Private Equity Spotlight: Caleb Clark on Entrepreneurial Spirit in Investment

[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. I'm Sean Mooney, BluWave's founder and CEO. In this episode, we have an amazing conversation with Caleb Clark, senior partner with ATL Partners. Enjoy.
I'm super excited to be here with my friend, Caleb Clark. Caleb, thanks for joining.

[00:00:37] Caleb Clark: Great to be here, Sean. Thanks for inviting me.

[00:00:39] Sean Mooney: I've been looking for this. Caleb and I have known each other for a fair bit of time and I was trying to think like where it went back to might have been like the OG or days of early BluWave, but it's been fun to watch Caleb as you kind of played a really important role building one firm and then getting into almost a really entrepreneurial effort of kind of envisioning the future of another firm today.
And we're going to get into that. I'm really excited to have this topic today and I think it'll be fun.

[00:01:05] Caleb Clark: Yeah. Well, Sean, I mean, I think. Your namesake, BluWave, comes from our combined hometown at one point, so as my daughter starting high school in Connecticut, it's always a good reminder that I need to give you a call.

[00:01:19] Sean Mooney: That's a great point, and that's probably where it came from, and for those of you from Fairfield County, you'll either have a really warm feeling when you think of our name for reasons you may not understand, or a visceral, depending on what sports your kids played. Sorry. Sorry. We'll let people decipher that puzzle in terms of the origin story of BluWave.
So I'd love to maybe kick it off here. It's always great to start with a bit of the story of you. So can you talk about how you got into the private equity industry, kind of how you came up and then maybe just a little intro also into kind of your latest endeavor here?

[00:01:56] Caleb Clark: Yeah, sure. So, I mean, I think if you look at my resume, it's kind of the classic investment banking to private equity to business school.
But I think if you peel it back. There's a little bit more to this story than that. Before I went to college, I took a year off and my father had started a pharmaceutical company and I ended up working with that company for about half the year. It was nothing glamorous. I was working in the warehouse.
The rule was always, you got to start at the bottom rung and work your way up. And that was kind of my introduction to business candidly and seeing business from that earlier stage where my father had founded the firm with two other individuals. And they grew it at the time I was working for to a company that employed over 70 people, right?
So really understanding business from the ground level, as opposed to maybe looking at it from a financial or balance sheet perspective, I went to a liberal arts school, decided to work in investment banking to kind of get that training in finance, drinking from the proverbial fire hose, if you will. I had a great experience, but I ended up working in, you know, Aerospace and transportation group at BTOX Brown, where we did a lot of work with financial sponsors.
And that was kind of my introduction to private equity. So, I mean, we worked with funds like Carlisle and some of the big names at the time. I mean, it's interesting to think back. I think Carlisle had 3 billion in their last fund, right? I mean, now, if you look at where the industry's come over the last 20 years, It just dwarfs that.
So it's kind of staggering to look back on that. But for me, when I worked with the sponsors, both from an M& A advisory perspective, as well as kind of, we did a lot of financing work. It was really getting a feel for being a principal, understanding what it meant to be an investor and actually be held accountable for the decisions you were making, which was very compelling from my perspective, but then layering on sort of that entrepreneurial spirit where you were really working with businesses, is helping them to grow.
And that's what really fundamentally attracted me to kind of private equity. So after I did my stint in investment banking, I went out to San Francisco, worked for GenStar Capital, and then did a brief stint in politics, which we can maybe talk a little bit more at the right time. And then I ended up going back to business school and then worked for Windjammer Capital.
And then before joining ATL, I worked with Palladium Equity Partners, where I was a member of the management committee, investment committee, and co led the industrial practice over there. So now I'm at ATL, joined the firm a little over six months ago, and really re this sort of story comes kind of full circle because I rejoined with the founder of ATL who led the transportation group over at BTA, Alex Brown, when I was a lowly analyst.
So it's been great to get back together with Frank and the team here. We're a small group, nine investment professionals. And we're an established firm, but we're still small and nimble and looking to grow. And for me, it was an opportunity to kind of get back to those entrepreneurial roots and not only go out and do great investments, but to help kind of build the firm and take it to the next level and really have a personal impact in a way that I might not somewhere else.
That's been a great journey. I'm really excited about the platform we've got here at ATL and see a ton of opportunities in the sectors that we're focused on.

