On this episode, Shiv interviews Kelly Ford Buckley, General Partner at Edison Partners, a growth equity firm with over 39 years of experience investing in high-growth software companies in secondary markets.
Kelly dives into Edison's hands-on approach to value creation, emphasizing their preference for taking on execution risk over product or market risk, and how they use maturity assessments across five centers of excellence—like go-to-market, product, and finance—to identify and prioritize opportunities for portfolio companies.
She shares real-world examples of transforming pricing models, aligning sales and marketing for faster growth, and building operational muscle to scale without paralysis, while stressing the importance of capital efficiency in today's macro environment. Kelly also discusses the role of AI as an efficiency tool rather than a distraction, the advantages of focusing on secondary markets for more grounded founders, and how Edison's domain expertise in verticals like fintech and healthcare IT drives repeatable success. This episode offers actionable insights for investors and operators looking to maximize enterprise value through focused, low-risk execution.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hey everybody. Before we jump into today's
episode, I just want to point out a few ways in which you can
work with us here at hassas #1. If you're an investor and you're
in the middle of a transaction and you want to figure out what
is the marketing potential of the target investment that I'm
looking at, you can engage with us in the due diligence
engagement or within two weeks, we can give you a very clear
picture of all the levers withinthe marketing function of that
(00:22):
organization for them to drive more revenue and pipeline for
the business while being incredibly efficient #2.
If you're the founder, CEO, operator, or investor of a
company or marketing is just under leveraged and it's seen as
a growth lever where that requires more investment.
We can come in and do a deep dive across three to four months
and analyze all the opportunities within that
(00:43):
business on the marketing side by looking at demand Gen. paid
media, account based marketing, content marketing, product
marketing, SEO, website, and much more.
And come back with a set of recommendations and a road map
for what marketing needs to execute against to drive more
enterprise value for that business.
And #3 if you're the CEO of a company that doesn't have a CMO
(01:05):
right now or there is a gap in the organization because of VP
marketing, CMO was recently transitioned out.
We can come in in a fractional CMO capacity and partner with
you on that business and lead the internal team and the
operational plan so that the marketing function continues to
make progress and drive more pipeline and revenue.
And will also help you hire yournext CMO by being part of that
(01:28):
hiring process and on board thatnew person once they're ready to
join the organization so that they get a running start.
These three types of engagementsare some of the most common ways
in which investors, CEOs and companies work with us.
And we have a proven track record of driving a ton of
enterprise value and revenue growth across those companies.
To learn more, go to www.hassas.com where you'll get
(01:50):
a lot more information in terms of the types of engagements I've
described. And you can see case studies and
other examples of the work that we've done.
So you have a lot more confidence in partnering with
us. And with that said, let's get to
the episode. Enjoy the show, come to the
Private Equity Value Creation podcast where we interview
leading investors, operators, bankers, and advisors to help
(02:11):
you answer one question. How do we increase the
enterprise value of our companies?
My name is Shiva Narayanan and each episode I will dive deep
with a guest to help you become a better value creator and
capital allocator. So with that said, let's jump
right in and let's get started with today's episode.
My guest today is Kelly Ford Buckley and she is the General
(02:34):
partner at Edison Partners and what I really loved.
About this episode is that Kellyhas.
A ton of go to market expertise that she brings to investments
that they make over at Edison and Kelly and I had a great
conversation on the order of operations on how companies need
to approach value creation so that they're driving as much
value as possible along with minimizing the risk involved
(02:57):
with investments. That cause deals to fall.
Apart. Kelly brings us insight that
they. Don't really.
Want to take on product risk or market risk?
But they're happy to take on execution risk.
She talks about how they go about making sure that.
The plans that they. Layout in value creation.
They're actually go about executing them and mitigating a.
Lot of the risks. That they've identified on the
(03:17):
execution side, but they don't. Really want to.
Focus on fixing problems on. The.
Market side or the product side because they're just heavier
risks to take. On as an investor and.
So when we talk about the execution side, Kelly brings a
lot of. Detailed.
