The Talent Partner Study: Inside the VC. October 2018

Transcription

1 The Talent Partner Study: Inside the VC October 2018

2 Earlier this year, True Search deployed an online survey to Talent Partners1 of 90 leading VC firms based in the U.S. and Europe predominantly Early Stage (series A or B) to Late Stage Venture (series C+); 106 Talent Partners participated, representing 72% of those surveyed. We work closely with professionals in this function on a day-to-day basis but found there was little literature or research detailing how the function was developing, where they spent their time, and how they were compensated so we decided to ask them. The insights gathered about this increasingly prevalent, yet still developing, function are presented in the following report. True Search appreciates all those that supported and contributed to this effort. 1 We define a Talent Partner as someone employed by a fund on a full or part-time basis whose primary focus is talent related activities on behalf of the fund and its portfolio companies. 2

3 MOST RECENT FUND SIZE $0-100m - 8% $ m - 11% $ m - 6% $ m - 9% $ m - 3% $ m - 9% $ m - 4% $ m - 3% $ m - 3% $901m-1bn - 2% $ bn - 5% $ bn - 13% $ bn - 3% $1.76-2bn - 3% $2bn+ - 15% Introduction We mapped 86 VC funds in Europe (30 with a Talent Partner (35%) and 93 VC funds in the U.S. (62 with at least one Talent Partner (66%). Investment Stage Most respondents were from Early Stage (Series A or B) to Late Stage Venture (Series C+). Locations Our findings show the most prominent location for Talent Partners is currently the U.S. and primarily in the Bay Area (71%; inclusive of SF and Silicon Valley). By contrast, only 8% are in Europe (London and Berlin). TOTAL ASSETS UNDER MANAGEMENT ( AUM ) $0-500m - 16% $501m-1bn - 18% $1.1bn-2bn - 15% $2.1bn - 3bn - 8% $3.1-4bn - 4% $4.1-5bn - 6% $5.1bn-6bn - 9% $6.1-7bn - 7% $7.1bn-8bn - 3% $8.1bn-9bn - 1% $9.1bn-10bn - 1% $10bn+ - 10% 3

4 Talent Partner Profile Most Talent Partners (58%) have been in their roles for 3 years or less and 90% for 6 years or less. This shows that, even in the Bay Area, this role is a young and emerging function in the VC domain that has seen increased investment and focus in recent years. Length of Time as a Talent Partner While still a relatively new function, we found that in terms of professional background, most Talent Partners have cumulative work experience of years. Only 7% of respondents have less than 5 years cumulative work experience. Participants were asked where they had spent their career prior to becoming a Talent Partner. The results showed that over 90% of Talent Partners have either an Executive Search or Recruiting background, often combined with experience in other fields. Previous Experience Prior to Becoming a Talent Partner 4

5 A Relatively Young Function In line with our findings regarding their experience, most funds have only had the Talent Partner function for 3 years or less. The majority of funds do not yet have a team larger than 1 or 2 Talent Partners although there are some notable outliers that have invested heavily in the function. We also compared the average number of Talent Partners with AUM. Unsurprisingly, and on average, the greater the AUM, the more Talent Partners at the fund more cash flow from management fees equals more investment in the function. Team Size 5

6 How Does the Talent Partner Team Divide Responsibilities? The majority of funds with two or more Talent Partners split responsibility between the team members by function (e.g. Board / CEO and Sales / GTM, etc.), seniority of the hire, industry sector or geography. 6

7 How Do They Allocate Time Across Priorities? We asked Talent Partners to highlight their strategic priorities for 2018 and then compared this to how they actually spent their time in The results revealed that Talent Partners have a highly varied number of responsibilities that can be difficult to prioritize throughout any given year. This suggests that this is an inherent aspect of the role. The data below shows 2018 priorities compared to time spent on these areas in

