The Exchanges

Q As you look at that going forward, what do you think you'll be able to do with the business?

A Well, I love the word corporate carve out and can put distressed in front of it, but I only say distressed because I think anybody would define a business that has declined that much as a distressed asset. I think there were three easy examples that I can give you as to why we're excited about the capital and the turnaround. The first one is just programming. The X Games, which really focuses on a much younger demographic, is really Created now, the linear television, where most of its demographic probably don't even own a television. It's really hard to reach them if they have no way of watching your content. So creating relationships with digital platforms to promote the content digitally, and also internationally, there's no international deal for the X Games. The second area is really what I'll call sponsorship. So for all sports teams and media assets, sponsorship is a big revenue line. Now inside ESPN, given the size of the X Games, the prioritization was on much bigger intellectual property. The NFL, UFC, Major League Baseball. So not a dedicated sales team to monetize the IP through sponsorship. So having a dedicated sales team, and by the way, there was no dedicated management team either, so hiring a dedicated CEO who's Stephen Flissler who ran original content at Twitch gives you a sense for the challenges that the business had before. So now you have a CEO who under…

AI assessment note: “three easy examples that I can give you as to why we're excited”

Q With that structural advantage at the time at Credit Suisse, what are the benefits and the drawbacks of building a new business inside a large financial institution?

A The benefits are if you can find a way to leverage all the different parts of the organization, you can build a business where you really have a lot of other people that are helping you build it. And that's one of the keys to starting a business, right? You just can't hire 50 people to do everything, so we were leveraging off the private bank, we were leveraging off of the investment bankers to make introductions for us, so that was definitely one of the advantages leveraging the infrastructure. The disadvantages of being inside at least an investment bank were, for us, capital. When you're looking at making investments in distressed assets, Banks are normally trying to get rid of assets off their balance sheets that are illiquid and problematic that don't require a hundred percent capital reserves. So that was ultimately one of the issues that became a seminal moment for me was how can we keep building a principal business at Credit Suisse when fundamentally they don't want to own these assets. And a year later, I took my entire business to Apollo, which was transformational, but I was in the right place at the right time. Apollo at that point was basically a US private equity firm. It just opened an office in London. They were trying to expand. And when I started talking to Apollo, it was pretty clear that building this business inside an alternative investment firm, which is…

AI assessment note: “The disadvantages of being inside at least an investment bank were, for us, capital.”

Q How did you decide after these individual investments you made to sort of bring that into a professional role?

A Well, it was the spring of 2018, and my youngest was graduating from high school in London, and after almost 15 years there, it was just time to go back to the US with all my kids here, and I wasn't exactly sure what the next path would be, but I knew that I had developed this knowledge base across entertainment, and media, and sports, and Through KeyMotion specifically, a lot of understanding about how technology and the innovation was driving disruption, and how could you capitalize on that? And it was still a little bit early in other people kind of realizing this, and so I thought a great way to approach it would be to work with people that I've known for a long time and had already invested with in the space. So obviously through my time at Apollo and at Penn, Josh Harris is someone I'm Close with, and Josh had gotten together with David Blitzer and formed Harris Blitzer Sports and Entertainment, HBSC, and it was effectively a holding company that owned a handful of assets, some of which I had been invested in. We had the 70 Sixers, New Jersey Devils, Prudential Center, there was an esports team there, there was Crystal Palace Football Club, and the world was in a very big growth phase, especially across this ecosystem, and The thesis was, we've got this fantastic operating platform that sees a tremendous amount of deal flow, but how do we harness all that? I had a lot of …

AI assessment note: “I thought a great way to approach it would be to work with people”

Q What was your path watching this along the way?

A I was very early. I was on the sidelines when the world Blew up in 89, 90. I remember being around the first time I saw somebody lose their job. I was at Bear Stearns. And it's a really unsettling thing for a twenty-three-year-old to see a vice president that you're working with not be around anymore. And that was my first taste of how it really works, quote unquote, the real world. But as our business slowed down, I Had started seeing what was going on in kind of a new industry, which was the financial restructuring world. And I actually went to go work for a boutique, which is a spinoff of Drexel. And some firms like Apollo became principal investors. And the firm I went to called the Argosy Group was a financial advisor restructuring firm. This is before Hulan or Jay Alex even existed. So we did financial restructurings of all these highly levered deals that came out of the junk bond boom, and that went on for several years, and then I migrated into distressed sales and trading, and that became my next career path, having had the valuation and restructuring experience, and then started getting involved in principal investing and trading.

