Pod Insights How I Invest with David Weisburd E336: The Private Equity Firm of 2030 About this episode Is private equity becoming an asset gathering business instead of a performance business?
In this episode, I talk with Sam Tidswell-Norrish, Partner at Access Holdings, about how private equity is evolving across sourcing, value creation, and distribution. We discuss why performance is still the core product, how AI is reshaping deal flow and portfolio operations, and why the lower middle market remains one of the best places to generate alpha. Sam also shares how culture, curiosity, and relationships drive long term success in an increasingly competitive and automated industry.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 David Weisburd? Last time we chatted, you said that there's a lot of innovation going on in private equity. What exactly is innovating?
0:05 Speaker 01 I would think about innovation in three buckets. The front office bucket, which is origination, product, distribution. The middle bucket, which is the portfolio company value creation component. And then the third, which is back office. And I think the most innovative people in the industry have probably been the biggest private equity firms today. The Apollos, the Blackstones, the people that grew the fastest were the ones that innovated the quickest.
0:31 David Weisburd? Which part is the chicken, which part is the egg? Did they grow because they were innovative or were they innovative because they had the budget?
0:37 Speaker 01 That's a very good question. It's probably a bit of both. One feeds the other. But these are firms that have been innovating in the product area very quickly. And you look at an Apollo that built a super innovative retirement services business in Athene. It's now the largest writer of annuities products globally. That was hyper innovative. So I think it comes down to culture all of the time.
1:01 David Weisburd? Speaking of innovation, I had the former partner of David Rubenstein, Carlisle. He told me the story about how David Rubenstein was the first partner to actually say, well, we could have two strategies in one firm. Back then, it was you have a real estate fund or you have a private equity fund or you have a credit fund. And no one had ever thought to have two different minds in a single fund.
1:19 Speaker 01 You have to think like that these days. But it's also important to stay true to what your north star is and your vision. Very quickly, firms become asset gatherers. In an environment where fundraising becomes harder, performance is more important than ever. And we need, the industry often needs to remind itself what its core product is. His product is performance. A customer client gives you a dollar and expects two and a half, three dollars back.
1:43 David Weisburd? Do you really think that's true?
1:44 Speaker 01 Yeah, I do. I think it's really, really important. And I think asset gathering has become more about management fees than it has about performance. And that can be a dangerous mindset.
1:54 David Weisburd? For the purist, returns are the product. I had the former CIO of Calipers, Russell Reed. We talked about this very thing. What part of the LP market is chasing alpha versus beta? And by his summation, from a capital standpoint, it was more than 95% were actually going after beta. Now people call it smart data, which is just a nice way to say beta. And only really 5%, the single family offices, the high net worth, some very innovative endowments, some very innovative pension funds, but only 5% of the capital is actually chasing alpha.
2:23 Speaker 01 I agree with that. And I actually think that we're saying the same thing, which is value creation and alpha creation to generate returns is something that is increasingly important.
2:35 David Weisburd? You're at Access Holdings that has 2.5 billion and you are competing one way or another with Apollo's, the KKR's, the Blackstone. How do you compete with them?
2:44 Speaker 01 Well, I don't think we do compete with them. We're further down the market. Now, we might compete in some way or form for LP dollars, but we don't directly compete with them. And that's a good thing because those are some of the greatest firms in the world. But we operate at access in the lower middle market. It is our laser focus. It's why I joined the firm. I wanted to focus the rest of my career on the lower middle market specifically. And I do believe that the ability to create alpha at the smaller end of the market is so much more prevalent. But it does require an incredibly hands-on, incredibly labor-intensive model. And it's not easy. It's easy to say it's easier to take $5 million EBITDA to 50 than it is a 500 to 5 billion.
3:26 Speaker 01 But in practice, it's really hard. Building businesses is difficult.
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5:30 Speaker 01 It's a great question. So at Access, everything for us begins with research and data. And we have a handful of capabilities that were built on those philosophies. Firstly, when it comes to origination, we have an in-house research division business called Noah Research. And that business allows us to pick a thesis area and go really deep on it instantly. We generate a thesis report and what we call an EKG report, an engagement Kickstarter guide. In a matter of minutes, it pulls from multiple different agents talking to each other at the same time, including ChatGPT and Claude. And it generates a report that we also turn into a podcast so that our deal team can get up to speed on an industry really, really quickly.
