Movers and Shakers in VC Circles

Private equity is increasingly the phrase used for larger Venture Capital firms. There is also a more regular career track beginning to form for many top VCs. Private equity professionals increasingly either move from an operations role or from corporate finance. 

The last year saw interesting career moves for industry professionals in the emerging markets along with transition from big to small firms or shifts from industry domains to private equity. In the emerging markets with high growth, talent does get ahead, whatever the gender, which will be the challenge for the Americans. 

One such high rising female in India is Vishaka Mulye. She took over from Renuka Ramnath as the new MD & CEO of ICICI Venture in April 2009. A career banker who joined ICICI group in 1993, Mulye has occupied various roles in treasury, structured products and insurance. She was the CFO of the bank between 2005 and 2007 and later the CEO of ICICI Lombard General Insurance. Her appointment at the helm of India's largest private equity fund (with about $2 billion fund under management) has catapulted her into the big league.

Jacoline Loewen, Expert on private equity and author of Money Magnet, Attract Investors to Your Business.

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How would you learn from your lousy leader?

Douglas Adams once noted: "Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so."
On the same theme, Keith McFarland was in Toronto to speak to the YPO Leadership Forum. He is the author of The Breakthrough  Company and talks about the impact of leaders who have not matured. Keith talks about one leader who said "All Buyers Lie". This negative attitude to customers impacted terribly on his long term revenues eventually.
Here's a quick story I valued from Keith in BusinessWeek:
The hotshot vice-president who took over the marketing group where I worked when I was in my 20s was a great anti-mentor. Arrogant, quick-tempered, and controlling, it took him only about six months to turn a great department into a loose collection of warring fiefdoms. I knew I wanted out, so I observed what I thought at the time was proper etiquette:
me out of it but finally relented, extracting only one promise: I would allow him to tell the president of our organization about the change.

What I didn't know at the time was that he and the president were at war over some of the same issues that were causing me to flee and that he intended to use my departure as a weapon against the president, who had been my friend and sponsor for a number of years. So my boss said I was leaving my post because I was tired of the president meddling in the affairs of our department. Nothing could have been further from the truth, but the president appeared to believe him and was so offended by the statement that it took several years to repair my relationship with him.

What did my first anti-mentor teach me? That people, even those you view as untrustworthy, are essentially reliable. Wait, hadn't this person betrayed me by lying about my motivations for leaving the job? Yes, and that's precisely my point. His actions were entirely consistent. I knew he was selfish, manipulative, and insecure. So to expect him to behave otherwise was bad judgment on my part.

I realized right then that people are surprisingly dependable and vowed to use what I knew about them to predict how they're likely to act. When my boss asked me to let him relay my move to the president, I should have been on my guard. I should have said: "You know, my relationship with him goes back almost 10 years, and I wouldn't want to offend him by not telling him myself."

The funny thing is, as the years have passed, the anger I felt for my first anti-mentor has dissipated. The lesson to treat every person as reliable (based on who they really are) has served me well as an entrepreneur, whether I'm dealing with colleagues, investors, or customers.


Posted by Jacoline Loewen - see YouTube interview with National Post: VIEW

The key reason for private equity's success

The massive profits that some private equity firms make on their investments evoke admiration and envy. The mainstream reason (which has been true for a large portion of private equity funds) is due to the firms' aggressive use of debt, concentration on cash flow and margins, freedom from public company regulations, and hefty incentives for operating managers.

But I believe the key reason for private equity's success is the forced strategy of buying to sell.

Why do I say forced? Mainly because it is my experience that  public companies, which, in pursuit of synergies, usually buy to keep. This attitude or frame of reference brings very different pressures to bear on management.

The chief advantage of buying to sell is simple but often overlooked. Private equity's sweet spot is acquisitions that have been undermanaged or undervalued, where there's a onetime opportunity to increase a business's value. Once that gain has been realized, private equity firms sell for a maximum return. A corporate acquirer, in contrast, will dilute its return by hanging on to the business after the growth in value tapers off. Public companies that compete in this space can offer investors better returns than private equity firms do. (After all, a public company wouldn't deduct the 30% that funds take out of gross profits.) Kinross is doing this by getting into diamonds, not just gold. Their more inexperienced investors attracted by the gold price hike, get nervous and want a concentrated stock. More experienced and professional investors appreciate the subtle nuance of the management team.

Corporations have two options: (1) to copy private equity's model, as investment companies Wendel and Eurazeo have done with dramatic success, or (2) to take a flexible approach, holding businesses for as long as they can add value as owners. The latter would give companies an advantage over funds, which must liquidate within a preset time--potentially leaving money on the table. Both options present public companies with challenges, including capital gains taxes and a dearth of investment management skills. But the greatest barrier may be public companies' aversion to exiting a healthy business and their inability to see it the way private equity firms do - as the sale and cashing in of a successful transformation, not a strategic error.

Jacoline Loewen, author of Money Magnet, Attract investors to your business

How Private Equity is using Social Media

Details of Simmons Bedding Co.’s bankruptcy reorganization plan have been translated into Chinese and posted on a Web site in Guanzhou to encourage Chinese bids, the Wall Street Journal reports. The move is unlikely to disrupt the company’s plans to be sold to Ares Management LLC and Ontario Teachers’ pension plan, but it does show growing interest by Chinese bidders in U.S. assets, especially at discounted prices, the WSJ writes.

Do you want to make money or do you want to tick all the boxes correctly?

"We are rowing against a tide where people are more interested in how you are ticking a box, instead of how you are running a business. In private equity we have a very simple job: make money for our shareholders. It is a purity I quite like. Lack of clarity is the source of the trouble; not knowing what your job is." The head of the British Venture Capital Association spoke out about why entrepreneurs and private equity, not government, will be the partnership to save the British economy. (Read more)

The Canadian Venture Capital Association also talks about the power of private equity versus other forms of lending or public market capital. The theme you will see repeated at CVCA conferences and their work with private equity funds,  is the superior performance of aligned interests of privately held capital versus the public markets. The private equity investment is a much more involved and engaged form of ownership that the dispersed model found on the stock market. There a company's shares are typically held by a wide range of institutions, leading to the phenomenon of the "ownerless corporation", where investors fail to hold a powerful management to account.

At Isis, which targets mid-market businesses that are seeking between £2m and £30m of equity, Kolade is looking to sectors such as healthcare and online retail for growth, along with traditional shops.

"If I were to buy into mainstream retail now, the leasehold deals I could do would be extraordinary," he says.

Jacoline Loewen, http://twitter.com/jacolineloewen