Dave Feierstein, Ronin Equity Partners | Transforming Business with a Hybrid Investor-Operator Approach

Sean Mooney:
Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices and real-time trends. In this episode, we have a wonderful conversation with Dave Feierstein, co-founder and managing partner with Ronin Equity Partners. This episode is brought to you today by Blue Wave. I've Sean Mooney, Blue Wave's founder and CEO. Blue Wave is the go-to expert of those with expertise.

Blue Wave connects proactive business builders, including more than 500 of the world's leading private equity firms and thousands of leading companies to the very best professional service providers, independent consultants, and interim executives for their critical variable on point and on time business needs. Enjoy. I'm very excited to have my friend and recent panelist together at a big private equity conference. Dave Feierstein. Dave, great to have you here.

Dave Feierstein:
Great to have you here as well. Thanks for inviting me.

Sean Mooney:
Absolutely. So Dave has one of the more interesting backgrounds in PE, and he's gone through kind of the big company, the small company, through the PE track, and now leads a PE firm that I think has a really interesting novel approach to the business of private equity, and we'll get into that a lot more in the minutes to come here, but first maybe, Dave, to kick things off, I'd love to get a little bit more about your background. What brought you into this industry? How did you kind of get drawn to the PE world?

Dave Feierstein:
Sure. I'd say you're going to have to go back a little far to understand how I got into private equity, because I'd say there was a point. I didn't even know it existed 15, 20 years ago when I was deciding even careers, what made sense and what I wanted to go into, and so I'd say I kind of am an entrepreneur at heart. My mom started a business in the 1960s and 1970s prior to having me, and she sold that business. She was in advertising. Then, my mom raised me and my sister, and ultimately was a teacher at the public school district that we attended for over a decade before she retired. My dad also was an entrepreneur. He had his own business in construction. He's now retired as well. So I ended up learning business at a very early age because of my parents.

When I was actually in elementary school, I had a candy business. I recruited other students to help sell products for me. They'd earn commission. By high school, I actually was taking business courses in high school, in accounting and in marketing. I actually was volunteering at the public library to actually help elderly people complete their tax returns, and I also learned competition, which I'd say is an important part of private equity and investing at a very early age as well. By high school, I was nationally ranked in speech and debate. I was also nationally ranked in one of the biggest business organizations that exists today, and in both you're kind of competing with tens of thousands of students in all the high schools across the country.

At first, as I mentioned, I'd never heard of private equity. I hadn't even heard of investment banking. In high school, I thought being a stockbroker or a wealth manager was the coolest job. My ultimate job at that point was like, "Hey, go run the Fidelity Contra Fund." That was my dream job. So actually, in middle school I actually collected mutual fund prospectuses and annual reports, and geeked out there. Then, I went to a business college. I went to Bentley College, up in Boston, and studied finance and accounting. I actually tested out of all my liberal arts courses when I started, so I actually immediately started studying just business, and graduated a year early, second in my class. I think where things changed, where I first even realized that private equity existed, was my first summer.

I interned both at a small boutique investment bank in New York. In addition, I also interned at three of the big four accounting firms, and each of the big four accounting firms, they do like week internships for sophomores, so each one was a week. So I interned at PwC, ENY, and KPMG in that same summer as well. After that summer, I knew I definitely did not want to be an accountant, which actually is generally what almost every person at Bentley is. My wife who I met at college is an accountant at the Big Four. I actually loved the investment banking internship that summer so much, I actually came back to Boston, and I ended up interning at two additional investment banks while I actually went to school. So I actually rejiggered my whole schedule, worked in the mornings, had classes in the evenings.

Then, by my junior year was accepted to join JPMorgan in their M&A group within their investment bank, and post-graduation, joined JPMorgan. I was at JPMorgan for about six years and did about a dozen different M&A sell-side deals while I was there, a lot of large deals as well, but by, I'd say, year four of those six years, I'd effectively automated my job. I had basically built a bunch of buttons that did everything that an analyst and associate effectively needed to do. So when I was an associate, I actually got kind of bored, and ended up just setting up meetings with clients at that point as an associate, which is quite rare. I actually started bringing in business to the bank and generating fees, which ultimately the senior folks did not like since it made them look bad.

So I left and joined Goldman Sachs in their private equity group, which at the time was called PIA or the principal investment arm. Some people used to call it Goldman Sachs Capital Partners. Today it's part of asset management. That was my first foray into private equity, and the reason I joined there is I thought private equity offered a really great mix of investing high corporate finance and operating experience, like you'd actually learn more about companies. Two years into Goldman, I had done half a dozen acquisitions for new platforms, and I realized I got a little bored there too. I thought, the only way I thought I could actually get operating experience was to actually go into a company directly, so I actually linked up with the folks at 3G Capital, the Brazilian shop. I ended up deciding to join the senior leadership team at Heinz.

