Day: April 2, 2026

I love competition. I’ve been an athlete all my life in sports and business, and healthy competition makes us better. Iron sharpens iron. I’m also a fan of the “Moneyball” way of thinking; not just playing the game but understanding how the game itself can be advanced. That’s why I find the evolution in Private Equity so interesting.

As I laid out in the first post, the investment industry is evolving beyond financial engineering and operational playbooks. It has to. The next constraint on value creation and returns is clear: It’s the ability of organizations to develop human capital (“People”) that enables value creation. That also sits at the heart of GrowthFire’s “Unlocking Potential”.

Research is catching up to what savvy leaders have known for a long time: human capital and culture drive superior results, but only when embedded in how a company actually operates. Not as slogans, but as core values and systems.

• McKinsey & Company found companies strong in both people development and performance grew revenue 2x faster, had half the earnings volatility, and were 1.5x more likely to sustain top-tier performance during disruption

• Gallup (347 companies, 3.35M employees, 736 studies) found highly engaged teams had more than 2x the odds of success

• Research from the National Bureau of Economic Research shows management practices alone explain ~30% of performance variation

• Harvard’s John Kotter and James Heskett found companies with performance-enhancing cultures delivered 682% revenue growth vs 166%, and 756% net income growth vs 1%

This isn’t about “culture” in the abstract, it’s about how companies develop people and teams to achieve great things. Those “great things” ultimately lead to greater value creation and higher valuations.

The implication is straightforward. The companies that outperform aren’t just the ones with the right financial structure, better deals, clear strategies, or better products. Those are table stakes. The outperformers build legacies by developing their people into leaders who can execute repeatedly and predictably.

Investing in people leads to more predictable revenue, faster growth, lower turnover, greater adaptability, and a lower risk profile. That’s what “Unlocking Potential” means in practice, and why human capital is increasingly a driver of growth quality, resilience, and enterprise value, even in a world of AI.

Chances are, you already have an incredibly powerful, underdeveloped asset in your business. If you’re not investing in it, someone else will.

In the final post, I’ll break down how leadership teams build this capability, and what separates those that do it well from those that don’t.

How leadership teams that develop people turn strategy into predictable growth, and predictable growth into greater valuations.

This is the first part of a three-part series that focuses on the confluence of several things I love: Helping people and companies see and achieve great things; understanding how industries shift over time; and exploring the dynamic around value creation and value distribution. If you don’t know me “yet”, that combination might seem a bit eclectic. If you know me, it makes perfect sense.

Private equity has gone through several evolutionary stages over the last few decades. The first stage started with financial engineering: Buying well, using leverage, improving margins, and paying down debt to generate returns. Then it moved toward scale and multiple expansion. More recently, investment firms have leaned into operational improvement: Systems, discipline, and execution. Each phase built on the last in order to stay ahead of investment return compression. And like every industry, the easy sources of value creation eventually become commoditized, disruption occurs and a new competitive landscape is created.

That’s where we are now. Investor returns are getting harder to generate using the traditional playbook, and firms are being pushed to develop new sources of value creation. Studies from McKinsey and others have reported that as much as 30% of a company’s valuation historically is based on the CEO and leadership team.  That worked then, but the emerging direction of value creation is becoming increasingly clear: The next frontier isn’t financial capital, strategy or headliner leaders, it’s the people systems and how human capital development in companies drives provable value by building organizational capability, capacity and scalability. Specifically, the ability of those CEO’s and leadership teams to develop people and build organizations that scale. Simply put:  Amazing things happen at the intersection of scalable systems and People on a mission.

In the next post, I’ll break down what the research says about this shift, why more and more investors are starting to move toward human capital development as a primary driver of returns, and what that means for mid-market, growth-stage companies and their founders.

A recent, detailed and rather dry analysis, published by the Yale School of Management of 59 company exits, reveals a surprising truth about how value is actually created in lower middle-market companies.A Mathematical Analysis of Value-Creation Attribution in Search Fund Projects

When the authors Lazier, Thomas and Wasserstein decomposed enterprise value growth across dozens of ETA deals, they found that roughly 80% of the increase in company value came from EBITDA multiple expansion, while only about 20% came from actual EBITDA growth. In other words, the biggest driver of returns wasn’t simply improving operations and profitability: It was building a bigger, more investable company for a buyer willing to pay a higher valuation multiple. And one of the clearest factors behind that higher multiple turns out to be company size.

Larger businesses with more revenue and EBITDA, even lower EBITDA margins, consistently attracted higher valuations at exit.

This is where a scalable go-to-market (GTM) engine becomes critical for lower mid-market companies looking to optimize their valuation. When a company builds a repeatable, predictable revenue system that includes clear pipeline management, diversified customer acquisition, consistent sales execution, and reliable forecasting, it becomes capable of provably growing revenue faster, and more consistently, with greater capital efficiency (lower working capital needs).

That growth doesn’t just add EBITDA dollars; it moves the company into a different category of buyer altogether. As companies move from sub-scale to scale, they become attractive to larger pools of capital, particularly mid-market private equity firms, strategic acquirers, and platform buyers, each with lower return requirements and a willingness to pay higher multiples. Simply put, predictable growth reduces risk. Lower perceived risk translates into higher valuations.

The takeaway is simple: operational improvements alone help, and they’re important, but they rarely drive the biggest valuation gains. Scaling the revenue engine and derisking growth matters a lot, for owners and investors. A founder-driven sales model may generate revenue and growth, but a scalable GTM system creates size, predictability, and buyer confidence. And in the world of exits and acquisitions, those are the attributes that command premium multiples.

When it comes to valuation, the study confirms what experienced operators and investors already know: Size Matters.