Episode 024
Brit Yonge, Corsair Capital | An Expert Perspective on Strategy and Resilience in Private Equity
Join us for an in-depth conversation with Brit Yonge, an Operating Partner at Corsair Capital, to hear his expert perspective:
1:29 - Brit's path to private equity
6:23 - How Brit formed his values from serving the US Military
13:45 - Characteristics for evaluating a great company
21:56 - Working with management teams to build great companies
25:44 - Persevering through an uncertain economy
32:15 - Personal/professional growth books and topics from Brit
For more information on Corsair Capital, go to www.corsair-capital.com.
For more information on this podcast, go to www.bluwave.net/podcast.
1:29 - Brit's path to private equity
6:23 - How Brit formed his values from serving the US Military
13:45 - Characteristics for evaluating a great company
21:56 - Working with management teams to build great companies
25:44 - Persevering through an uncertain economy
32:15 - Personal/professional growth books and topics from Brit
For more information on Corsair Capital, go to www.corsair-capital.com.
For more information on this podcast, go to www.bluwave.net/podcast.
EPISODE TRANSCRIPT
Sean Mooney:
Welcome to the Karma School of Business Podcast. In this episode, we have a riveting conversation with Brit Yonge, operating partner with Corsair Capital. This episode is brought to you today by BluWave. I'm Sean Mooney, BluWave's founder and CEO. BluWave is the go-to expert of those with expertise. BluWave connects proactive business builders, including more than 500 of the world's leading private equity firms and thousands of proactive companies to the very best service providers for their critical, variable, on-point and on-time business leads. Enjoy.
So, I'm very pleased to have Brit here to talk about his experiences in the private equity industry and his perspectives on business and in some ways kind of life. So, A, it's great to be talking to people in real life, which I think we've all gone through this experience together and now it's good to be back amongst humanity. And so, one of the ways I love to start these things out is just to get a little bit more of a perspective on the story of Brit. And so, in particular is ... I'm sure like many in PE, in the modern day PE industry, there's all these different paths. And so, I'd love to hear a little bit more about your story and how you ended up in the private equity industry.
Brit Yonge:
Yeah. Certainly, I came from what you might call a non-target background. I started my career actually in the service, so I went to the Academy and then served five years after that. Did a couple trips overseas. Very serendipitously landed at Palantir, which at the time was this kind of sleepy software company that no one had ever heard of. I couldn't get a meeting with anybody and [inaudible 00:01:58] rocket ship. And that was a really great place to start my career in the sense that it has a very strong culture. And I think like any company with a really strong culture, it gives you a lot to react to. It makes you think about what kind of values you want in your work life and what kind of values maybe you don't want.
And so, I was able to really learn a lot about myself as someone that was now in business and taking off the uniform and putting on the suit, so to speak. So, I got very fortunate to work on some clients that were in the financial services industry and found that area really ... I think intellectually it was very stimulating to me. Certainly the people in finance are very smart and the things you're working on are largely rather collaborative. You're trying to make your customer happy so that you can make money. It's the symbiosis of capitalism. And then I ended up starting my own company and selling that. And then one of my friends was asking me, "Hey, do you want to help out this private equity firm with a deal or two?" And a deal or two became two or three. And then they said, "Hey, do you want to come be an operating partner here and [inaudible 00:03:04] for all of our [inaudible 00:03:05]?"
So, it's funny how you can stumble into these things in the life if you ... I didn't even know what finance was at 27, 28 probably. [inaudible 00:03:15] that word. Didn't know what Silicon Valley was. I was 24, 25. So, it's funny how life can really just be a lot of fun if you just let it.
Sean Mooney:
It's really interesting, as we talk with a lot of private equity professionals like you, that's a recurring theme of this kind of life is a journey. It's not a destination. And people kind of just find their ways to it. And so, how did that play into this journey that you have?
Brit Yonge:
Yeah. I mean, I think it is ... You do stumble. There is a random walk. I think that's a concept, a finance concept that's perhaps a metaphor for life. The more you try to bake certainty into your model, the more foolish you're often going to be. At least that's how it feels sometimes. Yeah, I think there's a lot. The volatility is obviously stressful and it's terrible at the time and it gives you ulcers and all that, but it also makes life really interesting and there's a lot of opportunities that are presented with volatility. Again, finance concept that has larger and deeper implications.
Sean Mooney:
And it's really interesting how you talk about that. I almost came the opposite direction, so I was the prototypical, probably similar person to you but in different ways. Goals, achievement, I needed to gather ribbons and medals and trophies [inaudible 00:04:38]-
Brit Yonge:
Sure, yeah, yeah.
Sean Mooney:
And that sent me in a different trajectory where I went to a university that I worked really hard to get into and then I went to investment banking and then I went to private equity. And then I did the opposite of what 99% of my friends did. Then I did a startup, which was crazy to all my friends.
Brit Yonge:
Yeah, I think that's a story that doesn't get told enough. I mean, some of the best entrepreneurs are just getting started in their 40s.
Sean Mooney:
Absolutely.
Brit Yonge:
I think the guy who did Red Bull, I mean, he was like ... Had worked at Unilever or something for 20-some odd years, one company. Then leaves there and becomes an incredible entrepreneur. We have a ... One [inaudible 00:05:18] in our portfolio who came from a pretty sleepy company. I think it's kind of amazing to me that he lasted so long there, but he ... During that time, he developed an incredibly strong opinion about what that industry needed and then he left and he started that. I mean, I won't do the math here, but the guy wasn't that young when he left. So, I think that's the path to entrepreneurship that isn't talked about as much. And I think in this part of the economic cycle, we're going to hear more of those stories about people that have a little bit more maturity, a little bit more life, a little bit more understanding of accounting come into doing business formation and participating in these markets. And the cliches are going to be a little ... Are going to get challenged a bit, I think.
Sean Mooney:
I love that perspective and I would've really appreciated this when I was explaining it to my wife when [inaudible 00:06:09].
Brit Yonge:
[inaudible 00:06:09].
Sean Mooney:
She's like, "We're going to do what?"
Brit Yonge:
Yeah. No, [inaudible 00:06:14].
Sean Mooney:
To her credit, she was a saint. But yeah, that would've been helpful. But we can't turn the clock back [inaudible 00:06:21].
Brit Yonge:
[inaudible 00:06:22].
Sean Mooney:
So, Brit, we've heard a little bit on the tips of the waves of your career. One of the questions I like to ask is, we'd know you better if we knew this about you.
Brit Yonge:
Yeah, I think in a lot of ways my time in the service was formative. I thought I would leave the service and that would be it. And in many ways, it has been. I never have once said, "I wish I was still in the service." It is behind me. But there are these formative years, you form these really important values, and ways of working, and dispositions. And that's ... The directness, the comradery, the shared mission, kind of this idea of a true north, that we're all marching in the same direction, those things are a part of who you are. It's an identity forming experience, even if what I do today from a day-to-day perspective has nothing to do with national security, has nothing to do with wearing the uniform serving the country. Those values, they become a part of you. And I think it's something that even though there's a lot of distance between those years and those experiences and who I am today, that formative experience sticks with you. And to be frank, in finance there was a bit of a veteran mafia. There's-
Sean Mooney:
[inaudible 00:07:48].
Brit Yonge:
When you find out somebody that has served, there is a bit of comradery still and I don't think it's contrived. I think there's a real sense of, "I kind of know you without knowing you." Or, "I didn't know you without having met you," kind of thing. Yeah, I would say that's probably part of me that's ... You can't just shake that.
Sean Mooney:
And Brit, what was the nature of your service?
Brit Yonge:
I was intel guy and just given the years that I was in, I spent all my time in the counterterrorism mission [inaudible 00:08:15]. So, certainly at the time when you're a young 20-something year old male, that sounds like a pretty cool thing to do. And yeah, so I got to see what our foreign policy looked like at the [inaudible 00:08:27] end of it and for the good and the bad. And I think that ... When you're looking at deals day-to-day, week-to-week, management teams are kind of telling you a story of how awesome it's going to be. And many times it is awesome, right? But sometimes it's not. And I think that that's ... How to be a constructive skeptic is something that I learned in the service.