Then, ultimately Kraft Heinz, the ketchup business, and in the process moved to both Pittsburgh and Chicago. Did that for about three years, recruited what is now the Ronin team during the process at Heinz. Then, after that, did the same thing at a company called NCR, the old National Cash Register business for Blackstone for about two years, and then did the same exact thing again for Bain Capital as part of the investment in a company called Diversity. It used to be called Johnson Diversity for another two years, and then made a bunch of money for, not only them, but a bunch of even investors. We brought into those deals. Then, about two, three years ago, just started doing our own control buyout transactions backed by a bunch of the investors that had invested with us during those deals as well, so that's a little bit about how I ended up in the private equity and where I am today.

Sean Mooney:
That's an amazing background, and you're like the smarter version of me growing up, so there's a lot of parallels in that. I grew up in a really kind of entrepreneurial family in a manufacturing business. So I grew up working in the back of manufacturing plants in Texas.

Dave Feierstein:
Oh, wow.

Sean Mooney:
So I wore steel toed boots in hard helmets, but I grew up reading the Wall Street Journal with my dad in the morning, and then so my brother would always call me Alex P. Keaton, which probably dates me to a time long ago, and had all these little side hustles, and then too went to college. My friends were going to investment banking, and what's that? I don't know what that is, and I guess I'll go do that. Then, similarly found my way into PE, but you had a much better version of me as a childhood.

Dave Feierstein:
A lot of similarities. I did not know. I think my mom still has a picture of me when I was like three with the Wall Street Journal in a family photo, and actually was recently in the Wall Street Journal for the first time. Actually, just this year, so was a fun parallel, and my dad's business, I went on the job with him and was ripping down walls with no hard hat. My parents showed me the old videos, and so yeah, it's an interesting similarity.

Sean Mooney:
Did you get the hardest jobs whenever you would have to do things?

Dave Feierstein:
He gave me some pretty hard jobs. I don't even remember some of them until my parents recently showed me the old videos, but they gave me a hammer and had me knock a whole wall down with all the sheet rock, and they were having me paint the walls, put up wallpaper, and put glue. I became a mess after that and had to take a shower. But yeah, it was fun.

Sean Mooney:
I love it. When I was doing these jobs, I'm pretty sure there's a plant level bonus for whomever screwed with me the most, and one day, one of the plant managers comes up to me, smiling with a sledgehammer. He has a raspy voice like this, and he goes, "Sean, today you're going to make some room."

I'm like, "What do you mean, Ted?" Lists me into the dumpster with a sledgehammer, and I spent the afternoon making room in the dumpster.

Dave Feierstein:
Oh, wow. Okay. No, that's very funny. Hey, it sounds exactly like what my parents had me do, knocking down walls in houses.

Sean Mooney:
That's exactly right. So we've learned a lot about you through your life, a bridged version of the story of Dave. I know not to get into it. I probably should not get into a game of trivia with you. I don't know if there's some quiz bowl in your past as well, but it sounds like I want you on my team if we're going to do those things. So one of the things I think would be really interesting to talk about, we're in this topsy-turvy washing machine economy, and in part of the cycle where it's always kind of the hardest before it gets better. We have certainly some perspectives on where we are in that, but I think one of the things that would be great to get your sense and maybe your thoughts on is some of your experience with this now famous tool called Zero-Based Budgeting, and how it can be used to add value. I'd really be interested to get your sense, what is this tool and why should companies be thinking about this type of methodology as they think about their own businesses?

Dave Feierstein:
That's a great question. I think, first, you need to understand what this tool even is or what it was invented to be. There are some people who say that myself and my team invented Zero-Based Budgeting. We did not. It started well before me. We did change it dramatically to have it become what it is now today, and the way a lot of people think about it, because we've taught hundreds and hundreds of people, thousands of people at conferences how to do this the right way today, but I'd say if you go back actually to the 1970s, that's where Zero-Based Budgeting was invented. It was actually invented by an engineer at Texas Instruments, and it was just a different way of budgeting.

You had activity-based costing, you had traditional budgeting, and then you had Zero-Based Budgeting. Effectively, all it was is, instead of looking at prior to your data or any historical data, and just kind of growing from there, you'd start with a Zero-Based, and you'd have to justify everything you'd need for every year effectively from scratch, and particularly as to the need and importance and criticality to the overall business. That was effectively what it was invented to be. Actually, in the early 80s, it got adopted by the US government as the official budgeting technique of the federal government and the government accounting office or the GAO, and it was used under Carter and under Reagan, and then they dropped it. Then, you can see where the debt went. Maybe they should have kept it going.

