Get your free personalized podcast brief

We scan new podcasts and send you the top 5 insights daily.

Lower-middle-market companies often have underdeveloped or missing go-to-market functions, termed "phase zero capabilities." Acquiring firms must account for the time and cost to build these foundational elements from scratch, a step often overlooked during due diligence, which means going backwards before going forwards.

Related Insights

While large enterprises can afford specialized roles like Go-to-Market Engineers, Series A companies must prioritize foundational operations first. The initial ops hire should focus on building a solid data foundation, like funnel and pipeline tracking, before any advanced AI work is undertaken.

PE firms conduct rigorous financial and legal due diligence, but their commercial diligence is often thin. They approve aggressive growth theses based on a sales organization that was never designed for, or examined on, its ability to deliver, leading to missed targets post-acquisition.

Founders can secure meetings, pivot in conversations, and leverage their deep product knowledge in ways that hired salespeople cannot. This initial success is a unique, non-repeatable phase of founder-led selling, not a scalable go-to-market strategy to be replicated by a sales team.

Developing a new growth strategy is pointless until you've assessed the company's go-to-market maturity. Without a capable "growth engine"—including talent, processes, and systems—even the best strategy is unexecutable. This capability audit must come first to avoid wasting time during the limited PE hold period.

Don't expect the parent company's sales force to sell your nascent product. Their focus on core business means they will ignore emerging tech. An internal incubator must have its own dedicated go-to-market team to find new personas and develop sales plays before a handoff.

PE firms often assume engineering is the primary growth constraint in small software companies. The actual bottleneck is typically product management. Without a dedicated product leader to define what to build, engineers will still build, but they'll often build the wrong things, wasting resources and creating complexity.

Many PE firms use backward-looking commercial due diligence, which is superficial and fails to assess a target's true growth potential. A more effective approach is go-to-market focused due diligence that evaluates the scalability of the future revenue engine, not just past performance.

Private equity firms executing roll-up strategies should build a standardized go-to-market integration architecture *before* acquiring multiple companies. This "pre-wired" approach, like having standard plumbing on every floor of a building, makes integrating subsequent add-on acquisitions progressively easier and faster.

Early-stage companies often mistakenly hire a big-name CRO who has managed a $500M business. This leader is unequipped for the hands-on, resourceful work required to build a go-to-market function from scratch. Hire for the job that needs to be done today, not the one a year from now.

While M&A roll-ups are a common PE strategy, they are table stakes. The real, untapped value in smaller companies lies in optimizing operations—the "back office" where companies "live and die." This includes improving systems and processes, which are often underdeveloped due to budget constraints.