10 IDEAS FOR INCREASING THE NUMBER OF FEMALE SEARCH FUND CEOS
If you look at the Stanford study data on searchers by gender, you can see that the number of women is stark—in some years literally zero, and in others single-digit percent. When you go to one of the growing number of search fund conferences, it’s hard not to notice what women I spoke to called “the vast sea of men.”
Gender bias is an issue that is front and center in the country and in the economy these days, and you can see it play out in an uncomfortable way when it comes to the search fund ecosystem. We are missing out on very nearly 50% of the available talent. Purely from an economic standpoint that makes zero sense.
I actually believe that female search CEOs have a unique opportunity to break the glass ceiling. And leave an impact far beyond the returns they provide their investors.
I spoke to a dozen women who are involved in the search fund ecosystem. I also spoke to several women who seriously considered starting a search fund but opted for a different career path.
Out of those conversations, I developed ten ideas that might help increase the number of women in our ecosystem. They are merely intended as conversation starters. I have zero pride of authorship.
1.) Emphasize team building over private equity/banking background. Quite a few of the women I talked to cited the misperception that experience in private equity or banking is a prerequisite to raising a search fund. Some women have this background. But many, who do not, walk away for the wrong reasons.
Value creation in the search ecosystem, in my experience, is a highly people-intensive process. Sure, you need to be able to build a model and know your way around financial statements. But anyone at a top business school can handle that.
What really distinguishes a top searcher from the rest is the ability to get a seller’s trust and then, as CEO, to build a highly functioning team. What search CEOs underestimate most is the central importance of HR issues —hiring, retaining, and motivating great people—in determining their success.
If we were honest about the centrality of team building to the search ecosystem, more highly talented women would see that they are capable of flourishing in this environment.
2.) Make clear that being a CEO allows work/life balance. Being the boss means you get to decide how and when to work. Yes, the responsibility is a big one, but I heard again and again that the search fund career is seen as a macho black hole where there is no room for anything else. In the search phase, there may be a lot of travel, and deal heat generates its own demands. But, particularly once you are the CEO of a profitable recurring revenue business, the rules of engagement are your own. There is a lot more flexibility than on many other career paths. You can make your kid’s school concert or work certain hours if you want. There are benefits to being the boss.
3.) There is a difference between being an investor and being an operator. Several women I talked to said that they felt the operating role was undersold. They said search was described as doing a deal with equity backend. And in that context, going directly to PE, if that avenue was available, had far lower risk, higher NPV (except for outlier top search fund results), and more geographic predictability. The whole idea of a search fund is that you generate the bulk of the return by running the company well. This is not the same as working at a PE firm at all. If the operating experience were emphasized from the outset, it might be more attractive to women and might even persuade women who have the opportunity to choose PE over search fund careers to think twice about that choice.
4.) Put search in the broader entrepreneurship context. Women seem more comfortable with start-up and venture-backed entrepreneurship, even though the poor treatment of women in Silicon Valley is well documented. There are some profound advantages of entrepreneurship via acquisition as compared with pure start-up entrepreneurship. We should make sure that the search fund field is talked about in this broader context at the outset. We want to catch the attention of women who are interested in pursuing entrepreneurship in general but who might be scared away from a search panel without knowing what it really means.
5.) Collect data on female sellers and publish it. I have only highly unscientific anecdotal information but the female sellers could be quarter of all search fund acquisitions, maybe even a third. Female searchers might actually have a big strategic advantage with a material segment of the target sellers who happen to be women and who, given a choice, would respond favorably to a female buyer.
6.) Increase the number of female investors. The perception is that the search fund “mafia” is an old boy network. The only way to break that perception is to recruit women with substantial operating or investing backgrounds from outside the ecosystem to work at the big funds as well as getting more independently wealthy women to invest in the space for their own account. It would also help to look for more women to serve on search fund company boards.
7.) Your search can be as geographically specific as you want. I heard concerns about geography from women that seem different from what I see on the ground. Plenty of men say they are doing a nationwide search but actually have a very focused geographic preference. Clearly, it’s pointless to conduct a search with geographic restrictions that make it unlikely to find a suitable company to buy. But as long as it makes sense, you can be as geographically focused as you want and choose to be transparent about that with investors, or not. All they care about is your finding an attractive deal. They don’t care where it is.
8.) Develop case studies on success stories of women in search. Despite the low overall numbers, there already have been women who have succeeded. It would help to have those memorialized as case studies. They wouldn’t have to be overtly about obstacles those searchers faced as women, but they also should not be devoid of content about what it was like to be a successful searcher who happened to be a woman.
9.) Create a network of female CEOs from outside the search ecosystem to support women in search. The idea is to bring female CEOs from industry to bear on this issue so that they could foster and support women who are taking the reins of their companies and would like guidance from women with relevant experience. This could be done by business schools, institutional investors, or both.
10.) Make sure panels and speakers include women whenever possible. At least at the conferences and on-campus recruiting sessions I have attended, there has been a profound lack of women at the front of the room. We as a community should go out of our way to strategically invite the women who have succeeded to speak publicly so that they can present a gender-balanced picture when talking to the pool of potential searchers.
As I said at the top, none of these ideas is earth-shattering. You may disagree with some or all of them. I would welcome your comments and suggestions here or, more importantly, amongst your colleagues. My only real motivation is to get this conversation going.
It should not be the case that the search community is a male-dominated one.
We are all missing out as long as that is true.