And that's a tough thing to ... That's maybe not an obvious ... When people think about serving your country or whatever, that may not be an obvious lesson that you would think someone might learn, but being constructively skeptical has helped me a lot in the world of private equity because you do get to ... People are going to make representations about the future and the present and the past. And being able to push back and pressure test some of those assertions, to be able to examine facts in a way that's respectful but also firm, and being able to really test how much conviction someone has about the future or the current strategy, those are all things I might've learned the hard way. And this time, my legs aren't on the line. So, it's a lot more fun. And more lucrative too.
Sean Mooney:
Absolutely. But what a ... You think about formative experiences, at a young age, for good and probably some ways that you wished you didn't experience, you've learned how the world was and is and the way the world is versus the way you maybe hoped [inaudible 00:10:00]-
Brit Yonge:
Or would be, yeah.
Sean Mooney:
And that in some ways is perfect training for private equity because-
Brit Yonge:
[inaudible 00:10:05], yeah.
Sean Mooney:
... anytime there's something that's great and measurable at stake, there's incentives and people will take advantage of that whether it's at the global geopolitical stage or a business stage. And that was a thing that I learned when ... I was in PE for 20 years and you just learn that it's human nature and it's not that people are bad or good-
Brit Yonge:
That's right, yeah.
Sean Mooney:
... there's incentives. And sometimes people do things they wish they didn't or wouldn't have done.
Brit Yonge:
Yeah, I think that's a great way to put it. I think it is ... Incentivization and how incentives work is such an important idea to understand and how the world behaves and being able to predict human behavior. And not all incentives are monetary. They often are, but when you're a large organization or when you're in a different place with different cultural norms, there are very strong incentives at play. And being able to recognize those ... And not all those incentives are always altruism. So, I think that in examination is the maturation process of growing up, so to speak, is understanding the incentives that are at play and maybe getting more detached from some of the more rosy narratives of ... Whatever the narratives are when you're young and impressionable and are reading some book about whatever.
Sean Mooney:
And I really appreciate it, because a lot of the time it's like, if you learn not to get emotional about it, it just is what it is and it's human nature. And by and large, human nature's I think a positive nature that people embrace. But incentives drive outcomes and to get that at a younger age in your professional career, it's I think incredibly translative to what you're doing in private equity.
Brit Yonge:
Yeah. No, for sure. I think that's exactly right. You have to have this emotional boundary and I think that was a really hard ... I went through that experience in a very challenging way where you have these ideas of who ... In this case, really who the enemy is. And then you understand that there are some people that are [inaudible 00:12:01] incentives and it might just not be that they're all evil and believing some crazy ideology. There's some other incentives at play, there are very complex things happening here. And developing that emotional boundary, and I wouldn't go so far to say empathy or whatever, but being able to relate to someone else's perspective, that's an interesting thing to do when you're 25. And I think is oddly been incredibly useful in my own career when you're trying to get a deal together and even when you're opposite side of the table, there is a way to make this work even if there's a lot of obstacles in the way.
Sean Mooney:
If you can candidly look at the way the world is and not get caught up in the externalities, it's incredibly valuable just in general but also particularly as you're assessing opportunities and risks and finding the pockets of opportunities within risk, which is the name of the game.
Brit Yonge:
Yeah, and that's the challenge is because getting the externalities is ... Another way to say that is, it's the narratives. The narratives, they're addicting because they're well written and they're well worn and they play to the core of who we are as humans. But yeah, creating that emotional distance, having moments of rationality and empathy, it's so important, especially in the deal mechanics too. Deals are a roller coaster. I mean, it's a real roller coaster. And then when things go not perfect in the portfolio, it's another-
Sean Mooney:
Which is every day.
Brit Yonge:
Which is ... Yeah. Frankly, yeah.
Sean Mooney:
Across a portfolio.
Brit Yonge:
Yeah, yeah. I mean, it is ... Yeah, it's month-to-month, right? And so, that's important before you send the email and before you jump on the phone. It's a skill that's really, really useful.
Sean Mooney:
So, you've had this great, very unique, high-achieving career where you've served your government, you've worked for one of the most well known data startups. You've built a company and now you're looking at probably hundreds of companies a year as an operating executive at a top private equity firm. Now, when you look at these businesses ... I kind of over time developed my personal yardstick. This is in general what I'm looking for. And what would you say are some of the things that you look for that says, "This is either a good company or it could or should or will be a good company?"
Brit Yonge:
Yeah, I think that's a great question. I think given the backgrounds of most of the folks that work in private equity, you don't have to worry too much about the financials, because the kids that come into this industry are so well trained. They have a really incredible background. And it took me some time to catch up. I wouldn't even say I've been totally caught up. But, to get literate in that skillset, that analytical skillset. So, you don't have to look too hard there, because those folks are going to do the work, right? So, the questions for me are things like ... Really, the top one is product market fit. It sounds ridiculous, but it's just, do the customers like this product? Do they enjoy using it? Do they need the product? Do they enjoy using the product? Are they willing to pay money for the product?
Does it ... You can kind of go down and really dig deep in there and figure out what are the key things about the product or service that the customers love or need. And really understand that the company understands its own space, if that makes sense. That's probably the top most important thing is the product market fit. And if they're going to go and tell you about an adjacency, or whatever, is there a credible story? And there almost always is, right? Because you're selling the company, but you're also selling the company with the hopes and the dreams that you have tomorrow. So, there's going to be some story around, "Hey, we're going to expand. We're going to do some adjacency, whatever." So, that product market fit now becomes a product market fit capability.
Do we have somebody at the firm that understands this adjacency, this hopes and dreams, that knows what right looks like, that has really an intuition around where they want the company to go, intuition on this vision? Because that's not really something you can outsource. You can't really ... Obviously, you can hire management consultant firms and they'll do a great job of being very analytical. But day-to-day, week-to-week, someone has to make the thousand decisions to keep the company in the right direction and that requires ... That person can't just always be going and checking their notes, "McKinsey said this." That's not really a way to run a company. You can't outsource that. So, it's that product market fit and then the leader, finding out who at the company is making the decisions on the what's being built, and who it's being built for, and understanding how that secret sauce gets made, that's the whole [inaudible 00:16:49].
Sean Mooney:
Yeah, I think those are so spot on. It's like, kind of reflect on too many years of breaking my pick trying to figure things out and eventually in spite of myself, figuring a few things out in life and business. But, it was just ... It's [inaudible 00:17:02] business is like water, so many times you just want to go where it's easiest to flow. And if people like your product and they think it fits what they need and solves a problem they're going to be willing to pay for it. And so often it was just like, the products, they were great and I used to invest in highly technical, highly over-engineered products that were like, you have products in search of a market. And they were beautifully amazing, but no one wanted them.
And if you can just build something that there's a need and demand for and your customers will tell you they want, it becomes so much easier. And even as I personalize ... When I had this reverse entrepreneurial flow where I would always look for that and then I started BluWave. And when we started it, two of the three things they didn't want. And I broke my pick for months. I mean, it felt like a lifetime, but it was six months. And then, I finally had the audacity to ask our customers what they wanted and they told us. And so, I think it's just a great lesson for any business builder or any leader of a company, have the audacity to ask your customers what they want, if you already don't know it. And they'll tell you and then that fit and that lock and key, that water just flows so much easier versus digging trenches to get them to go to where it's supposed to go. And as you'll appreciate from me mixing 10 metaphors here, I grew up in Texas and it's the only way I know how to speak.
Brit Yonge:
Okay.
Sean Mooney:
You were keeping up.
Brit Yonge:
Yeah. No, I think it's ... I mean, that's spot on. We have several companies where we have a chief product officer and sometimes it takes a little nudging with this CEO to say, "Why do we want that?" Because there is an art, but there's also a science to that, right? It is wonderful when you have somebody that comes from the industry and they've been there for 25 years and they get it and know where it's going and they know where it's been, but if you're trying to scale that to a company culture or engineering team or a broader organization, it is nice to have someone who can be systematic in the way they think about product development and understanding who your customer is and the customer archetypes and all the buzzwords that you hear out of Silicon Valley.
