2024 FSG Year-End Report – Interview Transcript

Riviera Q&A with Jack Gage, Chief Revenue Officer, and Eric Larson, Managing Partner in Private Equity

Industry Insights

• Solomon Partners:How have sponsors/VC firms utilized executives to enhance returns in a high-interest–rate environment?
  
  
  • Riviera: VC-backed tech startups shifted focus to reducing burn rates, extending runway, and achieving profitability faster. This “more with less” or “rule of 40” mentality forced businesses able to optimize performance to operate in a more disciplined context, prioritizing investments most likely to contribute immediately vs. long-term, moonshot uses of investment capital. 
    
    
  • Private equity (PE)-owned companies reinforced the importance of capital-efficient growth strategies, driving EBITDA improvement and organic growth in lieu of inorganic growth that was easier to execute in a low cost of capital environment with greater certainty around asset prices. 
    
    
• When should sponsors/VC firms reassess their current executive team?
   
  
  • Yesterday is always the best time to evaluate leadership ranks, begin succession planning, and develop long-range human capital strategies mapped against the goals for the business. Riviera’s 2024 Future of Tech Leadership study showed that technology executives, in particular, are seeing shorted tenures over the last several years — an average of three years for C-level. This supports evidence that growth–stage companies will require different leadership talent and capabilities for different phases of their journey. Similarly, changes in control can require leadership that has operated within the new context, brings pattern recognition and mid/senior talent with them that helps navigate new phases in the company’s lifecycle. 
    
    
• What strategies can sponsors use to attract and retain the “best” talent?
   
  
  • The power of the purse remains a powerful lever for acquiring the best talent, but only once the best talent has been identified and engaged, and other important factors are considered attractive. In Riviera’s 2024 Future of Tech Leadership report, approximately half of respondents cited compensation as the top factor in entertaining new opportunities. Close behind, however, were the quality of a new company’s leadership team, conviction in the product, and recent business trajectory. Taken together, this calls for a blended approach to up-leveling and attracting leadership that requires investments in the product, vision of the business, and caliber of fellow members of the executive team. 
    
    
• What are some factors that encourage executives to seek new opportunities?
   
  
  • Both internal and external factors can be the driving forces that encourage executives to seek new opportunities. Often when executives decide it’s time for a change, this can be directly attributed to a misalignment of their expectations when they took on the role with the reality of the situation at the company. This can be caused by changes in company direction, budgetary constraints that affect the executive’s ability to hire the talent they need and execute on their roadmap, and mismatch of company culture. In other cases, external drivers can encourage executives to seek new opportunities. Some of these might be: exciting new developments in other industries (such as the growth of Generative AI), the draw to return to an industry or type of company that the candidate had prior experience in, opportunities for career progression and growth, and opportunities for higher compensation or upside.
    
    
  • To improve retention and limit the risk of turnover on an executive team, it’s important to deliver on the promises that were made to the executive when they were hired into the role to put them in the position to be successful, and to ensure that they’re being given opportunities for career progression. It’s also important to regularly stay up to date on market–rate compensation for executives to ensure that they’re being paid properly. To attract top–tier talent, similar factors must be considered, as opportunities that will attract top candidates will need to show a promising growth story, exciting challenges and the opportunity for a great deal of impact and ownership, and market rate or above–market compensation/upside.
      
• What are key characteristics of a successful executive team?
  
  
  • In PE, where exit timelines, cash constraints, and value creation are at the fore, and fluidity and change are a given, senior leadership must have a sense of urgency and be clear on goals and objectives for the business. Open, direct communications drive alignment and speed of execution. Technology and product leaders must be able to articulate how they will partner with go–to-market, finance and the broader operating team, taking specific steps to drive the roadmap forward and deliver results. There is no time to be diffuse and broad — whatever the objective is, it must be sharply defined and revisited often in an executive dialogue.  
    
    
• How is AI impacting the need for senior product and technology leaders?
   