I've actually talked to a bunch of people in the government, in the White House, actually, about these programs before in the past as well. They've not brought it back yet, though, to the government. Now, fast-forward today, what we're really well known for is we're the team that really built and created, I'd say, the modern-day version of zero-based budgeting. Now, if you think about in the 70s and 80s, I mean, you barely had email, let alone any sort of system or software, and so what you could do with it back then is very different than what actually can be done with it today. Budgeting is kind of boring. If it was just doing a budget at a company, that's what? A couple months in the year. You're kind of done. Not the most exciting, interesting topic to really talk about.

Probably the most boring topic you'd want to hear about. So what the modern-day version of zero-based budgeting is today is actually a way of thinking and using that same methodology of, "Let's break everything down to nothing from scratch, and really build a super defined, very data-driven process in every single function in the back office," so it's using that same approach to not just budgeting, but to the entire way you manage your entire finance department, all your HR department, your whole IT department, your legal department, all your communications internal and externally, the way you manage procurement or even your sales operations teams. So those are functions that, actually, can be very standardized from company to company. They're all your back office functions, so it's actually a way to use that.

Now, you've got another question, which is how does it get used at big companies, and then how does it use it at small companies? So big companies are big, and as over time, as they've gotten bigger, they've become inefficient. They end up having too many people, doing too many things, fixing too many things with way too many processes. And so in a larger company, it's a way to rationalize and take things out of the business to make it really efficient, and that's kind of the way we did it at Heinz, at Kraft Heinz, at NCR, or at Diversey. These are big companies, multi-billion dollar businesses. So over time, they became inefficient, and so let's take the inefficiency out, take what we've just saved and redeploy it as best we can into working areas of the business, sales, marketing, R&D, engineering, et cetera.

That's the way a big business generally can use it, and the way we've applied it there. On a small business, very different. It's still the same methodology, but it's actually a methodology on how you manage and build the processes, the systems, and the infrastructure that you need to actually scale and scale quickly. Because in a small business, you may not even have any processes. You may not even have any systems. You may be actually starting from a blank slate. So it's like now that you're there, what do I need to build to actually exist? Without a lot of that infrastructure, you can't scale. It actually will impede you from scaling and scaling quickly. That's kind of the way you can use it there.

Sean Mooney:
Yeah. I love that. It's kind of interesting, the way that you're describing it. It makes me think about two of the kind of concepts that have been really important as I've kind of developed my own business philosophies, and certainly how we've built Blue Wave here as well is, one, I'm a huge fan of Lean six Sigma. It's like, eliminate waste, have an efficiency of process and efficiency of outcomes, a low variability of outcomes, and then two is this sense about understanding some costs and/or sacred cows, and not just doing things because that's the way "historically things were done," and to kind of adopt change and change in what the business changes, the world changes, and hopefully in front of it. So I think it's a really interesting concept, and the way you describe it, I've never really connected that.

Dave Feierstein:
No. Hey, I'd also say a lot of people use Six Sigma, Kaizen in operations, plant floors, factories, shop floors, production floors, engineering teams. I'd say a lot of that methodology, like effectively think about the Six Sigma for the back office functions as being like your zero-based budgeting approach, at least the way we've applied it.

Sean Mooney:
That's great, and I've always said it's interesting, even within our business where we have all these amazing resources that can be used to build value in a company, and I've always thought even Lean Six Sigma is one of the most underused toolboxes even for business services companies and other parts of the company, and what you're articulating here is, you can use this in that kind of way to transform other parts of your organization in a similar way that you're doing, like your manufacturing plant, and so that's another thing that has filled in some gray space in this rusty bucket of a mind of mine. I think it'd be helpful. Dave, do you have a couple examples that you can share how you've deployed this business transformation playbook?

Dave Feierstein:
Yeah. I'll give you an example of how it had been rolled out or we've rolled it out at a large company, and then how we've rolled it out and used it in much smaller business, which is really the businesses we focus on and acquire today at Ronin as well, so you'll get a very big contrast on how it's utilized. We start by saying, actually, when you think about big companies, you went back to 2013, 2014, which is actually when I was at Heinz a building and creating this whole methodology and really expanding upon it. Only about 5%, maybe 3% of the Fortune 1000 were even thinking about zero based budget. It was kind of dead. It had been dead for decades since the 80s.