But there's a lot of merit to those processes if they're done right and they're done with intellectual curiosity and genuine openness. And not in a condescending way, but a true curiosity around what does my customer want and need. Getting that work done, that research done, getting it documented, getting that vocabulary, infiltrating the organization with that vocabulary is just huge. Because then at that point, everyone feels like they know the customer, even if they haven't spent as much time with the customer. And in those organizations, I do think in so many organizations it really does help to have that customer interface. You hear the stories about the Walmarts of the world where all the executives have to work, whatever [inaudible 00:20:00] three days a year and it's ... I don't think it's a cliché, I think that's a genuine thing that consumer facing companies do to keep themselves close to the problem and close to the customer.
Sean Mooney:
Yeah, I love how you say that. And there's a couple things that really resonate with me is one of my favorite books that probably saved my entire company, frankly, was the iconic lean startup book, where it's just, don't try to just create the perfect in vacuum. Get the essence of the business out there and get at your customers as soon as possible and they'll tell you. And then the Walmart thing is really important. I have all these sayings just from the way I grew up and I call a lot of what we do, it's just the Walmart form of innovation. Where it's like, get it out there, listen to your customers, see what other people are doing and put it together. And you don't have to recreate this wheel.
There's all these people who will tell you what that shape and form should be and you'll get there a lot faster with a lot more certainty. So, I think those are really good points. One of the things as we look at the modern ... The current era of private equity, and it's come a long way. And so, I'm going to date myself. I started in private equity in the late 90s where it was just deal team people. We were buying low in an inefficient market and we would upgrade the accounting system, add a salesperson. And then we would sell an inefficiency purchased price to an efficient process and then spike the ball and I thought I was a business genius and saw the world in slow motion.
And little did I know. And now the industry's matured in a good way, in that now if you ... As I look at the modern era of PE or the current era of PE anyways, it's a symphonic motion of skills and resource and it's deal teams working together with operating teams working together with [inaudible 00:21:55] executives. And so, how does your firm think about that interplay between the three and how do you all work together as you look to build these great companies?
Brit Yonge:
Yeah. I mean, certainly I haven't been around this as long as you have, but I do ... I was reading Mitt Romney's biography or something where his first couple deals they bought for less than cash in the balance sheet or something. It was [inaudible 00:22:20]-
Sean Mooney:
The good ole days.
Brit Yonge:
I was just like, I've just lost so much respect for you. It was so easy for you guys back then. Yeah, it's definitely much more sophisticated, right? And you have a much more ... A lot more players on the field and that isn't always a good thing. I think, I mean, just the old school RACI RAPIDs framework, whatever you want to call it, where you have roles and responsibilities defined or at least alluded to. That's a tried and true one and I think it's super effective for making sure people know, hey, whose responsible for delivering this, whose heads on the line, who gets to contribute from the chief seats, or criticisms and then who else just needs to be FYI informed. That's essentially the RAPID or RACI or whatever the business [inaudible 00:23:08] framework is for it these days.
But that's an effective [inaudible 00:23:12] tool, that roles and responsibilities conversation I think is very effective and just helping people ... Because it's not like people wake up one day and go, "You know what? I want to be really destructive to this process." People want to do the right thing. People's incentives, and we [inaudible 00:23:25] earlier. Most everyone's incentives in this space are to create [inaudible 00:23:30] value. So, where you do have friction is often just for lack of role and responsibility.
Sean Mooney:
I think that's very insightful. And you think about the private equity industry, it's one of these industries where it only works for all involved unless it works across not only one company, but a portfolio of companies. Every business virtually has to be successful. In PE, it's kind of like, the analogy I'd always use in my mind is you think about PE maybe versus VC. PE, they're making one to three times their money. In a 10 investment fund, you need pretty much every deal to do well. So, when you get into tough times like now, private equity races towards their portfolio companies. Whereas, maybe in venture capital, they're kind of incentives and economics are more like, "We're going to get two or three out of the 10, but they're going to be home runs." And so, we have to be right less often, but we have to be right in a more substantial way. And so, in PE there's ... It really means that all the incentives are aligned, but it doesn't mean that people always communicate well.
Brit Yonge:
Sure.
Sean Mooney:
And so, through that RACI kind of construct you're talking about, if you can go through, in a really precise way, explain the end goal and then how everyone's going to work together, it seems like ... Exactly you said, it's going to end up much better for all. And candidly, as I think about my experience in private equity, the first word being private ... I didn't use my words so well all the time.
Brit Yonge:
Yeah. Certainly, it's a different investing style and you really can't have zeros in the portfolio. It's just hard to make the numbers work. And you trade certainty for absolute [inaudible 00:25:11]. But those ... I mean, I think a variety of preferences is really valuable. I think just from a theoretical perspective, having a variety of time preferences, of return preferences, of [inaudible 00:25:24] preferences, it allows for a more efficient market and it allows for people to find novel ways to create value. And that's through the capital structure, but it's also through the skillsets. And I think we've just seen really interesting ... I think you called it symphonies. We've seen a lot of really interesting ways to come and bring value to companies and the customers.
Sean Mooney:
So, talking about that, it's a good segue in terms of we're in this topsy-turvy world right now. There's all sorts of things happening, both domestically, globally from a macroeconomic, microeconomic perspective and in some ways it's really easy to get fearful, right?
Brit Yonge:
Sure, yeah.
Sean Mooney:
And in many ways, that's what most of the world does is like, "Let's circle the wagon. Let's wait it out." But what I love about private equity is, I call it, we as an industry run towards the storm. It's not just circling wagons. No, we're putting slickers on and we're going to put stakes in land and make a positive out of this. So, as you think about your portfolio companies, how are you working with them either thematically or tactically to say, A, we got to sure it up, safety and foundation, but where do we find these pockets of opportunity and tilt the lens?
Brit Yonge:
Yeah. I mean, there is a ton of opportunity [inaudible 00:26:42] opportunity. And yeah, I think just given how private equity works from a structural perspective, we're better suited to take advantage of that. And I think an example of this would be, we've had 10 years or a long time where many companies could happily spend $20 to earn $10 kind of thing. Or what does Jim Chanos say? You sell $10 bills for $20 or something. But look, I think a more charitable articulation of that is there's been companies that have been willing to pay a lot of money to acquire customers. And I'll let the Jim Chanos' of the world decide whether or not that's economical or not economical. But that willingness has decreased.
And so, now for a company ... Companies like ours, which need to be profitable and need to have positive unit economics, there's an opportunity to go to places and to customers and compete where we couldn't have competed before, just because our constraints are different than maybe a growth equity fund or VC funds' constraints. And so, there's just a lot of companies in so many spaces that are no longer spending as much on customer acquisition and to some extent, servicing customer on the backend. But I think most of that spend was probably on the acquisition side. And so, that opens up ... Those companies have done all this work to find the product market fit and to establish what the customer wants, because typically these entrepreneurs are incredibly good at the product side and the go to market side.
And so, we can take what they've done and what they've learned and now compete for that customer base, where we really [inaudible 00:28:27] we probably couldn't have two or three years ago. So, I think that's one theme that's really interesting across our portfolio is there's always going to be a handful of startups that are just pouring cash to get customers. And now, we're able to compete for them. And then, tangentially or [inaudible 00:28:46] I guess there's also now ... Some of those companies are now interesting [inaudible 00:28:50] targets where they have different expectations around what their company's worth and that can be a more interesting conversation than it would've been 50 years ago when every engineer thinks that they're equity's worth a bagillion dollars. It's a much more grounded evaluation discussion.
Sean Mooney:
It's easy to go fast and far when someone's filling up your tank every two seconds. But when the spigot goes dry and you can create your own fuel and power your company, then suddenly the companies that have spent the time and maybe have that discipline to understand the product market fit-
Brit Yonge:
Sure.
Sean Mooney:
... and understand who their customers are and they can go and acquire customers in a way that probably makes more sense, at least historically, what a tremendous advantage, the tide goes out.
Brit Yonge:
Yeah. And that's-
Sean Mooney:
[inaudible 00:29:40] metaphors.
