilitates seamless collaboration, streamlined decision-making, and a unified approach to surmounting obstacles. An executive team capable of cultivating a conducive culture improves team dynamics and significantly contributes to superior business outcomes.
Do you anticipate a surge in AI-focused hiring in PE-backed companies this year and beyond?
Natalie Ryan: Absolutely. In PE-backed companies’ current landscape, AI integration is not just a trend but a strategic pivot towards innovation and competitive differentiation. As previously mentioned, private equity firms’ growing interest in appointing Chief AI Officers highlights their commitment to leveraging AI at the executive level. Furthermore, I’ve seen a surge in VP Partnership roles, specifically aimed at fostering collaborations with AI platforms; this underscores a proactive approach toward embedding AI in product development. This strategy enables companies to gain early insights into upcoming AI technologies, allowing them to tailor their offerings more effectively to secure a competitive edge.
Beyond tech, industries traditionally backed by PE firms—finance, healthcare, manufacturing, and retail—are increasingly recognizing the imperative of AI in maintaining market leadership, too. This recognition has already translated into substantial investments in AI applications, driven by the need to innovate, enhance operational efficiencies, and personalize customer experiences. Consequently, there has been a growing demand for specialized AI talent, including data scientists, machine learning engineers, and AI researchers. These roles are critical in developing and implementing AI strategies that align with the companies’ long-term visions and are often integrated within the broader technology leadership framework, reporting to the Chief Technology Officer, Chief Data Officer, Chief Digital Officer, or Chief Information Officer, depending on the organization’s specific needs and technological infrastructure.
Given these developments, it’s clear that PE-backed companies are not only anticipating but actively contributing to a surge in AI-focused hiring. This trend is expected to accelerate in the coming years as AI becomes an indispensable element of a competitive strategy across most (if not all) industries.
Looking into your crystal ball, how do you expect 2024 to play out?
Jon Landau: Through Q1 2024, SPMB is currently on pace to match our 2023 search volume, with CEO/GM, Sales, and Product Management remaining the top three functions of interest for our PE-backed clients. That said, based on a number of conversations with our PE investor partners, we’re seeing positive indicators of a modest uptick in PE deal activity slated for the back half of the year.
Solving our clients’ most challenging problems through talent acquisition has been and remains our top priority in both up and down markets. If we can help you take advantage of the current market conditions to expand or upgrade your leadership team, we would love to have these conversations. Contact us directly or visit us at SPMB.com .