Then, after Heinz had been written about so much in that kind of success. Then, Kraft being written about further, it actually expanded. By the time we were in 2016, about 25% of the Fortune 1000 were talking about it on earnings calls, talking about it publicly, implementing programs, and we were actually talking a lot to those companies to make sure that we're doing it the right way, just help them and guide them down the right path. Today it's even bigger. Today, if you look at even the big consulting firms, McKinsey, Bain & Co, they all have practices that did this and do this today. 10 years ago, 15, 0. They didn't have practices, and actually, many of those biggest practices, we trained their teams, because we knew we could never handle the volume of companies ourselves in what was going to happen there.

We wanted to make sure it was done right, and here were the things you should and should not do. So today, if you look at companies like Verizon, companies like Walmart, they're also doing these programs, and this is only recent exercises, but at a big company, let's take Kraft Heinz, and Heinz is an example. It was all about cost takeout. If you think about Heinz, I was asked when I came in, my goal was I got to take a billion dollars in cost out of Heinz in two years, which I did. We, then, bought Kraft, and I was asked not only to integrate Kraft into Heinz, but I also, Dave, want you to take another billion dollars in cost out, but do it in half the time, do it in one year. These are pretty ridiculous goals. But again, that's 3G Capital's way. We were able to achieve all of those things. So it was not easy. It was actually the toughest job I've ever been in.

And I've been in some insane jobs, including the job I'm in today. It was by far the toughest job I've ever had, the longest hours I've ever had, but was one of the most rewarding jobs to learn what to do and what never to do again. Now in that example, while it was great at taking tons of cost out, and actually, what most people don't know is about 70% of those costs had nothing to do with people. They were actually all non-people related cost items. 30% was extreme amounts of people reduction. Now, the problem and also the reason we left the business is none of the costs we were really taking out were getting reinvested back into the business, which we did not think would sustain itself long-term, and for people who've now read the news, now realize that is the case. And so we left about seven years ago, actually, for that reason, is we actually wanted to use this approach very differently.

We actually wanted to take our whole operational approach, which we built there, and which is really rooted in building the back office infrastructure and making it really efficient in a business. We actually wanted to use that to help grow businesses instead. So we left, obviously went to two other big companies to really test it, pilot it, really tweak it to a level of efficiency, and then we got to a point where we said, "We've got it," and then we started applying it to smaller companies. So a good example of how it's applied at a smaller business would be to take a company, like a business we bought back in May of 2021. It's called Hardison Foods. It's a specialty food business. It makes specialty cheese that you'd find in grocery stores all across the country, all branded product, and we bought the business.

When we bought it, we actually put three separate companies together all in the same day to immediately create that business. We also do a lot of deals like that at Ronin, but it's perfect for this whole approach, because it creates an extremely complicated integration. All three of these companies were family-founded, Ronin businesses. They had almost no infrastructure. There was no ERP system. They were using Excel. They were using QuickBooks. They didn't even have most of the back office functions. They had no demand planning. They were running payroll with checks. A lot of it was done in paper. They didn't have procurement teams that were actually running procurement teams. They didn't really have HR teams and IT teams, because there's really no systems. There was really no finance teams either.

So effectively, you had a blank slate of really mediocre, very small kind of back office, but that's very common in a lot of the companies I look at, we acquire. And so by putting this in, we built them an entire infrastructure. Doing so added cost into the business. We added people. We built an ERP system. We built multiple other systems, including demand planning, and in two years, doubled the EBITDA of the business. There would've been no way that they could have even gotten there in that short of time if we had not built all the processes, the systems, and the infrastructure for them. Now, it was hard to actually, our model, which I'm sure we'll talk more about is we actually go into the business, do it for them, and we do it for free, because we think it's the right thing to do if we're going to be our true partner of a business as well, so that's kind of the way you can do it in a smaller company.

Sean Mooney:
Yeah, and I love that. That kind of reminds me in my days in PE, where we would look for these businesses that I would call companies that were successful in spite of themselves, and virtually every business that we invested in, we were taking profitability down so that you could come out the other side of this, what's known as the J curve, right?

Dave Feierstein:
Yes.

Sean Mooney:
We're going to take it down, put it in the system so that they can sustainably scale, and I think what you're also articulating is you're building it the right way the first time, and being really thoughtful about how to do it versus this meandering path to figuring stuff out.

Dave Feierstein:
You are exactly correct. Yeah, I think, actually, every time we do a deal today, we are underwriting massive cost, and usually the first year EBITDA might even decline as well, and that's okay. That's the way that two years, three years, four years from now, you come out the other end saying, "I'm doubling my company every year now. I'm growing 20, 30, 40 percent a year," and that's what's been happening in our businesses. You can't do it without infrastructure.

