EQ in Private Equity
I began my career as a lawyer with big law firms in Boston. My primary clients were private equity and venture capital firms, ranging from large shops doing multi-billion dollar deals all the way down to smaller VCs operating in the pre-seed space. It was in this ecosystem that I realized my own future lay in entrepreneurship. So, in 2005, my wife and I started our first business together and that has grown into the TypeCoach brand. In the last few years, I launched a small venture studio called The Idea Factory, which focuses on early stage (napkin/concept/prototype) projects in the digital web and mobile application space.
In re-entering the world of venture capital on the early-stage side of things, I have been surprised to find that only a handful of VC firms use any form of personality-based resources. And of the VC firms that do use them, it’s only for internal use. I am not aware of a single firm that has used such resources with their portfolio companies.
Almost every one of the world’s leading organizations uses some form of personality type resource – from those companies that make up the Fortune 500 to premier management consulting firms, to law firms (although that is a relatively recent trend) and other organizations operating in the highest echelons (business schools, medical schools, non-profits, etc.). But, there has apparently not been a widespread application in the field of private equity.
Yet.
EQ Growth in Private Equity is an Un-tapped Catalyst
It is my belief that these firms see such solutions as the domain of more mature businesses and, therefore, an unnecessary “luxury” item for the startup and scale-up space. However, I am convinced that there is a massive opportunity for firms to accelerate the development within their portfolio companies through intentional applications of practical tools and techniques that improve interpersonal communication and emotional intelligence. That, rather than a luxury item, these resources are an un-tapped catalyst and accelerant for lower-friction growth. And, it is also my belief that there is an opportunity to increase exit valuations and fund/investor ROI/DPI through these applications.
Finally, I would add that the need for improvements in emotional intelligence and communication are most obvious and pronounced in portfolio companies edging into the high-tech / AI side of things. The founders and technologists operating those firms tend to have lower natural emotional intelligence. It is my hypothesis that training and tools deployed in these contexts will have an even higher impact on short and long-term outcomes for the company and its investors.
If you want to see how this works, we have written a scenario that showcases the elements of personality type and the role they can play in communication challenges and emotional intelligence in the context of a high-technology startup environment. The link below will allow you to test our your skills and learn more.