[00:05:19] Sean Mooney: I love your background there. It resonates on many levels. A, you've worked with some really, really good firms and great people along the way that no doubt helped you kind of form a perspective over time.
And certainly everyone you mentioned, you would think really highly of. Do a B, I also love kind of your entrepreneurial story because it resonates with me. I too grow up in kind of an entrepreneurial family and I too worked in the plant and The manufacturing facilities. And I think there was a plant level bonus for whomever messed with me the most.
It's like all sorts of things that, uh, you know, I think people would come up smiling with jobs for me, but it's that whole thing of like start at the bottom and learn to appreciate the people who push the broom as much as the person who kind of makes decisions in the air conditioning. So I really like that.
And I also appreciate your kind of entrepreneurial shift in movement here. And I kind of had a similar phase where I'd worked my whole life to become a partner and a member of an investment committee of a PE firm. Well, then I decided to start a company. So in many ways, yours was a lot wiser. You just stayed in the business you knew, but they'd be able to scratch the itch by not doing something entirely as insane as I did.

[00:06:35] Caleb Clark: I think it's a really unique situation for me personally, just to be able to come in at a unique attachment point here and sort of ETLs growth cycle and evolution. But I think oftentimes when we talk about private equity, we're always talking about sort of the deals we do and the businesses we invest in, which is obviously a huge part of the private equity model.
But oftentimes I think the actual firm building gets left out of the discussion. Right. And one of the. Mantra is that my team is tired of hearing me say it's like if we were going to build best in class businesses and make best in class investments, we have to be best in class ourselves, right? I always look at the firm as a business in and of itself and an organization.
And how do we continue to optimize what we do every day? This is an industry that's not getting less competitive, right? But that's part of the excitement. That's part of the challenge. It's the challenge of working with businesses, but it's also the challenge and kind of building a great firm. You always have to be bringing new ideas, new ways of doing things.
And that's how you're gonna end up providing best in class returns for your partners, your investors.

[00:07:43] Sean Mooney: We'll dig deeper into that because I think you and I have waxed poetic on this more casually about the business of private equities turning into a business, whereas it used to be more of kind of a round table in like the late nineties, early two thousands.
And yeah, I

[00:07:57] Caleb Clark: used to, I refer to it as the five guys and a dog, right?

[00:08:00] Sean Mooney: Yeah. Yeah. And a whiteboard. Well then they had whiteboards back then. We'll get into that, but before we do that, I'd love to just maybe double tap into a little bit more of the story of you and kind of my common question at the beginning of these episodes is we'd know you better if we knew this about you.
And so Caleb, what's something, maybe a tidbit of trivia, et cetera, that we'd know you better if we knew.

[00:08:22] Caleb Clark: Yeah. I mean, I think I touched upon it before. So I did take a little bit of a diversion and sort of the classic kind of private equity career growth model. I ended up after GenStar working in politics for a couple of years.
I grew up in New Hampshire, which is kind of a hotbed of political campaign. So a family member of mine was running for Congress. I went and helped out, helped build that campaign. And then you got sucked into the whole first, the nation primary with the presidentials. I think that was a really unique experience for me and stepping away from finance and business in a sense, but in many ways, a political campaign is a marketing campaign combined with kind of a startup mentality.
But the unique part is you're not working with people who are necessarily getting paid. There are a lot of times they're volunteers and how do you tap into their motivations to get them to do what you want to do and lead. Through motivation as opposed to command and control. I think that has served me well over the years.
I think one of the lessons of private equity is even though we are oftentimes most of our investments are controlling investments, we control those underlying investments. You have to build and create alignment. You can't dictate alignment and those skills at the end of the day, I think it treated me well in terms of those aspects, but I did have to answer a lot of those questions when I was coming out of business school in terms of why I did that and why it was relevant for the work we're doing today.

[00:09:52] Sean Mooney: It's interesting with the way you kind of framed it. I never really thought about it that way in terms of the relevancy to what you do now. And the way you put it, a campaign is like, you have to get a lot of seemingly Explicitly or implicitly connected and disconnected pieces working together. You have to do it quickly.
You're going to have all sorts of twists and turns. You're going to have to pivot. And yet you still have to achieve this kind of big, overarching objective in a three dimensional playboard space.

[00:10:20] Caleb Clark: Yeah, no, I think that's a great way of putting it. I mean, it's pretty fascinating when you think about sort of those organizations coming together and you have to do it in a very short period of time, people with a lot of different backgrounds, a lot of different agendas, a lot of people want to come in and talk policy and say they want to, uh, Yeah.
Right. The foreign policy briefs for the candidate. And at the end of the day, you really need them to be making phone calls and licking and stamping envelopes again. It's what's the real grunt work out there. That's going to drive the day to day execution or blocking and tackling. That's going to lead to the objective.
And I think, look, we have a longer time frame in our investments, but it's not without its own sense of urgency. So, Thank you. Bringing that to the table, I think is also important.

[00:11:03] Sean Mooney: I think that's a really interesting story. And I'm curious, Caleb, did you ever get tempted to kind of stay in that world? Or was there a kind of like a natural progression?
He said, okay, I want to get back to. What I used to do.