Sean Mooney:
Yeah. It's really interesting. That was always, as I thought about particularly, similarly like you, a lower middle market company investor, there was so much that the company did right, but there's so much room for opportunity by doing other things better, and so a lot of times we're undoing things or having to build net new things, and you're always kind of fighting the word historically. "Historically, we did this. Historically, we did that," so it's a big change management element of it, and one of the big freeing things that I felt by starting something from scratch was we have a mantra here, where it's like "If you could do the thing that you're managing, the way that you always wished it could have always been done, do it that way." It's like going back to a couple minutes ago, everything is sunk. Just do it the right way, and then worry about it later, so how do you see that in these kinds of businesses?

Dave Feierstein:
No. I agree. Actually, the one thing I took away from what you just said was change management. Actually doing this at bigger companies is a lot harder from a change management perspective, and the reason why is there are people doing these things, and they've been doing them for decades. And so to go in and say, "We're going to do it totally different, change all the processes, all the systems, everything," it's like, "Whoa, hold on. I've been doing it this way for 10 years. It works. Let's not change."

It's actually the change management of big companies, way more difficult. Small business is like the opposite. They don't even have processes. So when you come in you're like, "~Hey, I want to go add people. I want to go add systems. I want to make your job easier, more efficient," and you're like, "Please. It's so inefficient. I'm excited. Please come and help me. I can't wait for more people, more resources, more systems, more processes. It just makes my life easier," so they're very welcoming in a small business. You don't have to deal with that cultural backlash. It's been very interesting to kind of see that, and it's kind of unique

Sean Mooney:
Yeah, and I love that, and that's why I like investing in the lower middle market, because they're race boats. They're early to turn, versus the tanker ships, maybe they displace more water, and they're safer in stormier weather, but the race boats are fun to drive and change course.

Dave Feierstein:
Now, that's a good analogy. I like that.

Sean Mooney:
And I think that's a good kind of segue, because the business of private equity is increasingly turning into a business, and those that are successful are the ones who really view their own private equity firms through that lens of, "We're going to bring something more than a check," and you mentioned earlier kind of about your approach. I'd love to maybe take it a little bit deeper on what is the Ronin approach to value creation? What resources are you bringing to support your portfolio company so they can be as successful as possible?

Dave Feierstein:
Good question. So I'd say a couple of things. First thing is there's two fundamental big differences in what Ronin does, that are important to understand, and there's a bunch of others, but there are two big ones, particularly as you think about what you just asked. First one is every single person on the Ronin team has a hybrid investor operator background, meaning they've spent half their career, in the case of myself, about a decade in traditional investment banking or private equity, and they spent the other half their career, or about a decade as well for me, as senior executives at companies. What that allows us to do is a bunch of different things. You understand a different way of diligencing assets. You understand a business better, you can relate to an owner better.

You can talk their language. There's a lot of interesting things that kind of come out of that. So everyone on our team has to have that hybrid background. Almost no one that comes in today has it. It's very difficult to find someone who just naturally will have that background. So when someone does come in, they have to learn both. So it's actually a large amount of training involved in what we do for Ronin talent that comes into the business. It's also the reason our turnover at Ronin has been 0% in a decade, and all the partners have been together for a decade as well in all these situations I just mentioned, so we're a very tight-knit group. Every person on the team will spend half their time embedded in a company, half their time underwriting a deal, half their time embedded in that company they underwrote, half their time back underwriting another deal.

So the deal team itself is the operating team. There is no separate deal team and no separate operating team, and we feel like that is a way better model where you get continuity with the owner consistently, and the whole message of what you underwrote in the deal is consistent with when you have to operate and execute it to, so your underwriting becomes more efficient as well, so that's one big difference. Second big difference is our operating model itself is where we actually embed our own deal team into every company we invest in as interim senior executives for at least 6, 8, 12 months per individual platform or portfolio company investment. We will actually do it on a full-time basis and we move to the company in the process to really work alongside the existing management team if there is one every day.

A lot of people say, "How does that scale? I mean, it sounds like a really intensive model. How do you make that work?" Obviously, it took you two, three years at these big companies. How do you make it work in a scaled model today and have a firm and a franchise? It took us a long time to figure that out, right? To take what historically took us two, three years at Kraft, Heinz, NCR, and Diversey, and whittle it down to be able to do it in six, eight months per platform, and not change anything we do or change the quality of our work, which is very important to us. What it actually required us to do was to pre-build all the IT systems we might use at any company offline at Ronin, so we can lift and shift all that code and configuration in any company we buy on an as-needed basis.