6:15 Speaker 01 That doesn't mean all the traditional work doesn't need to happen, but it does allow us to be prepared and to go deep on an industry. The engagement Kickstarter guide then pulls a one-to-one list. So if we're looking at pest control as an example, there might be 10,000 pest control companies, but there's probably only 200 that fit our criteria of. EBITDA of number of employees, of location, et cetera. And so we score these companies. We have a digital sophistication score that goes on their website and tells us how they're thinking about lead gen and analytics. We have 31 different data points that create that score and then populate our want to own list. So we then know which 200 companies we want to speak to.
6:58 Speaker 01 And that comes back to Kevin McAllister, the founder of Access's philosophy. We invest in businesses we want to own, not businesses that are for sale necessarily. This allows us to be that much more prepared and well read on the types of companies we want to own in a space, rather than just being opportunistic.
7:15 David Weisburd? Is AI also telling you which industries to go after? Or is it you decide to go in an industry, you decide an industry may be something worth pursuing, you do the EKG report, and then you go after the target list? Talk to me about your process.
7:27 Speaker 01 Whilst AI creates a lot of efficiencies for us, which we'll talk about today, the fundamental is that you still need to have the idea. AI doesn't do all the thinking for you. Now, it can help prompt ideas, and we absolutely use our tools for that. But it doesn't do everything for you. The one area that I think is particularly useful, where it does a lot of ideation and insight and analysis for us, is with our portfolio analytics. So we built, and this should blow you away because it's pretty advanced. I don't think there are many organizations that are doing exactly this just yet. But we worked with an organization called Accordion, who do office of the CFO activities for private equity firms.
8:12 Speaker 01 And we worked with Snowflake to build a data warehouse. And we connect all of our common infrastructure in our portfolio companies, the ERP systems, HRAS systems. And using FiveTran, an engagement layer, we take, put all the data out, and we put it into the data warehouse that Snowflake built for us. That then allows us to query huge sums of data, all the way down to, say, a store level, so that we can know real time data on cash management. And How the call center might be operating. We know that maybe at our pet care business, we're not answering the phones regularly enough. So we're losing out on leads or we're paying invoices too early and taking working capital out of the business.
8:57 Speaker 01 Or as one example that we actually just were talking about yesterday, our car wash business, we can look at of the 250 car washes we have, which performed worst last month. We can then look at that specific store and say it's one in Philadelphia. And we can see that the rainfall last month was really high. And so that's why we miss budget. But we can also look at last year's rain data that tells us that actually it was the same as last year. We just miss budgeted. And we can also then fast forward and use it predictively. So we can see if there'll be rain, heavy rainfall next month. And then that allows us to do a handful of things. One, we could think through how do we lower costs on resourcing because it's going to
9:41 Speaker 01 rain, rain more. Two, how can we think through supply chain and procurement adjustments? And three, how do we think through dynamic pricing? We could, as an example, focus more on interior car washes than exterior and do offers around around that to try and mitigate the weather. And then finally on pricing, another tool we have at the moment is a scraping pricing data tool. So we look at every single car wash in the United States. Every month we refresh the data and we can then price match based on all of the car washes in the United States.
10:19 David Weisburd? That's on the third layer. So that's after you invest, that's the value add. We talked about the first layer, which is figuring out whether the industry is sexy enough to pursue, although it's pest control and car washes. Sexiness is a relative term. And then which for which targets to go after. So you have your target list, your 200 out of the 10,000 pest control businesses. And then the next step is winning, winning that business and going into the company with a right entry point. How do you use AI to win?
10:47 Speaker 01 The private equity industry has historically, in some situations, been painted with a brush of corporate raiders and sharks and
10:58 David Weisburd? Gone back to the barbarians at the gate.
