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I have firsthand experience of how PE ruins startups. We were a small startup and unfortunately our founder decided to go with a PE firm rather than a VC firm f

I have firsthand experience of how PE ruins startups. We were a small startup and unfortunately our founder decided to go with a PE firm rather than a VC firm for a round of funding. The latter were upfront about job cuts but the PE firm did not say anything until them took over. The founder got a good paycheck but we were left holding the bag. There was a bloodbath and they ruined the culture, the product and the morale. I never realized the meaning of a "cutthroat" culture until that time. It was personally the most stressful period of my employment. From then on, the moment that I see PE mentioned anywhere, I know its time to run.

tracerbulletx 3y ago
Same thing happened at a company I worked at, they also constantly tell you how they are investing in the future of the company and will not be doing all of the culture destroying things that they are definitely going to do. So if you are in this position and they say it will be different, don't believe them.
- SirMaster 3y ago
  It's not always like this. A PE bought a majority stake in the company I work for which for 40 years was a family owned company. They said they were financial partners only, non-operational and they bought because they liked how we were. It's been years since and things have only gotten better as far as I am concerned. I mean they were pretty great originally when the family owned it and I had no complaints, but the culture and engagement and such has only gotten better, and the company is growing faster and becoming even more profitable than ever before as well.
  - mistrial9 3y ago
    that is the Warren Buffet model.. who can complain? not everything goes that way.. congrats on the successful transition
    - SirMaster 3y ago
      Just from what I hear it seems like most go bad. Though I have to assume it's also a case of people are more inclined to complain when things go poorly. I mean why would people write comments about how such a thing went smoothly and well. People do now and again but not usually spontaneously. Part of why I felt I should share my own experience. Hard to know what % of PE acquisitions the workers end up liking vs. hating, but I bet it's not as many bad cases as it seems from media or online comments.
andix 3y ago
Was it at least a good deal for the founder? I feel your pain about what happened. I've seen comparable things a few times first hand. My learning was: just leave once the change starts, only stay if you're getting something out of it. It's not my company, I'm only in charge of my life, I'll find something better soon. I think I would not recommend to run once PE is mentioned, it can also change for the better, but it can be a red flag to look more closely.
- SNosTrAnDbLe 3y ago
  Thanks! It was a really sweet deal for the founder as he left as far as I know and I suspect for their direct reports as well. Its been a while but it still brings out some bitterness. I did leave after an year but the damage had been done by then.
- fnimick 3y ago
  > Was it at least a good deal for the founder? This doesn't make it any better for the, you know, entire rest of the company. It's important to remember that this startup industry relies on selling dreams to idealistic young grads who will usually end up under the bus while the higher-ups walk away with the profit, if there is any. And a lot of us here are complicit, because we rely on cheap labor and false promises to get the next company off the ground. Once you see your first exit where the CEO walks away with $10+ million and every single other employee's stock (even the first few engineers) was made worthless in backroom dealings, you get jaded about the way this entire business operates.
  - twiddling 3y ago
    It's strictly business. You keep your CV up to date and move on.
    - BizarreByte 3y ago
      Nah, I'm tired of this. It's not simply business, some of us actually give a damn and care. PE fucks up everything most of the time, hurts the majority, and I hope I never encounter it again in my working career.
hotpotamus 3y ago
I believe they prefer the term "sharp-elbowed", but either way, you can imagine why so many were not interested in having Mitt Romney as a national leader.
enlyth 3y ago
It's not all black and white, at least from my experience A similar thing to what you described happened at a software company where I used to work at, culture destroyed, many people let go. I will name and shame the PE firm - it was Hg Capital However currently, I've been at a company for a few years who is owned by Morgan Stanley Capital Partners, and it's a completely different story. The culture is great and hasn't changed at all
- curiousllama 3y ago
  It REALLY matters what kind of PE you’re talking about. Bought by a growth equity fund? Probably fine. Bought as part of a roll up? Probably screwed. PE is like tech: similar tools, but very different firms.
  - chiph 3y ago
    A previous firm I worked at was bought as part of a roll-up (market segment consolidation). If you're the firm that they're rolling all their acquisitions into, that's great & exciting. If you're one of the roll-ees, not so much. They bought us not for our technology but our customer base. They intended to convert them all to their other firm's product. Little did they know that a lot of our customers had left the other firm for us because we treated them better.. So what happened is in addition to the back office staff & sales staff being laid off, they laid off the developers & testers too (they kept a few managers for a year for continuity). I realized this when the folks they sent to town refused to go to lunch with us in an rather awkward moment.
    - SNosTrAnDbLe 3y ago
      That is funny as the exact thing happened in my startup as well (we were one of the roll-ees) We got some suits sent by the PE after the funding round.They politely said that they had other plans when we invited them for lunch.
- rcoveson 3y ago
  Morgan Stanley Capital Partners: The middle-market private equity platform that cares.
api 3y ago
A major difference is that VCs (good ones at least) specialize in startups in a given sector and have some understanding of the sector, the product, the market landscape, the culture, etc. They also operate in that sector long term which means they really want to maintain a decent reputation among founders, employees, and even customers. VCs really don't want to get their name associated with "OMG run away!" since it could adversely affect their deal flow in the future. PE usually doesn't have any special connection to your sector or community. They just buy stuff and try to run it according to bog standard MBA rules.
- vdqtp3 3y ago
  > PE usually doesn't have any special connection to your sector or community. I know you said usually, but it really does depend. Thoma Bravo would be an example of one that is tech sector focused. Not that I like TB, just saying that doesn't always apply.
eli 3y ago
PE acquired us and was a great partner. Allowed us to do larger M&A deals than we otherwise could have. Supportive but mostly stayed out of the way. Never suggested any cuts or anything that would impact culture. Ultimately led to us being acquired by a strategic a few years later in what I think was a good outcome for everyone. These are all just anecdotes. My experience doesn't override yours, but I'd be careful drawing broad conclusions. I think sometimes PE gets a bad rap because they can be a "buyer of last resort" for companies that are already struggling.
- mbesto 3y ago
  My firm supports 100's of PE acquisitions every year and I can tell you that your experience is far more the norm than what the parent comment has suggested.
  - icelancer 3y ago
    The idea that PE comes in and sets eight figures of their own money on fire and ruins a business, shooting themselves in the foot makes no sense, yet every other story online is about them doing exactly that. Of course there are LBO scams going on (more historically rather than currently) but these billion dollar firms don't come in and lose a ton of their own money along with money of their outside investors on a regular basis.
    - eli 3y ago
      To be fair, I think there are also some PE firms that simply aren't that good at their job.
      - mbesto 3y ago
        This is very, very true. There is a huge proliferation of PE firms now too and many who are very unsophisticated, especially when dealing with smaller, family run businesses.
      - icelancer 3y ago
mbesto 3y ago
YMMV. Really depends on which PE firm it is. The large cap ones are notorious for what you are describing. The PE clients I work with are very growth orientated and understand that culture is important for growth, so I don't believe you can paint the whole space with one brushstroke.
snapetom 3y ago
I am inadvertently part of a PE cleanup, being a PM hired by a guy PE brought in. I am of the opinion if PE destroyed this company’s culture and strip/sell it off, it’s certainly deserves it and will be better for everyone involved. This place worked for decades as a cost center. It never made money, routinely losing $10-$40 million a year. Multimillion dollar deals were negotiated and made with handshakes, biting is in the ass. The engineers spent their time making shit, over engineered products with no regards to the little customers we had. Our suite of products have no interoperability. Just last week i again repeated why to a couple of “top engineers” why having single sign on across Our products makes a good customer experience. PE is a tech boogeyman here on HN and Reddit. But now I wholeheartedly believe that’s Sometimes PE needs to come in and shut things down.