What that allowed us to do was it automated a lot of what we might've historically been doing manually, but it also allowed a system to run a process versus a person, so it allowed us to transition out in a more seamless way of the business as well. Now, it wasn't easy to do. It took us about three, four years to build all the IP around this. It's about 16 different systems today. Now that we have it, we can do some interesting and unique things. So actually, we separate the Ronin team into today, actually, three separate groups. So three to four Ronin team members go into one company full-time. Three to four go into another company full-time, three to four go into another company, because we have 12 people.

If you time all your deals perfectly, you can actually do a lot. So that's actually why, in the last two years, we've done a total of twenty-two acquisitions across five new platform investments, have another platform under LOI right now and generally do about somewhere between two and three new platforms a year in this insanely intensive, unique model. So you asked, "Hey, how do I create value, and what resources do I give to these companies?" That's what we do. When we do do it, we don't charge the company for it. There's no consulting fees, there's no salaries, there's no bonuses, there's no healthcare programs. Our view is, if we're going to take a monitoring fee or a management fee out of a business, we should work for it.

We shouldn't just show up at the board once a quarter and just start earning money. And so, the owners that we work with really appreciate that concept as well. I'd say almost every deal we do is a family-founder owned company. It's probably about 80% of our volume, and a lot of times when we talk with an owner, they will tell us they're really good at certain things. They're usually, though, very self-aware on the things they're not so good at, and they'll usually tell us, all the time, they're good at sales, marketing, R&D, and engineering, because if they're not at least somewhat good there, they wouldn't even have a business to begin with. Then, they'll also separately tell us, though, they kind of don't know what they're doing.

In finance, HR, IT, legal, communications, procurement, sales operations, actually oftentimes half or more of those functions, they don't even exist in the first place even to begin with. And so when we are talking with the owners, actually we're really backed by a bunch of large families, so we really look and act more like a family office than we do a private equity fund. So we actually can be more relatable for them, but we situationally like to look for businesses where we can give them more than capital, more than advice. We're actually looking to invest ourselves into their business for 6, 8, 12 months full time, move there. When we do that, it's actually to build them an entire back office infrastructure entirely for them that oftentimes isn't there fully.

That level of sweat equity we end up putting into the business, a lot of these owners find it to actually be quite a significant really personal time investment on our part. I still actually don't know of any other investment firm really doing this model with their own deal team like this, but we've found it to be more important to do in smaller deals with these types of owners, because a lot of times they won't double or triple the size of their business quickly if they don't at least, at a minimum, get that back office operating kind of a robotic machine. It's worked out very well. Actually, every business we bought in the last two years has pretty much been a family or founder owned business.

The reason many of them wanted to work with us, and actually, in many cases the owners actually only wanted to work with us. They actually didn't even want to talk to anyone else, is the owners told us they hated the back office, and they found it extremely distracting to them. They just like selling and making kind of cool things all day. So it really let them do their thing. They can focus there on what they love to do, and our team at Ronin will handle all the back office, kind of administrative minutia, entirely for them. I don't know if that was helpful, Sean, to give you a little perspective on what we do, where we focus, how we do it a little different.

Sean Mooney:
I love it. It's a really fresh approach on a business model, the private equity business model that's been around for a long time, that hasn't really zigged and zagged that much, and I appreciate your approach. When my kids would ask me when I was younger, what I did when I was in PE, I'd tell them one of two things. I'd say, "Well, I work in the salt mines," or I said I was a cobbler, because cobbler's kids have no shoes. And so we were really good I think at instructing in working with our portfolio company teams, and I thought we had a quite interesting approach as well.

But what you're talking about is this very integrated approach to private equity. We're going to be working with and for you in this kind of integrated circle, and we're going to be in the front lines with you. The easiest thing to say is, I was even thinking about your model in earlier days is like, "How do you do that?" and you think about it, the easiest thing in the world is to say, "Nope, you can't do it," and where I give you a lot of credit is you thought through the problem and said, "Well, how do we get it to, 'Yes, this will work'?" Because what you put out is the easiest ones, "Oh. This thing will scale," and then you said, "Well, okay. Well, how do we make it scale?"

Dave Feierstein:
Hey, it took us a decade to figure out how to do it, because it is extraordinarily hard. I mean, to actually figure out how to do what most consultants, private equity firms, or executives would do in three or four years, do it in six, eight months entirely with your own team. That's a difficult task to figure out, but you got to automate a lot of things when you do that, and you have to find a very unique skill set of people to be willing to do that, and so it's a difficult model to replicate, I'd say, without being operators and investors and figuring out how to optimize it entirely, particularly given I'm investing in industrial and consumer companies, it's even more complicated, because you're dealing with manufacturing, inventory, supply chain, transport, and logistics.

