What's a Private Equity Operating Partner and how can you become one? | The Suite (2022)

What's a Private Equity Operating Partner and how can you become one? | The Suite (1)

Maybe you have a friend who made this career shift in the past, or perhaps you noticed someone's profile and thought “Hey that looks like a sweet gig!”. Regardless, your interest was piqued and you want to know more about becoming an Operating Partner for Private Equity and/or Venture Capital firms. Here is an overview of what an Operating Partner is, what they do, and what salary they can expect to be paid.

In this article:

  • What an Operating Partner is
  • What an Operating Partner does
  • Inside the role of an OP
  • Is the job right for you?
  • How much are Operating Partners paid?
  • Key takeaways
  • Operating Partner FAQs


What is an Operating Partner?

An operating partner is a term used by VC firms and PE firms to describe a role dedicated to working with privately held companies to assess their value during the due diligence process and create gameplans for improving their weak areas post-investment. The leverage specialized skills honed over a successful career to make material impacts at the fund level. So in short, there are two types of Operating Partners.

Operating Partner at a Private Equity Firm

Normally an accomplished executive with a long track record of Operations, CEO/General Management, Finance/Audit, or Human Resources experience. These professionals will get involved on due diligence and serve as interim leaders at portfolio companies when the private equity firm first invests. They will also oversee the recruitment of the fulltime person.

Operating Partner at a Venture Capital Firm

More of an advisor than an operations person, so the name is actually kind of misleading. These people will usually be former founders, technology executives (like the recent trend of Chief Revenue Officers), or well-known industry names. They will usually focus the majority of their time at the venture capital firm itself and be an "on-demand resource" for the portfolio companies.

What does an Operating Partner do?

As mentioned above, operating partners perform a variety of services aimed at improving the performance of a struggling and/or developing business and usually sit as a member of the senior management team. Private Equity or Venture capital firms will have an entire team of functional experts ready to be deployed into their portfolio companies to assess and coach their leadership teams as part of a broader transformation strategy.

These experts will have extensive backgrounds in things like Digital Transformation, Finance & IPO readiness, Marketing & PR, Talent Development & Acquisition, and the list goes on. These backgrounds will shift depending on the needs of the portfolio company.

To the companies who receive investment from private equity or venture capital firms that leverage the operating partner model, imagine having on-demand support from an expert in one of the previously mentioned functions to support your team and guide you through complex challenges that your leadership team lacks the experience to solve.

What's the difference between an operating partner and Venture Partner?

Venture partners lead the core deal team of a VC firm. They are responsible for the sourcing of and managing of the firm's overall deal flow and investment strategy, and manage the firm's investment team. An Operating Partner is responsible for working with the current portfolio companies and assisting the founding teams in their day-to-day operations.

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So it is easiest to remember it like this: Venture Partners bring the companies in, and Operating Partners take care of the companies once they are there.

Here's a more detailed overview:

Operating Partner vs Venture Partner

Comparison Items Venture Partner Operating Partner
Meaning The Venture Partner controls the decision making, direction, and future of the fund. Operating Partners are expert advisors to the fund and its portfolio companies.
Position Highest (Usually) Middle
Accountable to CEO or Managing Partner/s (if there is one) Partners
Perspective Long-term Short-term
Focus on Investor returns and fund performance Portfolio company performance/growth
Function Investor Operations
Strives for Efficiency Effectiveness
Success means Returns Company Growth
Final result Portfolio performance Company Optimization

3 things you need to know about being an Operating Partner.

While the value of a central operations shared-service is universally understood, its look and feel still varies from firm to firm. There are several factors that contribute to this: the role of the operating partner is relatively new and they are still figuring it out, the private equity industry hasn’t universally agreed on what an operating partner is, each firm has different needs and the role of their operating partners changes to match.

Whatever the reason, a recent panel between The Carlyle Group, TPG,Terroir Capital, HIG Capital, and several others, concluded that the role of the operating partner is: 1) difficult to define, 2) critical to the due diligence process, and 3) 50/50 strategic advisor, business manager. So what do Operating Partners face? Let’s take a look.

1. The role of Operating Partner is tough to define

After existing for 10+ years, the role of a private equity or venture capital operating partner is still hard to define. Each firm has different styles, expectations, and goals for their operating partners and so the role itself adjusts. Some firms view operating partners as portfolio company CEOs, others see them as strategy consultants.

Despite subtle differences, you can categorize the various types of operating partners into 3 groups.