Brit Yonge:
Yeah. There was a lot going on there. I don't discourage any ... I mean, I think the winner in all this is the American consumer. I mean, it's not dissimilar than the Shell Oil revolution. I mean, certainly some investors wish that it worked out differently. But at the end of the day, Americans and the world got cheap gas prices for a better part of five years. And I think when we look back on this we'll say, "Man, we got some pretty cool apps. I got to do some pretty cool things with broad sharing." And not to call anyone out, but-
Sean Mooney:
Created tremendous amounts of innovation [inaudible 00:30:13]-
Brit Yonge:
Yeah, there's just a lot. Yeah. And I'm very thankful that of all the cool apps and services and stuff, again, I think the consumer is the real winner while those of us in the financial world knife fight it out over what the valuation should be. So, I don't see it as necessarily ... It doesn't have to be an adversarial thing. There's just-
Sean Mooney:
No.
Brit Yonge:
... [inaudible 00:30:31] opportunity.
Sean Mooney:
Yeah, I think they're both ... I mean, venture capital has been so tremendously impactful for our nation and the world. And has private equity. So I agree, I don't view them as adversarial, they're just different, right? They're different stages, different sizes. And as we talk about here, during these periods of transition, it opens opportunity for certain companies more than others. And it sounds like that you all ... I think you pointed out a good one during this kind of period of maybe pulling in the ... There's more constraints in the world.
Brit Yonge:
Sure.
Sean Mooney:
It provides opportunities for companies like yours and it doesn't mean that these venture capital companies won't come right back and-
Brit Yonge:
No, they're [inaudible 00:31:12]. Yeah.
Sean Mooney:
And candidly, if we remember from 2001, 2002, what came out of that? Amazon, eBay, all these titans that we all know [inaudible 00:31:21]-
Brit Yonge:
Yeah, there's going to be a great vantage I think coming up.
Sean Mooney:
They're going to be amazing businesses started and coming out of venture capital. And there's going to be great companies that will be coming into the private equity portfolio companies as amazing products. And so, [inaudible 00:31:36] there will be an efficiency that happens really across the economy. And let's face it, we haven't had a recession in what, 15 years?
Brit Yonge:
[inaudible 00:31:44].
Sean Mooney:
And every once in a while, you need to reset things. And so, this will be as much as it's really hard I think for everyone to go through, what comes out of this will be someone that's ... An economy that's stronger and sturdier and a better trajectory.
Brit Yonge:
Yep. I think it pays to be an optimist. I don't know many short sellers who are billionaires, so ...
Sean Mooney:
It's really hard to be a good short seller, that's for sure. You can go infinitely the other way. So, one of the things I love about people like you and people in our industry is, I think most people are students of business and life and like to read a lot. And certainly they ... I'm the poster person for successful in spite of myself. Had I not been able to learn from everyone else and kind of copy paste them into my life I would've been in a lot of trouble. Are there any books that you've read that have made an impact on you that you think are something that others should also consider?
Brit Yonge:
Yeah. My favorite book of all time is Viktor Frankl's Man's Search for Meaning. The book's a bit dire, because the setting's a bit dire. It's about his experience in the Holocaust, but he's a psychologist and he talks ... It's a book about his life, but also about psychology and I think it's really just about the sovereignty of human choice and the empowerment of having agency, even in the smallest things. And he has just story after story of ... Or you can take his circumstance, which is truly dire and really articulate the empowerment of being able to make your own choice. And I think ... We get through so much in the world, but certainly in the world of finance that we don't get to choose. We don't get to choose monetary policy. We don't get to vote any of that.
There's a lot of exogenous everything to what's going on and you can spend a lot of time worrying about that and worrying about what the print was yesterday and what does it mean. But fundamentally, we're buyer shops, so we own these companies. So, there's a lot of agency to be exercised within the portfolio, within what we have in front of us. And you can kind of tune out some of that noise, or maybe curate it, I would say, curate some of the noise in the financial ecosystem. There's a lot to be empowered by within our day-to-day. There's a lot of choices that we do get to make. And asset prices aren't always rationale and they're going to go in some directions and that doesn't change what we can do for our customers and our companies today.
And I think that's ... Viktor Frankl was a very accomplished psychologist and he created a flavor of psychology that I think became cognitive behavioral therapy, which is probably the most effective and tested form of therapy out there. So, I think he's an incredible person to look to and the mentality that can be constructive in the face of adversity and the face of adversity that you don't really sign up for. No one signs up for COVID. That was not on ... There was a lot of diligence pre-2020 where people were talking about recession planning. And I remember those conversations pretty vividly and I don't remember anyone ever talking about a global pandemic. So, there's a lot of empowerment and security from just understanding the choices that you do get to make and making those as well as you can.
Sean Mooney:
Yeah. I think obviously Viktor Frankl's writing about a period of time that was incredibly awful and tragic and catastrophic. And you put that in perspective to what we all go through, it's kind of like, wow. Everything's easy compared to that. But the takeaways that you're sharing, I think are also incredibly powerful. We're dealt a hand in many different situations and you can fold or you can decide and act. And so, I talk a lot about ... On this thing, one of the frameworks that I really love is a gentleman named Colonel John Boyd, the OODA loop. And it's just this whole idea of-
Brit Yonge:
John Boyd's wonderful.
Sean Mooney:
... take the step forward and take action and you can ... You're not just going there in perpetuity, you can take a left or a right. But just do something and own the outcomes. And I think that's incredibly empowering for really anyone.
Brit Yonge:
Yeah. I mean, John Boyd was so influential when I was a junior officer. And he has this wonderful speech or essay, you can do something or you can be somebody. He was so ahead of his time. And he had this ... He articulated so well too. And not in a discouraging way either. This choice of, you can accomplish things and you're going to have to be a little bit different if you want to do that. Or you can be somebody and get a title. And it was the most constructive version of this tension between conformity and innovation. Because it's like, The Catcher in the Rye where Holden is the character that he can't accept the world the way it is and he has this gnashing and he's not able to ... He calls everything phony and everything fake, but there is an upside and a downside to these choices.
This choice between orthodox and heterodoxy and conformity and nonconformity. And this tension is just so important and you have to have people that are willing to do both. And I think John Boyd was really ... Colonel Boyd was really an interesting guy in what he did, creating the F-16 and OODA loop and all this stuff. And he did it within a system of the Air Force, the military in the Pentagon, some of these really calcified institutions and he did it in a way that affected and touched the lives of so many people [inaudible 00:37:44] disciples of Boyd. And I do think he articulated in this really special way of saying, you can be somebody, you can do something. And that's a choice that you have to make as a junior officer and as a person in your career. He's a wonderful thinker. I wish he had written more. He lectured, but he never really committed to writing and I think a lot was lost.
Sean Mooney:
I think ... I know I'm relatively newer to him and I picked him up during COVID and I just started researching, how do you make decisions in time of haze and craze with imperfect information. I found him and then he's been a big part of how we run our business now today.
Brit Yonge:
Yeah. And I think there's a couple of these guys who have kind of cult-like status in the service. I think another would be Admiral Hyman Rickover who's the Father of the Nuclear Navy and he has this incredible life. It was kind of a lore, people don't even know how old he was because he lied about his age to get into the academy as a 14 year old or ... I mean, I think every time the story's told he's younger and younger. But he invented the Nuclear Navy, which is just incredible, the audacity to do that. And-
Sean Mooney:
The forward thinking-ness of doing that-
Brit Yonge:
Yeah.
Sean Mooney:
... at the time he did it.
Brit Yonge:
And this ... Really, one of the key challenges there is that the boats ... I mean, not to state the obvious, but these boats are under the water and you can't communicate with them. So, you [inaudible 00:39:06] centralized complex piece of machinery and it's not a ship. A ship wants to be a ship and float. Submarines are ... It's really a marvel of human engineering. And so, the way he thought about building an organization that can function with smart people doing the best that they can underneath the water that can't be communicated with, he's an incredible ... [inaudible 00:39:29] Boyd-like figures that has a lot of lore around him and some of his essays are just incredible about thinking about safety and risk and holding people accountable. These are some special people for sure.
Sean Mooney:
Well, I'm not familiar with him, so I'm going to add him to my deep dive. Because I think this is someone who I'd really like. And so, I'm going to add-
Brit Yonge:
Sure.
Sean Mooney:
... him to probably a very deep rabbit hole starting this weekend.
Brit Yonge:
All right.
Sean Mooney:
So, Brit, this has been incredibly insightful, impactful and I've learned a ton from you today. And I very much appreciate that. So, thank you so much for taking the time to share your perspectives and thoughts here today.