I sometimes say that tech companies are a little easier, or software, they don't have any of those things, so it's a little bit easier to manage. You have less functional areas to really deal with every day. But yeah, no, for us, it's a real partnership like, "Hey, if we're going to partner with you and why you should care, well, you should care because I'm willing to be side by side with you in the trenches and give you what you are needing. I'm not here to give you a bunch of consultants and put a bunch of people in your company. I'm here to give you free resources that are going to do the job with you." For us, we're earning the role. They don't work for us. We work for them, and while we do a lot, our goal is to earn their trust not to tell them what to do and order them around, and so that's very important in the beginning as well.

Sean Mooney:
No, that's great. And I think that makes sense. I love how you say, "We work for them," and it's probably for and with them, right? In private equity, one of the things I've always loved about the industry is the ultimate objectives are completely aligned, and that's value creation. Everyone does well when you create value that's involved with these businesses, and then you've taken it a step further, in that not only are we going to align the ultimate end goal, but all the steps to get there.

And so that's really unique, and I appreciate that, and I can also kind of intimately probably also empathize and feel what it must've been like to create this over time, because it was almost like year one of Blue Wave, where I had to change the whole delivery model and add this whole symphony of motion and humanity, and automate all these things. My hair was on fire for 18 months, and so I'm sure, I don't know if that was like you when you first started getting going and trying to figure it out, but I imagine there was some light nuts.

Dave Feierstein:
Yeah. We built pieces of that. We built a lot at Heinz, a lot at Heinz and Kraft Heinz. We had a base to start with. NCR was, "Let's take it, expand it to every function fully." The diversity was, "Let's systematize it," and it was great because diversity was a complicated carve out, 250 TSAs, 150 countries. We had to manage all that.

Sean Mooney:
Oh my goodness.

Dave Feierstein:
We ripped out every system and put them all in six, eight months. So it was the perfect, "Let's test the systemization of this whole thing," and then, by then, the model was complete and we had it.

Sean Mooney:
That's good. I think that's an awesome story of very purposely figuring things out, and also then being able to deploy it in kind of a novel way, which is no easy task, so I give you a lot of credit for that.

Dave Feierstein:
No, thank you.

Sean Mooney:
So one of the things is, I know you work all the time, I think a lot of people do, and I've had this similar deal; we all just find there's just too much going on. We're all searching for that 25th hour in a day. So one of the things that I've always tried to do is these little life hacks that make life a little easier, a little more fun, sometimes just a little more streamlined so you can kind of find those moments of humanity in your life. I'd be curious, Dave, if you have any little life hacks that you've figured out that you think, "Wow. This just made just a little bit of a difference in my life"?

Dave Feierstein:
Sure. Hey, I'd say there's a couple. I'd say probably the main one that a lot of people will know me for is actually a very similar life hack to Mark Zuckerberg, and I did not actually know he did this as well until I read about it after the fact. I hate shopping. I think it's a huge waste of time, going to stores, even shopping online.

Sean Mooney:
Absolutely.

Dave Feierstein:
Colors, sizes, trying things on, all these subscription services is like a massive time suck. I don't have time to do that. So I figured out what I like to wear. Once I figured that out, I bought ten pairs of everything, and I just roll through that. So I have ten pairs of the same exact shoes, of the same belts, of the same pants, ten pairs of three different types of shirts, of three different types of blazers, and even the socks, I've got about fourty different pairs of socks. They're all exactly the same, and made it very easy. So I'm never the fashionista of the bunch, because it's usually very plain. I usually will either be in dark blue or dark black, and I will look that entirely up to down, so I'm never the fashionista with a bunch of unique fashion trends going on, but it definitely saves me a bunch of time, probably hours and hours and hours of time.

Sean Mooney:
I 100 percent appreciate that for mostly [inaudible 00:38:36]. I'll go to a store once a year, and a maybe less amplified version of that. So the socks, I realized sorting socks is such a pain in the neck. I can never find the different patterns, and so I would do gold toe for years.

Dave Feierstein:
That's my sock.

Sean Mooney:
Yeah. They're the best, and my dogs will eat my socks too, so they just disappear. I still have socks on auto delivery from Amazon, but I recently switched to Bombas, and so I think those are my next kind of upgrade, and so now I'm trying to decide because now I have two types of socks in my sock drawer, and it's driving me nuts a little bit, but that life hack, it's amazing how much it just simplifies things.

