This article is part of our VC Portfolio Relations spotlight series. Each week, a different professional joins us to share their experience partnering with organizations as a venture capital or private equity firm. Learn more in the intro article.
Marc Craver runs partnerships, alliances, and business development at FloQast, which provides software for corporate accounting teams to manage their workflow and close the books faster and more accurately. Today, Marc joins us to share his perspective on selling through private equity partnerships from his experience at FloQast and, previously, Oracle NetSuite.
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Understanding the Difference Between Private Equity & Venture Capital
Before we dive into private equity (PE) and venture capital (VC) partnerships, let’s first clarify the difference between the two. Both types of firms invest in organizations, hoping to help them grow and recoup more than their initial investment. However, with VC firms, they invest in a company but typically own just a small stake. Meanwhile, PE firms own more of the company, leading to a deeper involvement in the day-to-day operations.
From a timeline perspective, PEs typically hold companies for 4-5 years, during which they’ll make some improvements, then look to exit. On the VC side, they usually put in a little bit of money and hold onto companies longer. Having relationships at PE firms is far different than with VC firms. Since PE tends to have more control over their companies, they’re often seen as an advisor and an investor.
The Value of Pursuing Private Equity Partnerships
For technology and software companies, pursuing private equity partnerships can be an effective strategy for building authority and reaching new customers. Marc shared, “I started getting involved with PE firms at NetSuite, which makes ERP software, something that every company needs. Some companies start on QuickBooks, and as they get bigger, they need to move onto another type of general ledger system. NetSuite noticed that the companies they were selling to were high-growth companies or had just been bought out by private equity firms. So they decided to build out a group focused on the PE channel.”
Marc was able to bring his insights on effectively leveraging a PE channel to his next role. “When I first was introduced to FloQast, their C-suite wanted to learn more about how NetSuite ran their private equity practice. FloQast had noticed 40% of the companies they sold to were either VC- or PE-backed, which means it was helping companies grow and improve. So I introduced FloQast to a few PE firms. Every time I introduced them, the PE firm had great things to say about them. Eventually, I joined FloQast to run partnerships.”
Since FloQast is such a great-fit product for organizations working with PE and VC firms, Marc has driven a lot of success through the channel. “Our PE channel has grown well. Those partnerships for us have been essential because we fit in the right area. A lot of PE firms are hiring operating partners to help them grow and improve their portfolio companies. For example, sales operators help them get their sales strategy in motion, or ex-CFOs may find the best ERP to get invoices out faster and reduce the time it takes to get paid. We look to work with those operating partners that need to improve their companies.”
In addition to supporting operating partners in improving their portfolio companies, Marc highlighted another way he’s worked with PE firms. “Sometimes, we partner with PE firms to provide discounts for their entire portfolio. We’ll also provide white-glove services that help de-risk the implementation of our solution. By taking those steps, we can demonstrate that we’re true value added partners. It’s all about how we can help them and all of their companies achieve better results for their accounting and finance teams.”
The Timeline for Private Equity Partnerships
All great partnerships take time, and private equity partnerships are no exception. From Marc’s experience helping companies build their strategies, he shared, “I would say it’s at least an 18-month to a 2-year initiative. It’s expensive because it takes a while to get into it. Now that people are doing a lot of outreach to PE firms, it’s getting noisier. You have to bring value to the forefront and show successes before they trust you.”
Before you start approaching private equity or venture capital firms, you need to take inventory of your audience and goals. “If you look at your customer base, you should have a lot of companies that are VC- or PE-based already before you reach out to any firms. Building a PE sales channel isn’t a magic bullet to get a bunch of equity-backed customers — they should be there to begin with. If you only have a small percentage of VC-backed clients, this isn’t the approach for you.”
Outside of establishing your own goals, you need to consider the value you can drive for the firms you’re looking to partner with. “Think through what you can offer to people. For example, we offer really good discounts to firms and their portfolio companies. Additionally, for many firms, it’s less about the discount and more that they can trust the team that’s working with them. They see how well we can work within a partnership.”
Best Practices for Strong Private Equity Partnerships
In closing, Marc shared a few key pieces of advice for anyone looking to initiate a private equity sales channel. “One of the biggest metrics we track as a company is our customer satisfaction numbers. We like to look at that from an overall company perspective and a PE perspective. If there are great customer satisfaction numbers, we know it’s a good fit. Going in there with numbers, positive stories, and references, makes it easy for those private equity firms to hear how good you are. If we see their satisfaction numbers are falling within a portfolio or not there to begin with, we want to dive in and see what’s happening in order to improve.”
In addition to metrics tracking, Marc highlighted the importance of finding the right resource. “When you’re hiring into this role, it’s a really interesting hire. It has to be somebody who understands the environment and has seen PE firms work. For the people who are starting in this as a relationship manager for PE firms, it can be very, very lonely for a long time as they’re trying to build this out. These PE teams have a lot on their mind and tech vendors are a minor part of what they’re thinking about. So when you’re approaching firms, it should never be about one deal. It should always be about the bigger picture of adding value to the entire portfolio.”
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