The Exchanges

Q So Mark, I want to pull a few threads out. You just Blew by two national championships. What sport was that in a college?

A That was in lacrosse in college at Princeton. Although athletically, I think of swimming as the sport that I really focused on growing up. So growing up here in Washington, I spent most of my time in the swimming pool when I wasn't studying or at home, and that was probably the driving force in my life athletically. Lacrosse was something I did for fun in high school, but when I went to College, my swimming career ended. I swam too much butterfly, I think, and suffered a shoulder injury in my senior year in high school, and then, uh, switched and walked onto the lacrosse team at Princeton, and we were lucky enough my freshman year and my junior year to win the national championships in 92 and 94.

AI assessment note: “That was in lacrosse in college at Princeton.”

Q So when you've had a seat at the table at these great institutions for a long time, what was the impetus for leaving and going out on your own?

A A couple of things. One, just a sheer passion for the sector in which we invest. As I built my career, I'd always walk this line of having an expertise, but being able to be a generalist. You want to have access to the greatest deal flow so that you can learn the craft of investing, however it may come. I look at the time I spent working on a deal like TRW Automotives. Is that in the, in the auto sector? But at the same time, from the day I stepped into Merrill out of Princeton till now, I was always committed to the communications and technology sector. What I saw in the 2013, 20 14 time frame was an opportunity to move back to a lot of the investing that I had begun doing early in my career. Businesses that were 10 to fifty million dollars of EBITDA Places where all of the technological change that's happening in the communications and technology sector was available to be invested in before the companies got too big. There's very exciting things you can do with large checks to write at a mega fund, but I found myself missing a lot of the exciting businesses that we could support and work with that were a little bit smaller, that required more like a hundred million of equity, not a billion of equity. And look, there's creativity all around in finance, but for me and in this sector, growth buyouts where you can work closely with entrepreneurs and managers in spaces that are g…

AI assessment note: “an opportunity to move back to a lot of the investing that I had begun”

Q I'd love to walk through your investment process with this eye towards these aspects that you've continuously improved compared to what you saw in your past. So why don't we just start with at the top of the funnel, the sourcing of these ideas?

A We have generally A three pillar segmentation of the communications and technology sector. So it's either mobility, fixed line, or technology services. But within those three pillars that we focus on, at any given time, we have eight to 10 sub-sectors in all of those pillars. So often led by Todd, given, of course, his consulting background, the associate teams with input from the partners Are constantly assessing and reassessing, you know, call it on average, 10 different subsectors within each of those pillars that we find generally attractive. From those subsectors, we'll then build investment themes. Those investment themes are then given a deep dive and iterated on by a given team within the firm that shares those on a regular basis with the broader partnership, and then as a partner gets excited about one of those subthemes, We begin to pursue active engagement with businesses, attendance of conferences, and it gives us sort of a list of here are the five or six different things that we like. But the real foundation, the superstructure that allows that to exist within the firm effectively is our quarterly partners meetings. So from, I guess it's been now six years that we've been doing it. We all come together one day a quarter to just reflect on where the industry's headed, What are 10 times three, 30 sub-sectors are that we're focused on, and what the handful of high pr…

AI assessment note: “We have generally A three pillar segmentation of the communications and technology sector.”

Q you've got your three core sectors and then the 30 sub-sectors, and you get your themes. It sounds like what you're trying to do, if I understand it right, is find tailwinds in each of these sectors. What happens when you get to that theme or that tailwind level with the pricing and competitive dynamics when there are so many other people out there looking for good deals as well?

