Succession Planning In Partnerships

I read today that the founders of KKR have named Joseph Bae and Scott Nuttall as co-Presidents and heir apparents. I’ve written before about succession planning in investment firms. Getting this right is challenging. There are a lot of stakeholders; the investors, the partners, the employees, the portfolio companies. Everyone worries about what might change under new leadership.

I am a fan of gradual but clear and transparent transition, which is what KKR is doing and what we have done at USV.

Our partners Albert and Andy have been running USV for the last eighteen months as Brad, John, and I have focused our time on our portfolio companies and new investment opportunities (which Albert and Andy also do).

Giving everyone clarity about what is going to happen but allowing the transition to play out over time seems to work best in investment partnerhsips, which contrasts with the quick handovers which seem to work best in operating businesses.

Partnerships are complex and powerful operating models. When they work well they are a beautiful thing. But they are easy to mess up and so transitions need to be handled with a lot of care.

#VC & Technology

Comments (Archived):

  1. awaldstein

    I can’t speak to how it works in your world.In the operating one, my world, yes–change happens best when it is crisp and clean and in real time.

  2. William Mougayar

    Succession planning is taken very seriously in large companies. No reason why it shouldn’t be the same in smaller ones too.

    1. awaldstein

      if you don’t have a clear model or profitability honestly spending cycles on succession planning seems like not a great use of time.

      1. PhilipSugar

        I agree with both of you. The only definition is when you are a “company or truly a partnership” I define that as you are profitable, with a stakeholder base (employees, clients, and in this case investment companies) that depends on you.Then you owe it to those stakeholders to not screw things up if you get hit by the proverbial beer truck. (I say that because I in fact was hit by a car while I was walking on a walking path that was doing 45mph)

        1. awaldstein

          Of course.The lack of clarify around what people mean when they say startup or small company is overtly ambiguous and likely takes away from the value of a lot of statements.

          1. PhilipSugar

            Yes. Absolutely correct. When you are small you are absolutely reliant on a handful of key people at most. You don’t have the luxury of having all sorts of plans.You only have the luxury of surviving. When you do that then you can start having overhead.Frankly from my viewpoint too many businesses have too much overhead from people that are “playing” business person.Succession should be “next woman up”. No different than the New England Patriots who I do not like but I respect. Bellicheck says next man up.

          2. awaldstein

            In top ten phil comments!

          3. PhilipSugar

            I tell people I have a strong belief.If you make yourself “un-replaceable”Then I have to replace you.I believe in Principles much more than Powerpoint.If I train you so that if I go down you can take my spot, that is a Principle that has to be lived every day, not put in a Powerpoint.When Brady was suspended Garapllo came in, when he went down, Brissett came in.Patriots kept winning.

    1. JimHirshfield

      “The story, all names, characters, and incidents portrayed in this production are fictitious. No identification with actual persons (living or deceased), places, buildings, and products is intended or should be inferred.”

  4. David C. Baker

    Good thoughts, Fred. I don’t know your world, so I can’t speculate if this applies, but in the M/A work that I do with small expert firms, here are some typical mistakes:1) An arranged marriage where multiple partners are put together who wouldn’t have necessarily started a business together.2) Passing a business along to people who are not entrepreneurial risk takers.I tell people that someone is ready to move into a key role if:1) They have full access to all the financials, including what everyone makes.2) You anoint one leader who assembles his/her team of others partners.3) You’re willing to tell the world and identify the successors.Sounds like a fair bit of that wouldn’t apply in your situation because all the partners–I’d guess–are risk-takers already.

  5. kidmercury

    please photoshop USV faces on top accordinglyhttps://uploads.disquscdn.c…

    1. fredwilson

      nice. i don’t speak french very well so i must be Duncan 🙂

  6. Tom Labus

    So many of the big banks have succession plans and an heir apparent(s). Then the intrigue begins. Those guys wind up somewhere else like Jamie Dimon. It’s a tough call since it requires a majority of adults to pull it off.

  7. CJ

    I worked at a partnership once where the culture was great one day, literally the best place I’ve ever worked and abrupt leadership changed killed it overnight. That abrupt leadership and culture change are the reason I went from work to workED there.

  8. Ron Shah

    Hope Albert and Andy can take the baton and create leadership in positioning USV. The east coast needs a leading VC firm given the insular thinking and bias of Bay Area VCs. I, for one, used to accredit this leadership to USV. But to be honest, it feels that USV is losing their edge as a finder of great founders… and is instead moving toward becoming a specialist in themes like blockchain.

    1. fredwilson

      there are some great founders in our two most recent funds, the 2014 and 2016 vintages. we likely need to do a better job getting the word out on that

      1. pointsnfigures

        Why can’t great founders also be starting blockchain companies?

  10. ShanaC

    Don’t think about this too soon :p

  11. pointsnfigures

    Learned a lot from being a small part of this on a couple of boards. Done well, the organization just motors along. Done poorly, the politics start.