Private Equity

“If you look at Cambridge data, the average venture return over the last 10 years is one to two x net. You will do better in private equity. You'll definitely do better in the public markets. You don't need to lock up your money for 10 years.”

“Even private equity today, when they're doing a new investment, they're looking for something that's AI native. They're not looking to buy a workflow software company growing 10% that's seed based. Like, that's just not happening.”

“Exits in venture now way exceed private equity.”

“You can't just throw an operating partner at the company and say, let's put AI on it. It just doesn't work. You need to completely, and if you have, by the way, if you do have a founder mentality at the management team, like, it is possible, but the board has …”

“We did double track between VC and NP, and P was much more adapted for the next phase of the dummy, doing more and more M&A, consolidation,”

“What happened was in the NFL and a few other leagues, no individuals could afford them anymore. Like they ran out of people who had enough money who could buy them. And so they started lifting the rules so that private equity could buy in because they just wan…”

“And the point is the private equity playbook, which is going to be to do cost cutting, to maximize the profit, or to, is something we can apply ourselves. I mean, why would I sell the company to someone who can do and then reap the benefits of our own work?”

“We were around 15, twenty million in revenue, and then we sold it to a private equity firm in... In twenty-twenty-two. So we did our first exit when we were 26 or something.”

“You see a lot of these middle market private equity firms do that. They roll up these small companies. They're doing five, 10, twenty million dollars EBITDA each, and they bat, they just buy a bunch of them, and now they're up to a hundred million or two hundr…”

“We're five years into no net new customers and price increases and mediocre module expansion. I don't think there's another five years of those knobs and dials left.”

“So it's not a bubble that's going to impact most people in the room, right? Or most people across the U S but it could just destroy a lot of VCs and a lot of funds and a lot of PE, right? Because they're going all in.”

“Versus the 800 plus mom pop shops that exist all over the U.S. That are not just not only growing or not only are they not growing, they're actually going away. And either private equity is buying them, or they're being absorbed into other companies, or anythi…”

“You pair that with a public market that's vastly outperformed, the broad private market measured on, say, a Cambridge index level, and it's causing most people I know to have very difficult conversations around what is the future path of private allocation in …”

“Literally people are buying HVAC companies for 12 times EBITDA. These are businesses that are like project based businesses, right? And now you're saying chapter seven liquidations of private equity backed HVAC things.”

“The returns are really bad now. And so for that's, again, the capital's argument, the returns are terrible now, generally. The median fund. There's obviously ours, right? So it's almost, it seems like it's become venture-like where you've got a top decile that…”

“And so you sell a business to PE with ten million of EBITDA and you sell it again at 25 and you sell it again at 75 and then a 102 hundred. So you can have business that are for sale three, four times. And that means the day you close the transaction, the comp…”

“The thing, the key, key thing to understand here is that founders are sometimes a little frustrated with private equity because they think of them more like venture capitalists, and like venture capitalists typically will take, very gung-ho, will take extremel…”

“When you become a partner at a private equity firm, you really have to be a mile wide and an inch deep because you have to be good at all of these different things. Working with bankers, brokers, lawyers, accountants, reading financial statements and credit ag…”

“If you think about a continuum of public securities and private equity, the AI will not do Private equity. Always need people to do deals. I think you will. And then you have the kind of the stuff in between that requires a lot of negotiation and human interac…”

“I personally expect the returns from private equity in the ground to be disastrous. Because so much of exposure is to enterprise software, and this does not mean that enterprise software companies are going out of business. Far from it. It means that the prosp…”

“If you're a vice president, you should get paid like a vice president. When I'm looking at the vice president, we're equal. If I'm in the Navy and you're in the Army and we're the same rank, we should be paid the same. You're doing something very different tha…”

“And in some spaces, like in private equity, carry usually has a minimum return before the carry accrues to the person. So, you know, might have a six, seven, eight percent Return to the investor before the SPV owner gets the carry, but in these situations I've…”

“Venture capital and private equity is an access business. And it's not like you can just call up your broker and say, hey, I want some shares of Anthropic today and execute an order. Like, you need to pay for access, and that's what venture capital is doing, a…”

“One, if you'd looked at their performance generally They've ruined more businesses that they've grown. They just don't, one, they think they're smarter than the owners of people that created the business in the first place. Second, they think they can over lev…”

“And the reason why I try to talk these business founders into not selling to private equity is, and look, they're not all bad. And so, I'm not talking about all of them, but a lot of them are. And look, if you have, Investors, if you have shareholders that the…”

“If I were to ask the, whatever the typical staff or the typical member of Congress was, if they weren't on a committee that, like a banking committee or financial services committee or something like that, if I were to ask them, what do you know about venture …”

“If the safe part of the business takes some significant hits, it, you know, it's definitely going to reduce the appetite for risk.”

“You can't build a company big enough to go public. Strategics don't care. So you can sell this thing for three X revenues to fill in the PE from. That's not going to be true going forward.”

“If you look at private equity in 2007, 2008, that was about seven percent of institutional portfolios. Now it's about 16% of the institutional portfolios.”