AI assessment note: “I was at Bear Stearns... went to go work for a boutique, which is a spinoff of Drexel”

Q There have been a lot of iterations at times of the thought that banks in Europe would be selling assets. What were the components of what made that opportunity work?

A Well, it was really simple. It started with regulatory changes. Germany had state guarantees, which meant they were triple A rated no matter what their balance sheet looked like. And when the EU was formed, the concept, which still exists today, of a level playing field, so governments just can't subsidize an industry in their country because it's unfair to the other industries in other countries. So when those federal guarantees went away, it was a little bit of the, wow, Germany has these problems. Everybody else has them too. But this was the first wave of what you'll call the, wasn't even called the sovereign debt crisis then. It was just deleveraging. So this was the early 2000 and those trends continued and you saw some other green shoots. And then obviously what happened, the financial crisis was just the next wave. And because banks are regulated, it was Easy to see the amount of distressed and non-performing loans they had in their balance sheets, and there was a shift in this part of the distressed market. Originally, it started in Asia in the late nineties when you had financial crisis in southeastern Asian countries, and then it moved up to bigger economies like Japan and Korea, and most of those markets were dominated by U.S. investment banks. That were using proprietary capital to buy assets off the financial institution's balance sheets, and they built really big…

AI assessment note: “It started with regulatory changes. Germany had state guarantees”

Q You spent time in a bunch of different iterations in a new market. When you're doing something in a relatively new area or institutionally new area, how do you actually go about that process of sourcing these opportunities?

A Sourcing is where everything starts. It's the key because not everyone's going to see every deal. Sometimes you see a deal too late where you really can't have an impact. And so A lot of starting a new firm is building a brand. The entrepreneurial requirements to sourcing are tremendous. I don't think there's any industry where you're really just sitting in your office or in these days at home and expecting everything to fall into your lap. It just doesn't happen that way. We have made a concerted effort to be very proactive in sourcing, and it starts with all the different relationships you've built over the course of your life. You have to start there, and we have the partners I've mentioned are part of that, and we have a lot of other strategic investors who own media companies and teams and are investors in venues who were investors in the fund. As you think about the overall industry, With the capital that's flown in, with technology creating new businesses, great companies have been established. They're successful, they're on a growth trajectory, and now they're looking for more capital and a partner. And the best way to find those earlier stage companies Is with relationships with the institutional investors who focus on the early and venture stages. And there's actually a fair amount of them across the entertainment and media sports ecosystem with a technology focus. Th…

AI assessment note: “best way to find those earlier stage companies Is with relationships with the institutional investors”

Q So there's so many steps in between where you've been in this distressed business to what you're doing today. What was the impetus for the next step in your career after Apollo?

A It was a very organic process. I think there were three moments that just happened that I never really anticipated. So when you live abroad, at least my kids well went to the American school in London, and they play in various sports tournaments with other schools across Europe, and my oldest son was playing in a basketball tournament in Brussels in 2014, and after the game, his coach was sitting with an individual who had an iPad. The iPad had all the clips from the game, all the shots he made, all the shots he missed, and A whole bunch of other statistics, and I was kind of struck by it because first I was like, wow, that's really good for him to understand, and then after talking to the individual, I asked some questions about the company, and it was a company where it had been founded at this engineering school outside Brussels, and they were trying to commercialize it, and they had sold the product to some of the French basketball leagues and the Belgian basketball leagues, and they were trying to expand the commercialization of it, and I said, well, you know, I could certainly help you in a bunch of different ways. I'd love to learn more about it. So I went a couple times to meet the university and meet the individual engineers who started the company, and when I went, there's a scene in, I forgot which Steve Jobs movie it is, but he's assembling computers in his garage, …

AI assessment note: “It was a very organic process. I think there were three moments that just happened”

Q Given the breadth of experience you've had, right, everything from distressed to startups, sports, technology, buying assets off of banks, How did you decide what your universe would be for Velocity?

A You have to describe what you're doing to somebody in a way that they can understand. To say, oh, we're going to do this, we're going to do that, we're also going to do that, that just doesn't work in today's world. Maybe if you're on your fund 11, you get discretion to do lots of different things, but I'd learn from my experience building a business and running it at Apollo that focus is probably the number one Priority, especially when you're starting out, and so, for me, that was it. Let's define what we're gonna do. In order to define it, let's pick where we believe We are differentiated where we can be successful. Just because someone else is doing it doesn't mean we should do it, and so we felt that businesses that are looking both for capital and for some strategic advice and domain expertise, that would be where we really wanted to focus. Starting up a business, we felt We would focus on mostly non-control investments to begin with. Just from a size of team and a capital perspective, it seemed like it made more sense. And we decided definitively we were not going to be investing in sports teams. But some of the underlying foundational themes that people look at for sports teams cuts through everything that we do. The value of intellectual property, technology driving, innovation disruption, New companies being established, funded, being successful, and then needing a st…

AI assessment note: “kind of a little bit by process of elimination, we said, where do we really have a lot of expertise?”

