Maybe you have a friend who made this career shift in the past, or perhaps you noticed someone's profile and thought “Hey that looks like a sweet gig!”. Regardless, your interest was piqued and you want to know more about becoming an Operating Partner for Private Equity and/or Venture Capital firms.
An operating partner is a term used by venture capital and private equity firms to describe a role dedicated to working with privately held companies to assess their value during the due diligence process and create gameplans for improving their weak areas post-investment.
As mentioned above, operating partners perform a variety of services aimed at improving the performance of a struggling and/or developing business. Private Equity or Venture capital firms will have an entire team of functional experts ready to be deployed into their portfolio companies to assess and coach their leadership teams as part of a broader transformation strategy. These experts will have extensive backgrounds in things like Digital Transformation, Finance & IPO readiness, Marketing & PR, Talent Development & Acquisition, and the list goes on.
To the companies who receive investment from private equity or venture capital firms that leverage the operating partner model, imagine having on-demand support from an expert in one of the previously mentioned functions to support your team and guide you through complex challenges that your leadership team lacks the experience to solve.
It's important to know if you are going to consider this shift that there is a difference between leading and influencing. Many successful executives who are proficient leaders believe the skillsets transfer easily, but all too often those same executives are wrong. As an Operating Partner, your role is to influence the executive teams and provide expert opinion, that’s it. To be successful, you must be ok with not being the one in charge as that is rarely the reality. The role of an Operating Partner is much more closely aligned to being a coach & adviser, often offering recommendations and pushing forward subtle changes, than the person leading the charge. If that appeals to you, then great! You will find these roles to be both challenging and fulfilling; however, if you are someone who needs to hold the remote and choose the channel, you may want to reconsider.
Yes. The role of these partners requires them to be on the ground implementing change. Often, these executives are parachuted into businesses on a 3-6 month basis, spending 4-5 days on the ground until the project is finished and you’re off to the next one. The life of an operating partner is not all that different from that of a consultant. Some find it to be like an adventure and some feel the strain of being constantly on the move. In reality, your likes/dislikes will decide which group you fall into.
Compensation levels vary greatly depending on the size of the firm you are working for, but on average you can expect to be paid a base and bonus that is in line with your market value in-house at a company of a similar size. That alone may not be exciting for most of you, but the big cherry on top of Operating Partner compensation packages is the participation in Carry or Carried Interest, which is a person’s share of profits from a particular investment. This high risk/high reward form of compensation can create true “quality of life” changing payouts; however, they can also amount to nothing after years of hard work. When deciding whether or not this life is right for you, we would advise you to work under the assumption that Carry will likely never come to fruition. That way, it is always this amazing nice to have, and never something that your current lifestyle depends upon. Much of this can also be said about joining a startup and acquiring Options.
The role of a Private Equity Operating Partner is one of constant change and excitement where no two days are typically the same. If this sounds like something that would appeal to you, then your best way of breaking into this coveted space is to reach out directly to the investment partners and make your case as to why you would add value to their portfolio. (But read this before you do) If the constant change and unknown doesn’t appeal, then rest easy knowing there are always opportunities to continue down the path you are on. If you find yourself needing help on either path, join The Suite, and get support from a vetted community of your peers.