Anand Shah

PE - How to Use AI to Unlock Growth in Portfolio Companies All PE firms and portfolio companies should be thinking about unlocking GTM and growth via AI (i.e. not merely ChatGPT or other LLMs but actually implementing apps that are "AI Agents"). 1. What are "AI Agents"? - AI agents are autonomous systems powered by ML and natural language processing, designed to perform tasks with minimal human intervention - They can interpret data, determine the workflow & direction (i.e. make decisions), and execute actions across various functions, continuously improving through self-learning 2. Examples of using AI Agents in PE portfolio companies: - For Sales: AI agents handle lead qualification, respond to inquiries, book meetings, and provide personalized product recommendations, ensuring no opportunities are missed - For Marketing: Generate campaign briefs, segment audiences, create tailored content, and analyze performance to optimize outreach efforts - For Customer Success & Support: Provide 24/7 support, resolve customer issues autonomously, escalate complex cases to human agents with full context, and ensure consistent, brand-aligned responses 3. How PE portfolio companies benefit: - Efficiency: Automate repetitive tasks, enabling teams to focus on high-value activities - Scalability: Handle growing customer volumes without increasing headcount - Personalization: Deliver tailored experiences using real-time data insights - $ Cost Savings: Reduce operational costs by streamlining workflows 4. Business Impact for PE Portfolio Companies: - Accelerate GTM Execution: Faster lead conversion, better customer retention, and enhanced marketing ROI - Improve Metrics: Boost Customer NPS, CSAT, and efficiency - Enable Growth: Scale operations seamlessly while improving team productivity. 5. How PE Firms Must Think About Adoption - Define clear portfolio objectives to use AI agents (not just LLMs) - Ensure integration with existing CRM and data systems - Prioritize high-quality data and ongoing performance monitoring - Use AI agents to complement existing GTM teams, focusing them on automation ------------------ #pe #privateequity #investing #ai

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PE - PE Portfolio & the Value in AI BCG on "Where’s the Value in AI?": > AI Adoption Challenges: 4% of companies are at the forefront, consistently driving substantial value with AI, scaling and realizing returns on AI investments - these are the market leaders in using AI > Value in Core Processes: market leaders achieve 62% of AI-generated value in core functions, including operations (23%), sales/marketing (20%), and R&D (13%). This focus yields a 50% revenue growth advantage and 60% higher shareholder returns over less mature companies. > Strategic Differences Among Leaders: Leading companies focus on: 1. Prioritizing AI in core functions and support 2. Driving AI initiatives aimed at revenue growth and cost reduction 3. Investing heavily in a few, high-impact AI projects with the potential to scale > Important - GTM Benefits: sales/marketing gains from AI are significant ins sectors like software, media, and telecom > AI Playbook for Success: 1. Set a bold strategic commitment from the top 2. Maximize the potential value of AI with initiatives that include streamlining everyday business processes, transforming entire business functions, and developing new offerings 3. Implement one to three high-value, easy-to-implement initiatives to fund the journey 4. Ensure that the minimal viable infrastructure required for these initiatives exists 5. Perform an AI maturity assessment to baseline current critical capability gaps versus peers 6. Ensure that implementation governance focuses on people and processes over technology and algorithms 7. Set up guardrails to deploy AI responsibly --- Source: BCG, "Where is the Value in AI?", https://buff.ly/4fifzNC ------------------ #pe #privateequity #ai #ceo #cro #saas #gtm #growth #middlemarket #boardofdirectors #board #revenue #revenuegrowth #investing #investment #finance #business

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PE - Portfolio / Cost of Revenue is up 68% Key to success in PE: - Optimizing Revenue Growth in a capital-efficient and profitable way - Unique strategies that are profitable and drive disproportionate ROI are critical today in PE - Successful growth is both: ARR and EBITDA Great panel with Seth Brody at Apax Partners, Craig Greenseid at The Carlyle Group Rajveer (Raj) Kushwaha at Warburg Pincus Prerak Vohra at Goldman Sachs and Michael Hoffman at SBI at the Private Equity International NYC conference. --------- #pe #privateequity