11:00 Speaker 01 Exactly. People you don't want to sell your business to. So we use our insights to not be smarter than the management team, but to use it to be prepared and to engage and develop relationships. And that's a cultural philosophy that we have. As an example, we have a large sports asset in the sports infrastructure space called Playfly. We pulled just yesterday a report through our research business on hot topics and it used social listening tools to pull information about the name, image, likeness discussions that are happening online between all the athletic directors so that we could engage in conversations knowledgeably about their perspectives. Not necessarily the
11:43 Speaker 01 facts and figures, but just understanding what their perspectives are going into conversations. That stuff helps you win because it allows you to have empathy. And this is an industry where sometimes empathy has been a little bit lacking. The other thing I want to talk about in terms of winning deals is an area the industry has also had a very low bar in, which is media. Now, understandably, the first word in the descriptor for the industry is private, so it hasn't been a marketing forward industry, although I do enjoy some of the Christmas videos that the bigger firms put out each year. But I don't know if I call that marketing, plus a. One area that is a really
12:25 Speaker 01 big part of the industry and growing, as we see more consolidation, is the independent sponsor market. It's formalizing.
12:32 David Weisburd? Thousands and thousands.
12:33 Speaker 01 Thousands of them.
12:35 David Weisburd? The last McGuire Woods conference had 2,000 independent sponsors.
12:38 Speaker 01 It's extraordinary. It's been growing at a 52% CAGR over the last five years. 25% of deals in the lower middle market will be done by independent sponsors this year. And so As the industry grows and becomes more institutional, they're no longer called the derogatory fund list. They are independent sponsors. That's an area we think we'll see a lot of good deal flow. And Kevin and I were talking before Christmas about how we can participate in that deal flow, not just more proactively, but how can we be a leading firm that participates in that deal flow? And Kevin was a three times independent sponsor before raising funds at Access Holdings. He did a fantastic job, but he's had that lived experience.
13:22 Speaker 01 And he unpacked for me all the things that he wished he'd had as an independent sponsor. And one of the big areas, despite quoting facts, there are not, there's not a lot of quantitative data in this space. So the data isn't there. And there isn't a single source of media entity. So an aggregation of news and what's happening in the industry. And then the final part is services. All these independent sponsors, they aren't in a position like Access where they can build infrastructure and build a
13:52 David Weisburd? They don't have the management fees to support.
13:54 Speaker 01 Correct. Yeah, they don't have the ability to build a 25 person value creation team or a five person talent team. And so an independent sponsor needs that stuff if they want to continue growing and being ahead of the field, as well as equity and credit and all sorts of other things. And so our answer to that was building, which launched recently, Independent Sponsor News, ISN. You can think of that like Prequinn or With Intelligence meets CNBC, with a marketplace of services from providers who want to serve the independent sponsor community. That allows us to participate in the flow of information to and from the industry. And I didn't think, as a private equity firm, when I first got into the industry, I would ever be launching a media platform.
14:39 Speaker 01 But that's, that's what we've done. And the idea here is it helps us serve the industry, both as Access Holdings and our strategic partners to serve the industry. But it also helps us be better at what we do, which is find great deals.
14:52 David Weisburd? When we started the media franchise three years ago, it was a very contrarian move, having Institutional investors jump on a podcast was probably for 80% of institutional investors, probably the biggest nightmare. And the way that I liken it is kind of like mental math before we had the calculator or the calculator before we had AI. You could either go out and spread your message one to one, which is also there's obviously room for that. It's important. Or you could do a one to 10,000 or one to 1,000. I was just talking to a manager about jumping on podcasts and he's like, I'm busy building my fund. And I took a step back and I thought, well, what does a fund manager do? He raises capital and he sources deals and there's some kind of obviously decision layer on top of that.
15:36 Speaker 01 Yeah.
15:36 David Weisburd? What does a podcast do? Raise capital. We've had over five trillion NEUM on this podcast, for example. And two is find deals because people want to hear. We've talked about this de-commodization of every private market. So before I had Professor Steve Kaplan from University of Chicago.
15:52 Speaker 01 He's one of our advisors.
15:53 David Weisburd? And awesome guy. And in the 90s, he said, people would come into University of Chicago and they would talk about their private equity fund. And he would ask them, what's your differentiation? And most of the speakers would actually kind of look at him weird and like, we don't do that. Like it was almost a dumb question. In the 2010s, everybody had differentiated by focus. We're a private equity fund, lower middle market focusing on 10 million to 20 million dollar EBITDA businesses with a 20 to 40% growth rate. Of course, when you peel that back, that's not really differentiation. That's just essentially giving a banker a mandate on which auctions you want to be part of. So now we're in this third evolution, which is how do we actually differentiate by providing value and focus to the companies? That's why you see these niches in the private market. Some of these niches are a hundred billion dollars, like continuation vehicles.
