Small to medium sized businesses across the UK are missing out on crucial funding opportunities due to the wrong individuals filling board level positions, according to 81 percent of venture capital fund managers. These findings come from a new paper by executive search and interim management firm, Intramezzo.
The report, A Board Fit for Purpose, revealed that due to a lack of good existing talent, over a quarter of respondents (32.5 percent of venture capital investors and 21 percent of corporate venture capital investors) always or frequently feel the need to replace existing CEOs. It also found that the quality and strength of the leadership team is a top factor in decisions to invest in portfolio companies, with 85 percent of respondents stating that they are unlikely or highly unlikely to back a company that lacked the right skills.
The research study collated the responses of 100 corporate venture capital (CVC) and venture capital (VC) fund managers and looked at how these individuals make their investment decisions. It found that 90 percent of respondents are finding that sourcing candidates with the right skills and experience for leadership positions is the biggest challenge when making senior hires. Further to this, nearly two-thirds (60 percent) said that identifying skills gaps is a major or moderate challenge.
Dermot Hill, Chief Executive of Intramezzo, stated: “The makeup of the executive board is crucial to the success of any organisation, but more so for start-ups and high-growth businesses, where they do not yet necessarily have a proven business model or high-levels of revenue. The tech scene in the UK is thriving but we are struggling to produce many unicorns (companies valued at $1billion or above) or global giants, and a lack of executive talent could be the main reason why. Ambitious start-ups need a CEO in place who has the potential to be a leader of a £100m business, not just a £1m business. Thinking more strategically about identifying the talent that is needed as the business grows is key to achieving this.”
In terms of finding this talent 43 percent of respondents said that executive search firms were the most successful way of finding lasting candidates – despite networks still being used by just over half (55 percent) of VCs and CVCs. Hill continues “Finding an individual able to lead a company into new markets, new opportunities, and who fits with the company culture is not a given. Businesses and investors, must begin to understand what they need now, as well as what they might need in the future, and make sure they choose a candidate accordingly. Having the right people in place to propel the business through its next phase of growth is crucial.
A successful talent strategy is dependent on recognising whether the existing leadership team is capable of meeting not only current objectives but the longer term ambitions of the business. Individuals capable of handling current businesses as well as achieving future growth can often be recognised by their commitment tomaking sure the business is constantly moving and developing, whether that’s by being unafraid to ask the difficult questions or committing to ambitious growth plans.”