tracerbulletx 3y ago

Same thing happened at a company I worked at, they also constantly tell you how they are investing in the future of the company and will not be doing all of the culture destroying things that they are definitely going to do. So if you are in this position and they say it will be different, don't believe them.

SirMaster 3y ago
It's not always like this. A PE bought a majority stake in the company I work for which for 40 years was a family owned company. They said they were financial partners only, non-operational and they bought because they liked how we were. It's been years since and things have only gotten better as far as I am concerned. I mean they were pretty great originally when the family owned it and I had no complaints, but the culture and engagement and such has only gotten better, and the company is growing faster and becoming even more profitable than ever before as well.
- mistrial9 3y ago
  that is the Warren Buffet model.. who can complain? not everything goes that way.. congrats on the successful transition
  - SirMaster 3y ago
    Just from what I hear it seems like most go bad. Though I have to assume it's also a case of people are more inclined to complain when things go poorly. I mean why would people write comments about how such a thing went smoothly and well. People do now and again but not usually spontaneously. Part of why I felt I should share my own experience. Hard to know what % of PE acquisitions the workers end up liking vs. hating, but I bet it's not as many bad cases as it seems from media or online comments.

andix 3y ago

Was it at least a good deal for the founder? I feel your pain about what happened. I've seen comparable things a few times first hand. My learning was: just leave once the change starts, only stay if you're getting something out of it. It's not my company, I'm only in charge of my life, I'll find something better soon. I think I would not recommend to run once PE is mentioned, it can also change for the better, but it can be a red flag to look more closely.

