Private Equity Spotlight: Building Success with Tim Schulte of Council Capital

[00:00:00] 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 an amazing conversation with Tim Schulte, partner with Council Capital. This episode is brought to you today by BluWave. I'm Sean Mooney, BluWave's founder and CEO.

[00:00:30] BluWave is the go to expert of those with expertise. BluWave connects proactive business builders, including hundreds of the world's leading private equity firms and thousands of leading companies, to the very best BluWave credentialed professional service providers, independent consultants, and interim executives for critical, variable, on point, and on time business needs.

[00:00:51] Enjoy.

[00:00:55] I'm very excited to be here with my friend Tim Schulte from Council Capital. Not only an amazing private equity investor, operating executive, but also of the Nashville variety, which is one of my favorite varieties of all time, given that I also live in Nashville. So, Tim, great to have you here with us.

[00:01:11] Tim Schulte: Thanks, Sean. Great to be here.

[00:01:13] Sean Mooney: I've been looking forward to this conversation for a while. Tim and I have known each other for quite a long time at this point, but we haven't had a chance to sit down much and talk as human beings. So. This'll be good. It'll be a good opportunity to talk things that are important, both the business and life and all that kind of fun stuff.

[00:01:28] So Tim, as we kick off here, maybe get a little bit of the story of you kind of how did you come up? What brought you to this P industry that you live in working

[00:01:37] Tim Schulte: today? Sure. So I took a fairly nontraditional path into private equity. I was a history major undergrad. I'd always been my favorite subject as a kid, went into consulting for a few years out of school, kind of learned the basic toolkit of PowerPoint, Excel, and such, then joined an early stage startup.

[00:01:54] Think half dozen people sitting around a table, figuring out what they were doing, bar in the office, ping pong table, stereotypical startup. Exactly. Went to business school and coming out of business school. Landed in private equity and what I had learned from the consulting startup experience was I really enjoy.

[00:02:14] The act of building businesses, less expertise, and even less passion as to what that specific business does. But the act of working together with your peers to build something of value to customers. I know that sounds generic, but I found very fun. I think in consulting, you have a lot of the benefit of a diversity of industries, a diversity of.

[00:02:36] Companies of people of projects you learn a lot, but the incentives are really around selling more work, not necessarily building businesses and creating value. No disrespect to consultants and found in private equity. You're able to still get that same diversity of. Intellectual stimulation and personal relationships, but you're able to do it in an environment where you have aligned incentives around improving products, improving businesses, improving customer experiences, and the relationships that you build aren't 12 week projects, but they're multi year partnerships.

[00:03:11] And so the type of work I began doing was similar to consulting, but the construct in which I did it, I found wildly more fulfilling. And so that's what led me into private equity and into a value creation role within the industry, not a traditional investor role. I love your

[00:03:28] Sean Mooney: background and I love that there's so many inroads to private equity now.

[00:03:32] And that's a constant theme that we've talked about in this podcast here with our guests is it's not just this one path anymore. One thing that resonated with, I started off in investment banking and it's kind of the same thing where you're like, you feel like you're adding value, but you never get to kind of take it to that next level.

[00:03:46] So that absolutely pings, in terms of resonates in my mind. would be curious maybe to go down a little bit deeper on one avenue here that you talked about. You've got this really interesting background that you've done consulting in some ways. You've done kind of the venture capital side of business building and then the private equity side.

[00:04:03] What were some of the difference in the approaches as you think about, when you were in a startup and maybe the approach that you take with maybe the steeper trajectory? That maybe is sometimes less certain versus the way that you all do things in private equity. How do you compare and contrast?

[00:04:18] And it's not that one's necessarily better or worse. I'm sure they're just a little different.

[00:04:22] Tim Schulte: So yeah, I have had the opportunity to work both within venture capital and private equity in the venture world. You're largely focused on. Making investments to prove out business models or product market fit in the private equity world.

[00:04:36] We are investing in areas where there, there is already proven product market fit. There is a proven business model and we are working to scale those proven elements of a business. And so I'd say the private equity approach has been more. Data driven, more methodical, more kind of consistent and process oriented.