  • AI is significantly shaping the demand for senior product and technology leaders. As industries across the board seek cutting-edge AI innovations such as agentic systems, large language models, and multimodal technologies, along with improved operational efficiency, there is an increasing need for AI expertise at the leadership level. AI product managers and engineers with specialized knowledge are essential for managing the complexities of transforming theoretical concepts into real-world AI applications. They address critical decisions, such as whether to buy or build solutions, scalability, cost considerations, and long-term sustainability. At the executive level, leadership is crucial in driving AI organizational transformation, understanding and addressing customer needs, fostering collaboration among teams of data scientists, engineers, and product managers, and ensuring adherence to AI governance, privacy, and ethical standards.

2025 Outlook

• What emerging areas or technical backgrounds should sponsors be focused on when hiring new executives? 
  
  
  • While AI is capturing headlines, sponsors should prioritize cybersecurity leadership now more than ever. The escalating threat landscape and increasing regulatory scrutiny make a strong CISO essential. Look for executives with deep technical expertise in areas like threat detection, incident response, and cloud security, coupled with the ability to communicate effectively with boards and stakeholders about risk mitigation and cyber resilience. These leaders are critical to safeguarding businesses and ensuring continued growth in today’s digital world. 
    
    
• What have you heard from your sponsor clients regarding 2025 initiatives?
   
  
  • In 2025 our client sponsors will be focused on leveraging AI/ML and data to accelerate their growth and position in the markets they serve. This is a continuation of an increasing trend we witnessed in second-half 2024 and will gain momentum throughout the year. The winners will have a clear plan and the right team to execute on it. Expect to have competition as you build your team and be sure to get aligned on exactly what you’re solving for. This will enable you to act quickly when you identify the person you want to hire. 
    
    
• Where do you see opportunities for sponsor-backed businesses to improve operations via executive hires?
  
  
  • In 2025, sponsor-backed businesses can unlock significant operational improvements by making strategic executive hires across product, technology, and data functions. Digital transformation and technology enablement are critical, with leaders who can drive automation, AI adoption, and digital-first strategies to streamline operations and enhance customer experience. Product innovation and roadmap prioritization, particularly in SaaS, fintech, and data-heavy industries, will fuel growth through high-ROI initiatives and market differentiation. Chief product officers (CPOs) who are customer-centric visionaries, skilled in building scalable products, leveraging data-driven decision-making, and integrating emerging technologies like AI, will lead this effort. Technology executives, including “change agent” chief technology officers (CTOs), are essential for transitioning from legacy systems to modern, cloud-based architectures while maintaining cybersecurity. Unlocking the value of data is critical for sponsor-backed companies. Leaders in AI, analytics, and data science will implement advanced tools, predictive analytics, and machine learning models to optimize performance, reduce costs, and enhance personalization.
    
    
• How do you assess the market for talent in 2025, and what are your expectations of new opportunities/demand?
  
  
  • The year 2024 was marked by notable changes in the private equity landscape, particularly in the valuation strategies and timelines for portfolio company exits. With elongated exit horizons becoming the norm, there was a palpable shift in focus from rapid acquisitions to optimizing the performance of existing portfolio companies. One of the most visible strategies employed by PE firms was the replacement of leadership within their portfolio companies, underscoring a renewed commitment to driving operational excellence.
    
    
  • In a challenging macroeconomic environment, PE firms took a proactive stance by scrutinizing and reshaping the leadership of their portfolio companies. By bringing in seasoned executives equipped to navigate complexities and enhance value creation, firms sought to streamline operations, improve efficiency, and bolster overall performance. This shift highlights a pragmatic approach to delivering returns despite the headwinds in the broader market.
    
    
  • From a technology and product perspective, 2024 saw an overwhelming emphasis on roles centered around transformation and optimization. The majority of leadership placements facilitated during this period were for chief technology officers and chief information officers (CIOs). These roles were pivotal in driving engineering velocity and ensuring that organizations were equipped with the technological agility necessary to stay competitive.
    
    
  • As PE firms adapt to a dynamic market landscape, 2025 promises to be a year characterized by strategic growth and increased activity. With a stronger emphasis on exits, distributions, and reinvestment, the coming year will likely see firms prioritizing scalable and sustainable value creation. The role of chief product officer, in particular, will gain prominence as PE-backed companies aim to lean into platform plays. These leaders will own the product roadmap, identifying and integrating bolt-on acquisitions.