A You've usually identified the tailwind in the creation of the subsectors, right? In-building would have been one of those six or seven subsets of, call it the wireless pillar. We know that that growth is coming. Then the question is, like you say, should we just buy the hottest thing in that segment? That's where relationship and industry expertise really matters. That's where you really need to lean on your ability to attract talented managers to the investment theme. So the fact that when we approached the folks at CTS, we had already thought through the different subsectors that they would want to pursue. That my partner, uh, Todd Crick had known the management team there from a decade ago, and actually it helped them win some business in their early days. And the fact that we've got people like Bill and Kevin and Matt who are experienced in the industry adds credibility. We were by no means the first private equity shop that approached them, but at the same time, we are able to then leverage our credentials in the industry. I always say we, we like to find situations where we can win based on our experience, our relationships, and our expertise, not our ability to pay a dollar more than someone else. And you can avoid auctions, although even in auction situations, That can matter. Businesses do not always go to the company that only pays the highest price, particularly when…

AI assessment note: “win based on our experience, our relationships, and our expertise, not our ability to pay”

Q What's the playbook after you've bought a company?

A We spent a lot of time on that. We recently brought on a head of portfolio management who had come from a bit of the consulting world. And he and I, over the last six, nine months have literally written what we were calling a playbook to kind of how we build value and how we create value. There's multiple lenses to it. You know, if you think about our deals and how they work from a temporal standpoint, There's the foundational phase, the transformational phase, and then what we call the independence phase. And I have a tendency, and it doesn't lend itself to the podcast medium, to A, use a lot of whiteboards, and B, to often draw what we call within Astros the swoosh, this logarithmic curve that talks about process improvement that constantly happening within our portfolio companies. And the first chunk of the swoosh is that foundational phase, putting in place Governance. Putting in place really first and foremost culture. So getting the right blocking and tackling elements of the deal in place and call it the first six months to a year of the investment. Then you usually have some form of seminal events. It could be incremental M&A. It could be transformation of the management team. It could be just the launch of a new product, but whatever it is that we bought the business to go and try to do, we then begin to do after the foundation is set and during that transformational p…

AI assessment note: “foundational phase, the transformational phase, and then what we call the independence phase”

Q How have the dynamics of co-investing changed over time from your perspective in the GPC?

A It's changed over the course of my career, really interestingly. When I was at larger firms that already had not funds that are nearly as large as they are now, but still more than enough capital to do the deals that we wanted to do, co-investment was something that we offered to LPs as an aside. It was usually a replacement for capital that could have gone into the fund, but didn't, and it was kind of a nice to have for LPs. I think now the market's matured to a point Where it can be an active part of a fund strategy, and it is an active part of our strategy at Astra. So you think about the partners we have from Constellation, large global pension funds, as well as sovereign wealth institutions that could put to work much larger checks than we could ever write, but are working with us because they think we'll find unique opportunities where, sure, our fund will be the first Priority in sourcing and investing, but where they can ride along and top up our capital. So our fund can be a portion of the deal and our LPs capital can be a portion of the deal. And that's where I think true alignment between GP and LP really exists. If you do it correctly, it's also where we can begin to build relationships with future LPs for future funds and frankly, work alongside institutions that may only co-invest alongside us. So to me, it's true partnership in deal making. It's a wonderful tool,…

AI assessment note: “co-investment was something that we offered to LPs as an aside... now the market's matured”

Q And how have you thought about that lens from the perspective of competitors, cooperators, other private equity firms doing deals together in terms of equity checks?

A I lived through the days of club deals as firms grew, and you know, I've had Lots of war stories working on the mega deals like, you know, I remember Bill and I worked on the Univision transaction when it was Clash of the Titans, right? You had someone from every big firm or the Alltel deal I talked about when Kevin sold that company. We were, we were partnered with KKR. So the idea of working alongside other investment firms is something that's by no means foreign to me. And I think it could make a lot of sense. And When you find like-minded individuals that can benefit from pursuing a deal with you, it's great. It's another arrow in our quiver. We, we love working with our LPs and our, our investors, but at the same time, if marrying talents with another firm that may say have experience in turnarounds or some other kind of segment, maybe even an infrastructure fund that has a different cost of capital than we have, where it makes sense to collaborate And you've got trust and relationship. It's a wonderful thing. Um, we've also got a lot of institutions that invest up and down the balance sheet. So we're doing a deal right now with another fund. That's not much bigger than we are on the equity side, but they happen to also have a credit product or preferred equity product and working with the people that, that speak your language and invest in a way that you invest. It's just…

AI assessment note: “the idea of working alongside other investment firms is something that's by no means foreign”

Q That decade or more that you were working for the Carlisle's Black Rocks, the large private equity firm in the real heyday, which probably continues. What did you learn about the business that you wanted to replicate?