SNosTrAnDbLe 3y ago
Thanks! It was a really sweet deal for the founder as he left as far as I know and I suspect for their direct reports as well. Its been a while but it still brings out some bitterness. I did leave after an year but the damage had been done by then.
fnimick 3y ago
> Was it at least a good deal for the founder? This doesn't make it any better for the, you know, entire rest of the company. It's important to remember that this startup industry relies on selling dreams to idealistic young grads who will usually end up under the bus while the higher-ups walk away with the profit, if there is any. And a lot of us here are complicit, because we rely on cheap labor and false promises to get the next company off the ground. Once you see your first exit where the CEO walks away with $10+ million and every single other employee's stock (even the first few engineers) was made worthless in backroom dealings, you get jaded about the way this entire business operates.
- twiddling 3y ago
  It's strictly business. You keep your CV up to date and move on.
  - BizarreByte 3y ago
    Nah, I'm tired of this. It's not simply business, some of us actually give a damn and care. PE fucks up everything most of the time, hurts the majority, and I hope I never encounter it again in my working career.

hotpotamus 3y ago

I believe they prefer the term "sharp-elbowed", but either way, you can imagine why so many were not interested in having Mitt Romney as a national leader.

enlyth 3y ago

It's not all black and white, at least from my experience A similar thing to what you described happened at a software company where I used to work at, culture destroyed, many people let go. I will name and shame the PE firm - it was Hg Capital However currently, I've been at a company for a few years who is owned by Morgan Stanley Capital Partners, and it's a completely different story. The culture is great and hasn't changed at all

curiousllama 3y ago
It REALLY matters what kind of PE you’re talking about. Bought by a growth equity fund? Probably fine. Bought as part of a roll up? Probably screwed. PE is like tech: similar tools, but very different firms.
- chiph 3y ago
  A previous firm I worked at was bought as part of a roll-up (market segment consolidation). If you're the firm that they're rolling all their acquisitions into, that's great & exciting. If you're one of the roll-ees, not so much. They bought us not for our technology but our customer base. They intended to convert them all to their other firm's product. Little did they know that a lot of our customers had left the other firm for us because we treated them better.. So what happened is in addition to the back office staff & sales staff being laid off, they laid off the developers & testers too (they kept a few managers for a year for continuity). I realized this when the folks they sent to town refused to go to lunch with us in an rather awkward moment.
  - SNosTrAnDbLe 3y ago
    That is funny as the exact thing happened in my startup as well (we were one of the roll-ees) We got some suits sent by the PE after the funding round.They politely said that they had other plans when we invited them for lunch.
rcoveson 3y ago
Morgan Stanley Capital Partners: The middle-market private equity platform that cares.

api 3y ago

A major difference is that VCs (good ones at least) specialize in startups in a given sector and have some understanding of the sector, the product, the market landscape, the culture, etc. They also operate in that sector long term which means they really want to maintain a decent reputation among founders, employees, and even customers. VCs really don't want to get their name associated with "OMG run away!" since it could adversely affect their deal flow in the future. PE usually doesn't have any special connection to your sector or community. They just buy stuff and try to run it according to bog standard MBA rules.

vdqtp3 3y ago
> PE usually doesn't have any special connection to your sector or community. I know you said usually, but it really does depend. Thoma Bravo would be an example of one that is tech sector focused. Not that I like TB, just saying that doesn't always apply.

eli 3y ago

PE acquired us and was a great partner. Allowed us to do larger M&A deals than we otherwise could have. Supportive but mostly stayed out of the way. Never suggested any cuts or anything that would impact culture. Ultimately led to us being acquired by a strategic a few years later in what I think was a good outcome for everyone. These are all just anecdotes. My experience doesn't override yours, but I'd be careful drawing broad conclusions. I think sometimes PE gets a bad rap because they can be a "buyer of last resort" for companies that are already struggling.

mbesto 3y ago
My firm supports 100's of PE acquisitions every year and I can tell you that your experience is far more the norm than what the parent comment has suggested.
- icelancer 3y ago
  The idea that PE comes in and sets eight figures of their own money on fire and ruins a business, shooting themselves in the foot makes no sense, yet every other story online is about them doing exactly that. Of course there are LBO scams going on (more historically rather than currently) but these billion dollar firms don't come in and lose a ton of their own money along with money of their outside investors on a regular basis.
  - eli 3y ago
    To be fair, I think there are also some PE firms that simply aren't that good at their job.
    - mbesto 3y ago
      This is very, very true. There is a huge proliferation of PE firms now too and many who are very unsophisticated, especially when dealing with smaller, family run businesses.
    - icelancer 3y ago

mbesto 3y ago

YMMV. Really depends on which PE firm it is. The large cap ones are notorious for what you are describing. The PE clients I work with are very growth orientated and understand that culture is important for growth, so I don't believe you can paint the whole space with one brushstroke.

snapetom 3y ago

I am inadvertently part of a PE cleanup, being a PM hired by a guy PE brought in. I am of the opinion if PE destroyed this company’s culture and strip/sell it off, it’s certainly deserves it and will be better for everyone involved. This place worked for decades as a cost center. It never made money, routinely losing $10-$40 million a year. Multimillion dollar deals were negotiated and made with handshakes, biting is in the ass. The engineers spent their time making shit, over engineered products with no regards to the little customers we had. Our suite of products have no interoperability. Just last week i again repeated why to a couple of “top engineers” why having single sign on across Our products makes a good customer experience. PE is a tech boogeyman here on HN and Reddit. But now I wholeheartedly believe that’s Sometimes PE needs to come in and shut things down.