Perspectives on how Edison brings.
Their. Their.
Team and their operating partners and how they actually
(03:38):
create a ton of enterprise. Value for the companies.
That they're. Investing in along with making a
lot of these essential. Trade-offs that are necessary
that you need to prioritize the right initiatives to create as
much value for these companies. As as possible so.
I think there's a lot to learn from it, especially as you're
thinking about. What type of risks?
You take on with your particularinvestments because.
(03:59):
I really like that perspective. From Kelly, because execution
risk is something that we can control, especially after the
capital has been deployed. You can figure out OK companies
marketing is not great. OK, well here's how we're going
to solve it. We're going to hire an ECMO.
We're going to bring on a partner like.
How to SAS or? Bring on other vendors to.
Support that or we hire. Additional headcount inside.
The team or make some. Adjustments and and then from
(04:21):
there you execute. Right, whereas product risk and
market. Risk is just harder to kind of
get. Rid of, so I thought.
I thought that was. A really interesting insight and
I think it. Applies to all areas like.
Product and sales and customer success and everything else that
goes. Into.
Creating value for companies so.With that said, I'll leave you
to it. Enjoy the episode.
(04:47):
Alright, Kelly, welcome to the show.
How's it going? Going great.
Thanks for having me. Yeah, excited to have you on.
So why don't we start with your role and Edison, and then let's
go from there. Sure.
So Edison Partners is a growth equity firm.
We have been around for 39 years, um, investing in high
(05:10):
growth, mainly software companies, vertical software
businesses located in secondary market.
So we prioritize between the coasts and the majority of our
portfolios outside, we don't invest in Silicon Valley and
majority of the portfolios also outside you know, New York.
(05:33):
And in major markets we are, youknow we write, we make minority
and majority investments. Companies are typically 10 to 30
million revenue at the time of investment and our checks are
15,000,000 plus and we're big believe we're very engaged as
(05:57):
investors. Our team is a pretty diverse mix
of both longtime investors as well as operators, former
operators like myself. So I joined the firm almost all
what 11 1/2 years ago, spent 20 years operating primarily in
(06:18):
good market roles in high growthtech companies that look a lot
like the companies we invest in at, at Edison.
And one of those companies was actually an Edison company.
So that's how I got to know the my now partners and they
recruited me over as the companywas making a, a strategy sort of
shift in evolution from venture to growth.
(06:39):
So we started on that journey with on the 8th, which was 2015
vintage and I joined in in, in 14 and now we're investing out
of our 11 fund and which is essentially fund for, for our
growth equity strategy. And I've worn multiple hats
here. I started and built out Edison
(07:02):
edge or value creation platform,started taking boards, putting
capital to work. I focused mainly on vertical
software and in Fintech as a specialty, as an investor and
still very much involved though are you know, I was sort of
employee one on our value creation platform building it
(07:23):
out and now we have lots of resources, you know, doing it,
but I'm, you know, I, I like putting the operator hat on when
I can so. And what?
Would you say really separates out Edison from its counterparts
or other firms that are chasing similar investments?
Like what is really your secret sauce?
(07:45):
I think the domain it's probablya couple of things.
It's a the domain expertise vertically where in the, in the
sectors where we invest, even prior to becoming your growth
equity investor in when we were doing venture deals, it's the
same industries. So, um, you know, there's kind
(08:07):
of a long tenured team with deepdomain expertise in the
verticals where we invest. I'd say the stage where we
invest is very specific and you know what it takes to accelerate
and scale growth for this growthstage.
And that goes hand in hand also with the operating chops of our
(08:29):
team and and the way we work with our companies.
I think pound for pound, we invest more in value creation
than most firms and funds of ourour size and and we don't charge
for it. It's, it's part of our formula.
We know it works and it's, you know, it's of no cost to to the
(08:52):
companies we work with. Hmm.
Yeah. And and so talk about that piece
like just expand on the verticals where you feel like
you add the most value or where you're focused and then the
stage of businesses where you specialize or you feel like you
can add the most value to these companies.
