Give us a sense of how H.G. GDC fits into this world of private
equity, Steve, you want to go first? Sure.
Thanks, David. You know, from the very beginning, from
our roots, we decided that we wanted to do private equity differently.
And we believe that across the table were people that were founders or
financial sponsors. Louis, management teams across the table
is somebody who cares more about who I am than the last dollar and what I bring
to the table than the last dollar. And the fundamental principle is that
partnership investing will world. Where will the world?
Fifteen years ago, that was a little bit of a bet today.
Partnership investing is taking over the world.
And so for us, the differentiation that we make is that we live here.
We seek your reference across the table. We need your reference at the end of
this engagement where because that's how we're going to go forward, because
that's all we do as partnership investing where others will say we're
partnership investors, but they rent here.
They read here for the time and they don't really get it.
Not rooted who they are. Rich, this partnership investing sounds
really nice and I can understand why you might attract a lot of hills that way.
Can you make as much money? Because that's not, let's be frank, the
model historically associate with private equity.
We think what coming and buying it, stripping a lot of costs out and
reselling it. Yeah, I think it's really important,
David, to where we focus is in the middle markets
and medium sized businesses. So for us as a seven billion dollar
private equity firm where we tend to see the opportunity create real alpha is
buying good businesses in the middle market as traditionally defined with the
goal of transforming them into great companies.
So, Richard, sounds like when you come in, it's not the management team that
you're replacing. You don't come into it by definition.
You pick companies have good management teams.
So what is it you're providing? Is it capital, basically?
And typically in private equity, we think of leveraging up your capital as
equity as I understand it. We would think about it in sort of three
different deal market types. One is buying builds very important in
this type of macro environment. The second would be in business
transformation, helping upgrade, upgrading core capabilities and
processes. And third is growth enablement, maybe
change in the go to market process, the go to market motion helping businesses
go global. But again, we're taking very distinctly
medium sized companies in a billion dollars of enterprise value low and
we're creating multi-billion dollar enterprises over the course of a
partnership with the owners of that business.
Steve, I understand you focus on the middle market.
If I can call it that. Are there particular sectors that you
tend to be attracted to or see deals from?
We live in Palo Alto, California. That's our that's our our base of
operations. So we've been in technology for 25, 30
years. So we're doing that.
Do some technology, no question. But how tech has informed places like
business services, financial services and even some consumer interest in
particular places is where we will kind of trade.
We won't go further than that, but that's a pretty wide swath that we are
gaining through our thematic sourcing efforts, some real expertise in our
shop. And, you know, while we are now trying
for the first time, we think I've been working to do a sports angle in sports
investing from the very beginning, from my previous life.
But I I took my my heroes, Roger Stone IBEX.
He told me that, you know what, I my first retiree is that what should I do?
What's your what's your recommendation is just run.
So I read. And so I felt a little bit awkward.
You know, reinvesting back into sports. But now I've kind of matured in my
private equity life that I've been in longer than I played football while I
was gonna ask you. Steve, obviously, given we all think of
you with a 49ers helmet on. That's the way we know Steve Young.
Given that. Do you get more deal flow out of sports
so people tend to come? You know, you've done a lot of work
actually with other former professional athletes to help them in their business
ventures. So one of my passions is to try to pay
it forward and try to Korea trying to create a repository of
transition stories from professional life into the next phase of their lives.
And I've always talked about that as a hard ending to a to a passion for people
and then finding out that they're middle aged and they don't have it.
You know, I was great at something. And the next day I'm not good at
anything. And so how did those transition stories
and how to pay forward for other athletes today?
I'm worried passion about trying to figure out how to tell those stories
about people who have transitioned good and bad.
My transition story was one that I'm grateful for because I went to law
school. I was playing that degree, allowed me to
join with Rich twenty five years ago and get into private equity.
And I'm very grateful for that. But I sports as is you'd think I would
have been doing this the whole time. But I did.
I ran away from it and I didn't I didn't do it much.
And so we are not we don't in our portfolio, 48 platform businesses and
600 add ons, very little touch sports, if you can believe it.
But today, I think going forward we're looking now and we're trying to use that
unique kind of previous background that I have to kind of add to the
possibilities. Rich Paul Allen last time I checked is
in Silicon Valley. We had Silicon Valley Bank has the
failure Silicon Valley Bank and some of the other regional banks.
Has it affected your business? In in a way, it's sort of accelerated
the opportunity around this tilt towards partnership.
We find that that really large and growing ecosystem of venture backed
businesses are looking for outcomes, right?
You have an ecosystem of venture capital and growth equity investors.
You have wonderful entrepreneurs that are around these businesses.
But if you think about what Steve had mentioned, the essence of what we do,
we're looking for folks that in the kind of businesses that we're transforming
from good companies or good businesses, the great companies
is numerous owners. And so what we've found, David, is that
because of what's happened with the macro environment, with SVP and others,
you have this really large universe of smaller companies that would have
typically raise a series C, D, E, F and gone public that have now said maybe it
might be better to join forces with one of our core active portfolio companies.
Which one of the precipitating effect causes of what happened?
It's like a valley back. Was that higher interest rates that
really took down the valuations of a lot of private equity companies effect.
This week in the Financial Times, there was a lead article on that subject for
private equity. Is it affecting your business, Rich?
The diminishment or so I assume of the valuations given what's going on with
the discount rate? Well, David, I think in Steven, I talk
about this all the time with our with our team in uncertain macro
environments, business quality becomes more important than ever.
And because these companies tend to be more resilient in the face of macro
pressures, the type of businesses that we look for invest in and help support
transform even if they do get impacted in the near
term. You will see them rebound quickly.
Steve, I can't let Super Bowl Most Valuable Player quarterback go with
asking one question evaluations of professional sports teams.
They are through the roof. As we talked to people is just
extraordinary. And I talked to some of the investors
who say they're going to keep going. What do you make about some of the
valuations we're seeing now? Some of the pro teams?
David, I I my step might be a little bit off, but it's not a lot off.
Seventy five of the top 100 shows on television, the highest rated shows on
television, 75 of the top 100 were NFL football games.
Think of the power in that stat equity values have 20 times in the last 20
years. And you know, people say players are
paid too much. Quarterbacks are making 60 million
dollars a year. As far as equity value growth in the
last 20 years, quarterback salary growth has not.
His only half of it. And so I'm not saying they should be
paid more. I'm just saying that equity values are
through the roof because of the power of live television.
And you've seen that around the sports world.
And NBA and Major League Baseball was on its back 20 years ago.
I'm overstating it. But, you know, now flourishing because
Lifetime television runs the world and the NFL runs like television and by a
long way. So you talk about the power of the NFL,
that power only grows. And that's why you think, you know,
forty nine or ten, that's worth eight to ten billion dollars.
Could be 20 billion. Could be I mean, the upper ends are, you
know. Who knows?
But the NFL has done a great job of building equity value, that's for sure.