A At each of the firms I was lucky to work at. So at Whitney, the entire firm sat around one table every Monday morning. When a deal was done, you know, we sort of introduced the deal to the partnership. It was still the days when it felt like you were investing your own money. It felt like a true partnership and the explosion of capital that we saw in private equity over the 20 years that would follow hadn't really occurred yet. It taught me one of the most basic lessons, which is in deal analysis and in running a firm, you've got to have that commitment that we're all in the same boat together concept. And what I loved about my time at Whitney is I never lost that. No matter if I was flying to Tokyo to work on a mega buyout, or if I was restarting the equation at Astra on our first deal, but treat everything like you're curating something very special. Or yourself, others, and to treat your LP's capital as though it was not only your own, but something very precious. At Blackstone, I learned the intellectual honesty and rigor that goes into making good investment decisions. The one thing that was certainly taught over the time I spent there was there are ways to easily make mistakes if you don't dedicate yourself to the craft of truly studying in depth what you do. And what I loved about Blackstone was the intellectual honesty of the investment process. There were no questions …

AI assessment note: “At Blackstone, I learned the intellectual honesty and rigor that goes into making good”

Q What's been your biggest challenge thus far in growing out Astra?

A You know, it really evolves. Today, the challenge is managing the portfolio. In the beginning, of course, there were challenges attracting capital. Every challenge kind of evolves with the stage of the business. The challenges, they change every day. Which deal to do, which deal not to do, how to do it, how to create our processes and commit to those processes and get Everyone coalesced around one idea. It sometimes seems when you start a business that is a private equity firm and your product is deal making, the impetus is to say, well, let's go do some deals because that's the product we need to go produce. But the inherent tension that everyone needs to understand and really wallow in, if you will, is we got to do the right deals. We got to have what one of my partners calls our North Star, which is Not just doing deals, and not just doing deals because we're, we are paid to find and do deals, but doing great deals, and making sure that the deal we do is an astral quality deal. And that's something that everyone's committed to, but it's something that you've got to build organically Through the hard work of having our weekly calls, going through our ICE process, uh, passing on deals that looked like they were going to happen and didn't. Reviewing the hundred deals we looked at the prior year. So a lot of it's just the hard work of trudging through all of that activity, but i…

AI assessment note: “Today, the challenge is managing the portfolio. In the beginning, of course, there were challenges attracting capital.”

Q Well, why don't we go back and talk about how you first got started in investing?

A The investing part of my career really began as a matriculation and exploration into the finance world generally. I started in investment banking, and then while I was at Merrill Lynch, I worked on a deal called Park Communications. It was an odd communications Broadcasting company that was owned by two entrepreneurs with 100% debt, and we were in the process of refinancing that debt package to the tune of making those two founders two hundred million dollars of profit with zero dollars invested. I, I called it the, um, Digliani and Miller company, and this idea of leverage and how it could be used to create value for ownership and for investors was powerfully brought to my attention in that experience. That was Circa 1996 or so during my investment banking time. But, you know, I was always attracted to Wall Street since my days in high school. I participated in a program called the lead program in business down in Texas as a sophomore in high school. And I guess I found myself thinking I like math and I like history. So things that kind of deal with the social sciences always appeal to me. I chose Princeton partially because I read Liars Poker my senior year in high school and Michael Lewis went to Princeton and it seemed to get him to Wall Street. So from a personal standpoint, a large part of my motivation growing up was to really make the most of what I felt were great oppo…

AI assessment note: “The investing part of my career really began as a matriculation and exploration into the finance world”

Q So you mentioned this Idea of a utopian ideal and doing your own thing. So what is the utopia that you wanted to create?

