Practically 10 years in the past, in April 2015, I revealed a weblog known as “Confronting the ‘S’ word: Dealing with general partner succession.” Because the founder and managing companion of Classic, I needed to make sure that Classic would survive after I retire. Making certain the survival of Classic was a duty that I owed to our buyers, portfolio funds, corporations, and workers.
Enterprise funds take a very long time to construct and notice their investments — in lots of circumstances, greater than a decade and a half. An engaged, energetic, dedicated, and hungry enterprise administration crew is as important on the finish of the fund as it’s at the start. That is true for funds ending their lives and for the 2 to 3 extra funds raised alongside the way in which. Administration crew longevity is important in challenged exit markets (as we’re presently all experiencing). Succession administration is extra essential now than ever earlier than.
Sadly, only a few VC managers have managed succession nicely. So, in 2015, I made a decision to analysis the perfect practices in succession administration and interviewed the managing companions of a number of of the world’s main VCs to see what labored (and didn’t) in managing their succession processes.
[The succession process] requires an open and real dialogue between the senior retiring and incoming administration groups.
On the time, I recognized “six rules of succession”:
1. GPs should proactively handle and time succession: The worst factor a fund supervisor can do is cope with this concern throughout fundraising for a brand new fund. The method must be triggered by the GP’s recognition {that a} long-term crew improvement plan is required, not attributable to LP questions throughout fundraising.
2. Implementing the succession course of early: A fund administration crew wants to begin the method and implement the mechanisms not less than 5 to seven years earlier than the present management crew transitions out. It’s common for the founding or the present managing companion to begin phasing out of their late 50s or early 60s.
3. Progressively devolving administration obligations to the youthful companions: Fundraising and different agency administration obligations ought to regularly be transferred to the junior crew earlier than the ultimate transition date.