The Functional Expert:

These operating partners are former executives, strategy/accounting consultants, or lawyers with a deep functional expertise and experience working within businesses experiencing similar growth patterns. These people will have deep ties into the functional executive network they are a part of.

The Industry Expert:

These operating partners are industry-specific former senior executives, (typically CEOs or CFOs, or senior-level general managers) who have operated in the spaces that the firm invests in and fit the firm’s overall investment strategy. These people will have deep executive networks across the industry to tap into.

The Generalist:

These operating partners are the least common. Former consultants, often complemented with a few years of relevant industry experience. These people will have broad and utility based networks to tap into made up of a variety of executives from different backgrounds.

Most often however, firms use some sort of hybrid model, adapting their strategy to fit the needs of their companies. This can include a mix of sector experts(manufacturing, financial services, lending, retail & ecommerce, and others) and functional experts (strategy, finance, talent, supply-chain, etc) who partner on different engagements across the portfolio.

What's a Private Equity Operating Partner and how can you become one? | The Suite (2)

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2. Critical to due diligence, but tight on time

Private Equity firms use operating partners early on to get a running start on the due diligence process, but it’s important to understand that time spent on the deal diligence is time not spent on improving current portfolio company performance. In fact, the due diligence portion of a deal should only take up 5-10% of an operating partner’s time.

Too much longer and they won’t be able to do what they were hired to. No matter how much you want to look at the shiny new business you can fix, be sure to focus on the ones you already have. Rebuilding business operations takes time and attention, so make sure you have the bandwidth to give both.

3. 50/50 strategic advisor, business manager

Depending on the firm, some operating partners must have a board seat at whichever company they are assisting. It becomes part of the required institutional strategy. Holding such a seat can give the operating partner a deeper view into the overall business strategy and control over the direction, but it also places a lot of stress between the operating partner and the executive team.

Navigating the operating partner dynamic is one thing, navigating the board member dynamic on top of that can be even trickier. For this reason, some firms don’t give operating partners board seats, insisting that the advisor relationship is far more effective than the governing relationship. And of course, as you can probably guess, some firms mix it up depending on the circumstances.

From the perspective of the operating partner, sitting on a board is often preferred to not, as serving as board members changes compensation. Read more on how board seat compensation breaks down.

Any time you step into a newly created role or a type of role that hasn't been around for a long period of time, there are going to be growing pains. For those of you who thrive under pressure and constant change, this will be a dream role. Others who need stability and consistency should stick to working as an operator within companies, as this will prove a difficult transition for them.

Is the role of an Operating Partner right for you?

It's important to know if you are going to consider this shift that there is a difference between leading and influencing. Many successful executives who are proficient leaders believe the skillsets transfer easily, but all too often those same executives are wrong. As an Operating Partner, your role is to influence the executive teams and provide expert opinion, that’s it. To be successful, you must be ok with not being the one in charge as that is rarely the reality.

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The role of an Operating Partner is much more closely aligned to being a coach & adviser, often offering recommendations and pushing forward subtle changes, than the person leading the charge. If that appeals to you, then great! You will find these roles to be both challenging and fulfilling; however, if you are someone who needs to hold the remote and choose the channel, you may want to reconsider.

Do Operating Partners travel a lot?

Yes. The role of these partners requires them to be on the ground implementing change. Often, these executives are parachuted into businesses on a 3-6 month basis, spending 4-5 days on the ground until the project is finished and you’re off to the next one. They need deep executive networks and the only way to grow that is to spend the time meeting new people.

Some find it to be like an adventure and some feel the strain of being constantly on the move. In reality, your likes/dislikes will decide which group you fall into. Also, your desire to travel may change depending on where you are in your personal life. If you are at a later stage and your kids have left the nest, this may sound very appealing to you.

How much do Operating Partner get paid?

Compensation levels vary greatly depending on the size of the firm you are working for and whether or the firm is a Venture Capital firm or Private Equity, but on average you can expect to be paid a base and bonus that is in line with your market value in-house at a company of a similar size. In addition, the breakdown of salary, bonus, and equity will also be similar.

That alone may not be exciting for most of you, but the big cherry on top of salary, is the participation in Carry or Carried Interest, which is a person’s share of profits from a particular investment. Like Options or RSUs, Carry may not pay out large sums immediately, but given time and a bit of luck, it can generate a life-changing payday.

Here is a chart showing the average split between Operating Partner compensation levels. You will see a breakdown of Operating Partner Salary, Bonus, and Equity in terms of relative breakdown.

