December Views from Banff
(Originally released December 2022)
With December well underway and the end of year fast approaching, we wanted to give you a quick rundown of the market and what we are paying attention to, reading, and hearing, plus a little extra to boost you into the New Year.
Boards and CEOs
“Last year, 43% of public-company board appointments were filled by first-time directors, up from 38% in 2020 and 25% in 2016, according to Heidrick & Struggles.” - WSJ
According to recent research at Russell Reynolds, 79% of the time investors replace the portfolio CFO following the deal, and 42% do so within 12 months. - Jenna Fisher at Russell Reynolds
From McKinsey, the four common ingredients for success of new CEOs:
Not making it ‘about you’: our shared vision vs my vision
Listening, then acting: identifying the biggest needle, and moving it
Nailing your firsts: you never get a second chance to make a first impression
Playing “big ball”: strategically manage your time, talent, and rhythm
Major takeaways from Heidrick’s Route to the Top (2022):
CEOs appointed between July 1, 2021 and June 30, 2022 included the highest share of first-time CEOs in three years: 69% compared to 48% in 2021 and 50% in 2020.
64% of that first group were internal appointments (compared to 61% in the prior period).
Only 18% of the CEOs in the study were long tenured, having spent more than 90% of their career in their current company (excluding founders).
13% of new CEO appointments were women, compared to 11% in 2021 and 9% in 2020.
On the earlier stage stage, it won’t be a surprise that we are seeing a great number of early stage founders and CEOs exiting - gracefully or forcefully. That’s only half the battle for many investors though - getting a deal structured that allows for a smooth exit and attracts a great successor is attempting to thread an incredibly small needle.
Investors
This year, U.S. venture capital firms raised a record $150.9 billion through the end of September, according to Pitchbook.
But, raising money has become more difficult for emerging funds - often the gateway for women and underrepresented minorities to break into VC, according to a recent Forbes article. This year, only 100 first-time funds have successfully launched, compared to 307 last year.
Meanwhile, already established firms are growing ever larger. Funds sized $1 billion or larger have received 60% of the capital so far this year, up from 34% in 2021, per PitchBook.
According to a report by BLCK VC, 54% of Black VCs who attained the status of “partner” did so by starting their own fund, rather than being hired or promoted by an existing firm. On average, those funds are 46% smaller than the industry average.
On PE lack of investment activity: it's the effect of valuations not coming down enough combined with the high price of funding. No one wants to sell if they are not distressed, most believe that all their troubles will go away “tomorrow” (in 6 months). But if they are distressed, it’s a harder sell.
Diversity = Competitive Advantage
All S&P 500 boards now have at least one female director; 98% have two or more; and 81% have three or more. Women now represent 32% of all S&P 500 directors, the most ever. - A new study from Spencer Stuart
Positive financial performance is associated with smaller gaps between overall diversity and the diversity of the management team. - Workplace Diversity and Financial Performance
PE firms with strong representation of underrepresented groups on their investing teams have a competitive edge. - The State of Diversity from McKinsey
What We Are Reading
A Few Good Stories - Morgan Housel
An end run around a college degree - Josh Macht
How Our Careers Affect Our Children - Stewart D. Friedman
If You Try To Do Everything, You Won’t Do Anything - Ryan Holiday
Six graphs everyone needs to see - Sahil Bloom
The 7 Principles of peak performance - Allen Weinberg
The Art of Receiving Feedback - Andrea Mignolo
What’s going on here, with this human - Graham Duncan
Bonus from the Banff Team
Networking and What’s Next- Trisha Colton
A Reading List and Reluctant Leaders - Astri Sorenson
Check out our new Insights page on the Banff website too!
Final Thoughts
On networking/preparing for your career: “You need to love practice more than the game; you need to love the process, the results as the happenstance.” - A Banff client
On excellence: “Amateurs love the prize, professionals love the process” - Sahil Bloom
On starting over: “No work is ever wasted. And if it’s not working, let go and move on - if it’s useful, it’ll show up again.” - #17 of Pixar’s 22 Rules for Storytelling
On failure: “Everything you learn by trying and failing proves indispensable in whatever’s next.” - Mike Allen
On your career: “You have 80,000 hours in your career. This makes it your best opportunity to have a positive impact on the world.” - 80,000 hours
We are hiring! Banff Advisors is looking for a founding backend engineer who is passionate about making the executive talent world more purposeful. Please share this opportunity with your network and encourage all interested candidates to apply!
Have a great holiday!
- The Banff Advisors Team