8 Top Strategic Priorities in Advising portfolio companies on recruiting matters (71%) Managing the firm s collective executive talent network (61%) Managing search firm relationships (47%) Advising portfolio companies on compensation (40%) Key Insight: Unsurprisingly perhaps, the top four priorities Lowest ranked priority: Internal HR work (16%) are closely related to talent acquisition for the portfolio. Percentages shown based on total respondents. 8

9 Greatest Influences We wanted to learn who has the greatest influence on how Talent Partners spend their time. Based on their responses, in most cases they set their own agenda. This indicates the need for highly autonomous, self starters in the role with the ability to prioritize and execute consistently. Predictably, the second biggest influencer on time is their investment professional colleagues, who lead and manage the investments. Where respondents selected Other, comments indicated a combination of fund needs and their own judgement. 9

10 Involvement with Portfolio In any given year, the majority of Talent Partners (60%) will work with between 25-75% of their portfolio companies. This was interesting to see given venture returns are typically generated by a small percentage of the overall portfolio. It indicates that Talent Partners work with a high number of companies to help them realize their potential. Respondents also shared that they typically interact with the management teams of the portfolio companies they work with on a weekly or monthly basis. The cadence of interactions often depends on how recent the investment is, with more attention being directed to more recent additions to the portfolio. 10

11 Challenges to Success Almost 60% of Talent Partners identified their biggest challenge to success is the sheer variety of tasks required by the function. This was closely followed by resource constraints in terms of the headcount needed to execute against these tasks. The challenge of demonstrating ROI for the function given many of its activities does not necessarily carry a quantitatively measurable outcome. Despite resource constraints being identified as a clear inhibitor to success, approximately 60% of Talent Partners confirmed that they have no plans to expand the size of the talent team in the short term (next 12 months). 11

12 Key Challenges Defining priorities. Resource constraints. Difficult to define ROI and success metrics. Building stronger relationships. More than 60% revealed that their biggest challenge to succeed is the variety of tasks within the Talent Partner function. 60% indicated no plans to expand their Talent Partner team in The top three ways that respondents recommend to better assess ROI are: Majority of respondents shared that developing better partnerships with their portfolio companies and investment professionals is needed to succeed in their role. 1. Increase CEO engagement level 2. Increase the size of their executive network and executive introductions 3. Complete executive searches indirectly or directly across their portfolio 12

13 What Does the Future Look Like for Talent Partners? MORE TECH/ DATA DRIVEN STRATEGIC + ADVISORY GROWTH + SPECIALIZATION DEAL STAGE INVOLVEMENT Automated processes, predictive psychometric tools, tracking candidates, companies and relationships, leverage data to improve the quality of searches. Evolving to a more strategic/ advisory role vs. a tactical/ execution oriented role. Increasing the team size to lead to more specialization in the role. Helping to win deals as a strategic advantage in pitches or actually moving to more deal sourcing or deal enablement. Based on the top four comments received. 13

14 There will be more of a focus on contributing to deal sourcing/deal enablement. It will become a key role for VC/Investors in Europe; in the USA it is already a key role. It s going to become slightly drowned out as each firm has their own set of Talent Partners and companies have multiple rounds, investors, etc. Talent Partners will either need to work together, or work even closer with their executives to bring value to the table. This will morph with how investors work in the next 5 years. Will be recognized as a key contributor of value and rewarded appropriately. Will increasingly have presence on Boards and pitched as part of portfolio support to entrepreneurs. Similar to a CISO, top Talent Partners will be deal enablers (different from sourcing). The key challenge will be a transition from transactional value to strategic value and working more proactively across a portfolio vs. more reactionary to current needs. Firms will devote more resources to this function over time. With more data and better systems, having better informed discussions with CEOs to help influence their talent agendas. This will become a must-have function in every VC firm. This role will evolve to be a lot more advisory rather than tied directly to recruiting. What does the future look like for Talent Partners? Seed = more hands-on Venture/Growth = more strategic Both = more talent CRM-enablement to productize Talent Networks and achieve more-with-less. 14