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PE - PE Acceleration Toolkit (i.e. not Playbook) What commercial, GTM and growth areas do you cover in your "PE Portfolio Company Toolkit" (i.e. some funds like Vista Equity Partners call it a Playbook but I refer to it as toolkit with the aim of it being a participatory, not a prescriptive playbook)? Some ideas* come to mind - what else? (* i.e. Commercial/GTM/Revenue Growth - not including Product, Engineering, R&D and other functions) 1. Sales Optimization   - Sales Org Structure   - Sales Management Process   - Sales Prospecting & Outbound   - Sales Process Engineering - Pipeline Management - Forecasting & Commit Process - Forecasting Rollups - CEO & Board   - Sales performance metrics and KPIs   - Channel Sales, Partner and alliance programs   - Rev Ops & Sales Enablement   - Sales Quota, Compensation & Incentives   - Sales Tech & Automation 2. Marketing Optimization   - B2B Demand Generation strategy   - Marketing Management - Marketing Process Engineering - Defining Lead Nomenclature - Campaign Management - Strategic Messaging Architecture   - PLG - Product Led Growth   - Digital & Inbound marketing    - Account-based marketing (ABM) - Customer Marketing - Product Marketing - Marketing/Sales Alignment & SLAs   - Marketing Metrics / KPIs   - Marketing Tech & Automation 3. Customer Management, Success and Retention   - Customer onboarding processes   - VOC - collecting and analyzing customer feedback   - Customer Segmentation   - Customer Management Processes   - Proactive customer Engagement   - AM & Expansion Sales   - Renewal strategies   - Customer loyalty strategies   - Customer support optimization   - Customer metrics and KPIs 4. Pricing and Packaging   - Pricing strategies   - Value-based pricing   - Discounting strategies & pricing transparency   - Subscription and usage-based models   - Pricing experimentation and A/B testing   - Competitive pricing analysis 5. Operational Efficiency   - SaaS metrics (CAC, LTV, churn rate, etc.)   - Process automation and workflow optimization 6. Talent & Culture   - Leadership & Management    - Attracting and retaining top talent   - Building a high-performance culture   - Performance Management   - Remote work best practices   - Continuous learning and development 7. Community Building   - Community creation & engagement   - Building an ecosystem around the product   - Customer Advocacy Programs 8. Data and Analytics   - Data-driven decision-making   - Business intelligence (BI) tools and dashboards   - Data governance, security and privacy   - AI applications Other: 9. Product (& GTM Alignment) 10. M&A (Commercial/GTM integration) 11. Finance (Supporting the GTM org) 12. GTM Board Updates & KPIs 13. Etc. ------------------ #pe #privateequity #business

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💡Benchmarks in the investment industry serve as a standard for measuring the performance of securities, mutual funds, or investment managers. They provide a reference point for analyzing allocation, risk, and return of a portfolio, enabling investors to make informed decisions. Thanks Peter Walker for keeping us all informed!! Can’t wait for this!! Follow and get on the waitlist for this one! #benchmarks #fundraising #Capitalraise #founders #womenshealth #femhealth #medtech #wellness

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In vertical SaaS, the very best companies landed with a product solving a specific, burning pain point that horizontal solutions solved badly and then became broad product suites over time (ServiceTitan, Veeva Systems, Doximity, etc). My partner Gordon Ritter calls this “layering the cake”. In vertical AI, the landing wedges are much more brittle. While the painpoints they solve are very real (and often unaddressable by SaaS alone), they’re also much more likely to commodotize in the near term as the tech advances. 👀 Therefore, the need to layer the cake in vertical AI is much more urgent than in vertical SaaS. 👀 The best vertical AI CEOs not only recognize the dynamic, but talk about it openly. Helps those around them keep up the speed of innovation and their eyes on the bigger prize.