[00:11:15] Caleb Clark: Yeah. Well, it was made a little bit easier by the fact that neither of the candidates that I worked with one, so it didn't present those other opportunities. At the same time, I found myself missing private equity, missing a little bit more of that entrepreneurial spirit and business, the accountability that comes with helping to execute transactions, make investments, build companies.
I did go down to DC, do some interviewing, but at the end of the day, I It was also reaffirming from that perspective as well, knowing that this is something that I really was interested in, that I truly loved. So it made it easy. When I went to back to business school, I wasn't trying to pivot my career or switch.
It was just about building sort of my knowledge base and going back and getting into private equity. So again, I think I took the right things away from it. But for me, just the challenges and unique nature of the private equity business was one in which. I really wanted to get back to you at the end of the day.

[00:12:14] Sean Mooney: that makes a ton of sense and But what a great experience being able to kind of like get a front row seat to seeing what a constitutional republic Occurs and how it functions and how democracy interplays with all of this in a way that few can or do you know when I was in college, I went to college in washington dc and one of the great kind of aspects of that is you could work for any sort of that and I always wanted to scratch that itch because I was You involved in student government in high school.
And so then I saw, and I worked for one of the big think tanks in DC as an intern. And same thing, there was a lot that was fascinating about it, but there was also a lot that just wasn't for me in terms of actually being on the business building side versus the policy side. So I think what you say kind of resonates on multiple levels in terms of maybe similar paths that you Play it a little bit further out.

[00:13:05] Caleb Clark: Yeah. I mean, what's fascinating to me, right. Is I think people see the political world and it feels very distant to them and growing up in New Hampshire and being around it, I was obviously a little bit more of a political family, but people are like, I always wanted to do that. And I'm like, well, whatever your political inclination is, stop by a campaign headquarters.
It's amazing how quickly you can get access to that world. If you want to work hard and you're smart, I encourage everybody to do that. I mean. There's not a lot of public service there. I think we all benefit. And I think in today's world, unfortunately, it's viewed with more negativity than positivity, but it's an important part of what makes this country great and to participate, as you said, in the democratic process.
I actually think it's kind of reaffirming. And again, I mean, it's also interesting. You realize that these people don't necessarily sit on pedestals or all human beings like you and I are. And I think that also is behoove me as I've gotten into private equity and you grow in your career. And you think about the importance of relationships and what we do.
And that at the end of the day, building those relationships is going to be key, whether it's with the management teams, operating executives, or potential new investments. And so.

[00:14:19] Sean Mooney: And I love your call to action. It's easy for me to kind of sit there as a Monday morning quarterback and complain, but the ability to actually do something and impact change requires lots of really good people getting involved.
That's a nice call to action for any of our listeners here who want to experience that. Democracy and a constitutional Republican work.

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[00:15:02] Sean Mooney: Turning the page here, Caleb, back to kind of your business perspective, as you've kind of grew and evolved in private equity. I think most of us developed kind of an internal yardstick and you're looking at so many companies, like here are the elements of value that I'm looking for that a company could, or probably more importantly today should, or will have.
You get an investment memo, a SIM that comes in and you're flipping through it on the weekend. What are some of the things that you look for in a business, or even at the management meeting stage, where you say, Here are the traits that I'm looking for about a company. Is it good? Or it can be good.

[00:15:42] Caleb Clark: I take it maybe a little bit of a broader perspective when I look at the investment and we can get into some of the individual attributes to the businesses when we look at them, but fundamentally I'm looking for asymmetric returns, right?
So good downside protection with the opportunity to accelerate growth on multiple levels, right? So what does that mean from a downside protection perspective? You want a business that's got. An entrenched market position, a clear, different competitive advantage, a clear reason for existing, whatever known culture you want to look at it.
But it's an established enterprise that you can have a defensible mode around that you can pivot off of and create growth. As I say, it's a lot easier to play offense when you're not playing defense all the time. And then you want to have more than one avenue for growth because business is not a linear path, despite whatever investment banking memo or SIP that you read shows, you know, it's not going to be up and to the right the whole time during your investment ownership period.
So, you know, whether that's M& A, professionalization, commercial excellence, profitability, pricing. The various metrics that we look at from a value creation perspective. You want to see the ability to grow the business. And then fundamentally we're looking for. businesses that are in end markets or subsectors where they've got significant GDP, what we call GDP plus plus tailwinds for growth, right?
So you're going to be able to take advantage of those opportunities for growth going forward. But at the same time, you've got an asset that at the end of the day, somebody is going to want to own and you're not sort of fighting the business model or having to reinvent the business model as you implement your value creation and growth drivers.

