Lee McCabe Proposes a New Model for Private Equity: Build Capability First, Chase Capital Later

In a recent LinkedIn post, Lee McCabe challenges the traditional private equity playbook, arguing that building operational capability should precede the pursuit of capital. McCabe suggests that the prevailing model, which focuses on financial engineering and cost-cutting in an era of cheap money, is becoming obsolete as holding periods lengthen and exit markets tighten.

McCabe proposes a shift in focus, stating:

“If I were building a PE firm from scratch today, I wouldn’t start by chasing capital. I’d start by building something that can actually improve a business without needing a spreadsheet to do the heavy lifting.”

The author contends that the old model, characterized by leveraging assets, trimming costs, and quick exits under the guise of “operational excellence,” is no longer sustainable. He points to the increasing average buyout holding periods, citing a figure of around 6.4 years in 2025, as evidence that the nature of the job is changing significantly.

Rethinking the Private Equity Firm as an Operating Factory

Instead of a traditional “deal machine,” McCabe envisions a private equity firm that functions more like an operating factory. This would involve establishing a robust, internal operating system that can be deployed across portfolio companies from day one. He dismisses the idea of superficial “platform” pages on websites with generic imagery, emphasizing the need for tangible, functional systems.

McCabe outlines the composition of such a starting team, focusing on specialized operational expertise rather than traditional finance roles. He highlights the importance of individuals who can drive immediate improvements:

• A pricing and promotion specialist to prevent margin erosion.
• A CRM and lifecycle operator skilled in monetizing customer data.
• A data expert capable of integrating disparate systems.
• A RevOps builder focused on optimizing sales processes and conversion rates.
• A product or automation operator adept at iterative development and measurement.
• A finance partner with a strong grasp of ROI and a skeptical view of vague “marketing vibes.”

This core team would develop a standardized playbook and technology stack, eliminating the need to reinvent operational strategies for each new acquisition. McCabe advocates for centralized functions like demand generation, standardized reporting, a unified data model, and a decision-making cadence that fosters accountability.

“The kind of stuff that feels slightly oppressive, which is usually a good sign.”

This approach, according to McCabe, is designed to create efficiency and consistency across the portfolio.

Focusing on Operational Messes in Unsexy Markets

McCabe suggests that once this operational engine is proven, attracting capital will become a secondary concern. He believes capital is readily available for firms that have already demonstrated their ability to create value through execution.

Identifying the Right Acquisition Targets

The ideal acquisition targets for this new model, as outlined by McCabe, are businesses that are unsexy, fragmented, operationally messy, but still cash-flowing. These are markets where small improvements in execution can yield significant compounding gains. Home services are cited as a prime example.

“If you can raise call conversion, fix dispatch, clean up financing offers, and stop the lead sources from fighting each other, you do not need magic. You need competence.”

McCabe argues that achieving success in these sectors relies on fundamental operational competence rather than complex financial maneuvers or abstract transformation initiatives. He concludes that the current market gap is not in accessing capital or building brand recognition, but in developing scalable operational capability.

“Capability at scale. The rest is theatre.”

In essence, Lee McCabe’s post advocates for a paradigm shift in private equity, prioritizing the development of deep operational expertise and infrastructure before seeking investment, positioning capability as the true driver of value in today’s market.