[00:04:54] The venture world learned a lot about storytelling and understanding customer and market needs. And so for me, both experiences have been fun and valuable, but they are a bit more different than I think. People often believe because the two industries get lumped together so often.

[00:05:13] Sean Mooney: Yeah, I think that's a really helpful distinction and a really good summary of that.

[00:05:17] In some ways you're doing like very early stage R and D and VC. And then you're doing, you pick up in private equity is more of the, maybe the end of the development and the go to market kind of planning in terms of how you think about building and the phases of growth and development. Exactly. So I think that was an interesting aside.

[00:05:32] So thanks for obliging, uh, my rabbit hole. I took you down there. One of the things before we go too deep into some of your thoughts on business building is maybe just go back a little bit to you. And I'd be really curious. One of the questions I'd love to ask people is we know you better. If we knew this about you, Tim, what's one of the things that we would know you better if we

[00:05:52] Tim Schulte: knew this about you.

[00:05:53] So most important thing about me, my wonderful wife, Catherine, we have an 18 month old Henry. They take up most of my time outside of work. And I say that in the most positive way possible. I also am involved with an organization in Nashville called Nashville Classical. It's a charter school K through eight.

[00:06:09] That I personally get so much personal fulfillment and joy and learning from being involved in my community in that regard. I selfishly get a lot of out of that experience. We just opened our second campus and the school itself I'll say is scaling. And so it's also been fun to contribute a lot of what I learned in the private equity world, scaling businesses.

[00:06:31] To my personal life and community organizations, helping them scale their operations and excellence as well. The one thing I'll add completely unrelated, Sean, you and I joked about this offline before we started recording another one of your podcast guests. I think it was a month or two ago, Eric Jensen now at Nordic capital talked about his nickname, which was.

[00:06:53] I shared with you that I have a pretty well known nickname too, which is sweet tea. So my father in law, then the boy from the North dating the young woman from Tennessee, my father in law gave me the nickname of sweet tea, which has expanded to friends. Professional colleagues at multiple employers. I have two nephews, an eight year old and a five year old.

[00:07:16] I think the eight year old has never once called me Tim. And I'm pretty certain the five year old doesn't know my name is Tim because they exclusively know me as sweet tea. In the personal and professional setting, you'd know me better if you knew my real name was Sweet Tea. I love

[00:07:31] Sean Mooney: both of those, those examples and particularly the Sweet Tea nickname, which is actually a pretty awesome nickname.

[00:07:38] If you got to

[00:07:38] Tim Schulte: pick one, whatever, I've been called much worse, so I will take

[00:07:42] Sean Mooney: it. Sweet Tea, it just sounds awesome. So one of our other guests on the podcast was a naval aviator. And what he made very clear is no one gets cool nicknames. There's no Maverick and Goose and Iceman in the real world and in aviation.

[00:07:57] So Sweet Tea, I think is one that you can take to the bank and own because it's really kind of awesome.

[00:08:03] Tim Schulte: I'll have to thank my father in law for that.

[00:08:06] Sean Mooney: So I think this is a great start to our conversation here. And then maybe segwaying a bit back to business. I'd be curious. So you've had this really kind of amazing background, you've done consulting, you've done startup, you've done private equity and a lot of the continuum of business building, through all those lenses that you have, I'd be really curious to think, what are some of the most important traits that you look for in a company when you're thinking about, um, Is this company a good company or can, or should it be a good company?

[00:08:35] And really through the lens also, if like, if you're a business builder right now, if Tim's thinking about these things, so should they.

[00:08:41] Tim Schulte: I'd say the way that we think about it at council is really three components, market, team, and company. The first being the most important, I think it's Warren Buffett who has a quote.

[00:08:50] Something to the effect of management with a great reputation, tackles a market with bad economics and the market's going to win out. So we are very much thematic investors doing a lot of work to understand what is the market we want to be in, and then let's find the right company. To play in that space.