Yeah, sure. So I mean, vertically, we've
been investing in Fintech, you know, from office of the CFO to
(09:19):
payments technology to wealth and trading and democratization
of financial services sort of broadly as in so various themes
within Fintech and the evolutionof, of all of those markets for,
(09:39):
you know, 25 plus years, 30 years.
So my, my partner Chris always says, like I've been doing,
we've been doing fintech since, you know, before fintech was
cool. So, you know, we're deep in
fintech, also healthcare IT and we don't invest in life science
or devices or biotech, but healthcare technologies,
(10:02):
software essentially that sells to payers and providers.
And that also it's not uncommon to find an intersection between
Fintech and healthcare technology and where we, where
we invest. And then otherwise, you know,
we're in vertical sass. Generally, we like specialized
(10:24):
supply chain, you know, technologies.
We, we like anything that's digitizing critical
infrastructure for the United States, whether it's around
water or energy or, or supply chain, frankly, 911 security
and, and, and safety or orientedtechnology that's, you know,
(10:50):
powering the next generation of infrastructure for America.
These are all categories where, you know, we go really deep and
have had, you know, decades of experience investing in.
Value creation side, as you're coming into these companies and
are you building out standardized processes or
(11:10):
benchmarks or frameworks as waysto help these companies and
create value across the board? As you start to kind of
recognize some patterns that arethat are the same?
Or is it more about the approachlike how do you, how do you, how
do you address those types of opportunities when there's
potential similarities between these investments?
Sure. We have 5 centres of excellence.
(11:33):
So we go pretty deep on go to market product and tech
leadership and people finance and and then just broadly like
good governance and we have a, aframework for assessing the
maturity and capability across those five areas.
(11:56):
We, we often get to know the companies we invest in for 2
plus years before we invest. So we get to know them early.
So we've had some exposure to their evolution and where
they've invested what the level of operational maturity is, you
know, the the quality of the team.
(12:19):
But when we're really, you know,sort of post term sheet really
digging in during diligence, we evaluate the maturity and the
capability across each of those five areas.
It's quantitatively driven basedon criteria of key components
of, you know, let's say and go to market components of the
(12:41):
strategy, components of the position and the market,
different components of how they, how they plan and perform
and also processes and then people or design and, and the
capability of, of the teams. So all of those things are
(13:03):
evaluated and scored and then it, you know, we output a based
on the score, plot them on a maturity scale and based on
where they are and based on the investment thesis in terms of
where does, where is value creation?
Where do we think it's going to happen and where does it need to
(13:26):
happen? We'll marry that investment
thesis with the value creation plan to prioritize the key items
to optimize or in some cases fixor build or create or establish
if it doesn't already exist. Hmm and and walk through those
(13:47):
quantitative areas just I think I think this is a great place to
kind of dig into. You mentioned the the five
biggest series, like you said, go to market, product,
governance, finance and leadership.
Is that right? So I'll help us understand kind
of how what you what you're looking at quantitatively to
assess the maturity level and then how do you figure out what
next steps would be? Sure.
(14:07):
I mean it's, it's by centre of excellence, right.
So for go to market, there couldbe 30 to 50 areas of assessment
and and that scores are applied against and as an example, let's
say the go to market model and the sales dynamics, right.
(14:32):
So is there approach aligned with what buyers in each segment
of that they're targeting need to make a purchase decision like
is it or are they, so is their model and their motion and you
(14:52):
know, their strategy and therefore model and motion lined
up with the level of complexity that their ICP comes with,
right? And and also aligned with the
willingness to pay the economic value of of the deal or that
ICP, right. So there will look at you know
(15:14):
what kind of specialization theyhave in their, you know,
vertical sectors or segmentation.
We'll look at sales cycle dynamics, we'll look at is there
channel involved partners at all.