[00:17:29] Sean Mooney: And that makes a ton of sense. And so you get in that first look and for our listeners, we've had some of these conversations before. What happens in private equity, you get a lot of these, what's called confidential information, memorandums, SIMs is the abbreviation, and you get stacks of them, and they come in and they come in and they come in.
And when you're looking at something and that first read. Are there any signals that you're looking for that shows that this business has moats? Like I'm going to look in here like, Oh, there's something here that at least at a high level says, I'm going to put a team on this and we're going to dig in.
And by extension, like the same things that every business builder should likely be thinking about in terms of how to build a mode and then show the signals up.

[00:18:15] Caleb Clark: A couple of things. I mean, one, yes, we look at confidential information, memorandums, like the rest of our. Peers out in the private equity world, but we're trying to see a business, get to know a business before it even gets to that stage or thematic investors.
And then we want to know those businesses well ahead of time. But I think your question still holds, why do we want to own those assets? Or what about these businesses beyond the subsectors that they're in, make them businesses that we want to be investors of and partners with the management team. So I think there are a few things that I look at.
I use the principle of numbers don't lie, right? You want to see high margins and high free cashflow. We all like to talk about EBITDA, but if you might have a 25 percent EBITDA margin business, but if you're spending half of that on capital investment, or you've got huge working capital commitments, those numbers aren't really showing the true cashflow velocity for those assets.
So I look at first and foremost, what's the profitability of the business? Like what's the historical growth rate been? consistent story to how the business has grown over time. But typically, if it's a low margin business, there's a reason for that. And that would indicate that the business is probably more of a commodity player than having a truly differentiated product or service offer.
And then as you take a further step back, what's the market position of that business in the industry that it plays in? So does it have a significant market share? What's its relative market share to others in the space? And we don't have to see, it doesn't have to be 50 percent of the market or even 30 percent of the market, but we want to know that it's got a strong market position.
In the industries that it's serving because that again indicates that there's a real reason for that business to exist and that there's clear moats around the business, right? Then you look at kind of the product service offering. What are they offering to their customers? Is it unique? Is it differentiated either from an engineering perspective or a unique service perspective where the customer cares more about the quality of the product and reliability versus price again, going back to kind of the differentiation of the product.
That the company is providing organic could be a service. So those are some of the fundamental aspects that I look out right off the bat. And look, we're also looking for opportunities to improve the business. We can talk a little bit more about value creation, but it has to have a certain fundamental.
Quality to it. And we're going to be investing in high quality businesses, oftentimes that are founder owned, that we can help take to the next level. But it's got to have some of those fundamental attributes that we're looking for.

[00:20:57] Sean Mooney: And for our listeners, what Caleb just did is they gave you a short course on this is like business and private equity and value creation, one on one.
And so at the end of the day, are you in a good market that's growing? Do you have a big share of it? And do you make good money that's growing more and more each year? If you can do that, you got a good business. Like we can complicate things, but the way that you framed it, just simplified it all until like, this is what matters.
This up, people will see if you're doing that. I really appreciate that because it just really clarified so much of what's important in business. And hopefully our listeners We'll latch on to that, whether you're a business builder, a CEO, or an aspiring private equity professional, do what Caleb says. I like that.
And so maybe moving the page here, let's talk a little bit about kind of what you alluded to. One of the powers of a group like ATL, one of the things I really like about you all is kind of a thematic or a sector focus around aerospace, transportation, logistics, that whole world. So can you talk a little bit about A, what that does for you all in terms of being able to assess opportunity and effect change.
And then B, if you could talk a little bit about then how do you manage the interplay within your team to really help that whole process of not only assessing, but building and growing these companies into something that is much closer to full potential.