[00:09:07] So understanding regulation, competitive landscape, things like that. We at council, one of the things that makes us different is what we call our CEO council. So this is a group of three dozen successful public and private sector leaders from former acting head of CMS and a few state Medicaid directors, CFO at Cigna, CEO at Brookdale senior living, many more who help us understand markets, that's probably thing.

[00:09:33] Number one, that is most important to us. Thing number two is the team and there's an element of both competency and attitude. Both of those I think are equally important. Part of what we can do is help entrepreneurs to build out their management teams and bring in new capabilities. There needs to be a cultural fit and attitude and always be learning and always wanting to get better.

[00:09:56] We are on the same team type of mindset. And so. Team is extremely important to us. We just hired a chief talent officer earlier this year, who's focused on helping our portfolio companies. Build out their talent capabilities. I think a lot of other PE firms who have hired such a role had done it more as bringing exec recruiting in house.

[00:10:16] That's not what we've done. We are helping our companies get better at the act of recruiting and kind of building their recruitment engines. So market team and then company. Sounds silly to say, but is maybe the least important of the three. There's obvious things around growth and retention and things like that product and quality that are really important that we look at in order to have a productive partnership, though, both sides need to bring something to the table.

[00:10:40] So we're not looking for perfect businesses. We're looking for. Good businesses in good markets with a good team that we can supplement and build around to help them grow and where there are weaknesses or opportunities for improvement. That's where we as a value add investor can really contribute the most.

[00:10:57] So a little long winded, but that's how we think about it.

[00:10:59] Sean Mooney: I love those responses. And I think you very succinctly Summarize what's important and one, your point on market, I think is so true, it's hard to beat a bad market and if you have a really good market, you're probably going to do okay, but then if you have a really good market and really good team, this whole idea that magic happens and as I even reflect on my past career and the first 20 years of my career, I was in private equity and as I came up in the industry, early on it was about learning and chopping wood and trying to figure out the business of business.

[00:11:26] But then as I grew, it became more of my job was to be a recruiter and a psychologist and just because people matter. And, and when we look at our data today, working with. Hundreds of PE firms and thousands of their port goes the number one reason our phone rings is we need to get the right people in place, you know, working with top business builders like you, because it matters as much as the robots seem to be taken over, we seem to get more and more calls for the people.

[00:11:53] Tim Schulte: Yes. Private equity is not a finance industry. It is a people industry. Full stop. 100%. And it's

[00:11:59] Sean Mooney: interesting. We just did an analysis of the Inc. 5000. And when we looked at it, the industry, I think has this incorrect reputation based on 1980s movies that they're cost cutters. And what we looked at, we saw the Inc.

[00:12:12] 5000 is it, they were the number one job creator. They being the private equity industry and the PE back companies in the Inc. 5000. By far created the most jobs out of any other cohort within the small and midsize high growth businesses. And so I think you're spot on. It's a people business and there's a whole variety of reasons for that.

[00:12:30] And so maybe with that in mind, we talk about like creating value. I'd be curious, how does council capital approach value creation? What resources are you bringing to the companies that you partnered with to help them become safer, stronger, bigger, better.

[00:12:46] Tim Schulte: I think there's a balance that we try to strike between having real substance and being collaborative.

[00:12:52] Truthfully, I think a lot of private equity firms talk about providing strategic and operational support to their portfolio companies. For many, they can confuse pressure in a board meeting and help as the same thing. And so striking that balance between actually having real substance. But bringing it to bear and more of a partner oriented collaborative approach is something that we are really proud of and take a lot of intentionality in our model in that regard.

[00:13:16] And so the way that that actually comes to life is, is a few fold. One, I mentioned our CEO council earlier, so that if a group of active investors and advisors of the firm helping us understand markets, make introductions, sit on boards, things of that nature, we also have quite a few folks employed by council capital as part of what we call our value creation team.

[00:13:37] So the couple of different roles there. Simply our generalists and our specialists. So the generalist chief of staff model think post MBA, former consultant types who can drop in and help with strategy operations, things of that nature at a, at a, in a way that we are able to bring great talent to these companies and reallocate them in a cost effective manner.