16:35 David Weisburd? As an industry becomes more competitive, you naturally have this evolution from we're one of 10 firms, we don't really do that differentiation thing that's weird to now we focus on five to 10 million and we focus on this space. And here are the five different services we have for our portfolio companies. And by the way, we also have a really good reputation, talk to these 20. Previous investment. So it's really kind of downstream of a hyper competitive market.
16:57 Speaker 01 Touching on your first point around the evolution of media.
17:03 Speaker 01 If you'd asked that manager, would you like to be on the front page of the Wall Street Journal? They would have jumped at the opportunity and it's an evolution of mindset now. Individuals are their media channel and some managers are better than than others at this. But that doesn't just mean that the managing partner needs to be the person out front. It's responsibility for all senior employees, in fact, all employees in general. We have a dedicated social media manager at Access. Not many small firms have that. I hired someone who's an expert on LinkedIn, specifically on LinkedIn. The algorithms change every week and she's plugged into how the algorithms change so we can maximize our exposure. And our team, they are our greatest champions. They should be.
17:49 Speaker 01 And so they should be posting and championing our portfolio companies and our platform and our culture. Now, you have to be appropriate and everything is reviewed by compliance and this process is wrapped around it. But it's really important. Just not doing it's not an option anymore. And for senior people in an organization, I think being a vocal champion of what you're building is really important. Like this podcast, I love what we do and I'm very fortunate to have joined Kevin's firm. Because I think what his vision for the firm is totally unique. I'll give you another example of something I thought was was unique. Kevin has had this vision for a long time of us using technology across every part of our investment process.
18:34 Speaker 01 So we're looking at doing a deal in the towing. As we've identified a platform and they were out meeting with a number of potential add-ons. So that we can out the gates, do two or three deals and double the EBITDA in very short order. And as we were thinking through what type of add-ons and where should we do it? How do we create that market densification? One of our senior team members, using Claude.
19:00 Speaker 01 Ingested four different types of information. One, where are the towing stores today? Two, where are the M and A targets on our want to own list towing stores? Three, what are the routes that they run today? And four, what is the, using all sorts of publicly available sources? What are the other towing company routes? And where are the biggest volumes driven through? And using that data, we could then identify, how do we, how do we densify our market? Where do we want to do deals? So we then created this market map that I was reviewing this morning. It's fascinating, telling us where, where would be most logical from a growth perspective to invest in, in what sequence?
19:40 David Weisburd? Access Holding is very tech forward. It's literally in your DNA. A lot of private equity firms or venture capital firms for that matter, they feel overwhelmed. And they ask themselves the question, where do I start? Where can I start integrating AI into my process? What's the lowest hanging fruit? And what's a way to start integrating AI today?
19:58 Speaker 01 Yeah, it's such a good question and it's really hard. I think it's particularly hard for the big firms. Firstly, it comes down to culture. We have a very innovative culture and that, that really is, it begins with Kevin as the managing partner. He pushes all of us incredibly hard to be curious and to be innovative and to think through how to leverage technology to do things more efficiently. And so we had one of the earliest instances of enterprise grade chat GPT. And we rolled it out across the full company and all senior employees in our portfolio companies. Every month, and I don't know if Kevin would thank me for saying this, but every month we score our whole firm. Fifty employees and it, we score them based on how many prompts are they, are they doing?
20:39 Speaker 01 Now, that allows us to see how much time on, on a kind of best case basis, we've saved using chat GPT, which is statistically the stuff that I quite, quite like. But it also shows us by prompts, who the person who's using chat GPT the most is, all the way down to the least. Now, it's unsurprisingly relatively correlated to age, youngest people using it more, oldest people using it least. And we, and we share it with the organization. Is it shaming to some extent? Yeah, sure, maybe, but but it encourages people to use it, encouraged me to use it. I was at the bottom of that list when I joined and now I'm somewhere in the middle. I don't know how these guys are using, doing tens of thousands of prompts a month. Maybe they've got an agent doing it for them.
21:19 Speaker 01 But it's, yeah, that you have to change the culture and don't just teach someone, say to someone, this, you've got to use AI, you've got to teach a person how to fish. So we do AI training courses with external providers. We did one two months ago and we all learned how to build digital twins. So we now will have digital twins doing stuff for us in the background.