Dave Feierstein:
Hey, I think the other thing that helped, was important, is I need to find a shoe. If you're going to wear shoes, they're going to start to degrade. You need to find a shoe where they will repair your whole shoe for free or for a small cost every single time, so there's not a lot of stores that will do that anymore, so I invested in good shoes. I have Ferragamos. You go back to the store, resold the shoe, redo the whole shoe, send it back to me, and so I got six pairs of the same shoe, and I keep doing that. Every time one goes bad, I don't have time to go to a cobbler or a shoe guy, and tell them what I want. They know what to do, and you're done, and so very simple as well.

Sean Mooney:
I love it. No, it's just those simple things in life that just make things a little easier, and the shoe's a big one. I used to buy Allen Edmonds for the same reason, just because they would always fix them for you, but then they put metal shanks in there, and they would always ding me going through security, so I stopped wearing them.

Dave Feierstein:
Oh, wow. Okay.

Sean Mooney:
So I'm like, "All right. I'm done with these. Now I'm going to have to figure it out," so I might have to get Ferragamos. That's something I'll add back into my life. I'm going to replicate that, and they're very comfortable shoes too, so that's great.

Dave Feierstein:
They're a little expensive, but they're comfortable and you can get them repaired whenever you want, forever.

Sean Mooney:
What about on the technology front? Anything that you're doing there?

Dave Feierstein:
Technology front? So I'd say two things. I'd say one of the best investments I've made technology wise is having two pairs of AirPods. You'd be surprised. A lot of people don't have two pairs of AirPods. They have one pair of AirPods, but you're on the phone all day, and what would happen is, because you're on the phone all day, it would die on you, and then you'd have to find another pair of headphones. So I always have two pairs. While one's in my ears, one's charging, and then you just swap them out all the time. It's the best investment. They keep upgrading them, so every single time they upgrade them, I keep giving the old ones to my wife, and keep having to buy new ones constantly.

So it's almost like disposable now at this point, AirPods. That was one of my best investments after I did it. I'd say the other one actually is something we do more on our team as a firm. Our view is that our memory isn't so great, and particularly what one person might remember coming off of a call, versus what another person might remember, might be totally different. So now, while the simple task of writing things down can be very useful, what we've done is actually on internal meetings, we actually will share notes and write out exactly what's happening as it happens, so it's documented live, and to us, it creates a massive amount of alignment internally among the team, it creates a lot of productivity, and it costs almost nothing.

Now, the thing we do externally is, if we're on the phone with people as third parties, and we plan on potentially trying to extract lots of notes, we're trying to do diligence with an owner of a business, and it's going to be a two, three hour call, and we've got lots of questions, what we'll also do, because the amount of time that one person said they heard one thing and another person said they heard the other thing is a million of those, is we will use a bunch of OCR readers and plugins to Teams and Zoom that will just literally transcribe the exact calls, so we can just go back to it as well. So our view is writing things down, but live is a very good use and very low cost investment.

Sean Mooney:
I love both of those life hacks, and I'm going to copy paste them. Earlier last year, I did have two sets of the AirPods, and that's only because I'm the world's hardest person to shop for, so I got a gift of the AirPods for my birthday, and they weren't the ones that I wanted. I secretly went and got the other one that I wanted. Then, I recently got busted for it. They're like, "Hey, those aren't the ones we got you."

I'm like, "Yeah, they are."

Yours is much more purposeful than my accidental version of that, and I love the note-taking, because that's something that I particularly, and I won't totally age myself, but the old noggin doesn't work like it used to. So that kind of deal where you can just memorialize it and then take the recollection off the table, and the objectivity, make it a single source of truth, I think, is an amazing idea.

Dave Feierstein:
No. We have all the time, for example, like, "Hey, we discussed this a month ago at one of our meetings. What did we discuss again?" How many times did that happen? It's like, "Well, let's go back to the notes. Let's look at what we documented and what we're going to do here. Oh, okay. Great. We're aligned again."

Sean Mooney:
Dave, this has been great. I learned a ton. There's actually a number of things that I'm going to call you back with right after this to kind of start tinkering on our own business here, and as I think about other companies, so thank you so much. I appreciate having you on, and look forward to talking with you as soon as we can next.

Dave Feierstein:
No, I appreciate it. Thanks so much.

Sean Mooney:
Special thanks to Dave for joining. If you'd like to learn more about Dave or Ronin Equity Partners, please see the episode notes for links. Please continue to look for us anywhere you find your favorite podcasts, including Apple, Google, and Spotify. We truly appreciate your support. If you like what you hear, please follow rate, review, and share. It really helps us when you do this, so thank you in advance. In the meantime, if you need to be connected with the world's best in class, PE grade professional service providers, independent consultants, interim executives, or anything else, give us a call or visit our website at bluewave.net. That's B-L-U-W-A-V-E, and we'll support your success. Onward.

Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.

BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.