Q How does the diligence process different, if at all, on non-control investments from control investments?

A It's pretty much the same process we would undergo if we were looking at a control investment, because I only know one way to look at making an investment, and it's with that bottom-up mentality where you're trying to figure out what can go wrong, how do we protect ourselves, and how do we make sure that we're not making a big mistake here, because that's just how I've been trained over time. We really try to look at these investments through the lens of our diligence process should lever all of our domain expertise and relationships, and we feel as if when we see a business, we can understand pretty quickly who their customers are, who are the operating companies in the space that might compete with them, and then who should we talk to to get our diligence done. In these opportunities, it's not as if you're going to go call someone who's going to give you a big report and say, here's everything about the company, the industry, because some of these instances, they're just emerging. There's not a twenty-year operating history in the industry or in the company. It really is the domain expertise and speaking to companies around the ecosystem that makes sense. And I'll give you a perfect example in this company, Video Sites, where they are cutting-edge business tracking content, And measuring it and monetizing across social media. And so every rights holder in the world uses someb…

AI assessment note: “It's pretty much the same process we would undergo if we were looking”

Q So a lot of people, when they think about their careers early on, seek brands. What was it that had you go to Argosy from Bear Stearns?

A Well, it's interesting. I actually worked for Drexel when I was in college. I spent a year working on the floor of the commodities exchange in New York. So think of trading places. That's where I worked. It was really an unbelievable experience. I was a runner working for Drexel. And then when Drexel went out of business, I was connected with some of the people that set up new firms that came out of it. And I thought it was a good extension of investment banking experience to go into the restructuring world. And that led to the career path. But The firm, the Argosy Group, was definitely not a brand name. It was a small firm. There were seven of us when I started, and ultimately that business many years later was purchased by CIBC.

AI assessment note: “I thought it was a good extension of investment banking experience to go into the restructuring”

Q Which two people have had the biggest impact on your professional life?

A One of them I think has been on your show before, and I would say Doug Ostrover. Doug, that story I gave was the one that convinced me to go to DLJ way back when, when my first son was born and helped me along my path in many ways. And I do recall when Bennett Goodman and Doug Ostrover and Trip Smith set up GSO, I did have the chance to go work there when I was in Europe and decided not to, ultimately went up at Apollo. But if I had gone back to work with Doug, it would have been an amazing experience. So he had a great impact because he really gave us the platform to build out what we did. And that was incredible time. The second one is really the first job I had out of college. So I'll give everyone a quick story. This might not come across in the right way, but I'm a senior in college. I'm interviewing for my first job. And back then you'd have your on-campus interviews and Then you go up to New York for interview if you were in the financial sector. So I had a friend who had been working at Bear Stearns in investment banking, and I went through the process on campus, and I was invited for the final round at Bear Stearns in New York, and it was a Friday morning, and I'm a senior in college, and I decided that I was going to stay Thursday night in Philly and go to An event, and get up in the morning and take the train to New York, which I did. Ultimately, wind up at Bear Stea…

AI assessment note: “One of them I think has been on your show before, and I would say Doug Ostrover.”

Q What was different going from the investment seat in these distressed assets to owner-operator in both Keymotion and with this Yankees affiliate?

A Some of the same premises I had flowed through, which was we need to follow best practices. Organization information was always key, and sometimes the smaller companies don't have that. That was part of it. Hiring, attracting, retaining quality people, we always had that across our investment businesses. So you need to recalibrate the types of people you need to hire for these businesses, and sometimes I had to learn what skill set they needed to have for their specific role, because there was different roles than a principal investment business. When I was part of a group that bought Crystal Palace Football Club in the UK, I had this experience because my son went through the UK Academy football system. He plays professionally now in the US, and so I really understood the importance of the grassroots building of the youth academy, how that can feed players for the team, and so that was where I spent my time trying to Help, as we thought through that, and build our academy, and change trajectory of the business, but that was the same mentality of, this is a process, right? It's not going to happen overnight. We've got to hire the right people. We have to plan for it and put it in place, and sometimes that's hard. It takes time. It takes money, but saw that in key motion. Took a long time and a lot of money. We ultimately sold the Yankees AAA team at the end of twenty-twenty-one…

AI assessment note: “you need to recalibrate the types of people you need to hire for these businesses”