[00:22:21] Caleb Clark: I appreciate that. And as I think about it being a sector focused fund, look, we're targeting large mission critical industries that aren't going away, right?
Whether it's the commercial aerospace side of things, the defense industry, global transportation, and 3PL logistics. Those are all things that we need on a day to day basis, right? So these are large spaces that we have the ability to play in that have some very unique attributes. To them that there's complexity.
So we can benefit as investors by focusing in on these specific sectors and just fundamentally having a better understanding than maybe someone who takes a more generalist approach, even at, say, even the industrial level. But we're also not so niche that we're not able to pivot and look at areas that we want to invest in.
And so we take a step back. Done an ecosystem analysis of our subsectors. There's over 70 of them in our spaces that we look at. There's some that we think are better areas for investment versus others. They have to be of enough size that we see an opportunity to grow. And they also need to have the tailwinds behind them, but it enables us to target those subsectors.
And then can only go out and target the businesses within those subsectors that we want to own, right? So. We like the broader industries we're in, we want to target those industries within them that are create that GDP plus growth, and then we want to target those best in class operators that we can partner with and take to the next level.
I think your point around kind of the interplay between deal teams, operating executives, and the management teams is a really important one. One of the things that I really appreciate about ATL and our model is we have a very strong network of operating executives. I think that's become kind of table stakes in many ways to have an operating executive group.
That means different things for different private equity firms, but we've got about a dozen to 15 individuals that are true experts. in the industries that we're focused on that enable us to get up to speed, whether it be targeting those subsectors and themes that we want to be focused in on through all aspects of the deal process and investment process here at ATL.
And they're very much extensions of the firm. We're not just putting them on the website to have fancy CVs or have them show up at a management meeting. So that gives us the air of credibility. They're involved on a weekly, daily basis with us, with our portfolio companies, whether it's serving as on the board of directors or being consultants, but they're an extension of our firm, right?
So again, it starts with the operating executives and they help us, as I said before, identify the investment themes. We want to be a part of, then go out, do the outreach so that we're in touch with those companies that we want to own and well ahead of a process coming to market. And then once we've engaged with a business, whether it's through a process or in a more proprietary nature, they're helping us diligence that company.
And then as part of that diligence, we're building our value creation plan, the strategic plan, and they're helping us build a rapport and relationship with the management teams that we're going to be partnering with post close. A lot of the businesses we invest in are founder family owned. They help to provide that bridge between the investment team and the operation side of the business.
I think as I spoke of before, going back to kind of the early part of my career, look, businesses, they're organic animals, and it's about having those relationships from top to bottom and our operating executives by having been operators in the spaces that we're targeting can build a rapport with the management team that I, as an investment professional, I've never run a business, right?
So they can provide that level of continuity, but because they're as much a part of our team as our internal investment team and our back office and our internal operating group is, it's hopefully seamless. So then we're creating alignment from day one, where we start our due diligence process to when we made our investment to when we started initiating that value creation.
Process that we're all on board, right? Because the worst thing would be is like, okay, we made an investment in this company. What are we going to do with it? Right? One, you probably shouldn't be making the investment. But two, you lost a whole period of time to get that value creation, that strategic plan implemented.
And if everybody's aligned from the very beginning, then there's just going to be more coordination around it. And then when we hit bumps in the road, We're able to work through those and overcome those challenges. So it's really, again, from the very beginning and it starts with our operating executives, but then becomes a more seamless process when they're on the boards, we're on the boards, we're partnering with the management teams.
And we do like to see our operating executives be investors with us, as well as see a rollover from the management teams that we're going to be partnering.

[00:27:24] Sean Mooney: I really appreciate that approach. It's spot on in terms of where the future of PE is going. And what you all are doing from my perspective is you're making deliberate choices about who you want to be and where you want to play.
You've built an ecosystem around that, and you're not necessarily waiting for the flow of deals to come to you. You're having a perspective on what you want, and then you're going to get those companies. And then using the power of that ecosystem and the network effects that you've built to give you a, a differential lens into what that company could be.
But then B, helping them actually go and get it. That's so smart and it's essential today, and you all are already doing it. That's another lesson I think that a lot of people can take is, you know, be better at fewer things. Focus on those. Build systems around it. Go do it.

[00:28:11] Caleb Clark: Yeah, I mean, look, I think focus and discipline is critical to again, being successful in this industry.
I mean, the one thing I would also just take it one step further from what you said, John, was in some cases, we've actually built the businesses because the businesses don't exist in the format that we can go out and do that regular way. I'll be a great example. One of my partners led an investment in Lightridge, which was our investment in the space sector.
The space sector tends to be fairly barbelled. There's a lot of smaller mom and pop businesses out there. And then there's a lot of large players on the prime side of things. That industry is growing tremendously right now, but there aren't a lot of those sort of call it 10 to 25, 30, 50 million EBITDA businesses.
You can just go out and buy, and then you've got a built in platform. So we went in, bought a smaller asset, all equity. Then went out and acquired two other businesses to bring it together in a strategic way. We weren't just growing for the sake of scale. We were able to bring in software in terms of hardware.
And now we've created a platform that's very unique in the space where a lot of strategics, I think, will be interested in that asset down the road. But fundamentally, that business didn't exist. But we had identified space as a growing sector we wanted to get into. And by kind of taking a more creative approach, if you will, having confidence that was largely instilled by working with our operating executives, knowing we had the expertise in the space, we were able to go out and really kind of create an asset where maybe there wasn't.

[00:29:47] Sean Mooney: That's once again, so spot on. And that's a reason why I think private equity used to be thought of as like a financier business. And today you articulate so well, it's a business building business. And that's why we. So often reinforce that you are business builders, and I think the best in the world at it from an expected value perspective in terms of outcome times, probability of success.
And that's exactly it. You know, there's value. You've done the work. You're going to do the hard work to make it happen in through sheer will determination. And kind of sweat, you're going to make it happen and create something that's desirable and value added in the economy. And maybe with that in mind, Caleb, I've been saying we've been living in a washing machine economy the last few years where it's like, good news, bad news, good news, bad news.
And at least in terms of what we're seeing, it seems to me there's more and more good news cycles, but there's still the back cycle. As you think about like this age that we're in, what are some of the advice that you and your colleagues are offering your portfolio company leadership to kind of manage through this agitation, not only with the idea of like safety, but also success and finding opportunities in the now that we live in.