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What Boards talk about is important, what they don't talk about maybe more so as it has undue influence on outcomes. Reviewing the Sales Model versus just the outcomes creates failure points in scaling. Or, letting the technical debt accumulate to the point of crisis courts disaster. Establishing a cadence of meeting subjects keeps things from being overlooked and unaddressed.

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PE - Gross & Operating Margins <> Unique & Compelling Value Proposition, from Pat Grady on the "Invest Like the Best" podcast Pat Grady, Growth Equity Investor: "Unique and compelling value proposition is a comment on margin structure. If you have a unique value proposition, that should show up in Gross Margin because if your product is truly unique, you should be a price setter, not a price taker. And if you are a price setter, you should be able to set a price that's going to provide you with nice gross margins. So unique value prop gets you to a good gross margin. Compelling value prop is a comment on Operating Margin. If your product is truly so compelling, you shouldn't have to bludgeon people to death with sales and marketing to get them to try it and to get them to pay you for it. So if it is truly compelling, that should show up in the efficiency of your go-to-market organization or maybe there's a number like new ARR divided by sales and marketing where there's a number like LTV to CAC or there's a number like payback period. There should be some number or maybe 99% of your new customers come in organically." Source: Pat Grady & Patrick O'Shaughnessy, CFA https://lnkd.in/e38cjdyG #growth #investing #pe #privateequity #sequoia

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One of the things we see quite often at Grit Capital Partners, is a newly minted CEO. We see a big difference in the transition to CEO based upon the historical lane the CEO is coming from. There are different new muscles if you are coming from Product, Engineering, Finance, etc. In this article, we go deep on the CRO to CEO transition, which includes some thoughts from Rosie O'Meara, a particularly fine example of someone who has made the transition quite well. What were your biggest transition moments? https://lnkd.in/eEB-K2ZU

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What all corporates with a serious approach to innovation and growth should be realising by now.....merging CVC- and Venture Building efforts (and teams)... Add a deliberate M&A strategy (in an increasingly distressed startup ecosystem) and a small AI-Agent builder team and you have the winning formula for the next 5 years :)

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Tech PE - SaaS & Revenue Growth The image below starts with the most important initial driver of a "virtuous growth cycle" and I totally agreed with Bain & Company: It's Lead Generation which comes first, at the top. --- I am reminded of a key insights in Jason M. Lemkin's book "From Impossible to Inevitable" that highlights the most important role in driving SaaS growth: Lead generation is the #1 driver of growth. Don't over-index on just the product, not your sales team - it’s leads that convert into the Opps/pipeline. If you don’t have leads, you won’t have sales. This underscores the importance of consistent and scalable lead generation as the foundation for any company's revenue growth, highlighting that even the best sales team or product can’t thrive without a steady flow of leads. Source- the image below is from the report from OPEXEngine by Bain & Company can be found in their post: https://lnkd.in/dBbHF2tz ---- #pe #privateequity #growth #saas #tech #finance #investing #business

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VC platform teams rarely add meaningful value to portfolio companies. They’re mostly a tool for GPs to justify raising larger funds and collecting higher management fees.

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PE - Top Insights from Bain on PE & Commercial Excellence Key Insights in PE: - "Commercial Excellence" is the Key Driver of Growth and Impact: Enhancing sales, marketing, and customer success drives significant organic growth, boosting exit multiples in PE - Focus on Revenue Growth: Accelerating top-line growth has a *greater impact* on Equity Value in PE than other value creation strategies alone, such as cost-cutting - Start Commercial Due Diligence Early: Early focus on GTM strategies uncovers value-creation opportunities faster post-acquisition - Prioritize Early Wins: Tackle GTM priorities early to achieve quick growth wins - Realign GTM Teams for Impact: Aligning teams to priority accounts drives efficient resource deployment and growth - Build Long-Term Capabilities: Optimizing GTM initiatives for the long term improves both revenue growth and EBITDA - Prioritize High-Value Accounts: Fine-tuned customer segmentation helps prioritize high-value accounts, maximizing long-term customer value - Target Value Propositions: Focusing on key accounts and optimizing GTM strategy unlocks new growth opportunities. - Leverage Tech Stack: Digital tools like analytics can help scale market strategies, driving better results (including exits in PE) Source: @Bain - "How Commercial Excellence Accelerates Growth in PE: The ability to ignite revenue growth is separating the best from the rest." by Jason McLinn, David Burns and Mark Kovac ------------------ #pe #privateequity #tech #ceo #cro #saas #gtm #growth #middlemarket #boardofdirectors #board #revenue #revenuegrowth #investing #investment #finance #business

