As a B2B SaaS CEO, you may reach a stage in your company’s development where a different ownership structure becomes a viable option. While going public may seem like the obvious choice, the current market conditions for SaaS companies make it a challenging route. So, what alternative do you have? In this post, I aim to shed light on what it means to work with private equity funds as a majority owner. I will highlight the value of this type of shareholding and provide you with some key considerations if you decide to explore this path.
As a way of introduction and to provide some context, I have been leading tech companies for the past 10 years and have worked with PE-backed SaaS companies since 2017. Currently, I serve as the CEO of Puzzel, a Norwegian customer engagement platform (also known as contact-center-as-a-service or CcaaS). With 240 talented Puzzelers, we are on track to generate 550MNOK in revenue this year, with a 20% growth rate, profitable and backed by Marlin Equity Partners.
First, when working with private equity funds, it’s important to understand your investor engagement model, PE funds are typically hands-on and closely involved with the companies they invest in. As the CEO, this means regular check-ins and board meetings. This level of involvement has pushed us to enhance our reporting by automating and standardizing processes wherever possible. It has also pushed us to become a more data-driven organization and very much focus on focusing on what matters. The best PE funds understand the delicate border between being hands-on and micro-managing, which can be a risk with less experienced or less operationally savvy investors.
Thus, when a private equity fund invests in your company, they bring with them a clear hypothesis and a value-creation framework. This framework often includes a 180-day plan designed to enhance your company’s performance over the investment period. Additionally, they may provide access to an operating team or a network of experts who can support and assist you. For example, when we recently needed to reassess our go-to-market strategy, our investor brought in seasoned experts—former Chief Revenue Officer (CRO), Chief Marketing Officer (CMO), and CEO—to help us craft a new plan and oversee its execution, leveraging their wealth of experience. It’s crucial to view this support as valuable resources rather than micro-management. During my first experiences working with PE funds, I thought they were questioning my ability to run the business but now really sees it as additional senior/high-value resources.
Last, many PE funds view external growth and acquisitions as effective ways to accelerate product development or go-to-market strategies. In my most recent experience at Puzzel, we have done 4 acquisitions over the last 4 years and our investor acted as an outsourced M&A team, identifying potential deals, providing support during due diligence, and structuring the financing for these acquisitions. Of course, integration of these acquisitions is 100% on us but partnering with a PE fund will give you an outsourced/external corporate development team.
To conclude, working with a private equity fund as a majority owner offers numerous benefits. Personally, I love this ownership model; yes it is demanding but highly focused on value creation. It is essential to understand that shareholder value is ultimately an outcome of delivering high value to customers and employees, where we should all put our efforts. As a B2B SaaS CEO, if you are considering alternative ownership structures, I encourage you to explore the potential of partnering with a PE fund. It could be a rewarding journey, with ample support, resources, and expertise to help drive your company’s growth and success.