Brit Yonge:
Yeah, thanks for having me. I appreciate it.
Sean Mooney:
Special thanks to Brit for joining today. If you'd like to learn more about Brit and Corsair Capital, please see the episode notes. That's all we have for today. For more information on this podcast and BluWave, go to bluwave.net/podcast. That's B-L-U-W-A-V-E. 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, review and share. It really helps us when you do those things. So, thank you in advance. In the meantime, let us know if there's anything we can do to support your success. Onward.
Welcome to the Karma School of Business Podcast. In this episode, we have a riveting conversation with Brit Yonge, operating partner with Corsair Capital. This episode is brought to you today by BluWave. I'm Sean Mooney, BluWave's founder and CEO. BluWave is the go-to expert of those with expertise. BluWave connects proactive business builders, including more than 500 of the world's leading private equity firms and thousands of proactive companies to the very best service providers for their critical, variable, on-point and on-time business leads. Enjoy.
So, I'm very pleased to have Brit here to talk about his experiences in the private equity industry and his perspectives on business and in some ways kind of life. So, A, it's great to be talking to people in real life, which I think we've all gone through this experience together and now it's good to be back amongst humanity. And so, one of the ways I love to start these things out is just to get a little bit more of a perspective on the story of Brit. And so, in particular is ... I'm sure like many in PE, in the modern day PE industry, there's all these different paths. And so, I'd love to hear a little bit more about your story and how you ended up in the private equity industry.
Brit Yonge:
Yeah. Certainly, I came from what you might call a non-target background. I started my career actually in the service, so I went to the Academy and then served five years after that. Did a couple trips overseas. Very serendipitously landed at Palantir, which at the time was this kind of sleepy software company that no one had ever heard of. I couldn't get a meeting with anybody and [inaudible 00:01:58] rocket ship. And that was a really great place to start my career in the sense that it has a very strong culture. And I think like any company with a really strong culture, it gives you a lot to react to. It makes you think about what kind of values you want in your work life and what kind of values maybe you don't want.
And so, I was able to really learn a lot about myself as someone that was now in business and taking off the uniform and putting on the suit, so to speak. So, I got very fortunate to work on some clients that were in the financial services industry and found that area really ... I think intellectually it was very stimulating to me. Certainly the people in finance are very smart and the things you're working on are largely rather collaborative. You're trying to make your customer happy so that you can make money. It's the symbiosis of capitalism. And then I ended up starting my own company and selling that. And then one of my friends was asking me, "Hey, do you want to help out this private equity firm with a deal or two?" And a deal or two became two or three. And then they said, "Hey, do you want to come be an operating partner here and [inaudible 00:03:04] for all of our [inaudible 00:03:05]?"
So, it's funny how you can stumble into these things in the life if you ... I didn't even know what finance was at 27, 28 probably. [inaudible 00:03:15] that word. Didn't know what Silicon Valley was. I was 24, 25. So, it's funny how life can really just be a lot of fun if you just let it.
Sean Mooney:
It's really interesting, as we talk with a lot of private equity professionals like you, that's a recurring theme of this kind of life is a journey. It's not a destination. And people kind of just find their ways to it. And so, how did that play into this journey that you have?
Brit Yonge:
Yeah. I mean, I think it is ... You do stumble. There is a random walk. I think that's a concept, a finance concept that's perhaps a metaphor for life. The more you try to bake certainty into your model, the more foolish you're often going to be. At least that's how it feels sometimes. Yeah, I think there's a lot. The volatility is obviously stressful and it's terrible at the time and it gives you ulcers and all that, but it also makes life really interesting and there's a lot of opportunities that are presented with volatility. Again, finance concept that has larger and deeper implications.
Sean Mooney:
And it's really interesting how you talk about that. I almost came the opposite direction, so I was the prototypical, probably similar person to you but in different ways. Goals, achievement, I needed to gather ribbons and medals and trophies [inaudible 00:04:38]-
Brit Yonge:
Sure, yeah, yeah.
Sean Mooney:
And that sent me in a different trajectory where I went to a university that I worked really hard to get into and then I went to investment banking and then I went to private equity. And then I did the opposite of what 99% of my friends did. Then I did a startup, which was crazy to all my friends.
Brit Yonge:
Yeah, I think that's a story that doesn't get told enough. I mean, some of the best entrepreneurs are just getting started in their 40s.
Sean Mooney:
Absolutely.
Brit Yonge:
I think the guy who did Red Bull, I mean, he was like ... Had worked at Unilever or something for 20-some odd years, one company. Then leaves there and becomes an incredible entrepreneur. We have a ... One [inaudible 00:05:18] in our portfolio who came from a pretty sleepy company. I think it's kind of amazing to me that he lasted so long there, but he ... During that time, he developed an incredibly strong opinion about what that industry needed and then he left and he started that. I mean, I won't do the math here, but the guy wasn't that young when he left. So, I think that's the path to entrepreneurship that isn't talked about as much. And I think in this part of the economic cycle, we're going to hear more of those stories about people that have a little bit more maturity, a little bit more life, a little bit more understanding of accounting come into doing business formation and participating in these markets. And the cliches are going to be a little ... Are going to get challenged a bit, I think.
Sean Mooney:
I love that perspective and I would've really appreciated this when I was explaining it to my wife when [inaudible 00:06:09].
Brit Yonge:
[inaudible 00:06:09].
Sean Mooney:
She's like, "We're going to do what?"
Brit Yonge:
Yeah. No, [inaudible 00:06:14].
Sean Mooney:
To her credit, she was a saint. But yeah, that would've been helpful. But we can't turn the clock back [inaudible 00:06:21].
Brit Yonge:
[inaudible 00:06:22].
Sean Mooney:
So, Brit, we've heard a little bit on the tips of the waves of your career. One of the questions I like to ask is, we'd know you better if we knew this about you.
Brit Yonge:
Yeah, I think in a lot of ways my time in the service was formative. I thought I would leave the service and that would be it. And in many ways, it has been. I never have once said, "I wish I was still in the service." It is behind me. But there are these formative years, you form these really important values, and ways of working, and dispositions. And that's ... The directness, the comradery, the shared mission, kind of this idea of a true north, that we're all marching in the same direction, those things are a part of who you are. It's an identity forming experience, even if what I do today from a day-to-day perspective has nothing to do with national security, has nothing to do with wearing the uniform serving the country. Those values, they become a part of you. And I think it's something that even though there's a lot of distance between those years and those experiences and who I am today, that formative experience sticks with you. And to be frank, in finance there was a bit of a veteran mafia. There's-
Sean Mooney:
[inaudible 00:07:48].
Brit Yonge:
When you find out somebody that has served, there is a bit of comradery still and I don't think it's contrived. I think there's a real sense of, "I kind of know you without knowing you." Or, "I didn't know you without having met you," kind of thing. Yeah, I would say that's probably part of me that's ... You can't just shake that.
Sean Mooney:
And Brit, what was the nature of your service?
Brit Yonge:
I was intel guy and just given the years that I was in, I spent all my time in the counterterrorism mission [inaudible 00:08:15]. So, certainly at the time when you're a young 20-something year old male, that sounds like a pretty cool thing to do. And yeah, so I got to see what our foreign policy looked like at the [inaudible 00:08:27] end of it and for the good and the bad. And I think that ... When you're looking at deals day-to-day, week-to-week, management teams are kind of telling you a story of how awesome it's going to be. And many times it is awesome, right? But sometimes it's not. And I think that that's ... How to be a constructive skeptic is something that I learned in the service.
And that's a tough thing to ... That's maybe not an obvious ... When people think about serving your country or whatever, that may not be an obvious lesson that you would think someone might learn, but being constructively skeptical has helped me a lot in the world of private equity because you do get to ... People are going to make representations about the future and the present and the past. And being able to push back and pressure test some of those assertions, to be able to examine facts in a way that's respectful but also firm, and being able to really test how much conviction someone has about the future or the current strategy, those are all things I might've learned the hard way. And this time, my legs aren't on the line. So, it's a lot more fun. And more lucrative too.