We'll look at the average deal sizes by segment, by sector,
look at win rates, right. So we also look more deeply at a
(15:35):
lot of other unit economics on as we contemplate strategy and
planning. But based on the answers or the
complexion of the the model and the motion, like they think
they're going after this ICP andthe go forward strategy and use
of capital is to double down or diversify here or there where
(16:00):
we're looking for proof of repeatability and hopefully
predictability in the business. And if we're not seeing that
your score is going to be low onon how your execution is lining
up with the model and the the needs of a what the model needs
to look like to address what youwhat you are stating your ICP
(16:24):
3D, if that makes sense. We'll get back to the show in
just a moment. But before we do, one of the
most common and important value creation levers that we hear
about on this show from private equity investors and our own PE
partners is go to market. Yet when these same PE partners
bring us into their portfolio companies or new target
investments that they're exploring, we find that the
(16:46):
marketing function is quite immature, underutilized and
under optimized. And so that's a huge opportunity
that we see inside these companies.
And if you have a portfolio company that you feel like it's
scale a lot faster to drive morepipeline and revenue or you're
looking at a new investment where you feel like that could
be core to your investment thesis.
But we'd love to explore that with you and figure out how we
(17:07):
can partner with you to drive more enterprise value creation
on the marketing side, similar to the way that we've done with
major PE firms like TA, App Data, HGST, G and many more.
At this point, we've done hundreds of engagements across
hundreds of industries and verticals, and we have a ton of
benchmarks and frameworks that we bring to these engagements to
(17:27):
help you drive as much enterprise value as quickly as
possible. So if that sounds like something
you might be interested in, you can just e-mail me directly at
Shiv at how to sas.com or go to our website and schedule a demo
and we'd love to speak with you about it further.
And now with that said, let's get back to the show.
Totally. Yeah, that's one of the things
that we talk about with our clients and private equity firms
(17:49):
and portfolio companies that we work with is just that you can
have let's say a high ACV and limited total addressable market
that you're going after. And then in in those cases, the
companies are not investing enough to do 1 to one marketing
or account based marketing or partnering with sales in order
to reach out to those companies.And on the flip side, if you
(18:10):
have a company that is more transactional, if they try to go
to customized in their outreach,like there's a mismatch and the
go to market is not aligning in the spending way too much on
acquiring customers. So I guess my my follow up to
this would be that what are someof the areas that you're seeing
when you're coming in and you'rerunning this type of an
assessment? And I think it's great that you
(18:31):
are doing that in front of scorecard and figure out where
the areas of strength are, what the gaps are.
What are the biggest areas of improvement that you see or even
red flags that you're spotting that may potentially like make
it that you can and actually invest or they become the first
areas that you're actually investing into to improve those
(18:51):
businesses? Yeah.
I mean, it's not uncommon. I would say it's very common
that when we're investing, if there's capital going to the
balance sheet, which they're almost always is, they're
looking to the companies lookingto diversify and maybe they're
on there, they've got some earlyproof of the ability to go into
(19:14):
a new vertical or move from mid market up to enterprise or SMB
to mid market. Maybe they're going there's
multi product, multi channel. So there's a, there's an element
of. Does the business have the
muscle Bill around multithreading in go to market
(19:39):
or just across the business in general?
And that is usually, we do see that they do have some element
of that. But if they've been single
threaded, like 1 product, 1 customer profile, one segment or
sector, and they haven't yet proven they can multithread,
there's huge execution risk in that.
(20:00):
And that would be a warning sign.
I mean we don't take product risk or market risk and our
deals, we we take execution risk.
So then it's OK. Well, what kind of execution
risk would we be comfortable with to your point, like where
is there opportunity value creation opportunity even if you
have to optimize something versus, you know, a real warning
(20:22):
sign where you're just not goingto, you know, pay that
enterprise value or, or, or or lean in because it's just too
much execution risk. I have a lot of appetite for
transforming a pricing model or business model.
Like I can see something so clearly and say where where some
(20:43):
investors might say, oh, that's like a pivot or that represents
too much risk. There are signs and and there
are signals where I could just see so clearly that moving from
a usage model to, you know, a subscription model or
transactional to subscription would make so much sense and you
(21:07):
could do it with relatively low risk.
I also just personally have helped a lot of our companies
with that successfully. So I'm not afraid of it.