[00:13:59] Generalists can solve a lot, and I'd argue a lot more than most people think. That said, subject matter expertise is still important as well. I mentioned our chief talent officer earlier, but also things like finance or M& A, that subject matter expertise is important, and we bring that to bear to our portfolio companies as well.

[00:14:17] Partnerships, collaboration across companies, a million examples of all of those things. But the last one I'll highlight is we want to make sure that we have an impactful model, but we do it in a scalable way. And I think a lot of private equity firms talk about playbooks. We like the concept of toolkits much better.

[00:14:35] I think a playbook implies we've done this. We know what to do. We will tell you peers the play and what to do. Go run the play. Our approach is more toolkits. You're the builder. Our job is to provide you with the right tools so you can be successful in your role. And so the development of templates, resources, partnerships to bring that partnership to scale in a more scalable manner.

[00:14:59] Sean Mooney: I really like the way that you all are taking it. One is this idea that just given the nature of private equity. To date myself and I go back to like 1999 and our value creation plan was we were going to, upgrade the accounting system and add a salesperson if only things were that simple.

[00:15:16] And it was that work when, it was the age of buy low, sell high, right? It was just, it was an arbitrage and now you're transforming these companies in. You're bringing something, so much more than a check. And when I really like the way that you describe too is, I think so often in the world people view choices through the lens of or versus and.

[00:15:35] We can specialize in partnership, or we can specialize in playbooks. And what I heard from you is like, no, we're going to do something in between and maybe some common approaches, but custom implementations to solve unique challenges

[00:15:47] Tim Schulte: and opportunities. Exactly. In truth, there's a lot of diversity in the portfolio of companies that we've invested in.

[00:15:53] So we have 10 portfolio companies. Those ranges while all within healthcare, those range from services to tech and tech enabled services. I will simply say those range from small to medium to large. And so there are some funds. If you only invest in B2B software and all of your companies are using Salesforce and Marketo and NetSuite and the same set of systems looking at the same set of metrics with the same set of processes.

[00:16:20] You can take a more systematic, heavy handed approach given the diversity of the companies in which we invest. That just doesn't work. I mean, also I think that's less fun for everyone. And so I think the model has to be. Less heavy handed, but higher touch. And we try to strike that balance. And I think that's a

[00:16:40] Sean Mooney: great distinction and a, and a really important insight for people who are thinking about choices and partners.

[00:16:46] Who do you bring in as investors? And a lot of it will depend on not only, the PE firm, but also what type of business you're in right now. And so I think that's a really good distinction. I'd be curious and one of the things, maybe just a philosophy that I have on business in general and well run businesses.

[00:17:02] It's a symphony of motion between different organizations and functional areas that want to in some way silo themselves naturally. That's the order of nature in business and life and humanity. We want to kind of build structure and I view the private equity. We're kind of the same on a more kind of lattice level is you're having an interplay of not just within the organizations, but between the private equity firms, the deal teams, the operating teams, and then the Portco leadership teams, and then down through those organizations.

[00:17:32] So Tim, I'd be curious how you all manage this kind of symphony of motion within your firm and your portfolio companies.

[00:17:39] Tim Schulte: At the most basic level, I'd say mutual respect and appreciation for what everyone brings to the table. A lot of private equity firms. The investment team is the alphas and everyone else at the investment firm, the BD team, the value creation team, the folks at portfolio companies can be viewed as second class citizens.

[00:17:58] One of the things that drew me to counsel a number of years back was very much the mindset of like, we are all equal members on the same team. We have different roles and responsibilities and to use the symphony analogy, we have to play together or else none of us will. Sound good or do well, but that kind of mutual appreciation and respect is the foundation.

[00:18:18] I think folks often focus on defining roles and who has decision rights. And yes, that is really important, but they're overlooking the foundation. So we have a lot of processes in place with our board meetings and monthly financial reviews and our engagement model and things like that. But. Mutual respect and good communication is important.