Sean Mooney:
Absolutely. But what a ... You think about formative experiences, at a young age, for good and probably some ways that you wished you didn't experience, you've learned how the world was and is and the way the world is versus the way you maybe hoped [inaudible 00:10:00]-
Brit Yonge:
Or would be, yeah.
Sean Mooney:
And that in some ways is perfect training for private equity because-
Brit Yonge:
[inaudible 00:10:05], yeah.
Sean Mooney:
... anytime there's something that's great and measurable at stake, there's incentives and people will take advantage of that whether it's at the global geopolitical stage or a business stage. And that was a thing that I learned when ... I was in PE for 20 years and you just learn that it's human nature and it's not that people are bad or good-
Brit Yonge:
That's right, yeah.
Sean Mooney:
... there's incentives. And sometimes people do things they wish they didn't or wouldn't have done.
Brit Yonge:
Yeah, I think that's a great way to put it. I think it is ... Incentivization and how incentives work is such an important idea to understand and how the world behaves and being able to predict human behavior. And not all incentives are monetary. They often are, but when you're a large organization or when you're in a different place with different cultural norms, there are very strong incentives at play. And being able to recognize those ... And not all those incentives are always altruism. So, I think that in examination is the maturation process of growing up, so to speak, is understanding the incentives that are at play and maybe getting more detached from some of the more rosy narratives of ... Whatever the narratives are when you're young and impressionable and are reading some book about whatever.
Sean Mooney:
And I really appreciate it, because a lot of the time it's like, if you learn not to get emotional about it, it just is what it is and it's human nature. And by and large, human nature's I think a positive nature that people embrace. But incentives drive outcomes and to get that at a younger age in your professional career, it's I think incredibly translative to what you're doing in private equity.
Brit Yonge:
Yeah. No, for sure. I think that's exactly right. You have to have this emotional boundary and I think that was a really hard ... I went through that experience in a very challenging way where you have these ideas of who ... In this case, really who the enemy is. And then you understand that there are some people that are [inaudible 00:12:01] incentives and it might just not be that they're all evil and believing some crazy ideology. There's some other incentives at play, there are very complex things happening here. And developing that emotional boundary, and I wouldn't go so far to say empathy or whatever, but being able to relate to someone else's perspective, that's an interesting thing to do when you're 25. And I think is oddly been incredibly useful in my own career when you're trying to get a deal together and even when you're opposite side of the table, there is a way to make this work even if there's a lot of obstacles in the way.
Sean Mooney:
If you can candidly look at the way the world is and not get caught up in the externalities, it's incredibly valuable just in general but also particularly as you're assessing opportunities and risks and finding the pockets of opportunities within risk, which is the name of the game.
Brit Yonge:
Yeah, and that's the challenge is because getting the externalities is ... Another way to say that is, it's the narratives. The narratives, they're addicting because they're well written and they're well worn and they play to the core of who we are as humans. But yeah, creating that emotional distance, having moments of rationality and empathy, it's so important, especially in the deal mechanics too. Deals are a roller coaster. I mean, it's a real roller coaster. And then when things go not perfect in the portfolio, it's another-
Sean Mooney:
Which is every day.
Brit Yonge:
Which is ... Yeah. Frankly, yeah.
Sean Mooney:
Across a portfolio.
Brit Yonge:
Yeah, yeah. I mean, it is ... Yeah, it's month-to-month, right? And so, that's important before you send the email and before you jump on the phone. It's a skill that's really, really useful.
Sean Mooney:
So, you've had this great, very unique, high-achieving career where you've served your government, you've worked for one of the most well known data startups. You've built a company and now you're looking at probably hundreds of companies a year as an operating executive at a top private equity firm. Now, when you look at these businesses ... I kind of over time developed my personal yardstick. This is in general what I'm looking for. And what would you say are some of the things that you look for that says, "This is either a good company or it could or should or will be a good company?"
Brit Yonge:
Yeah, I think that's a great question. I think given the backgrounds of most of the folks that work in private equity, you don't have to worry too much about the financials, because the kids that come into this industry are so well trained. They have a really incredible background. And it took me some time to catch up. I wouldn't even say I've been totally caught up. But, to get literate in that skillset, that analytical skillset. So, you don't have to look too hard there, because those folks are going to do the work, right? So, the questions for me are things like ... Really, the top one is product market fit. It sounds ridiculous, but it's just, do the customers like this product? Do they enjoy using it? Do they need the product? Do they enjoy using the product? Are they willing to pay money for the product?
Does it ... You can kind of go down and really dig deep in there and figure out what are the key things about the product or service that the customers love or need. And really understand that the company understands its own space, if that makes sense. That's probably the top most important thing is the product market fit. And if they're going to go and tell you about an adjacency, or whatever, is there a credible story? And there almost always is, right? Because you're selling the company, but you're also selling the company with the hopes and the dreams that you have tomorrow. So, there's going to be some story around, "Hey, we're going to expand. We're going to do some adjacency, whatever." So, that product market fit now becomes a product market fit capability.
Do we have somebody at the firm that understands this adjacency, this hopes and dreams, that knows what right looks like, that has really an intuition around where they want the company to go, intuition on this vision? Because that's not really something you can outsource. You can't really ... Obviously, you can hire management consultant firms and they'll do a great job of being very analytical. But day-to-day, week-to-week, someone has to make the thousand decisions to keep the company in the right direction and that requires ... That person can't just always be going and checking their notes, "McKinsey said this." That's not really a way to run a company. You can't outsource that. So, it's that product market fit and then the leader, finding out who at the company is making the decisions on the what's being built, and who it's being built for, and understanding how that secret sauce gets made, that's the whole [inaudible 00:16:49].
Sean Mooney:
Yeah, I think those are so spot on. It's like, kind of reflect on too many years of breaking my pick trying to figure things out and eventually in spite of myself, figuring a few things out in life and business. But, it was just ... It's [inaudible 00:17:02] business is like water, so many times you just want to go where it's easiest to flow. And if people like your product and they think it fits what they need and solves a problem they're going to be willing to pay for it. And so often it was just like, the products, they were great and I used to invest in highly technical, highly over-engineered products that were like, you have products in search of a market. And they were beautifully amazing, but no one wanted them.
And if you can just build something that there's a need and demand for and your customers will tell you they want, it becomes so much easier. And even as I personalize ... When I had this reverse entrepreneurial flow where I would always look for that and then I started BluWave. And when we started it, two of the three things they didn't want. And I broke my pick for months. I mean, it felt like a lifetime, but it was six months. And then, I finally had the audacity to ask our customers what they wanted and they told us. And so, I think it's just a great lesson for any business builder or any leader of a company, have the audacity to ask your customers what they want, if you already don't know it. And they'll tell you and then that fit and that lock and key, that water just flows so much easier versus digging trenches to get them to go to where it's supposed to go. And as you'll appreciate from me mixing 10 metaphors here, I grew up in Texas and it's the only way I know how to speak.
Brit Yonge:
Okay.
Sean Mooney:
You were keeping up.
Brit Yonge:
Yeah. No, I think it's ... I mean, that's spot on. We have several companies where we have a chief product officer and sometimes it takes a little nudging with this CEO to say, "Why do we want that?" Because there is an art, but there's also a science to that, right? It is wonderful when you have somebody that comes from the industry and they've been there for 25 years and they get it and know where it's going and they know where it's been, but if you're trying to scale that to a company culture or engineering team or a broader organization, it is nice to have someone who can be systematic in the way they think about product development and understanding who your customer is and the customer archetypes and all the buzzwords that you hear out of Silicon Valley.
But there's a lot of merit to those processes if they're done right and they're done with intellectual curiosity and genuine openness. And not in a condescending way, but a true curiosity around what does my customer want and need. Getting that work done, that research done, getting it documented, getting that vocabulary, infiltrating the organization with that vocabulary is just huge. Because then at that point, everyone feels like they know the customer, even if they haven't spent as much time with the customer. And in those organizations, I do think in so many organizations it really does help to have that customer interface. You hear the stories about the Walmarts of the world where all the executives have to work, whatever [inaudible 00:20:00] three days a year and it's ... I don't think it's a cliché, I think that's a genuine thing that consumer facing companies do to keep themselves close to the problem and close to the customer.