Even though for some it may feellike, whoa, that's
transformation or that's a pivot, it's not.
So I would be very comfortable attacking that opportunity for
(21:28):
value creation where we might have real concern on taking on a
risk. Even if there's low hanging
fruit to fix, say a retention issue, it's usually multifaceted
and can run deep with it. You know the metrics are telling
you that, and you know that tends to be a big obstacle.
(21:52):
Yeah, I, I like what you said there, which is that taking on
product risk or market risk is much more unlikely for you, but
taking on execution risk is something that you're willing to
do because The X Factor there, they're way more controllables
in that type of an environment. Whereas for example, if there's
a retention problem, you may have an overall product market
(22:13):
it finish, you might need to do a bunch of development to get to
a better place. But on an execution side,
there's a lot more levers that you as the investor can actually
pull. Yeah, absolutely.
I mean there's, there are other.We're just thinking of a couple
of other quick examples too, where value creation opportunity
versus kind of that warning signand the high risk sign, you
(22:36):
know, does does the ELT, the executive team, you know, there
are a couple of roles that you may need to top grade or fill.
Like there's a gap. Like that's OK, right?
Like, OK, you've been, you've gotten to this point and you
haven't had a complete ELT, no big deal.
But it's like the entire ELT hasn't done this before at this
(22:57):
stage. Like that's a huge, that's it a
huge problem because you just can't move fast, fast enough
when you're like top grading an entire team.
And then I'd say another point, I mean just goes back to the
multithreading piece and having the muscle like if you're moving
up market to enterprise from midmarket and there's a lot of good
(23:21):
signals that you could be successful doing that with some
investment and additional focus.That's not that much of A
stretch using our capital to do that, no big deal.
But if the companies coming in saying, oh, we've been
successful with enterprise and mid market or and we actually
now are going to introduce PLG motion that we've never done
(23:46):
before, but we're confident thatwe can, you know, we can pivot
or evolve in this direction. I mean, PLG is requires a lot of
experimentation, a lot of time and a lot of and it it tends to
be capital intensive. So if you're having success,
you're reasonable repeatability in the business and mid market,
maybe even in the enterprise or even frankly in SMB, but it's
(24:09):
still deal sizes that justify talking to a sales Rep.
Like can you compliment that with PLG?
Sure. But if you're going to if the
strategy, the growth strategy isto go kind of all in on that
when and the capital is supposedto be, you know, applied to that
or that's what the team is proposing like that's that's
(24:31):
huge risk. Yeah, Yeah.
I think, I think that's a, that's a great insight because
in a lot of cases ideas seem good on paper, but then when
companies try to become something that they're not that
and they're asking you as the investor to take on that risk,
it kind of changes the return profile of an investment like
(24:51):
that. So how do you?
How do you? Prioritize there because
companies always have all kinds of great ideas and you have to
kind of really be focused on your value creation plan so you
have a framework for narrowing down which opportunities do make
sense. To pursue versus others.
Yeah, we do. So when we go through, so for a
(25:14):
new investment and we go throughdiligence and we run these
maturity assessments and the scores come out and there's
always more to do. Like you really get due after
prioritize. Like you can't paralyze A-Team
post investment. The whole idea is to get a fast
start and focus on the right things.
I think the prioritization becomes easy.
(25:38):
There may be a lot of things to do.
There's a first 180 day plan andthere's a second 180 day plan.
And then and then frankly if there's a follow on investment
18 months, 24 months, whatever it is in the future M&A you're
doing, there's another first 180day plan, right?
Like there's, there's we're looking at, we're not just
scoring this at the initial investment one and done.
(26:01):
It's engagement and progressing the maturity of these functions
and the team and the capability and the result over the life of
the investment. So from a prioritization
perspective, it, it's, it goes back to OK, well, what are, what
are we assuming in terms of our expected case outcome and
(26:23):
optimistic case outcome. And we were back from that in
terms of what the revenue growthis.