[00:18:38] Diverse skill sets, not having a hundred percent of people who work at a firm being investment professionals and a hundred percent of people on your board being investment professionals. Often not a great mix. And so diversity of people, diversity, responsibilities, mutual respect, good communication.

[00:18:55] You'll figure everything else out. If you have that, it is kind of the philosophical approach we've taken to it.

[00:19:00] Sean Mooney: Yeah. And I think that's spot on. So this concept of first principles, I get those, right. Yeah. And then everything else becomes easier. And I think that's a hundred percent how you want to build the foundation.

[00:19:10] And whether it's a private equity firm or a portfolio company or an independent company, or dare I say, even my family,

[00:19:17] Tim Schulte: everyone knows what they should do. Not everyone does it. Finding the partner who does it is, is what's important.

[00:19:23] Sean Mooney: So we've talked a lot about how you're approaching value creation and you're doing things in very interesting ways.

[00:19:31] Tim, I'd be curious to learn a little bit more about what are some of the things maybe that you're doing on the new deal side in terms of thinking differently about the business of private equity. So

[00:19:41] Tim Schulte: there's two things that highlight one is our executive and residence program and two is our investments in AI.

[00:19:48] On the first, we talked earlier about private equity being a people business. That is true. We talked about our thematic approach, which is also true. What's what's unique or additive to those prior comments is our executive and residence program. So I think from a process perspective, private equity firms have historically one found a business to invest in and then to subsequently make sure they have the right team in place.

[00:20:13] We have essentially flipped that to say, number one, let's make sure that we partner with the people that we want to be in business with good people. Good values, good skill sets, and then let's work with them to find a business to invest in. So our last two investments, both came through this executive in residence program.

[00:20:32] We're partnered right now with the gentleman, Alan Peninsky. Who is a leader in the payer services and value based care model connected to us through our CEO council, working with Alan to find what is the right business for him to help lead to success. And so that people first model comes to life in how we source businesses.

[00:20:51] That's the first thing I'd highlight. And the second one, I think everyone is talking about. AI. And in some cases it's hype and people don't always know what's real and what's not. There's a lot going on though at council, both within our portfolio as well as within the firm. So I could give you a million examples of portfolio pilots and projects.

[00:21:11] What we're pretty excited about is an internally developed tool that we've created, essentially think of healthcare, private equity, specific version of. Google and LinkedIn. So when we want to go into a new business. It can aggregate tens of thousands of research papers, data from PitchBook, data from Grada, data from other sources to help us much, much, much, much more efficiently come up with a short list of actually relevant companies, not just tangentially relevant companies.

[00:21:42] Help us better understand who within our network. Has connections to and around this company in a degree that's a few steps ahead of where you can get from a LinkedIn search, helping us understand and kind of framing up market research to inform our investment thesis and our investment memos that we have hired a Developer and have human beings whose job is to build out software product to help us be better private equity investors.

[00:22:10] I think that is something quite different and quite exciting that, that we're doing at council.

[00:22:15] Sean Mooney: I love both of those. And one, it just goes back to this common theme we've talked about is that it's the people that give you the edge. But second, it's these tools that can make you a lot more efficient and better make the people better.

[00:22:27] And that's, it's the same way we view it within BluWave. And we've similarly just made substantial investments in proprietary recommendation engines that are using kind of a multimodal AI techniques. Proprietary LLMs, the tools, the software tools that we use, we're looking to see what do they have embedded.

[00:22:45] Beware of confidentiality, by the way, don't ever forget that. And so the way that you're doing it there though, and thinking about the business of your private equity firm as a business is a very unique and then be, I think super exciting. And so to have those tools and that ability to invest, it's got to make you guys feel pretty good about, doing your own job so you can spend more on things that are interesting and matter.

[00:23:06] Future's bright. You're probably your associates love it too. Not stay until three in the morning on LinkedIn searches. That's right. Oh, that is really good. So I'd be curious now, maybe to bring things full circle to go back to you. One of the things that, I think we all know is the best business builders in the world are.