Sean Mooney:
Yeah, I love how you say that. And there's a couple things that really resonate with me is one of my favorite books that probably saved my entire company, frankly, was the iconic lean startup book, where it's just, don't try to just create the perfect in vacuum. Get the essence of the business out there and get at your customers as soon as possible and they'll tell you. And then the Walmart thing is really important. I have all these sayings just from the way I grew up and I call a lot of what we do, it's just the Walmart form of innovation. Where it's like, get it out there, listen to your customers, see what other people are doing and put it together. And you don't have to recreate this wheel.
There's all these people who will tell you what that shape and form should be and you'll get there a lot faster with a lot more certainty. So, I think those are really good points. One of the things as we look at the modern ... The current era of private equity, and it's come a long way. And so, I'm going to date myself. I started in private equity in the late 90s where it was just deal team people. We were buying low in an inefficient market and we would upgrade the accounting system, add a salesperson. And then we would sell an inefficiency purchased price to an efficient process and then spike the ball and I thought I was a business genius and saw the world in slow motion.
And little did I know. And now the industry's matured in a good way, in that now if you ... As I look at the modern era of PE or the current era of PE anyways, it's a symphonic motion of skills and resource and it's deal teams working together with operating teams working together with [inaudible 00:21:55] executives. And so, how does your firm think about that interplay between the three and how do you all work together as you look to build these great companies?
Brit Yonge:
Yeah. I mean, certainly I haven't been around this as long as you have, but I do ... I was reading Mitt Romney's biography or something where his first couple deals they bought for less than cash in the balance sheet or something. It was [inaudible 00:22:20]-
Sean Mooney:
The good ole days.
Brit Yonge:
I was just like, I've just lost so much respect for you. It was so easy for you guys back then. Yeah, it's definitely much more sophisticated, right? And you have a much more ... A lot more players on the field and that isn't always a good thing. I think, I mean, just the old school RACI RAPIDs framework, whatever you want to call it, where you have roles and responsibilities defined or at least alluded to. That's a tried and true one and I think it's super effective for making sure people know, hey, whose responsible for delivering this, whose heads on the line, who gets to contribute from the chief seats, or criticisms and then who else just needs to be FYI informed. That's essentially the RAPID or RACI or whatever the business [inaudible 00:23:08] framework is for it these days.
But that's an effective [inaudible 00:23:12] tool, that roles and responsibilities conversation I think is very effective and just helping people ... Because it's not like people wake up one day and go, "You know what? I want to be really destructive to this process." People want to do the right thing. People's incentives, and we [inaudible 00:23:25] earlier. Most everyone's incentives in this space are to create [inaudible 00:23:30] value. So, where you do have friction is often just for lack of role and responsibility.
Sean Mooney:
I think that's very insightful. And you think about the private equity industry, it's one of these industries where it only works for all involved unless it works across not only one company, but a portfolio of companies. Every business virtually has to be successful. In PE, it's kind of like, the analogy I'd always use in my mind is you think about PE maybe versus VC. PE, they're making one to three times their money. In a 10 investment fund, you need pretty much every deal to do well. So, when you get into tough times like now, private equity races towards their portfolio companies. Whereas, maybe in venture capital, they're kind of incentives and economics are more like, "We're going to get two or three out of the 10, but they're going to be home runs." And so, we have to be right less often, but we have to be right in a more substantial way. And so, in PE there's ... It really means that all the incentives are aligned, but it doesn't mean that people always communicate well.
Brit Yonge:
Sure.
Sean Mooney:
And so, through that RACI kind of construct you're talking about, if you can go through, in a really precise way, explain the end goal and then how everyone's going to work together, it seems like ... Exactly you said, it's going to end up much better for all. And candidly, as I think about my experience in private equity, the first word being private ... I didn't use my words so well all the time.
Brit Yonge:
Yeah. Certainly, it's a different investing style and you really can't have zeros in the portfolio. It's just hard to make the numbers work. And you trade certainty for absolute [inaudible 00:25:11]. But those ... I mean, I think a variety of preferences is really valuable. I think just from a theoretical perspective, having a variety of time preferences, of return preferences, of [inaudible 00:25:24] preferences, it allows for a more efficient market and it allows for people to find novel ways to create value. And that's through the capital structure, but it's also through the skillsets. And I think we've just seen really interesting ... I think you called it symphonies. We've seen a lot of really interesting ways to come and bring value to companies and the customers.
Sean Mooney:
So, talking about that, it's a good segue in terms of we're in this topsy-turvy world right now. There's all sorts of things happening, both domestically, globally from a macroeconomic, microeconomic perspective and in some ways it's really easy to get fearful, right?
Brit Yonge:
Sure, yeah.
Sean Mooney:
And in many ways, that's what most of the world does is like, "Let's circle the wagon. Let's wait it out." But what I love about private equity is, I call it, we as an industry run towards the storm. It's not just circling wagons. No, we're putting slickers on and we're going to put stakes in land and make a positive out of this. So, as you think about your portfolio companies, how are you working with them either thematically or tactically to say, A, we got to sure it up, safety and foundation, but where do we find these pockets of opportunity and tilt the lens?
Brit Yonge:
Yeah. I mean, there is a ton of opportunity [inaudible 00:26:42] opportunity. And yeah, I think just given how private equity works from a structural perspective, we're better suited to take advantage of that. And I think an example of this would be, we've had 10 years or a long time where many companies could happily spend $20 to earn $10 kind of thing. Or what does Jim Chanos say? You sell $10 bills for $20 or something. But look, I think a more charitable articulation of that is there's been companies that have been willing to pay a lot of money to acquire customers. And I'll let the Jim Chanos' of the world decide whether or not that's economical or not economical. But that willingness has decreased.
And so, now for a company ... Companies like ours, which need to be profitable and need to have positive unit economics, there's an opportunity to go to places and to customers and compete where we couldn't have competed before, just because our constraints are different than maybe a growth equity fund or VC funds' constraints. And so, there's just a lot of companies in so many spaces that are no longer spending as much on customer acquisition and to some extent, servicing customer on the backend. But I think most of that spend was probably on the acquisition side. And so, that opens up ... Those companies have done all this work to find the product market fit and to establish what the customer wants, because typically these entrepreneurs are incredibly good at the product side and the go to market side.
And so, we can take what they've done and what they've learned and now compete for that customer base, where we really [inaudible 00:28:27] we probably couldn't have two or three years ago. So, I think that's one theme that's really interesting across our portfolio is there's always going to be a handful of startups that are just pouring cash to get customers. And now, we're able to compete for them. And then, tangentially or [inaudible 00:28:46] I guess there's also now ... Some of those companies are now interesting [inaudible 00:28:50] targets where they have different expectations around what their company's worth and that can be a more interesting conversation than it would've been 50 years ago when every engineer thinks that they're equity's worth a bagillion dollars. It's a much more grounded evaluation discussion.
Sean Mooney:
It's easy to go fast and far when someone's filling up your tank every two seconds. But when the spigot goes dry and you can create your own fuel and power your company, then suddenly the companies that have spent the time and maybe have that discipline to understand the product market fit-
Brit Yonge:
Sure.
Sean Mooney:
... and understand who their customers are and they can go and acquire customers in a way that probably makes more sense, at least historically, what a tremendous advantage, the tide goes out.
Brit Yonge:
Yeah. And that's-
Sean Mooney:
[inaudible 00:29:40] metaphors.
Brit Yonge:
Yeah. There was a lot going on there. I don't discourage any ... I mean, I think the winner in all this is the American consumer. I mean, it's not dissimilar than the Shell Oil revolution. I mean, certainly some investors wish that it worked out differently. But at the end of the day, Americans and the world got cheap gas prices for a better part of five years. And I think when we look back on this we'll say, "Man, we got some pretty cool apps. I got to do some pretty cool things with broad sharing." And not to call anyone out, but-
Sean Mooney:
Created tremendous amounts of innovation [inaudible 00:30:13]-
Brit Yonge:
Yeah, there's just a lot. Yeah. And I'm very thankful that of all the cool apps and services and stuff, again, I think the consumer is the real winner while those of us in the financial world knife fight it out over what the valuation should be. So, I don't see it as necessarily ... It doesn't have to be an adversarial thing. There's just-
Sean Mooney:
No.
Brit Yonge:
... [inaudible 00:30:31] opportunity.