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The acquisition game is very different from 10 years ago now that 70% of SaaS acquisitions are led by private equity investors or PE-owned strategic buyers. Most SaaS founders aren't thinking about the new realities of eventually selling their SaaS companies. It's very different than the old days of "sell it for big multiples to a strategic buyer, cash out, and see ya later." Here are 5 questions for founders to consider the new realities of a potential PE-backed exit: 1) Is my company built to keep growing efficiently after I sell it? - Your SaaS metrics need to be healthy. Growing steadily with efficient CAC and solid revenue retention - You need a business that runs without you, the founder. - And you will still be responsible for fixing the problems in your business. 2) Would I invest in the new company with my hard-earned equity or cash? PE buyers don't cash you out of 100% of your equity, just a partial "first bite of the apple" prize. They buy a minority or majority of your company, so you become the major private investor in the acquiring business. This is not an earn-out. You now own shares in a new company that you don't control. You must be confident enough in the new owners, operators, culture, and vision to invest 20-60% of your hard-earned equity in this new venture. 2) Why will this acquisition work to build and sell a much bigger company? Most old-style mergers and acquisitions didn't work for either side. In this new world, founders need to find the right owner/partner with the right strategy and team to ensure their hard-earned equity pays off on their "2nd bite of the apple" when it is sold again. Founders should also do deep due diligence on their acquiring PE investors, not just pitch themselves for "sale" to any takers. 3) Do I trust the new owners and operators to do the right things? Most founders don't stay on as CEOs when they sell to PE buyers. Someone else owns your business (PEs), and they have CEOs who will run the business their way. 90% of founder-CEOs who sell to PE end up as board members with the ability to make suggestions to the new leaders. That's it. You must trust the people and their approach to your business and your precious equity. 4) How will things change now that I'm not the CEO? Maybe you continue running the business as a CEO with new owners for a while, but eventually, you won't be there. Now what? How do you spend your time now that you're only an involved board member? This is very jarring for most former CEOs, so it's worth considering before selling. 5) How will things change now that I have money? The biggest reason to sell a major part of your healthy SaaS business is to take some chips off the table and win a major cash prize. You invested 5-15 years in this business and probably some of your own cash. Now what? Will your life change a little or a lot? It's a whole new world for successful SaaS founders when they sell to PE buyers. #practicalfounders

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Open-source models can be a strong lever for increasing gross margins at AI companies, especially those that have hefty cost structures (e.g., enterprise sales orgs that require significant customer success or implementation resources, as well forward-deployed AI services models common in healthcare and life sciences). One of many reasons to maintain a modular and flexible stack with minimal dependencies when building an AI company. More on the importance of flexibility in the AI stack: https://lnkd.in/eA2XATRk h/t Delip Rao #ai #artificialintelligence #generativeai #healthcare