[00:23:26] Collectors, consumers and sharers of other people's wisdom, there's a saying that's part of probably just most worlds, but particularly in private equity, like don't recreate the wheel and the only reason I survived in an industry where I was never the smartest person in the room was by liberally borrowing insights from others.

[00:23:46] So now that I have the opportunity, Tim, to pick your brain here and hopefully make myself a little bit better at your hard earned, you know, work I'd be curious, what are some of your favorite books that you've read and maybe some of the takeaways?

[00:23:58] Tim Schulte: So I know I won't be the first of your podcast guests to make mention of Yuval Noah Harari.

[00:24:04] An author who I have found to be hands down the most thought provoking author. He's got a number of books, Sapiens, Homo Deus, 21 lessons for the 21st century, business aside as a human being, incredibly interesting, incredibly thought provoking. So I would put that at the top of anyone's. And then the other thing I'll mention, so I actually started a book club pretty recently with one of the executives from a portfolio company here in Nashville.

[00:24:32] So we have met once but the first two books we read for our meeting was psychology of money and die with zero. Both had similar themes around. All of us have a finite amount of health, wealth, and time. And all of the decisions that we make are essentially trade offs across those three dimensions.

[00:24:51] And so we need to be more thoughtful and intentional about what we're giving up and whether it's actually worth it. I'd bet a lot of people who listen to private equity podcasts. Prioritize time and energy around probably maximizing wealth one health two, and time three, but then having control over your time is actually the best predictor of happiness in life.

[00:25:13] And so, and not necessarily a lot of novel concepts that you didn't know beforehand, but pretty thought provoking around, are you focused on the right things and being intentional about the trade offs that you make, and that applies to both business, the projects you work on, how you spend your time. And more importantly.

[00:25:30] Life outside of it.

[00:25:31] Sean Mooney: I think those are great recommendations. And I'm certainly familiar with Yuval Harari, but I haven't read any of his books yet. So literally right after this, I'm clicking one purchase by on Amazon. So those are great recommendations.

[00:25:44] Tim Schulte: It'll be a great 15 that you spent.

[00:25:47] Sean Mooney: No, I can't wait.

[00:25:48] And then I think your point on kind of these. Choices that we all make between wealth and time and just allocation of resource and humanity is something that I think probably everyone who listens to this struggles with and, and first and foremost, I know that I do immensely and I have, right? it's just like you said, it's like, it's just go, go, go.

[00:26:09] You're on this hamster wheel and I'm starting to learn. I don't know that it's becoming imprinted. One of my friends that was on a recent episode here wrote this book that is called My Teacher, My Son, and I'll show you here, and he, was in kind of this go go go ecosystem and had this really tragic, kind of unimaginable accident that occurred in his family, and it caused him to kind of pause.

[00:26:32] And reflect and learn like we're only on this rock for one lap, maybe many laps around the sun, but this is our one and he calls it their one shot. And something I've been thinking a lot about lately. And so thank you as well for bringing that up because it's something that I know that I struggle with personally.

[00:26:48] Tim Schulte: I'm under no illusion that I have solved it, but I think the importance of reflection. Can't be understated.

[00:26:54] Sean Mooney: That's wonderful. Tim, I really, A, appreciate the opportunity to work with you and your colleagues at Council because it is a privilege and we don't take that for granted. But B, I also really appreciated the opportunity to learn about how you see the world.

[00:27:10] Not only from business, but also life. So, thank you so much for taking the time and sharing some of your wisdom with us today.

[00:27:16] Tim Schulte: Thanks, Sean. It was a real pleasure.

[00:27:20] Sean Mooney: Special thanks to Tim for joining. If you'd like to learn more about Tim and Council Capital, please see the episode notes for links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcasts, including Apple, Google, and Spotify. We truly appreciate your support.

[00:27:37] 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, private equity grade, professional service providers, independent consultants, interim executives, or anything else, please give us a call or visit our website at BluWave.

[00:27:58] net. That's B L U W A V E. net. 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.