Sean Mooney:
Yeah, I think they're both ... I mean, venture capital has been so tremendously impactful for our nation and the world. And has private equity. So I agree, I don't view them as adversarial, they're just different, right? They're different stages, different sizes. And as we talk about here, during these periods of transition, it opens opportunity for certain companies more than others. And it sounds like that you all ... I think you pointed out a good one during this kind of period of maybe pulling in the ... There's more constraints in the world.
Brit Yonge:
Sure.
Sean Mooney:
It provides opportunities for companies like yours and it doesn't mean that these venture capital companies won't come right back and-
Brit Yonge:
No, they're [inaudible 00:31:12]. Yeah.
Sean Mooney:
And candidly, if we remember from 2001, 2002, what came out of that? Amazon, eBay, all these titans that we all know [inaudible 00:31:21]-
Brit Yonge:
Yeah, there's going to be a great vantage I think coming up.
Sean Mooney:
They're going to be amazing businesses started and coming out of venture capital. And there's going to be great companies that will be coming into the private equity portfolio companies as amazing products. And so, [inaudible 00:31:36] there will be an efficiency that happens really across the economy. And let's face it, we haven't had a recession in what, 15 years?
Brit Yonge:
[inaudible 00:31:44].
Sean Mooney:
And every once in a while, you need to reset things. And so, this will be as much as it's really hard I think for everyone to go through, what comes out of this will be someone that's ... An economy that's stronger and sturdier and a better trajectory.
Brit Yonge:
Yep. I think it pays to be an optimist. I don't know many short sellers who are billionaires, so ...
Sean Mooney:
It's really hard to be a good short seller, that's for sure. You can go infinitely the other way. So, one of the things I love about people like you and people in our industry is, I think most people are students of business and life and like to read a lot. And certainly they ... I'm the poster person for successful in spite of myself. Had I not been able to learn from everyone else and kind of copy paste them into my life I would've been in a lot of trouble. Are there any books that you've read that have made an impact on you that you think are something that others should also consider?
Brit Yonge:
Yeah. My favorite book of all time is Viktor Frankl's Man's Search for Meaning. The book's a bit dire, because the setting's a bit dire. It's about his experience in the Holocaust, but he's a psychologist and he talks ... It's a book about his life, but also about psychology and I think it's really just about the sovereignty of human choice and the empowerment of having agency, even in the smallest things. And he has just story after story of ... Or you can take his circumstance, which is truly dire and really articulate the empowerment of being able to make your own choice. And I think ... We get through so much in the world, but certainly in the world of finance that we don't get to choose. We don't get to choose monetary policy. We don't get to vote any of that.
There's a lot of exogenous everything to what's going on and you can spend a lot of time worrying about that and worrying about what the print was yesterday and what does it mean. But fundamentally, we're buyer shops, so we own these companies. So, there's a lot of agency to be exercised within the portfolio, within what we have in front of us. And you can kind of tune out some of that noise, or maybe curate it, I would say, curate some of the noise in the financial ecosystem. There's a lot to be empowered by within our day-to-day. There's a lot of choices that we do get to make. And asset prices aren't always rationale and they're going to go in some directions and that doesn't change what we can do for our customers and our companies today.
And I think that's ... Viktor Frankl was a very accomplished psychologist and he created a flavor of psychology that I think became cognitive behavioral therapy, which is probably the most effective and tested form of therapy out there. So, I think he's an incredible person to look to and the mentality that can be constructive in the face of adversity and the face of adversity that you don't really sign up for. No one signs up for COVID. That was not on ... There was a lot of diligence pre-2020 where people were talking about recession planning. And I remember those conversations pretty vividly and I don't remember anyone ever talking about a global pandemic. So, there's a lot of empowerment and security from just understanding the choices that you do get to make and making those as well as you can.
Sean Mooney:
Yeah. I think obviously Viktor Frankl's writing about a period of time that was incredibly awful and tragic and catastrophic. And you put that in perspective to what we all go through, it's kind of like, wow. Everything's easy compared to that. But the takeaways that you're sharing, I think are also incredibly powerful. We're dealt a hand in many different situations and you can fold or you can decide and act. And so, I talk a lot about ... On this thing, one of the frameworks that I really love is a gentleman named Colonel John Boyd, the OODA loop. And it's just this whole idea of-
Brit Yonge:
John Boyd's wonderful.
Sean Mooney:
... take the step forward and take action and you can ... You're not just going there in perpetuity, you can take a left or a right. But just do something and own the outcomes. And I think that's incredibly empowering for really anyone.
Brit Yonge:
Yeah. I mean, John Boyd was so influential when I was a junior officer. And he has this wonderful speech or essay, you can do something or you can be somebody. He was so ahead of his time. And he had this ... He articulated so well too. And not in a discouraging way either. This choice of, you can accomplish things and you're going to have to be a little bit different if you want to do that. Or you can be somebody and get a title. And it was the most constructive version of this tension between conformity and innovation. Because it's like, The Catcher in the Rye where Holden is the character that he can't accept the world the way it is and he has this gnashing and he's not able to ... He calls everything phony and everything fake, but there is an upside and a downside to these choices.
This choice between orthodox and heterodoxy and conformity and nonconformity. And this tension is just so important and you have to have people that are willing to do both. And I think John Boyd was really ... Colonel Boyd was really an interesting guy in what he did, creating the F-16 and OODA loop and all this stuff. And he did it within a system of the Air Force, the military in the Pentagon, some of these really calcified institutions and he did it in a way that affected and touched the lives of so many people [inaudible 00:37:44] disciples of Boyd. And I do think he articulated in this really special way of saying, you can be somebody, you can do something. And that's a choice that you have to make as a junior officer and as a person in your career. He's a wonderful thinker. I wish he had written more. He lectured, but he never really committed to writing and I think a lot was lost.
Sean Mooney:
I think ... I know I'm relatively newer to him and I picked him up during COVID and I just started researching, how do you make decisions in time of haze and craze with imperfect information. I found him and then he's been a big part of how we run our business now today.
Brit Yonge:
Yeah. And I think there's a couple of these guys who have kind of cult-like status in the service. I think another would be Admiral Hyman Rickover who's the Father of the Nuclear Navy and he has this incredible life. It was kind of a lore, people don't even know how old he was because he lied about his age to get into the academy as a 14 year old or ... I mean, I think every time the story's told he's younger and younger. But he invented the Nuclear Navy, which is just incredible, the audacity to do that. And-
Sean Mooney:
The forward thinking-ness of doing that-
Brit Yonge:
Yeah.
Sean Mooney:
... at the time he did it.
Brit Yonge:
And this ... Really, one of the key challenges there is that the boats ... I mean, not to state the obvious, but these boats are under the water and you can't communicate with them. So, you [inaudible 00:39:06] centralized complex piece of machinery and it's not a ship. A ship wants to be a ship and float. Submarines are ... It's really a marvel of human engineering. And so, the way he thought about building an organization that can function with smart people doing the best that they can underneath the water that can't be communicated with, he's an incredible ... [inaudible 00:39:29] Boyd-like figures that has a lot of lore around him and some of his essays are just incredible about thinking about safety and risk and holding people accountable. These are some special people for sure.
Sean Mooney:
Well, I'm not familiar with him, so I'm going to add him to my deep dive. Because I think this is someone who I'd really like. And so, I'm going to add-
Brit Yonge:
Sure.
Sean Mooney:
... him to probably a very deep rabbit hole starting this weekend.
Brit Yonge:
All right.
Sean Mooney:
So, Brit, this has been incredibly insightful, impactful and I've learned a ton from you today. And I very much appreciate that. So, thank you so much for taking the time to share your perspectives and thoughts here today.
Brit Yonge:
Yeah, thanks for having me. I appreciate it.
Sean Mooney:
Special thanks to Brit for joining today. If you'd like to learn more about Brit and Corsair Capital, please see the episode notes. That's all we have for today. For more information on this podcast and BluWave, go to bluwave.net/podcast. That's B-L-U-W-A-V-E. 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, review and share. It really helps us when you do those things. So, thank you in advance. In the meantime, let us know if there's anything we can do to support your success. Onward.
THE BUSINESS BUILDER’S PODCAST
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.
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.
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