What's a Private Equity Operating Partner and how can you become one? | The Suite (3)

This high risk/high reward form of compensation can create true “quality of life” changing payouts; however, they can also amount to nothing after years of hard work. When deciding whether or not this life is right for you, we would advise you to work under the assumption that Carry will likely never come to fruition. That way, it is always this amazing nice to have, and never something that your current lifestyle depends upon.

In conclusion...

The role of a Private Equity Operating Partner (or Venture Capital Operating Partner) is one of constant change and excitement where no two days are typically the same. If this sounds like something that would appeal to you, then your best way of breaking into this coveted space is to reach out directly to the investment partners and make your case as to why you would add value to their portfolio.

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If the constant change and unknown doesn’t appeal, then rest easy knowing there are always opportunities to continue down the path you are on. Just because a job sounds interesting, doesn't mean it it the right job for you. The path towards in-house C-Suite executive can be just as rewarding.

What's a Private Equity Operating Partner and how can you become one? | The Suite (4)

Want to learn more?
FAQs on being an Operating Partner

Is working in PE as an Operating Partner worth it?

For the right person? Absolutely. It can be a uniquely challenging and rewarding role that allows you to flex different muscles and get your hands into various businesses that you may not have been exposed to otherwise.

What makes a good Operating Partner?

In short, the right balance of analytical thinking with creative problem solving. You need to be able to think fast on your feet and work with different personality types. A Private Equity Operating Partner will also need a deep executive network.

How do Private Equity Operating Partners get paid?

Private Equity Operating Partners will be paid a mix of cash compensation and LTI (long-term incentive) usually in the form of carry, or carried interest (equity in the fund or individual investments that pays out when a business is sold).

What is the difference between a Partner and Operating Partner?

As stated above, the partner focuses on the deal flow and portfolio investments, the operating partner focuses on optimizing the investments once they are in the firm's portfolio.

Is an Operating Partner an owner?

No, an Operating Partner is an agent of the fund they work for. They do not normally own the businesses they work within unless they choose to co-invest (very rare with this deal size) or have carried interest in the fund itself.

Do Operating Partners charge fees?

No, companies leveraging their investors' Operating Partners will not be charged a fee. The work they do is covered by whatever compensation package they agreed to with the VC or PE firm.

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FAQs

What is an operating partner in a PE firm? ›

As the primary liaison between a private equity firm and its portfolio company, an operating partner ensures that the portfolio's executive team has the people, processes, and tools it needs to meet the goals established by the PE firm's investment thesis.

How do you become a partner in private equity? ›

Most people who become Partners do so by starting in private equity at the junior levels and rising through the ranks. Winning a promotion to the Partner level requires a combination of politics, performance, and luck.

What does Partner mean in private equity? ›

A private equity firm is called a general partner (GP) and its investors that commit capital are called limited partners (LPs). Limited partners generally consist of pension funds, institutional accounts and wealthy individuals.

What do private equity partners look for? ›

Four crucial things to consider when choosing a private equity...
  • Investment firms may look similar on-paper, but due diligence will separate the best from the rest. ...
  • Personality fit. ...
  • Industry experience. ...
  • Track record of success. ...
  • References matter. ...
  • THE AUTHOR.
31 Mar 2021

What makes a good operating partner? ›

An operating partner must confidently lead teams and direct managers to new tasks, so past leadership experience is invaluable. Background as a CEO or COO also makes it easier for the operating partner to empathize with the PE portfolio company leadership and build rapport.

How much do operating partners at private equity firms make? ›

$65,500 is the 25th percentile. Salaries below this are outliers. $114,500 is the 75th percentile.

How are operating partners paid? ›

Private Equity Operating Partners will be paid a mix of cash compensation and LTI (long-term incentive) usually in the form of carry, or carried interest (equity in the fund or individual investments that pays out when a business is sold).

What is private equity and how does it work? ›

Private equity (PE) refers to a constellation of investment funds that invest in or acquire private companies that are not listed on a public stock exchange. So-called PE funds may also buy out public companies, take them private, and then restructure them for potential future growth.

How do I get started in private equity? ›

How to get into private equity
  1. Get into private equity right out of college. ...
  2. Get a master's degree. ...
  3. Transition from an engineering career to one in private equity. ...
  4. Transition from a consulting, accounting or investment banking role.

What is the difference between a general partner and an operating partner? ›

General Partners are the PE guys who make the investment decisions, operating partners are the guys who go into the portfolio companies and make all of the strategic decisions - think KKR Capstone.

