Whether you are an early-stage investor in New Zealand or a growth equity investor in the US, the issue around human capital and specifically talent assessment, acquisition and retention is universal
This topic is equally, if not more important to the founders and operators of capitalized assets who are looking to realize and/or maximize their company’s enterprise value. In the post pandemic world, this topic has picked up even more steam as talented people have had time to reflect on their own needs and aspirations. This has led to a major supply demand conundrum for operators and investors trying to build teams and accelerate growth.
Those that can help solve human capital challenges for their portfolios are differentiating themselves from their peers.
Finding the Right Partner
In the current investing climate, where there is a ton of money floating around, investors who can show sellers and operators how they can help beyond financial capital will win more bids.
Those that can help solve human capital challenges for their portfolios are differentiating themselves from their peers. On the flip side, the operators or founders who are selling minority or majority stake in their companies, want a partner who can not only give them the money but help solve problems. These sellers have become incredibly wise in their diligence homing in on just the ‘what’ but also ‘how’ their potential investing partner can do to alleviate their problems.
With human capital challenges at the top of the stack, it is often the leading area of investigation for the founders.
As an investor, the five basic questions that I start my diligence with include (there are many others that follow these questions):
- Do I have a founding/operating team that I would like to work with?
- Are they talented enough to realize and maximize the inherent enterprise value of the business they have built?
- Does that team realize not just “what” but “who” they need in their organization to help deliver on the company’s potential?
- Can I either coach them and/or find them the additional talent they need to help them, and their business be successful?
- Do they have high Emotional Quotient/Intelligence that will help them acquire, cultivate and retain talent and hence build an organization that can deliver the returns I am willing to underwrite?
As a seller/operator, the five key human capital questions I find myself asking, and those that I have faced (as an investor) most recently include:
- Why should I accept this firm’s deal over the next three funds waiting outside the door?
- What can they do for me when it comes to building my team?
- Do they have a proven track record (process, tools, and case studies) of building high performing teams quickly?
- Do they have high enough Emotional Quotient/Intelligence to work with me and my team?
- What is the quality of their own team and ability to acquire, cultivate and retain talent in their own firm (have they practiced what they would like me to do)?
I find this amplified focus on human capital/talent results in a very healthy tension between the sellers and investors. With deeper diligence on people, clear and honest human capital plans, and commitment to going beyond financial capital infusion, there is a much higher chance of realizing a higher investment yield for both sides.
Do you have a technology or company that needs funding and support? We are looking for innovative, pre-revenue companies with strong intellectual property and global potential.