The Predictive Index for Private Equity and Venture Capital
Alongside financial statements, business plans, and other forms of due diligence, Predictive Index cognitive and behavioral assessments are critical components to determining valuation of a prospective acquisition or investment target, and to informing a decision to proceed with or decline an opportunity to invest.
Innate Behaviors Drive Portfolio Performance
When talent and human capital are critical to the success of an enterprise, understanding the drives, needs, and cognitive abilities of the management team is imperative to identifying gaps in innate abilities and sources of potential conflict. A venturesome, innovative founder and CEO may prove to be confrontational and impulsive when faced with diminished autonomy resulting from the need to work alongside an unfamiliar board. His CFO may have precisely produced decades of error-free financial statements, but then post-acquisition becomes reticent to incorporate new metrics related to EBITDA that are essential to scaling the business. And their outspoken CMO, while admired for his visionary thought leadership in the industry, may falter while attempting to formulate a marketing attribution model necessary to ensure that his new advertising budget is spent profitably to drive expansion in Europe.
Fix Problems Before they Occur
Careful consideration should be placed on any concerns that come up in due diligence; while some resultant setbacks may prove to be small bumps in the path to success, others could impair or annihilate the performance of your investment. And many of these potential disasters can be diffused before they become problematic. A candid talk with the CEO can uncover his acknowledgement of discomfort brought on by working with outside advisors, along with his commitment to thrive in this new environment. The CFO may benefit from a call with a peer at another of your investments, providing comfort that GAAP accounting standards will ensure cash continues to flow in and that his books will become inscrutable to vigilant auditors. The gregarious CMO who was initially concerned that he lacks the introspection and focus on metrics necessary for oversight of a large-scale digital budget will be thrilled to hear that he’s been approved to hire a director with 10 years of digital experience.
Beyond the Executive Team
Assessments can be deployed throughout your portfolio companies to expedite and improve screening of candidates, to build and develop outstanding teams at every level, and to identify high-potential employees and future leaders. By identifying the cognitive abilities and behavioral drives that best predict success within each specific role, employees are matched to the positions in which they will most likely succeed. When employees’ needs are met by their roles, job satisfaction and productivity go up and turnover along with resultant costs is reduced dramatically. And just as team dynamics are important within your portfolio companies, they are important within your firm as well. As your internal teams become better aligned, portfolio performance will improve, and your own directors and partners will be better equipped to work with C-Suite executives and work through any business challenges that inevitably ensue.
Two models have been developed specifically for private equity and venture capital professionals. The fund pricing model allows the Predictive Index assessments to be utilized on an unlimited basis with all employees of the investment firm, candidates for employment with the firm, as well as with C-Level executives and C-Level candidates of the portfolio companies. Fund pricing is discounted with each portfolio company that becomes a client of the Predictive Index. The more comprehensive umbrella model allows for unlimited use within the firm as well as within all portfolio companies, for all employees and all candidates.
We can provide a demonstration of the Predictive Index with your own investment professionals, or with the executive team of one of your portfolio companies or investments. Contact us today to see for yourself: