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Working in the Private Equity World: One Executive’s Experience

Barb Stinnett is a longtime tech executive and angel investor who began her career in Silicon Valley and went on to serve in senior roles for many large tech firms based there. She’s Minnesota born and bred and calls the state home, but still spends 40% of her time in the Bay Area, where she also has a home. She now runs her own consulting firm, Timmaron Group. Her experience in the tech industry and in investing covers such a broad gamut that it’s hard to fit into a brief profile, but I wanted to try – specifically the part of it focused in private equity. Here’s my interview:

You’ve been an angel investor and managing partner of early-stage funds. But could you share your earlier experience doing M&A with corporate organizations and working with private equity firms to conduct industry and market roll-ups?

Understanding investments, how to make them, how to attract them, is some science, but mostly art. It’s about relationships as much as it’s about the products and services offered. Each phase of my career has led to the understanding I’m fortunate to have today, 30-plus years later. The common thread has been about keeping the focus on growth and innovation. 

Being a woman executive in the high-tech industry in Silicon Valley was rare at the time I started — even more rare to conduct business with the world’s top venture capital and private equity firms, such as HG Capital, Vista Equity Partners, Sequoia, and others. Having the opportunity to learn about investing, mergers, acquisitions, and sell-offs has been key to the success of the work that I’ve performed, and the companies I’ve served over the years.

I started with HP, where I ran the company’s revenue-generating, customer-facing business units – sales, services, and support. During this period, I worked with our board and then-CEO Carly Fiorina to define, negotiate, and integrate Compaq into HP. From a merger and acquisition perspective, this became the underpinning of what I refer to today as “the playbook” for organizational integration and transformation – bringing a multibillion-dollar organization together, determining the product, people, and processes that would form the new company’s combined efforts, and spinning out those units that no longer were a fit in the go-forward model. Through this effort, I met key global private equity firms, who offered companies for HP to consider for acquisition, and allowed a pathway to “exit” parts of the prior organization to be sold to others.   

From the Fortune 25, I moved into software-only “midcap” firms, where the work I was doing was with other companies, sometimes public investors, sometimes private equity investors, to grow and have “an event” of some sort – a roll-up, a merger, an IPO. I served as a VP and GM for Sybase, where we prepared the company for acquisition by SAP. I led i2 Technologies in a turnaround to be sold to JDA. And I worked with Vista Equity Partners as their first female CEO for their very first $100M+ roll-up company, SumTotal, a human capital software-as-a-service firm. 

Learning how to operationally take the Fortune 25 processes and procedures “playbook” and downscale it for midcap companies, while coupling an investor’s view of how their dollars would bring a return on investment, was a new learning for me. Understanding how a company’s pre and post valuations are determined – somewhat unique formulas that vary between private equity firms – and building a growth plan around the investments, were critical. Private equity firms started to share their desires, and the metrics they tracked for success, along with the cadence they required to put funds into a business – what they needed in the investor deck and what they needed to see to invest.

I became a CEO-in-residence for multiple private equity firms. In this role, you’re part of the investor’s “stable,” meaning part of their on-call executive staff for companies in which they invest, where they need assistance to execute their “playbooks.”

What do PEs look for as they work with early to mid-cap growth companies? Why do they invest, what do they expect, how do they execute on transactions?

PEs invest once the angels and VCs have taken some of the risk off the table, and a company is operationally working. Most times, they come with a playbook they want executed, in order to deliver a result that’s important to that PE firm – for example, growth in a specific market, x-amount of ROI, a geography they want to grow in, and so on. Most PE firms like to invest in a tight-as-possible, vertical solution – something unique with a solid ROI.

Last but not least, PEs look hard at the leadership team. However, they usually have their stable of C-suite executives they know and can trust to get the job done for them. In that regard, what you’ll usually see in the final stretch is that they’re most comfortable putting their own team into the game to finish that “last mile.”

What should CEOs and other execs of growing companies be aware of regarding the culture and style of PEs?

There’s an absolute “aha” learning moment in working with PE firms. If it’s your first time, especially if you’ve just jumped from a corporate environment into a PE-funded or driven portfolio company, you need to know when you’re just having a discussion, and when you are discussing a decision with your PE firm.

PE firms are like a machine – they’re used to running specific plays, in a specific way, for which they’ve previously received specific results. Their portfolio companies will have a cadence that’s similar. Their formulas for success, in sales, support, and other operational areas, will be scalable and similar.  

The best advice I’d share about working with a PE firm is to remember you’re not alone. It’s not just you, your board, and your C-suite. There’s an important network to leverage: the portfolio CEOs and their teams. Get to know your counterparts in the other portfolio companies. Learn from each other. Talk openly about how you are facing challenges and how each of you solve similar issues.Share ideas, problems, growth initiatives – what works, what doesn’t. For the period you’re working with the PE firm, you’re part of their family. You have to work it. That will help both the investor and your company, smoothing out the journey for all.

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