21:37 David Weisburd? Access Holdings is an interesting use case because you guys started using AI very early in the private equity space. Was it some combination of bottoms up, top down processes? Meaning you started, 24 year olds started doing, using it for sourcing and then they figure out this process. And then they took up to senior management and senior management created this protocol. Or was it kind of top down? How do you create these firm wide competencies?
21:59 Speaker 01 It's not easy and we haven't found it easy by any stretch. So I think we are doing stuff quite on the leading edge, but it but it's a really deliberate way of living.
22:11 David Weisburd? But like this market mapping, is this something you do now as a process for every company? Or is this just something you, Sam, are doing yourself?
22:17 Speaker 01 No, this is, this is something we're doing for all of our portfolio.
22:19 David Weisburd? So somehow it was institutionalized.
22:21 Speaker 01 Correct.
22:21 David Weisburd? Talk to me about that process.
22:22 Speaker 01 It begins with a vision. So you can't just try to acquire data from a portfolio company and then analyze it. That's what the industry has been doing forever and it all lives in spreadsheets. So we created, the vision was to have a unified architecture. So all of our portfolio companies are on the same ERP system as an example. And that, NetSuite is an example, pulls all the information out and through Five Trang connects into Snowflake and puts all the data into Snowflake, but it's direct to source. So it, we're pulling everything from one place. Now, we have all sorts of data governance and guidelines around it and we're not pulling all data. So we're not taking bank account data for payroll as an example. But what we put into Snowflake, we can then analyze and assess.
23:07 Speaker 01 Snowflake have this Cortex tool, chatbot, that I think they built on Claude, Opus 4.6, that then allows us to query the data that we have. And it starts making recommendations to us. And so it starts being self fulfilling. But you can't get to that point without going through an incredibly labor intensive process of getting everyone onto NetSuite as an example. So it begins with a vision, but it needs to have a real plan. And you need to have a team executing against it. We have an internal head of AI who used to run McKinsey's transformation group. I wanted to bring in some outside perspective as well, so that, you know, we don't all drink our own Kool-Aid and someone who could really challenge us.
23:49 Speaker 01 And so I spoke to a great friend of mine, Mark Porat, who's the co-founder and CEO of a company from the 1990s called General Magic. And they built the original iPhone. If you haven't watched the movie, you must watch it, General Magic. And Mark built, when he built the first iPhone, 12 years before the iPhone existed, he built the infrastructure layer that went with it, including cloud and intelligent agents and all sorts of stuff. And so he's one of the originals to build Agentic. Mark critiques everything we're doing. He tells us where he thinks we're going wrong, where we should be pushing harder. And having that outside person also looking at this for us as an advisor is really, really useful.
24:28 David Weisburd? Just had the founder of Model ML, a three-time YC-backed founder, raise $100 million to go after Agentic AI. It's essentially Harvey and Magora for finance. And you introduce it to him, he's a fellow Brit as well.
24:40 Speaker 01 Love it. Amazing. I mean, that, if you fast forward, and I don't mean to frighten anyone, but in five years' time, this industry looks nothing like it does today. It'll be the same amount of change as it happened over the last 50 years.
24:54 David Weisburd? Double click on ads 2031, you walk into your office. What does the future of private equity look like?
25:00 Speaker 01 Human beings won't be replaced. Someone needs to be doing the prompting and coordinating the technology. But it looks very different. These aren't private equity firms that are technology enabled, won't be growing by headcount, that's for sure. And if you fast forward into a world of AGI and then superintelligence, the power of superintelligence, and I don't think people truly yet understand this, just go watch some YouTube videos on quantum technology. But superintelligence is a world where you can query how to cure a disease and it goes and solves it instantly. If we think the private equity industry isn't going to change, then we're wrong. But the question is how? So what type of new and innovative products are we building? We talked about secondaries earlier, semi liquids and evergreen structures, all these
25:45 Speaker 01 stuff is relatively new and will continue to advance through products that are much more bespoke. When we think about the capital raising environment, all of the larger firms are investing heavily in distribution into the global wealth channel. RIAs, high net worths, $87 trillion is going to change hands in the next 10 years. So how does technology innovate around that part of the market as well?