[00:30:59] Caleb Clark: Yeah. I mean, I think going back to your point around building businesses, right. I think the old model or the tarnish that private equity gets, gets painted with is We're slashing burn. It's all about cutting costs, getting in there. And I honestly find myself on the opposite side of that when we're working with portfolio companies and new investments and talking about the strategic and value creation plan is really encouraging our executives and management teams and boards to think about investing in the businesses, right.
And investing early and often you want to be disciplined, whether it's capital investment or new hiring. But if you want to double the size of a business. You can't do it with the existing organization. You want to get to 50 million in EBT and you got 15, you've got to build a team. You got to build an organization.
That's going to be a 50 million organization to get there. The idea that you're going to do it with these organizations that you have today is probably wishful thinking in my mind. So encouraging our teams to think about how can we make strategic initiatives that are going to result in outcomes sooner versus later.
I mean, one of the biggest frustrations is. Waiting three years to initiate a value creation plan that we had identified at the beginning of the investment. And then we're just starting to see the results of that investment, because it does take time. And then we're going and we're selling the business.
And so we've created all this value, latent value in the business. It's a better company, but you're not seeing the results of that investment because it, Takes time to harvest it and then the next guy is going to get the benefit of it and maybe you get a little bit of a Multiple premium or someone's willing to lean in a little bit harder, but that's a lot different than hey I just generated 10 million dollars leave at DA because we just went and built an international distribution network that we're now Targeting markets that we weren't targeting before when we made the investment if you wait too long to make those investments You're not going to see the opportunity to do that.
And I think when you look to go and sell a business, you get paid for what you can show people, not what you can tell people. And the best way to show someone you've created value is to actually deliver that growth and that EVTA to the bottom.

[00:33:11] Sean Mooney: That's so spot on. I always say people in private equity are from Missouri.
It's the show me state. You're like, you're not going to get paid for something that's kind of theoretical. You might get a little bit of credit. It's been interesting. Yeah. Switching seats going from a private equity investor to being a CEO, you really, really tangibly get to look and feel and see and understand the idea that if everyone's got some version of this impact versus effort X, Y chart, like there's always gonna be a couple things that have like high impact, low effort.
But most of the really transformative things are high impact, high effort, and they're going to take three to five years to fully realize and value. And so the things that you're articulating here is like, you got to start building the things today that really aren't going to be blossomed until three, four or five years from now, maybe.
And you're always going to have a series of the next things up. And one of the things that I've learned, I think, to communicate that even internally here is like, they're like, why are we doing this? It's not even part of our business. And it's like, well, it will be three years from now, there's going to be really important.
But if we wait for three years, minus 60 days to start, that's going to push it back three months. So we just have to do this stuff now. And we're going to be doing lots of twists and turns and A and B turns getting there. But this is what we think is going to happen. And we have a strong hypothesis and we're going to test as much as we can along the way.
But if we don't start today, it's never going to happen.

[00:34:41] Caleb Clark: Right. To your point, it's like people are saying, well, we're not in that business. Why are we doing it? It's like, well, if we don't do it, we're never going to get into it, right? We're never going to be in that business. So we never try and enter that market.
If we never try and develop those new products, we don't do M& A. And look, that's, I mean, part of the approach a little bit goes back to, I think, what I was saying around how we think about investing in that we're investing in high quality assets. So you can afford to take some of those risks. Right. And oftentimes we're partnering with founders who they've had all their eggs in one basket.
Right. But now they're diversified. We're able to take calculated risk. We can take some of those bets and no, you're not taking enterprise risk, but we are going to go down this road. And if it doesn't work, we can pivot. But again, if you go down that road three years after you made your investment, it's harder to pivot.
You got to explain that to the individual who's a firm or whoever's going to buy the asset at the end of the day, why you decided not to do that and why it's going to be fine because you reallocated resources to XYZ. You have more runway to make those decisions earlier on, right? And oftentimes you'll hear a team say, yeah, we want to bring this resource on, or we want to do that, but let's wait two years.
And again, like, why are we waiting? You don't want to overburden the business, but you've got to do it now. If you're going to see the results. But look, I mean, oftentimes, again, when you've had all of your capital in one asset, you don't want to take those kinds of risks and challenges. And so part of that is working with our teams to open their eyes to empower them to make those choices.
Or the other counter is like, I've always wanted to do X my business, but I didn't feel comfortable. Let's do it. Let's make it happen. Let's do it. We can do that now because Yeah, there's going to be a J curve, but let's make the investment and we'll see the results sooner rather than later.