A I often say to Nia or the team within Astra that the world didn't wake up needing another new private equity firm yesterday. There's thousands of them. I think you can sort of generally check the box of the asset class, but the beauty of the industry is a group of people putting their own fingerprint on investing and building relationships in the industry and creating investments that Help accelerate the advancement of technology. Help grow new companies that advance the mission that I think all of this technology exists for is something special when you can sort of build that type of energy. And then after you've created that, who you are and how you use that perch is really important. So the, the, the fact that A firm like Astra can exist where we do interact with our nonprofit partners like SEO or the Navy Seal Foundation, and can also be participants in the growth of businesses like CTS, our in-building wireless services company, or helping with our dark net business Searchlight, which is really focused on child safety on the web. And there's lots of good that can be done, but at the end of the day, Who we are and how we can take governance and expertise that's applied in this industry, use it to make the world bend closer to justice. We try to do that.

AI assessment note: “use it to make the world bend closer to justice. We try to do that.”

Q So when you decided to set out, what is the ecosystem for a new private equity fund to look like? We know there's a lot of demand in the space, but often we see the big guys getting bigger and bigger. So how did you go about that whole process of getting going?

A It's difficult because Despite spending a long time studying dealmaking, studying the industry, what makes for a good investment, your interactions often aren't with the LP community on as broad a base as others when you're a dealmaker. So you have to get to know a lot of people in the investment community, and it's, it takes a while, and it takes patience, and it really just takes an exercise of finding those that I would say are looking for you. The way I think about it and the advice I give others who are beginning that journey is you want to focus on the deal making. Focus on the type of deals that you think you and your firm are suited to do. That will attract the types of investors that are looking for those types of deals and people who add the value that you're looking to add. And that's really the thesis behind all that we do at Astrid, building partnership. It's working alongside others who are committed to investing in the same way. And with the same culture that we have, and that's how we eventually found our friends at Wafra and Glendower who worked with us before our first fund in the Logix Communications acquisition that eventually led to the relationship with Constellation Capital, but also with many other investment groups that would ultimately be part of the first and the final close of our fund, and also part of the co-investment universe that supports the de…

AI assessment note: “how we eventually found our friends at Wafra and Glendower who worked with us”

Q How did you think about the value proposition specifically for Astra in a competitive landscape of however many hundreds or thousands of private equity firms?

A That was an easier thing to get my arms around, and it's really because of the luck I've had in the partners that joined Astra with me. So if I just spend a second with you walking through the backgrounds of, of the others, First, Bill Kennard and I really sort of hatched the idea of Astra after he had left Carlisle to become ambassador to the European Union. One of the seminal moments in my career was a day when a friend said, Bill Kennard wants to meet you. I was working at Blackstone, and Bill wanted to sit down and grab coffee and just talk to me about what they were doing in the communications practice at Carlisle in D.C., where I had grown up, and my wife was from also, and it was, it was a very natural choice, and as you know, I still had that twenty-year plan in the back of my head That, you know, I thought Carlisle was probably in the cards for me at some point anyways. And it led to a great friendship, as well as a wonderful experience. But the idea of working together on something entrepreneurial after he returned from Brussels was something we had discussed. Off and on since our time at Merrill Lynch, my partner Matt Murphy and I had discussed this. And Matt, during the 1520 years that had ensued since we were analysts together, had spent time at firms like MC Partners and Great Hill Partners. He had also then pivoted his career into the operations world, where he w…

AI assessment note: “it's really because of the luck I've had in the partners that joined Astra”

Q How do you guys go about making that decision? You know, you're doing this work, you're finding the themes. You could easily see a situation where everybody just wants to do the deal that you've identified. How does that process work internally?