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🔑 The Power of a Written Exercise in Interviewing Revenue Leaders 📝 Hiring the right revenue leader can make or break an organization. As we search for smart folks to drive our revenue growth at Vanta, one approach has consistently proven to be a game-changer: the written exercise. 🔍 Why a Written Exercise? Clarity of Thought: A well designed exercise reveals a candidate's ability to articulate complex ideas clearly and concisely. This skill is vital for revenue leaders who must communicate strategies across diverse teams and stakeholders. Strategic Insight: Through real-world scenarios, candidates demonstrate their strategic thinking and problem-solving abilities. This helps us gauge their approach to challenges and opportunities unique to our business. Analytical Prowess: Written exercises allow candidates to showcase their analytical skills. By dissecting data and presenting actionable insights, we can see how they drive decisions that lead to growth. Cultural Fit: How a candidate approaches a written task can also give us a glimpse into their work ethic, attention to detail, and alignment with our company values and culture. Elliot Goldwater has really nailed this practice, and it's incredible how much the exercise can swing a process towards or away from a candidate. 👥 Have you implemented written exercises in your hiring process? What has been your experience? #RevenueGrowth #Leadership #HiringTrends #Interviewing #TalentAcquisition #Strategy

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PE - Effective Boards of Directors (Expectations of Boards & CEOs) Insights for expectation setting for effective Boards of Directors for PE-backed CEOs: ------------------ Expectations of Board Directors: - Stay informed about the company’s business and industry trends - Prepare for meetings by reviewing materials and bringing relevant questions - Contribute meaningful insights and engage in discussions without dominating - Express views during meetings rather than waiting for private discussions - Provide constructive feedback with respect and professionalism - Be fully present and engaged during meetings - Support board decisions once made, even if personally opposed - Foster a positive working relationship and culture with management Expectations of the CEO & the Management Team: - Maintain transparency, especially in reporting bad news to the board - Uphold high ethical standards and deliver on financial and operational goals - Keep the board updated on significant developments promptly - Involve the board in decision-making as thought-partners, not just for final approvals - Provide clear and sufficient pre-reading materials for informed decision-making - Expose the board to high-potential executives for better succession planning - Promote a positive, energetic corporate culture in dealings with both employees and the board ------------------ Source:  "Sample Expectations of Board and Management" - Great Companies Deserve Great Boards: A CEO’s Guide to the Boardroom by Beverly Behan --- #boards #directors #pe #privateequity

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Here’s a question investors are often asked: When evaluating early stage companies, how much time do you spend on due diligence around future exits? It’s not surprising we hear this question a lot. Also not surprising: it’s got a wide range of answers depending on the firm. Some don’t spend much time here at all. Others make it a point to put meaningful time in as part of their process. Our current thinking: take the time to do the work on public market comps. At Alpaca VC, we spend significant time understanding how public market investors will  realistically value a business based on margin profile, product, business model & TAM. In short, we want to know: how will this company be valued at scale when we get taken out? Yes, we can acknowledge that the journey toward exit is a windy road and that there may be pivots along the way, but there are still public market companies that have a business model similar to the early stage company you're evaluating. And you can always look at gross profit multiples if you think the margin profile will change over time. So we still do the work on the comps. Quantitative metrics we look at when making the comparison to public market comps include EBITDA multiple, revenue multiple, Gross Profit multiple or all of the above. As part of this process, it’s also important to factor in the public market company’s year-over-year revenue growth as this will also significantly impact the multiple it trades at. Simple example: if you have two public market companies with similar business models and similar margin profiles, but one's growing 100% year over year, and one's growing 50% year over year, then obviously the DCF (discounted cash flow) analysis is going to spit out a very different valuation for the one that's growing faster. Why this matters: When you take all of that information into account as you evaluate an early stage business, you can begin to create a realistic picture of how this company will be valued in the public markets at exit - or how an acquirer will value the company for an acquisition. Strategic acquirers may, of course, pay a premium, but we won’t underwrite for that. This allows us, for example, to form conviction around valuation based on revenue and gross profit predictions. If we think they can do $100M of revenue five years from now, we use this diligence process to form a thesis about whether the characteristics above (product, margin, business model, etc.) will cause the company to be valued at $200M vs. $500M vs. $1B at exit. Curious how other early stage investors think about underwriting an exit and how much time they’re spending on public market comps even though these companies are in their infancy.

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