[00:36:33] Sean Mooney: That's so true.
And you see it from the lens of an investor to seeing like the behavioral economics play out in a founder CEO's head. And candidly, I feel it here too is when you're like, Oh, I don't have, we're growing rapidly. We're doing all the things, but there's not like, I don't have a fuel depot. And so like, you just can't go as fast and as far from shore as you'd prefer.
But with the power of. A group like ATL, they're like, no, we're going to top you off now. It doesn't mean you just go blindly into a storm and you don't turn around and go around it or like whatever the metaphor is, but that's part of, I think what you're talking about is you enable people to venture and kind of maybe sometimes leave the side of shore behind because there's something really good on the other side.

[00:37:15] Caleb Clark: Yeah. And again, that's, I bring it back to like our operating partners. They've been there. They've done that. They can hold the hand of our teams through those processes to say, Look, here are some of the pitfalls that I experienced in my career, whether it was integrating a business from an M& A perspective or implementing a new I.
T. platform. All these things come with risk, but the fact that we've had folks who have been there done that, I think, again, helps to empower people so you're not going blindly down a path. Otherwise, we're not creating any value as a firm, right? You're reinventing the wheel every time. That's not going to lead to the most successful outcome.

[00:37:59] Sean Mooney: Hey, as a quick interlude, this is Sean here. Wanted to address one quick question that we regularly get. We often get people who show up at our website, call our account executives and say, Hey, I'm not private equity. Can I still use BluWave to get connected with resources? And the short answer is yes.
Even though we're mostly and largely used by hundreds of private equity firms, thousands of their portfolio company leaders, every day we get calls from every day top proactive business leaders at public companies, independent companies, family companies. So absolutely you can use this as well. If you want to use the exact same resources that are trusted and being deployed and perfectly calibrated for your business needs, give us a call.
Visit our website at BluWave. net. Thanks. Back to the episode.
Caleb, as we kind of round out our conversation here, one of the things I'd love to get your kind of thoughts on is around kind of like this sharing and shared knowledge. And I don't know about you, but most of the most successful people that I know were kind of like traders of books and borrowers of other people's hard earned wisdom.
And it's just, just kind of like, to your point, like, why recreate the wheel? Someone else has gone through this, and heaven knows I've got all sorts of scars when I've tried and sometimes successful, sometimes not, as I'm recreating wheels. But it's a lot easier if you can go, Oh, I'm going to repurpose these lessons learned from others.
And so I'm curious if you have a book that has kind of had an impact on you that you think is kind of a helpful read, and maybe some of your takeaways from it.

[00:39:35] Caleb Clark: It's very true, Sean. I mean, I mean, I'm thinking of my bedside table, and I've got three different books that I'm reading in three different subjects and love to pick that up.
And I read a lot of history. I read a lot of biographies. But one of the books that is arguably a business book that I keep finding myself going back to is a book called Thinking in Bets by Annie Duke. It's fairly well known out there in the space. She's actually a college professor, probability professor, but she became a professional poker player.
I'm not really a poker player myself, but it's about decision making with uncertainty, right? And so you're never going to make a decision with 100 percent perfect information, right? That's just Business doesn't work that way. Investing doesn't work that way. Life doesn't work that way. Right. But it's saying, okay, let's recognize that level of uncertainty out there.
Probability, weight it and make the best decision we can. And I think it has some other fundamental lessons in it that I talked to my team about. I mean, just because you have a great outcome doesn't mean that was the right decision. And just because you have a bad outcome doesn't mean it was the wrong decision.
Right. And she uses a lot of sports analogies and things along those lines. I remember one of the founders of one of the firms that I worked with in the past, we ended up realizing an investment. We made over 30 percent IRR in that investment. And he said to the team, he's like, look, good outcome, but we didn't get paid for the risks that we took in that business.
And that has always stuck with me because many people would be like, Oh, that was an amazing investment, great investment, but you need to always have that perspective. And again, you're never going to have perfect information. But you need to be disciplined about looking back and saying, was that an investment we'd make again?
If so, yes, why not? And it can't just be the outcome, right? Because I think it's about how you got to that decision as much as what happened afterwards, because there is an element of uncertainty luck, if you will. And then also she talks about just having a group of individuals that you pressure test your decision making and understanding the personal biases that we all have in terms of how we think about investing and there's a tendency again going back to this looking at outcomes saying that oh it was a great outcome that's because I made a great decision and not because maybe we got lucky on right and poker plays out I mean the one thing I don't Love about the poker analogy candidly from a business and investing perspective is it's a zero sum game, right?
The pot is set when you get into that. I don't actually Believe that business and private equity is a zero sum game. Yes. Do we want to buy an asset for as low a price as possible? yes, and we want to sell it for as high a price as possible, but There's a lot more complexity to the world we live in in terms of I'm excited when I buy a business from somebody and they decide to roll into it if I'm buying from another private equity firm, or if I'm working with a founder and they want to put more money into it.
And then we all win on the other side. I think about growing the pot, not just how do we divide up the real pie, if you will.