26:10 David Weisburd? 95% of capital from retail has flowed to five firms in the world today. 95%. Apollo, Mark Rowan, recently said that he's going to invest a billion dollars into the retail channel, not into investments, but into figuring out all the infrastructure, all the tooling and all the human resources to go after that channel.
26:32 Speaker 01 It's not surprising. I mean, Mark is one of the most innovative people in the industry. I had the fortune of having a front row seat to some of that with my prior firm when we partnered strategically with Apollo. And they're working around the clock to innovate and build new products, to think through different ways to leverage technology for execution, value creation, distribution, everything. But yeah, the biggest firms will have the biggest budgets to do this stuff. It's much the same as banking. JP Morgan for many years was the biggest investor in technology and look at it today. It's got a moat.
27:07 David Weisburd? One way to think about private equity in five years is to think what remains. Two last things to remain will be decision making and relationship management. So all the operations, all the monitoring, all the reporting, which many large organizations, the bulk of their people are today, is probably going to be automated by AI. What remains is the decision, also the fiduciary responsibility, as well as the relationship building. So if you think about Apollo, they might have a relationship with a foundation endowment pension fund, and now they could do, in theory, they could have 700 products with that one LP. It seems crazy to say, but if you take away operations and execution as a cost vector
27:50 David Weisburd? and as a friction, that's what we're likely looking at in the future.
27:55 Speaker 01 And it totally changes the paradigm of how you have that conversation with an LP.
28:00 Speaker 01 Today, it's still GP sits in front of LP saying, this is the product we have in market. Would you like to invest in it? At no point does the GP sit in front of the LP and say, what are your investment goals? And how can we support your goals? When you're an Apollo and you have 30 different products in market, you can have that conversation much more dynamically. And over time, products will get increasingly bespoke to ensure that they do meet the LP's needs, so that when an LP is looking to deploy 100, 200, 300 million dollars into something, they can put it into something that's really working for their portfolio construction and wasn't just the first thing they found on the shelf that kind of fit what they were looking for.
28:38 David Weisburd? I had the CIO of the doctor's company, which is an insurance company. And one of the things that he talks about and really complains about is the lack of GPs that understand the insurance vertical. There's very specific things that they need. They need certain packaging.
28:53 David Weisburd? I also had a consultant in the Taft-Hartley Act funds. Most people have never heard of the Taft-Hartley Act funds. I believe it's close to half a trillion dollars in capital that no one's really focused on, to your point, because everybody has one product, one solution. And also ironically, a big underserved part of the LP world is the taxable investor.
29:16 David Weisburd? Everybody that's not a foundation endowment pension fund and completely new products today are being built around that, whether it's, the most famous is the tax loss harvesting product done by the AQR's and Quentinino's of the world, but now there's real estate. I was pitched a crypto tax aware strategy. Everything's now being served towards this tax aware investor, which is mostly going to be these retail channels are coming. Online. So this product market fit AI allows you to really serve the right product to the right market. And in theory, there's no reason why you can't have a product for one LP. Especially if that one LP has billions of dollars, but in the future, when the friction goes further down, you can in theory have one product for one type of taxable investor in this city, with this jurisdiction, with this retirement age, you know, that doesn't break the laws of physics,
30:00 David Weisburd? but something like that might be down the pipeline.
30:02 Speaker 01 Totally. And I think as we go further down and we see the democratization of private equity, one of the big responsibilities is education. You know, these are complex, illiquid, most for the most part, products. And as a high net worth or even further down downstream, starts to invest in products like this, they have to be aware of what they're investing in. And a lot of the times, the the RAAs don't know enough about the products either. Two big distributors into the RIA channel are iCapital and Case. And Case, in fact, does a fantastic job of educating the RAAs. It's one of their big points of differentiation. So I do think whilst there's an exciting, brave world out there with with lots of capital to go after,
30:47 Speaker 01 there is a responsibility to make sure that the people investing really understand what they're putting their money into.
30:51 David Weisburd? Access Holdings, you guys today are two and a half billion dollars. What do the next couple of years look like? And how do you look at evolving the firm to where it needs to go?