Who funds private equity? ›

Who can invest? A private equity fund is typically open only to accredited investors and qualified clients. Accredited investors and qualified clients include institutional investors, such as insurance companies, university endowments and pension funds, and high income and net worth individuals.

What is first close in private equity? ›

Initial closing – the first time that investors commit to making their investment in the fund. Final closing – the last investors commit to making their investments. Commitment period – the period over which investors are required to make their commitments, i.e. pay the money over!

What is a characteristic of private equity creation? ›

It is a linear process. It requires a long-term perspective. It targets quick returns on investments made over a short period of time.

How do private equity firms improve operations? ›

Private equity firms can find stronger returns and savings by examining customer service processes and outsourcing to produce better results where it makes sense. Example: An electronic instruments manufacturer was displeased with the disruption and inefficiency caused by calls related to a warranty program.

How much does a private equity principal make? ›

Private Equity Principal Salary, Bonus, and Carried Interest

On average, Principals at mid-sized-to-large firms in the U.S. earn in the $500K – $800K range in terms of base salary + year-end bonus.

What is carried interest in private equity? ›

Carried interest is a form of compensation paid to investment executives like private equity, hedge fund and venture capital managers. The managers receive a share of the fund's profits — typically 20% of the total — which is divided among them proportionally.

How much do Blackstone MDS make? ›

$641,893. The estimated total pay for a Managing Director at The Blackstone Group is $641,893 per year.

How much does a VP in private equity make? ›

Salary Ranges for Vice President, Private Equities

The salaries of Vice President, Private Equities in the US range from $200,000 to $400,000 , with a median salary of $349,000 . The middle 67% of Vice President, Private Equities makes $349,000, with the top 67% making $400,000.

How much does a partner at a hedge fund make? ›

Hedge Fund Partner Salary
Annual SalaryWeekly Pay
Top Earners$400,000$7,692
75th Percentile$147,500$2,836
Average$141,942$2,729
25th Percentile$69,000$1,326

How much carry do partners get? ›

Carried interest serves as the primary source of compensation for the general partner, typically amounting to 20% of a fund's returns. 1 The general partner passes its gains through to the fund's managers. Many general partners also charge a 2% annual management fee.

What is KKR Capstone? ›

KKR Capstone is a global investment firm. The Company manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, capital markets, credit strategies, and hedge funds.

How much do venture capital partners make? ›

Compensation levels vary by firm size, carried interest, and title, so I'm going to estimate a very wide range of $500K – $2 million USD. In practical terms, this range means: Base salaries are probably in the low 6-figure-range at many firms ($200-$400K), at least for the GPs (Junior Partners may be lower).

What is private equity in simple terms? ›

Private equity refers to the debts and shares of companies that are not publicly traded on a stock exchange. The term may also refer to venture capital that is invested in newly started businesses, known as startups.

What is private equity with example? ›

Private equity is the category of capital investments made into private companies. These companies aren't listed on a public exchange, such as the New York Stock Exchange. As such, investing in them is considered an alternative.

How does private equity make money? ›

Investment bankers make money by advising companies, structuring sales, raising capital, and taking a percentage fee on each transaction. By contrast, private equity firms make money by exiting their investments. They try to sell the companies at a much higher price than what they paid for them.

How many hours do you work in private equity? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

Is it hard to get a job in private equity? ›

Landing a career in private equity is very difficult because there are few jobs on the market in this profession and so it can be very competitive. Coming into private equity with no experience is impossible, so finding an internship or having previous experience in a related field is highly recommended.

Can anyone get into private equity? ›

To become a private equity analyst, you will need a bachelor's degree in accounting, finance or a related programme and sometimes an MBA as well. Entry-level positions are available, but usually experience working in the financial sector is a requirement.

Can the same person be GP and LP? ›

A person may be both a general partner and a limited partner at the same time in the same limited partnership.

What is general partner and limited partner in private equity? ›

In the case of private equity limited partners, there are always general partners who oversee business operations, so the role of limited partners is not to be involved in the day-to-day working of the business. Unlike general partners, limited partners do not have the equal decision-making powers.

Can the same person be a general partner and a limited partner? ›

No, a general partner and a limited partner cannot be the same person. Limited partners cannot exist without a general partner. However, a general partner can co-exist with another general partner.

Where do private equity firms get their money? ›

Private equity firms raise money from institutional investors (e.g. pension funds, insurance companies, sovereign wealth funds and family offices) for the purpose of investing in private businesses, growing them and selling them years later, generating better returns for investors than they can reliably get from public ...

