The private world of private equity – time to think digital?

Private equity is just that: “private”. It is very much all about deep personal, and confidential, business relations with both its own investors, such as the large pension funds, endowments and family offices, who plough money into the private equity funds, and with the companies in which the funds make investments,  such as those in the  consumer goods, industrials, technology and healthcare sectors. Relations are governed by limited partnership agreements, term sheets, subscription and shareholders agreements and non-disclosure agreements. Despite investing in the hottest technology trends, largely through its venture capital subset, private equity has not been known for its own adoption of the latest in tech. So digital marketing, or “digital” as Liveryman Professor Malcolm McDonald likes to refer to it, is in the early days of being explored by the sector. There are few private equity executives who regularly post blogs, with the notable exception of venture capitalist Fred Wilson, of New York City based Union Square Ventures, whose daily blog posts are an inspiration to us all (https://www.usv.com/people/fred-wilson). This does make one wonder how private equity firms go about marketing themselves in this digital age. Of course they have been quick to adopt Zoom in the pandemic, though most private equity executives would admit that there is no substitute for face to face meetings for getting to know a target company’s senior management team and seeing the business first hand, “kicking the tyres” so to speak.   

I have been involved in the world of private equity, and particularly, venture capital for many years, certainly since the early eighties when I was with Price Waterhouse in London and Pittsburgh, and then with PwC. This was  the time that private equity associations such as the British Private Equity & Venture Capital Association (www.bvca.co.uk) and the European Private Equity & Venture Capital Association, now Invest Europe (www.investeurope.eu) were formed. I authored the BVCA’s “Guide to Private Equity” back in 1993. As an academic researcher, author, spokesperson, trainer and adviser on the sector I have lived through its ups and downs, including the dot.com era, the global financial crash and now the coronavirus epidemic, all of which economic crises have been successfully weathered by the sector to date. My book on venture capital, entitled “Raising Venture Capital Finance in Europe” (Kogan Page, 2007) was published in my year as Master. Since then I have gone on to teach private equity and venture capital at the ICMA Centre, Henley Business School, University of Reading to both undergraduates and postgraduates, and have recently completed eight years of research into the investment practices of venture capital firms in UK/Europe and USA culminating in my book on “Venture Capital Performance” (Routledge, 2019). 

 

I used to run a course on “Marketing the Private Equity Firm” which was perhaps then the only private equity marketing course available in the UK. Delegates showed much interest in the critique of the websites of private equity and venture capital firms. These tend to be quite clear about the firms’ strategic focus, ie their stage, sector and geographic investment preferences, the bios of investment executives and other personnel and the names of companies in which they have invested. Whilst exits are usually highlighted there is often little detail on any gains made and usually no information as to how well their funds are performing or otherwise. Again depicting the private aspects of the industry. 

 

Perhaps because of its private connotations, private equity has had a history of being treated with suspicion by politicians, the public and the press ever since RJR Nabisco was purchased by Kohlberg Kravis Roberts (KKR), the huge US based private equity firm, in 1988, in what was then the largest leveraged buyout. The book and subsequent movie “Barbarians at the Gate” depicted private equity executives as greedy asset strippers plaguing companies with debt. Private equity firms have been described as “locusts” by a former German Vice-Chancellor and “a menace to healthy companies, to workers’ rights and to the EU’s Lisbon Agenda” by a former prime minister of Denmark. In 2019 US Presidential Candidate Elizabeth Warren said “Private equity firms often act like vampires bleeding a company dry and walking away enriched, even as the company succumbs”. Even venture capitalists, which surely do much to support enterprise and growth have been termed “vulture capitalists”.

With terms such as locusts, vampires and vultures private equity has needed to engage in some powerful PR and lobbying. It all came to a head in 2007 when some of the leading figures in UK private equity industry were hauled in front of the Treasury Select Committee to explain their actions in the light of a number of large transactions that had resulted in significant layoffs, including the £6.2bn AA and Saga deal. The private equity executives came across as rather arrogant, placing much emphasis on their “private” status; as long as they satisfied their pension fund investors what responsibility did they have to the unions and the public? Following this debacle the Walker Committee was established and “Guidelines for Disclosure & Transparency in Private Equity” were issued. The Director General of the BVCA was replaced with a more PR oriented official. 

So private equity executives might choose to avoid the limelight. Perhaps because of this, unlike professional services firms, the names of private equity bosses are not often incorporated into the names of their firms. Notable exceptions to this are Coller Capital, one of the largest investors in the global private equity secondary market, formed by Jeremy Coller in 1990,  and Andreessen Horowitz, the Silicon Valley venture capital firm, founded in 2009 by Marc Andreessen (the co-founder of Netscape which was acquired by AOL for $4.3 billion in 1999) and Ben Horowitz (the co-founder of Opsware which was acquired by Hewlett Packard for $1.6 billion in 2007). As Jeremy Coller himself has said on his own self-preservation: “It was called Coller Capital so that it would be harder to terminate me!” There is also of course Kleiner Perkins, a leading venture capital firm in Silicon Valley for some five decades, formerly known as Kleiner, Perkins, Caufield & Byers (KPCB), named after its four founding partners.  

Very recent coverage of private equity individuals has included mention of Leon Black who resigned in March 2021 from his leadership positions at Apollo Global Management, the private equity firm he co-founded some 30 years ago, following disclosure of his ties to the late paedophile Jeffrey Epstein. And Blackstone founder, Stephen Schwarzman, was cited for his rather large “salary” in 2020 having received at least $615m in payouts, most of it in dividends. 

But press coverage on private equity executives is not all negative. Many of the wealthy private equity chiefs, including the aforementioned, are known for their philanthropy. The Silicon Valley based Welsh billionaire venture capitalist, Sir Michael Moritz of Sequoia Capital, has donated millions to the University of Oxford and other institutions and charitable causes and, with his wife, is currently sponsoring the Booker Prize. Sir Ronald Cohen, often described as the father of British venture capital, formerly Chairman and co-founder of Apax Partners, is now the UK’s pioneering leader for impact investing. He is Chairman of Bridges Ventures, an innovative sustainable growth investor that delivers both financial returns and social and environmental benefits, and Chairman of Big Society Capital, Britain's first social investment bank. 

Another private equity veteran who is oft quoted in the press, and who is sometimes quite outspoken about the private equity industry, is Jon Moulton. He famously attempted to buy Rover cars from BMW back in 1999, which was ultimately acquired by the Phoenix Four, and in a blaze of publicity resigned from the private equity firm he had founded (Alchemy Partners) following disagreement with his partners who wished to turn it into a specialist financial services firm, saying in a leaked email to investors that he was “going to do the same thing again, only better” and founded Better Capital.   

Private equity is hardly out of the financial press these days, though this is usually in connection with the major deals that they are consummating. Perhaps it is time for the firms to more actively promote themselves (and the BVCA does sterling work here on behalf of the industry) and embrace more of what modern digital marketing has to offer, reaching out to their targeted audiences of investors and companies with the latest that technology has to offer. Maybe it is time for me to dust off and digitise that “Marketing the Private Equity Firm” course! 

This Thought Leadership blog is one of a series written by Marketors to provoke debate and help make marketing more relevant to businesses and society. If you would like to share your wisdom, please click here for details and how to get in touch.

 

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