As we go deeper into a number of Mid Market Private Equity portfolios, here’s what we’re noticing: If there are 10 companies in a portfolio there will be:
The PE firm is likely focused on one sector or industry, but now has 10 different approaches (with 30 possibly unique vendors) creating awareness and driving growth. Basically 30 companies trying to produce incremental growth on a variety of KPIs across the board. This is what we’re calling the Service Vertical Approach, where the model becomes:
The 3 portfolio companies above are all working interdependent of one another, rarely if at all sharing successes, insights, best practices, top creative assets, targeting audiences, strategic tactics or – most importantly – failures. These failures to reach their markets and goals can be experienced once, learned many times over. The PE firm is in a unique position to help facilitate this. With so many variables on all portfolio companies (trying to drive down CACs, increase ROAS, produce qualified leads that progress in the pipeline, build brand recognition and growth…) it becomes near impossible to instantly populate data to compare how brands are progressing. Although this approach is difficult to produce repeatable success and scalability, it is encouraged by the PE models – because the companies need to grow on their own, building and maintaining their unique footprint and voice in the market. The Private Equity firm doesn’t want to make too many decisions for the business. They infused capital into the venture because they saw something of value to their LP’s and trust leadership (in particular in growth capital) to see it through. But what if there was an intermediary solution between the PE firm and the portcos? What benefit would that offer? What is meant by the Sector Horizontal approach? The updated model builds a bridge between multiple portfolio companies, so as you build the vertical model and empower your portfolio companies to run their own businesses, you have one growth marketing industry expert working across brands. New Model:
With a centralized model above, this single growth marketing advisor across multiple brands builds repeatable strategies for multiple brands in a single Private Equity’s portfolio. If Private Equity firms were to build horizontal partnerships (centers of excellence) with single agencies that have experiences in their focus sectors, it opens up:
We’re actively building a centralized approach to portfolios. A vertical knowledge sharing infrastructure that will leverage sister portfolio brands to share industry targeting & knowledge, A/B test more initiatives, share in what works (& cut the wastage that doesn’t), accomplish more with less, and scale the similar tasks for all brands at once. When you have a single voice collectively advising multiple brands on successful tactics, the volatility and variables are reduced to core proven methods when approaching demand generation.
