An operating partner is a title used by
venture capital
Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...
(VC) and
private equity
In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...
(PE) firms to describe a role dedicated to working with
privately held companies
A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets, but rather the company's stock is ...
to increase value. The role was created by large-capitalization private equity groups when the importance of driving corporate change to add value increased as sellers became more sophisticated and
financial engineering
Financial engineering is a multidisciplinary field involving financial theory, methods of engineering, tools of mathematics and the practice of programming. It has also been defined as the application of technical methods, especially from mathem ...
less central to
private equity investment
In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a typ ...
s in the 2000s.
Firms with operating partners argue that value creation potential is better achieved by a fully dedicated partner than relying solely upon external consultants. The operating partner role has evolved into a full-time position drawing a combination of salary, performance bonus, and carried interest similar to an investment partner.
Definition
Operating partners are proven business leaders, functioning as either generalists or specialists, and have successful track records of creating value in operating companies. They are usually more capable of developing strategies and leadership teams than a deal-oriented partner. Most travel often to engage with portfolio companies and are expected to spend time leveraging their professional networks to improve portfolio company value. They are usually former CEOs, COOs, CFOs, chief revenue officers, management consultants, or some combination with market knowledge of PE, such as deal structuring, in the investment firm's target industries. They typically focus on due diligence, strategic planning, commercial growth, operational efficiency, and financial controls. Operating partners use their skills and experience to improve portfolio companies.
Role and Responsibilities
The role of an operating partner can span the full investment cycle from
due diligence to post-transaction integration through to a liquidity event or full exit event. Operating partners are deployed by investors and boards as a catalyst for change, as coaches or mentors, and in some cases, to serve as "sparring partners" for management. Operating partners may manage short- to medium-term as well as long-term operational improvement programs for portfolio companies. They may also support management in day-to-day operations, as interim management, as board members or observers, and/or as advisors.
The role of an operating partner should not be confused with the role of a venture partner or an entrepreneur-in-residence. A venture partner is a non-salaried external resource who is expected to source deals and play a significant role in a few or more companies over the life of a fund usually receiving salary and equity interest directly from the target company. An
entrepreneur-in-residence (EIR) is similar to a venture partner, but works on only a single company and typically steps into the company as the full-time CEO, CFO, or other c-level position.
Value
All VC and PE firms seek to maximize the value of their investment. In recent years, the industry has experienced increased pressure to drive
operational value creation. In other words, shifting focus from
leverage
Leverage or leveraged may refer to:
*Leverage (mechanics), mechanical advantage achieved by using a lever
* ''Leverage'' (album), a 2012 album by Lyriel
*Leverage (dance), a type of dance connection
*Leverage (finance), using given resources to ...
and multiples
arbitrage to increasing the fundamental operational, commercial, and financial performance of their portfolio companies. As a result, operating improvement must translate into increased enterprise value to yield higher investment returns. Hence the new partnership triad between
general partners
A general partnership, the basic form of partnership under common law, is in most countries an association of persons or an unincorporated company with the following major features:
*Must be created by agreement, proof of existence and estoppel. ...
,
limited partners
A limited partnership (LP) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited ...
, and operating partners.
Notable Operating Partners
While some high-level executives may be appointed as operating partners, they often function more like senior advisors.
*
Charles Giancarlo
Charles Henry "Charlie" Giancarlo (born 1957) is an American entrepreneur and investor. He is the chairman and CEO of data storage company Pure Storage. He is a former senior executive of Cisco Systems and Silver Lake Partners.
Education and c ...
was appointed as managing director and operating partner at
Silver Lake Partners following his departure from
Cisco Systems
Cisco Systems, Inc., commonly known as Cisco, is an American-based multinational digital communications technology conglomerate corporation headquartered in San Jose, California. Cisco develops, manufactures, and sells networking hardware, ...
where he was EVP, chief development officer, and president of Linksys.
*
Richard Baker was hired as operating partner at
Advent International
Advent International is a global private equity firm focused on buyouts of companies in Western and Central Europe, North America, Latin America and Asia. The firm focuses on international buyouts, growth and strategic restructuring in five core ...
having previously served as CEO at Boots plc and COO at Asda.
*
Mark Gillett was appointed as managing director and operating partner at
Silver Lake Partners following his departure from
Microsoft
Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washin ...
where he was a corporate VP and responsible for product, engineering, and operations at
Skype
Skype () is a proprietary telecommunications application operated by Skype Technologies, a division of Microsoft, best known for VoIP-based videotelephony, videoconferencing and voice calls. It also has instant messaging, file transfer, deb ...
.
*
Thomas Ryan was hired as operating partner at Advent International, which he joined after stepping down as president and CEO of
CVS Health
CVS Health Corporation (previously CVS Corporation and CVS Caremark Corporation) is an American healthcare company that owns CVS Pharmacy, a retail pharmacy chain; CVS Caremark, a pharmacy benefits manager; and Aetna, a health insurance prov ...
.
*
Bob Swan
Robert (Bob) Holmes Swan (born 1959 or 1960) is an American business executive. He was CEO of Intel Corporation from January 2019 until February 15, 2021. He joined Intel as CFO in October 2016 from General Atlantic, after spending years as CF ...
served as an operating partner at
General Atlantic
General Atlantic (also known as "GA") is an American growth equity firm providing capital and strategic support for global growth companies, headquartered in New York, United States. The firm was founded in 1980 as the captive investment team for ...
prior to assuming the CEO role at
Intel
Intel Corporation is an American multinational corporation and technology company headquartered in Santa Clara, California. It is the world's largest semiconductor chip manufacturer by revenue, and is one of the developers of the x86 seri ...
. Later, he joined
Andreessen Horowitz
Andreessen Horowitz (also called a16z, legal name AH Capital Management, LLC) is a private American venture capital firm, founded in 2009 by Marc Andreessen and Ben Horowitz. The company is headquartered in Menlo Park, California.
Andreessen H ...
as operating partner.
*
Gary M. Reiner
Gary M. Reiner (born c. 1954) is an American businessman and Operating Partner at General Atlantic. Reiner has been with the global growth equity firm since 2010, where he provides strategic counsel and serves on the board of several portfolio com ...
joined
General Atlantic
General Atlantic (also known as "GA") is an American growth equity firm providing capital and strategic support for global growth companies, headquartered in New York, United States. The firm was founded in 1980 as the captive investment team for ...
as operating partner in 2010.
* Jim Hinton, former CEO of Baylor Scott & White Health, joined
Welsh, Carson, Anderson & Stowe
Welsh, Carson, Anderson & Stowe (WCAS), also referred to as Welsh Carson, is a private equity firm. WCAS was formed in 1979 and focuses on investing in two growth industries, technology and healthcare, primarily in the United States. WCAS has a ...
as operating partner in 2022.
References
{{Private equity and venture capital
Private equity
Venture capital
Investment
Financial markets