And you know it spends profile the business and is going to be
if there's I look 1st through the lens of if anything needs to
be fixed or optimized, it's the things that would slow us down,
(26:43):
things that are preventing getting a fast start post
investment. So any sales and marketing
misalignment, right, like you, you brought up a good point
around, you know, kind of account base being super, being
snotty. You know, I think, I don't know
if you used this word, but like just being sniper focused, right
(27:04):
from a, I mean, we're investing in vertical software businesses
that are usually target, you know, targeting large, mid size
and large companies. We don't have a lot of SMB.
We have a little bit, but not a ton of like high velocity SB
motion in our, in our portfolio.You, you define your CP, you
(27:26):
need to be sniper focused, not casting wide Nets.
Otherwise your sales and marketing is just going to be
inefficient, right. So I'm it's not uncommon,
though, you see marketing on an account based Bernie and sales
territories are loosely defined,right?
Like what? What are we doing?
(27:48):
Like that's, that's misalignmentor there's a lack of shared
goals between marketing and sales and or marketing's not
measured on the ultimate outcome.
You know, it's just passing oversomething that may be qualified
to, to the early stages of a, ofa sales pipeline.
(28:08):
So really getting the interlock in place and that alignment on,
on motion and metrics is super important.
And that can really be in the way of getting that fast start
post investment. So we'll absolutely prioritize
that. Yeah, I think, I think that
order of operations is, is just so important.
(28:30):
What we've seen in the work thatwe've done with P firms and
especially on go to market side,it's almost like as a baseline
starting with what have you spent on historically, what's
worked, what hasn't worked in, in a lot of cases and I'm sure
you've seen this inside of your companies, you can have a $50
million business or $100 millionbusiness and they don't really
even have their data in order. And so getting that organized to
(28:52):
a point. Where you can.
At least say, OK, we're spending$5,000,000 or $2,000,000 on
marketing and or, or on sales. And here's the return that we
get on that. Here's our efficiency, here's
what we should scale up, here's what we should scale down.
And just that step back and figuring that out can reveal a
lot of insights into where the company should focus going
(29:13):
forward. And then as you identify what's
working, then you can start to look into, OK, what are all the
net new things that we can do and.
You need to adjust right to drive.
Yeah, the numbers absolutely drive it.
I think the example I just gave was, you know, certainly
qualitative where you can just see there are misaligned and
(29:33):
motion. And it's a big part of our job
to surface the data to show themthat if you get alignment, what
you can move, you know, accelerate the sales process by
acts, you can improve your cat and your CAC payback by Y.
You can, right. So yeah, it's not uncommon that
(29:54):
we're having to sell the priorities with metrics to help
them see, yes, This is why you can't keep doing things the way
you're doing them. And even before you go in and
expand your base of all the things that you are doing and
start a new initiative that's going to require different sets
of resources, people or campaigns and projects.
(30:16):
Like have we really nailed down our core business and core set
of activities And, and are we doing that to the best of our
abilities in terms of how strongthe go to market engine is?
And we at least we found that a lot of companies are not close
to maxed out and everybody's kind of drowning an opportunity.
So it's almost like you risk getting distracted before you
(30:36):
actually get really good at the things that made you a great
business that's worth acquiring in the first place.
Yeah, absolutely. There's, there's a, there can be
a back to basics like slow down before you speed up and make
sure we all understand where we are and what we're building
from. It's, it's interesting too, like
(30:58):
it's, it's not uncommon that areafter, you know, especially some
of our best companies, you know,the larger PE's that play above
us come in and, and you know, we'll get some partial
liquidity, but we roll with themand we remain on the board.
And some we've we've witnessed where that next level of value
(31:23):
creation capability at other firms come in, which is
certainly valuable. The big teams, lots of lots of
capability and and lots of engagement, deep engagement in
the company like swim lanes withall the different priorities
post investment. It can pair like especially in
(31:44):
recent years where sort of thesemega funds come down into, you
know, they might pay up and comedown into slightly less mature
businesses and it can paralyze abusiness.