[00:42:51] Sean Mooney: Yeah. I love that recommendation. I've never read that book. I'm going to one click Amazon it right after this a, there's a lot of synergy with our current conversation that we've just had, right?
It's just like forming hypotheses, making investments, see how they go. You're getting as much data as you can. You can't wait forever, but there's going to be things that you're doing through focus and through ecosystem to help inform the probability of your decisions. And then the more you can know about something, at least you're cutting down the range of outcomes.
And it goes really nicely with some of the other books that are kind of similarly kind of the canon of business, like good to great, get disciplined people who are really data driven and making kind of fewer bets on more important things. It goes really well with like Moneyball, right? It's like, expected value and outcome.
And so I'm going to definitely add that book to the library because it's so important because I think a lot of people think that people in private equity are like beacons of analysis paralysis. And no, what you're really trying to do is get as much information as quickly as you can just to make slightly better decisions with higher probability of success and lower bands of outcome.
The metaphors within that book, I think are going to play out really nicely for every business builder.

[00:44:10] Caleb Clark: It is sort of narrowing, I think the scope, but it's also at the same time, understanding what you don't know, right? Like understanding that there are things here that we are going to take a calculated amount of risk on that.
We're just not going to be able to find answers to. And obviously if those are too big, you're not going to make the investment, but. Being clear about where the level of uncertainty is. I mean, look, I think COVID is a very interesting analysis on this from multiple fronts. Like I don't think anybody who underwrote an investment in January of 2020 had a global pandemic in their analysis.
And there's always going to be some level of uncertainty that we're not prepared for, but if you are. Able to narrow that level of uncertainty. And then you're investing in businesses with clear reasons for existing clear differentiation, regardless of what gets thrown at them. At the end of the day, those are still going to end up being good investments and they'll hopefully survive and thrive in some of those areas of uncertainty that you just can't forecast in any situation.

[00:45:21] Sean Mooney: That's so spot on as well. You're not going to be able to control the world, but if you don't get into the batter box and take a swing, you're never getting on base. So you got to do it, but you're not going to know what pitch is coming, but you can probably study that pitchers tendencies. You can understand where you are in the pitch count and do little things to make it more likely you can hit the ball.
If not, you get up the next time up, you're going to hit it.

[00:45:43] Caleb Clark: Just to take that analogy, maybe slightly further. I mean, Hey, we're in this washing machine economy and I agree with that. But in many ways to me, what has happened is We've seen a disruption that no one forecast, but was always there as a potential, right?
So we're now just aware of a level of uncertainty that exists in the world that we live in that maybe we just weren't thinking about before, right? So is there really more uncertainty? I'm not so sure that there's more uncertainty in the world. I just think maybe we were convinced that there was less, right?
And so you've always got to be prepared for Again, as you said, whatever pitch comes your way and having those scenarios built out will enable you to pivot. But there may be one coming across the plate that you didn't even forecast. That's the. role we all live in, but you just have to recognize that those possibilities are out there.

[00:46:42] Sean Mooney: That's life and that's business. And that's part of what makes it fun.

[00:46:45] Caleb Clark: Exactly. It'd be boring if we knew everything that was going to happen. And again, I think also the more certain you have that eventually creates more risk at the end of the day.

[00:46:54] Sean Mooney: Thousand percent. All right, Caleb, this has been a really, really great conversation.
I've learned all sorts of things I wish I knew before. And I'm extremely grateful for you taking the time to share. So thanks for joining here. And I look forward to catching up with you sooner than later.

[00:47:11] Caleb Clark: Sean, really appreciate the time, enjoyed the conversation and look forward to working in the future.

[00:47:27] Sean Mooney: That's all we have for today. Special thanks to Caleb for joining. If you'd like to learn more about Caleb Clark and ATL partners, please see the episode notes for links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcasts. We truly appreciate your support.
If you like what you hear, please follow, five star rate, review, and share. This is a free way to support the show and it really helps us when you do this, so thank you in advance. In the meantime, if you want to be connected with the world's best in class, private equity grade, professional service providers, independent consultants, interim executives, that are deployed and trusted by the best business builders in the world, and you can do the same, give us a call or visit our website at BluWave.net. That's B L U W A V E, and we'll support your success. Onward.

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

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