Moonshots — But With Discipline: New Opportunities Across Narrower Pipelines of Funding for Innovation
Our NU Leadership series continues, this time with a look at how requirements are changing for talent in the Venture Capital industry. For more industry-focused insights from NU Advisory Partners, visit our News and Insights page.
By Ben Dewar
These are tumultuous times for venture capital investors and the businesses they fund — which makes linking businesses in the industry with next-generation leaders fascinating, important, and genuinely transformational. Compared to a placement at, say, a Fortune 500 company, a world-class executive can make an outsized difference at a smaller, venture-backed company. In fact, two of the main reasons I enjoy working in venture are impact and immediacy.
With that in mind, here are the trends we’ve been observing in our recent work for VC firms and their portfolio companies.
What’s NU in Venture Capital?
Capital flows have declined sharply over the past two years — albeit from abnormal highs. Venture capital firms have raised significantly less money over the past few quarters than they did during 2021 and 2022—global funding was $58.5 billion in the fourth quarter of 2023, down 25% from a year earlier. Exits from VC-backed companies are down, too. But the overall numbers are very similar to where they were in 2019. The COVID years were just a different era – a dramatic outlier.
VC firms have been shifting their allocation of funding toward “barbell” patterns of investment. At one end of the barbell, investors are making early bets on very young companies that will take many years to reach an exit opportunity, IPO or otherwise. At the other end, VCs are doubling down on the proven winners within their portfolios – those with solid financials, sustainable growth and grounded valuations. Companies in the middle of the barbell are facing new struggles: with a dramatic shrink in available new capital, they are trying to continue growth with fewer resources, while slowing burn rates and driving toward profitability – all at once.
Tighter belts are forcing many portfolio companies to scale back on executive searches. Firms watching their expenses are increasingly forced to focus on filling and upleveling only the positions deemed truly critical to the survival of the business, rather than investing in broader upleveling across entire executive teams.
Finding Talent in VC
We look for candidates who can steer a rocket through stages beyond the hyper-growth of its launch. No matter how huge a company’s potential, it needs leadership to execute against opportunities. Venture-backed businesses must invest not only in great ideas, but also in great management teams. In 2023, the most robust changes occurred within the CEO, CRO, and CFO functions.
With funding uncertainty, we seek executives who will adapt to changing times. Venture is traditionally a space filled with founder-led businesses that seek executives with a strong growth orientation. As the sector moves into more of a wartime mentality, success requires leaders with different mindsets. Executives can’t rely anymore on predictable flows of money; they must demonstrate the capacity for leadership in up-and-down funding environments and they must bring more discipline in their deployment of scarce resources. Today’s climate demands leaders who adroitly balance a growth mindset and financial restraint.
Careers in VC
It’s now crucial for leaders at venture-backed companies to have some experience in financial management and revenue generation. In an environment where access to capital is tighter, businesses will prosper by managing their money better and making money more sustainably. Leaders must bring deep business acumen to every role across the executive team, not just those with titular financial responsibility.
Fielding the right team at the right time is crucial to navigating challenging markets. Traditionally, VC-backed CEOs have looked to hire other executives from within the venture ecosystem. In this time of new challenges, that’s changing: Companies are now looking far beyond the usual suspects to find the skills to ensure their success. Specifically, there’s a new appetite for candidates with private-equity backgrounds, who know how to grow businesses with financial rigor.
NU + Venture Capital
For decades, we have worked with executives across all asset classes, including venture capital and private equity, positioning us well to help clients attract the best talent for their moment in time. Like our venture clients, we are a small, nimble organization able to compete at the highest levels and deliver innovative solutions. Get in touch with us to learn more.
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