31:01 Speaker 01 I joined Access for a handful of reasons. My prior firm, I was part of the formation of it and I loved it. It was a great business and a great place to to learn and to grow. But I always wanted to spend time in the lower middle market. And as we grew, I realized that that might not always be in in our future. And so Kevin, who I met six years ago, through one of the T-Roy Price leadership team members, said to me, he was always going to be focused on the lower middle market for his whole career. Nothing was going to change that. And that meant not raising funds bigger than, say, a billion dollars. And having a unique level of infrastructure
31:43 Speaker 01 for that fund size because of the ability to invest in processes and technology and so on. You don't you don't find the amount of infrastructure we have in the lower middle market very often, because those that can afford it tend to size out and go further upstream. And so when I joined, there were a few, a few things that Kevin and I wanted to achieve together with our, our other partners. Firstly, it was continuing to build a value creation division that was, that served the portfolio management teams and, and genuinely helped them grow, not nice to do stuff and bells and whistles, but, but things that were focused on building businesses. And our strategy is a build and buy strategy. And we use it in
32:26 Speaker 01 that order, build and buy intentionally, because you do have to build a business when you're investing between five and 20 million of EBITDA. And so our value creation division will be a continued area of, of material focus for us across platforms and how we, the technology we onboard our portcos to, and an organic and inorganic growth alongside seven functions we have in our, in our value creation division. The other area that's of huge focus for us is talent. So despite a massive focus on AI, we're also still very much focused on the human element. Kevin had a vision long ago to bring world-class talent into the lower middle market. If you go and invest in a pest control company,
33:11 Speaker 01 it's really hard to get someone from BCG or Bain or McKinsey who's been trained to be a ninja to go and work for a pest control company. Unsurprisingly, and same goes for executives. So Kevin wanted to build a junior operating partner program called the ACE program across, where we have four different types of roles and put those Aces into those companies, but rotate them. So and you create this opportunity for younger people to go and work in, in our portfolio companies and to get kind of private equity experience, but at the operating partner, in an operating partner model. And we now have 35 Aces across the portfolio today.
33:50 David Weisburd? When they're going out, they have their profile. Instead of saying pest control, they can now say private equity. In the age of AI, do you look at talent differently in that maybe pre-AI talent was maybe the hardest working or the most niche focused, but now it's almost like an AI first talent? Or is it just any smart person could kind of get up to speed?
34:09 Speaker 01 We were just on a call immediately before this this this conversation with an industry leading headhunter and we were talking about curiosity. The the person has to be curious, curious to challenge the status quo and to dissent with a level of EQ that that is appropriate. They have to be curious to hustle and find opportunity. They have to be curious to test new technologies. Curiosity is such a wonderful quality when you find it, but it's amazing how often curiosity doesn't.
34:39 David Weisburd? It's underrated because a lot of people talk about grit, but not as many people talk about curiosity. What's upstream of curiosity? Why? Why are people curious?
34:48 Speaker 01 Kevin will always look back at people's past, the heritage there. You know, we I can give you some examples, but we were looking through a specific CV not long ago. And he loved that this person played national level squash, hard game, requires fitness, strategy, great game. Loved it. But the person grew up in Greenwich. And so maybe the person was more privileged. They went to a private school. They probably had better coaches. They had better opportunities. So does that take away from the grit? And there were all these different variables that he was extracting from this person's resume that then allowed us to dive into some some slides. So I think curiosity is something that's generated early on in people's lives.
35:30 David Weisburd? I think it's like a subset of nonconformity. So you look at conformity, somebody that's always been the same culture, always, you know, third, fourth, fifth generation, doing the same thing. Their parents did the same thing. That's highly conformist. And then you have the nonconformist. Traditionally, in the US, it's been a lot of immigrant entrepreneurs, second, first and second generation immigrants raised out at some point 50% of all venture capital dollars, which is crazy if you think about just what they had to overcome to do that. I'm also a first generation immigrant. And then but within this nonconformist, you also have to have agency. So I think it's a combination of nonconformity and agency. So you have to think different, but instead of being, well, I'm different and nothing will happen. You have to be like, I'm different and I could do things.
36:07 Speaker 01 Totally agree with you. I often think through these kind of three areas as I'm interviewing someone IQ, EQ and TQ. IQ, we know, obviously, everyone in the industry has a very high IQ and they'll tell you about it pretty quickly. Less people have good EQ in private equity typically. So that's always something I'm on the lookout for and particularly not just the emotional intelligence, but the ability to truly empathize with people you're in dialogue with. And then the third is TQ, tenacity question. And so to your point on grit, but I do think maybe there's a CQ in there that we need to add as well.