Why is private equity so popular? ›

One reason many investors find private equity so alluring: It gives them the chance to invest in the kinds of companies that have been slowly disappearing from the public market—small-cap stocks with large-cap potential.

How long do private equity firms keep companies? ›

Private equity investments are traditionally long-term investments with typical holding periods ranging between three and five years. Within this defined time period, the fund manager focuses on increasing the value of the portfolio company in order to sell it at a profit and distribute the proceeds to investors.

What does 2 and 20 mean in private equity? ›

"Two" means 2% of assets under management (AUM), and refers to the annual management fee charged by the hedge fund for managing assets. "Twenty" refers to the standard performance or incentive fee of 20% of profits made by the fund above a certain predefined benchmark.

What is Mom in private equity? ›

06-15-2017. Also known as the investment multiple, it is the ratio of the realized and unrealized fund/equity value divided by the capital invested in the fund/company.

What are the stages of private equity? ›

According to Blackstone's Private Wealth Solutions group, the life cycle of PE funds is typically 7 to 10 years, and is generally broken down into three stages: the fundraising period, the investment period, and the harvest period.

What is the difference between a general partner and an operating partner? ›

General Partners are the PE guys who make the investment decisions, operating partners are the guys who go into the portfolio companies and make all of the strategic decisions - think KKR Capstone.

What is an operating partner at Chick Fil A? ›

The Operating Partner will primarily focus on continuous business improvement through the development of people, processes, and effective communication. This leader will be intentionally developed and long-term could have the opportunity to pursue becoming an Owner/Operator themselves!

Is managing partner higher than partner? ›

A partner, for example, has ownership interest in a partnership but does not have to manage the business. On the other hand, a managing partner also has an ownership interest in the partnership but is also responsible for managing the business.

What is an operating partner at Sonic? ›

Manage weekly inventory levels, rotation, tempering, dating of product and establish product par levels to ensure our awesome food is served fresh and fast. Ensure adherence to company policies and procedures. Ability to multi-task.

Can the same person be GP and LP? ›

A person may be both a general partner and a limited partner at the same time in the same limited partnership.

What is general partner and limited partner in private equity? ›

In the case of private equity limited partners, there are always general partners who oversee business operations, so the role of limited partners is not to be involved in the day-to-day working of the business. Unlike general partners, limited partners do not have the equal decision-making powers.

Can the same person be a general partner and a limited partner? ›

No, a general partner and a limited partner cannot be the same person. Limited partners cannot exist without a general partner. However, a general partner can co-exist with another general partner.

How much do Chick-fil-A owners make? ›

Chick-Fil-A Franchise Owner Salary

Owners make $200,000 to $240,000 per year on average after considering annual fees. Chick-fil-A restaurants produce around $5.3 million in annual sales on average so between 5% – 7% of total sales will hit the bottom line after expenses.

How much is it to open a Chick-fil-A? ›

It currently costs $10,000 dollars to open a Chick-Fil-A franchise in the US, and $15,000 CAD if you were looking to open one in Canada. There are no startup costs, costs for purchasing a building, for constructing a building or for buying equipment - Chick-Fil-A covers it all.

Is Chick-fil-A corporate a good place to work? ›

Chick-fil-A is proud to announce its ranking as a Top Company for Culture and Values, according to anonymous employee feedback shared on jobs site. The list is GlassDoor's first report on companies with the best work culture and values.

Who is the head of a partnership? ›

A director of partnerships is responsible for managing the relationships between an organization and its partners. They may be in charge of developing new partnerships, maintaining current partnerships, or overseeing any other activities that strengthen these connections.

Can a company have 2 managing partners? ›

An LLC can have as many managing partners as it wants, and they don't have to be members either. Owners in an LLC are referred to as members. They are not required to maintain an active role in day-to-day operations. Owners have the option to run the business themselves as managing partners.

What is silent partner? ›

A silent partner is also known as a dormant partner; an investor who becomes a member of a partnership by virtue of capital contribution, but plays an inactive role in the daily operation and management of the business.

How much does a sonic operating partner make? ›

Sonic Salary FAQs

The average salary for an Operating Partner is $128,976 per year in United States, which is 10% lower than the average Sonic salary of $143,946 per year for this job.

What does a operating partner do for a restaurant? ›

They oversee the preparation and delivery of products, restaurant repair and maintenance, team management, inventory management, and customer relations. To become a restaurant general manager, one should have excellent customer relations and service skills, and commercial awareness.

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