A We have an investment committee that includes the founders plus two other MDs that are seasoned professionals at the firm and process matters. And, and from the day we founded the firm, We instituted that. Despite the fact that even before we raised the fund, we were struggling to identify deals, and you sort of want to just do the deal that can get done, but that's not the way to build a track record. That's not the way to build long-term value, and so the discipline of passing on deals that don't make sense is something that's been there since day one. It may come from the fact that we have seen so many deals collectively within our own past, And while my partners have pretty impressive experience and having worked with businesses that succeeded, we've all learned from the businesses that have struggled. So the pain of doing a bad deal is something you don't quickly forget, and I think good investors never forget. You've got to get it right, and having a commitment to process and understanding that point of indifference and what side of it you need to be on is important for the whole institution to understand. We spend a lot of time on that. It's a joint intellectual exercise that Everyone needs to go through. I, again, I think back to my time at Blackstone where we really learned that. There's no such thing as a perfect deal, and there's no such thing as a no-brainer situati…

AI assessment note: “We have an investment committee that includes the founders plus two other MDs”

Q So what did you find when you got to Wall Street after those couple of years of yearning for it?

A What I found was hard work. I wouldn't say that the early days of my career were Wall Street opening its arms saying, you know, Mark Johnson, we've been waiting for you to come here. Here's, here's, here's how you, how you build a model. Here's how you start an LVO firm. It, in many cases, grit, determination, and, you know, while at Princeton, I did a few things. I met the love of my life. My wife, Kimberly, then Henderson, now Kimberly Johnson. And there's a conversation we had in college. And it's funny, I always say in four years, I was able to win two national championships and get an economics degree at Princeton, but I couldn't get a date with my wife until two years after college. So it took me six years to do that, but I could do other things. But there was a day we sat and I said, I'm going to leave here. I'm going to go work at an investment bank for a couple of years. Maybe then I'll work at a private equity firm. I'd like to go to Harvard Business School, probably. And there's this firm called Carlisle down in DC that I've heard of, and I'd love to work there one day. And so my wife always in the early 2000 while I was at Carlisle would tell the story of how I basically planned the next 20 years of my life at 19. So the path I followed between 19 and 40, if you will, was pretty mapped out, and I kind of followed it through grit, and I met a lot of wonderful people …

AI assessment note: “What I found was hard work. I wouldn't say that the early days”

Q So as you've moved from a startup to now you're seven, eight years in, and you look around the corner and say, well, you want to be doing this for 10 or 20 more years as This kind of next generation of private equity firm. Where do you think you'll need to innovate going forward to stay competitive and stay ahead of the rest of the pack?

A When we first started chasing deals and we hadn't raised our fund yet, I never referred to us as a fundless sponsor. I referred to us as a sponsor that had not yet raised the fund. And now that we have raised the fund and we've done a handful of deals, I really do think of the mission somewhat similarly in the sense that We bring a lot of co-invest into our deals today because what we're really trying to do is perfect the art of doing the types of deals that we do. And regardless of the size of our fund at a given time, what we want to do are a handful every year of great deals that sort of fit that hundred-ish million dollar equity check size. So think of us as investing what would feel like a billion dollar equity fund if we did it a hundred percent All equity out of our fund at any given time, and not looking to grow aggressively, but looking to perform exceptionally. And the key to that will be the battle scars, the team we build, the entrepreneurs that come into our fold. You know, I worked at firms where there was a pantheon of great managers who had performed in amazing deals for Carlisle, for Blackstone, and And geez, for Whitney, you know, going back for decades, of course, because the firm had been around for so long. And I'm excited to build that bench of great entrepreneurs and managers that we work with over time. And so I think our ability to continue to perfect t…

AI assessment note: “the key to that will be the battle scars, the team we build”