“Essentially all of the remaining old media properties that don't figure out a way to adapt to the new world are gonna, you know, they're, you know, gonna get basically run by private equity and that'll be that.”

“And I think that given the anxiety in the market, it will be harder to Get debt facilities if you have balloon payments coming up to replace, and that will actually increase the loss rate for the private equity firms.”

“I think software is just now maturing to a state where it's gonna have the same dynamic, and there's a one-time massive reset that's gonna happen because the amount of leverage in the system, and there's a lot of leverage coming due in these P-back companies i…”

“We do have a partnership with Harbor Vests for some of our high net worth retail investors. We've had some success there gathering assets.”

“PE guys regularly come in to growth venture at the top of markets thinking this looks easy, and they regularly retreat from those markets when they discover it's hard, right?”

“All that ultimately matters is a few companies per vintage, and you just have to be into those. And so certainly as a VC, much more than even private equity or hedge funds, as a VC, you don't actually have to work that hard meeting everybody. You can dive in a…”

“I believe this is going to happen. We're going to have fully automated end-to-end first probably hedge funds or investment companies that would be full in the fully automated fashion, deeply analyzing scientific and business details of companies out there and …”

“Building things is a lot more durable than ripping things apart. Cause you can make like one and a half times your money, or maybe, maybe even two times your money ripping stuff If you're lucky, if you time the exit just right. But if you actually build someth…”

“The fact of the matter is, like, in this revenue range, about 70% of the deals are done by private equity, either directly, like, they are buying it because they want to use what, build it around it, which is basically what's called a platform acquisition, or …”

“I think, like, most of the loans are probably fine, and by the way, Not to like you're, I'm sure your listeners understand a capital stack, like the credit, this is senior secured credit, which is the safest place to be in any kind of corporate financial struc…”

“So we made the choice to sell everything and start from scratch. Which was a bit easier than it would be for most portfolios because there was actually no private equity at all.”

“Given the predominance of indexing in public markets and that talent vacuum into another space, there might be a lot more alpha in public markets.”

“Venture is the biggest dispersion of all the asset classes, like compared to private equity, credit, or hedge funds or whatever.”

“We think a lot of firms do a really, really good job on the buy. Very, very few firms do a very good job on the sell, like, knowing when to sell, pressuring to sell, and we would tell you that the private equity funds tend to do a much better job on the sell t…”

“Many committees are a nearly impossible task where, particularly in the endowment business, colleges, because rich graduates who've made big donations, Would love to sit on the board. They are treated with kid gloves because they're wonderfully good at making …”

“Brilliant private equity and venture capital, and they are so much stickier than general money management. They don't turn over as fast in private equity and venture capital. The winners tend to stay winners.”

“The private credit business really can't fall apart before, frankly, the private equity industry falls apart. Meaning, if you think about it, who has taken on the biggest loans from private, from the private credit space? It's oftentimes the private equity pla…”

“There is a whole sort of universe that I'd put in the category of mark to make believe. And the incentive system is such that you want that mark to make believe to go on as long as possible, because if you are The equity owner, you don't want to mark your mark…”

“That is something where people like really struggle with the PEs. They're going to like bury the news in the headline, or they're not going to take accountability. They're going to blame somebody else. And the box starts with you.”

“And if you try to go head to head with the PE, you're going to lose, right?”

“The return on investment is you know, mainly to the insiders, private equity, venture capital the corporate officers and employees versus the public because they're mature companies when they actually go public.”

“That's 70% of B to B SaaS acquisitions in this range are private equity.”

“A lot of people have a view of, I like to joke, like a private equity is like, you know, like a Bruce Springsteen Movie or a song where it's like, you know, they're always bad and always pay poorly, but that really is a misunderstanding of really the biggest b…”

“There's a big piece in the FT this morning about how much money the private equity industry put into buying software companies in the last 10 or 15 years, and a whole amount of debt, like half a billion, half a trillion dollars of debt around that.”

“While we have been offered some pretty cool chances from people we trust, we've taken the tack that at this moment, we're going to keep our co-investing for the private equity book and let some of our other family office friends, I suppose, lean in and take th…”

“These B to B companies, pre AI ones at fifty million, a 100,000,200 1,000,800 million, no one wants to buy them. It doesn't matter that you, hooray, you got profitable. Thank you. That means you're not going bankrupt. You have not solved your existential probl…”

“We can go IPO. I don't want to. We could raise money. I don't want to. We could raise more money. I don't want to. We could sell to PE. I don't want to. Like we could quit. I don't want to. Like these are all options that we have and keep going for as long as …”

“Number two, the balance of the capital that's not ours is different from a traditional PE firm in the sense that that's a much higher component of high net worth individuals and families around the world. Some sovereigns also, but a very different LP base, and…”

“So the next offseason, in summer of 24, they vote to allow private equity into the NFL.”

“The NFL will approve a set list of private equity firms, large private equity firms who have the opportunity, the option, the ability to invest in league franchises. That list is vetted by the NFL subject to change. And if you are not on that list, you are not…”

“Upon any eventual sale or monetization of the ownership stake that private equity would have in an NFL franchise, A portion of the returns on that investment get skimmed off the top and go back to the NFL and then get distributed equally among all 32 NFL team …”