15 Compensation Total Annual Cash Compensation We asked Talent Partners to indicate their total annual cash compensation (base salary + bonus) and compared against a set of data points in order to ascertain whether cash compensation varied depending on any of the following: (a) size of fund (total AUM) (b) size of last fund raised (c) total years of experience (d) years of experience working as a Talent Partner 15

16 Compensation: by total AUM 16

17 Compensation: by size of last fund raised The firms with the lowest, most recent fund size had the lowest compensation range. It was only where the most recent fund size hit the $900M+ mark that we saw compensation of $750K or more for a Talent Partner. 17

18 Compensation: by total years of experience The more years of overall experience, the greater the compensation. Only Talent Partners with 20+ years of cumulative experience received compensation of over $1M. 18

19 Compensation: by years of experience working as a Talent Partner A similar trend emerged with years of experience as a Talent Partner. Although it s more difficult to draw conclusions here, as we found that very few Talent Partners had more than 15 years of experience. 19

20 Long-Term Compensation Using the same data points noted below, we compared long-term compensation (carried interest + other forms): (a) size of fund (total AUM) (b) size of last fund raised (c) total years of experience (d) years of experience working as a Talent Partner 20

21 Long-Term Compensation: by total AUM For funds with less than $3bn in AUM, there are greater ranges of long-term compensation, in some cases going up to $7M-$7.5M. This is also true for funds with the largest AUM amount of $10bn+. As noted earlier, the range in compensation at larger funds could be attributed to the varying levels of experience found in a bigger team. 21

22 Long-Term Compensation: by size of last fund raised 22

23 Long-Term Compensation: by total years of experience Long-term compensation of $7M+ was only paid to Talent Partners with at least 15 years of cumulative work experience. 23

24 Long-Term Compensation: by years of experience working as a Talent Partner It is difficult to draw conclusions here as generally speaking most Talent Partners have less than three years of experience in the role. 24

25 Measuring Talent Partner ROI We asked respondents how their funds measure the ROI of their activities. The general consensus was that it is challenging to measure ROI consistently and there is no one way of going about it. Most funds combine a number of different metrics to track and measure success. Interestingly, the most popular metric was an increase in the level of CEO engagement while overall fund and company performance were ranked less important. 25

26 Measuring ROI We also asked respondents whether they thought there were ways that the fund could better measure Talent Partner ROI. While the majority of respondents agreed it is challenging to do this successfully, we wanted to share some of the key comments. A popular comment was that CEO / portfolio company feedback is the best way to measure ROI. Another comment identifies that hiring retention rates for hires made when a Talent Partner was involved could be used, although there was no consensus here. Expansion of the network, more broadly and the number of these nodes that are verified via references as top talent. We re often too reactive. Founder/CEO NPS is #1. Management team feedback, success of hiring and other HR metrics. I don t think it s fully appreciated or could be measured by how important the part is of managing relationships with recruiters and recruiting firms. It can make or break important hires depending on the results. It s a big part of the job but I find it s not that known or valued. Brand equity, though hard to measure....all they (investment professional colleagues) care about is that the founders/ceos are getting value out of the talent team. No desire to track anything else like # of meetings, placements etc. Directly asking How helpful was X? A lot of talent support is hard to measure numerically, so qualitative feedback might be a better measure. How could ROI be measured? We don t overthink ROI since it is hard to measure, and I am very integrated in everything the deal team is doing. 26

27 Key Findings Measuring success is challenging. The variety of tasks required of Talent Partners and the difficulty with setting clear priorities makes accurately measuring ROI challenging. Investment is apparent. More and more funds are investing in the function as a way of helping their portfolio companies hire great people. The investment in the Talent Partner team will be a critical ingredient to achieve success as they undergo rapid growth. The function will be a key expectation. We foresee more funds choosing to add resources in the talent arena going forward as it becomes a key expectation of entrepreneurs when selecting funds they want to work with as they strive to become market leaders. Research led by Will Bruce, Partner, EMEA, Ben Dewar, Partner and Head of the People + Talent Practice 27

28 True Search is part of True Talent Advisory, a global portfolio of products and services centered on talent.