36:43 David Weisburd? If you could go back in time, you had graduated uni and you could give yourself one piece of timeless advice that would have helped your career accelerate or helped you avoid costly mistakes, what would that one piece of advice be?
36:54 Speaker 01 Everything I've ever achieved in my life has been because of other people. And that's the same for everyone, everyone listening to this, same for you. A lot of people like to think it was because of them. Everything we do and we achieve is because of other people in some shape or form. Someone said yes to something, someone challenged you and pushed you in another direction, someone encouraged you, someone signed a contract, whatever it may be, it's always because of other people. And the second you realize that, life becomes a lot easier because you index heavier on the relationships. And that's what I've realized, I think, going through my career, relationships are everything. I love people. I love people. Everyone's way smarter than I am. I've had to pedal really
37:37 Speaker 01 hard to keep up in this industry, but relationships are always the differentiator.
37:43 David Weisburd? So what's the takeaway? What would be the piece of wisdom?
37:47 Speaker 01 Be curious about other people. Lots of people think they're good with people, same way I do, maybe I'm not, but be curious and genuinely interested in other people. You've got to be interested in others to be interesting to others. And lots of people would rather talk about themselves than really dive into someone's background or what motivates someone.
38:08 David Weisburd? A lot of times people reflect back on their life and I reflected, three years ago, I had a three and a half hour dinner with Eric Torneberg, who I started this podcast with. And we decided to start this podcast and it really changed the trajectory of everything. And I just think about what's upstream of that. I guess maybe it's saying yes to things with really talented people. That may not be obvious why. I think there's a mix of putting yourself in opportunities and also having the neural plasticity to be open to new opportunities. As we get older, we become very fixed in our thinking. Going back to private equity innovations, being mostly fixed in your thinking is actually, I think, a positive thing. But if you could leave 20% of your neural plasticity open for new opportunities, I think really great things could present themselves sometimes in completely unexpected ways.
38:52 Speaker 01 That's an incredible point. If you always do what you've always done, you'll always get what you've always got. And that one's always really wrong truth for me, especially in today's day and age, especially in a world of AI. If you are not willing to change and to adopt new technologies, you will be left behind instantly. This world is moving so fast and it will never move as slowly as it does today. I recently spoke to our interns and they said, what advice would you give us? And the only thing I could think of really was pick something that's new and go really deep on it because there are new products in this industry that no one's yet an expert on. You could be, you could eclipse a managing director at Blackstone or a partner at Apollo in knowledge of a product within a year purely because it's new.
39:36 Speaker 01 So be curious, learn, embrace change are all things, I think.
39:41 David Weisburd? You could be the number one expert on private equity sourcing in a lower middle market. It sounds like so many niches, but how valuable would that be? Literally any lower middle market firm on the planet would want to hire you.
39:52 Speaker 01 Exactly right. And when, yeah, a new product comes out, you know, it's something that maybe provides greater liquidity. Go be an expert in that product. Go really deep on it. That's what'll make you most attractive to other firms.
40:04 David Weisburd? Thought a lot about operationalizing this, like, how do you stay open? And part of it is to think about as a portfolio, 10 to 20% of your time should be spent on testing completely new things. This is how top marketers do. They'll do something completely crazy. Like that's how Coinbase came out with this CR code in their Super Bowl ad. Most of these will fail. 90% of those 10% bets will fail. Most of the time, it's just. Something that takes a couple hours and 10% of those could end up 10x-ing and just growing your business considerably.
40:36 Speaker 01 100%. The moonshots are critical. Yeah, and you've got to be willing to fail. I think America does that much better than the UK. Their failure is embraced here. It's what creates such an entrepreneurial environment. It's one of the reasons I love spending so much of my time in the US. It's exhilarating and intellectually stimulating because everyone's willing to try and to fail.
40:56 David Weisburd? Well, Sam, this has been Absolute Masterclass. Thanks so much for stopping by.
40:59 Speaker 01 Well, you're kind and thank you for having me. It's been a real pleasure. I love this podcast and so it's been a dream come true to be here today with you.
41:06 David Weisburd? Thank you, Sam. If you found this conversation valuable, please click Follow How I Invest so that you don't miss the next episode with the world's top investors.
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