I see a quiet revolution in leadership happening in the world of private equity (PE) and venture capital (VC). As economic uncertainties loom and market dynamics shift, the blueprint for what makes a successful CEO is being redefined.

Visionary leadership is no longer enough to guide companies toward sustainable success. If PE and VC-backed firms want to propel to new heights and maintain momentum once they reach the top, they must invest more in operational expertise and agile talent ecosystems.

Beyond big ideas, firms need operational expertise to thrive at the top

While operational expertise has always been a cornerstone of effective leadership in PE/VC, we’ve recently been in the era of visionaries – of bold ideas and transformative ambitions, crucial for navigating periods of hyper-growth, like the dot-com boom or pandemic-era tech surge.

But today’s market demands and economic pressures are bringing operational prowess back to the forefront, reminding us that sustainable success needs bold ideas and disciplined delivery.

As PE firms extend their holding periods and race to optimize their portfolios, they’re increasingly prioritizing operationally intensive roles like Chief Product Officer and Chief Revenue Officer, which both saw the largest hiring growth in PE-backed firms in 2024.

This shift reflects a pragmatic response to the growing complexities of scaling companies beyond the acquisition phase. Effective leadership isn’t just about breaking new ground; it’s about ensuring long-term profitability and navigating challenges with precision and purpose.

Balancing risk-taking with profitability in a tough VC market

VC-backed firms are grappling with similar leadership challenges. Historically, venture capital has favored trailblazers who could “steer a rocket” through the frenzied early stages of growth. But as Hunter Scanlon highlights, these firms are increasingly shifting to a “wartime footing”.

2024’s volatile environment, where global VC funding hit a five-year low of $75.9B in Q1, and VC-backed IPOs raised just $1.1B in Q3, highlights a tough market where big-picture strategies alone won’t suffice. Firms need leaders who can guide them beyond the launchpad, navigating the complex terrain of scaling while ensuring sustainable growth.

The mantra for 2025 and beyond is clear: profitability must coexist with innovation. For VC-backed firms, the ideal leader is no longer the bold risk-taker – it’s the strategist who can harness creativity while mitigating risk.

First-time CEOs are bringing a fresh perspective on leadership

None of this is to say that the need for visionary leaders is dead. In fact, another key trend shaping the future of PE/VC leadership is the number of first-time CEOs, which surged from 26% to 48% over the last five years. This rise signals a move towards nurturing homegrown talent who bring fresh ideas and a willingness to challenge the status quo.

First-time CEOs are often more attuned to the unique pressures of modern business. They’re digital natives, comfortable with leveraging technology to drive growth. They’re also more likely to embrace diverse perspectives, foster inclusive cultures and innovate at speed.

These leaders bring a hunger for success and the ability to adapt to the intricate demands of their new roles. Although they may lack the gravitas of seasoned executives, their agility and appetite for innovation often give them a competitive edge.

Firms are building agile talent ecosystems to navigate uncertainty

However, the stakes are high for leaders in the industry. CEO turnover rates in both PE and VC remain significant, exceeding 10% in 2024.

This highlights two things: firms keep getting the hiring process wrong, and as they do, the business is being left open to more risk. The pressure is mounting to fill critical leadership gaps quickly and rethink the approach to hiring.

Interim executives offer a lifeline, bringing specialized expertise and an outside perspective that can be invaluable during transitions or crises. Interim CEOs have become a go-to solution for PE firms in periods of transformation. They can stabilize operations, implement strategic initiatives, and mentor future leaders—all without the long-term commitment of a permanent hire.

Firms must also start investing in robust executive development and support structures, including workshops and programs, leadership coaching and robust succession planning. Not only will this reduce CEO turnover rates, it will also create clear pathways for internal talent, ensuring there is a strong bank of leaders ready to step into key positions as-and-when.

These trends – the increasing use of interim executives and investment in leadership development – underscores a broader shift in leadership philosophy. Companies are becoming less reliant on singular, all-encompassing leadership figures. Instead, they’re building ecosystems of talent that can adapt to the evolving, and often unpredictable needs of PE/VC.

Final thoughts

As the leadership landscape evolves, PE and VC firms must adapt their strategies to attract and retain future-focused leaders. The real challenge isn’t scaling new horizons, but finding the balance needed to stay firmly planted at the top.

The future of leadership in PE/VC is here. It’s operational. It’s visionary. It’s agile. CEOs who can dream big while executing meticulously represent the future of successful organizations. And firms who know how to identify, nurture and support this talent will be counted among tomorrow’s leaders.

I specialize in connecting PE and VC-backed companies with leaders who make a meaningful difference. If you’d like to discuss how I can help, contact me directly and we’ll set aside time for a call.