For sure. And it's and and I we've seen
growth slow as a result. So the prioritization is key,
(32:09):
the the adapting and tailoring what we're looking to optimize
or establish or fix so that the business can keep doing while
what it's been great at and what's been driving the growth
while diversifying into that next market or optimizing how
(32:33):
customer success works. Or I mean, whatever the
initiative is, it just you gottalet the business continue to do
what it's so great at. And by adding new things or
fixing things that could be optimized, you can't parallel
the business. I mean parallelized, sorry and
parallel. In that even more so now because
(32:58):
with a lot of our clients and private equity firms, we're
finding that especially in the last, I would say 12 to 18
months as growth has slowed on the in the macroeconomic
environment for a lot of companies, it's even more
important now than ever where a lot of companies are maybe
closing. Fewer deals or they're.
Trying to be more efficient withtheir spend that this.
(33:19):
Topic of. Focus is more important where
let's say four or five years agowhen money was easier to find,
like you could be doing more stuff and it looked like you
were being productive. And now those same companies are
being forced to make sacrifices.Maybe they've made Hecktown
adjustments or reduced spend in other places.
And it's almost like coming backto the core business and and
back to basics almost. Yeah, 100%.
(33:42):
Companies have had to get religion on bottom line.
The good news is the companies that are coming to market to
fundraise or founders looking tosell or whatever it is, they
tend to be businesses with healthier profiles than they
were, you know, 18 months to twoyears ago.
(34:03):
So maybe the top line, they're not growing 60%, they're growing
35 or 40, but they're doing it on break even.
And I mean, we've always prioritized capital efficient
businesses. If if my view personally, I
won't and vast, some of us here will say like if they raise more
(34:24):
than two X their revenue, that is capital inefficient.
I personally, if you've raised, if you've raised more than
you're what you're generating inrevenue and I'm saying like gap
revenue, then your capital inefficient.
And I I won't invest in those. Those businesses they couldn't
(34:46):
have, they can have low losses. I'm OK with that for a while
while we accelerate even a loss,but event we have to see a line
of sight to break even to profitability and you know
capital efficiency at investmentand capital efficiency at exit
on on the way and in a good portion of the journey on the
(35:06):
way to exit is really important.And the good news is because of
the macro companies have had to get religion on how to how to do
more with less, be more focused.And we are we're now seeing that
in our pipeline. The deals we're looking at,
which I really appreciate because there had been a lot of
(35:28):
capital raise and a lot of inefficiency and really venture
profile companies with a ton of product and execute and
execution risk coming to market.And because of their growth was
so great. You can be sort of dazzled by
that. But there's no there's so much
to do into to figure out how to right size it and continue to to
(35:53):
grow and take advantage of the market opportunity, but do so on
lower losses or no losses. And it's been a real shift for
for companies. And I think it's actually why
also we focus in secondary markets like.
Yeah. The the founders and executive
(36:13):
teams with businesses in places like Birmingham and Indianapolis
and Grand Rapids, MI. And, you know, whether there
once was less availability of capital or just the mindset is
build a great business and focuson the business and not becoming
(36:37):
a professional fundraiser. Is, is the mindset of of the
founder and CEO that we that we want to back.
And they tend to exist in those,you know, outside of places like
Silicon Valley and New York and and Boston.
And that's been true historically.
I think that remains true now, but it has, it has been.
(36:58):
I think a lot of companies had awake up call where they realized
they wouldn't be able to sell their business at a price that
they want or raise capital from maybe the right investors and at
the right price because they were just burning and it looked
too ventury and there was just too much risk.
(37:21):
Yeah, I totally agree with the the idea of the secondary
markets like we we know a lot ofpeople in Birmingham and Atlanta
and Norfolk and a lot of these kinds of Provo where there are
great companies, but there's much less capital per capita, if
you will, a number of companies that are out there.
And so those companies are forced to build for
profitability and and make a lotof those trade-offs that some of
(37:44):
these companies that are raisingventure capital didn't have to
make at least in the earlier days.
So. The media, I mean, still the
press celebrates and even some investors, those who have raised
the most money and it doesn't mean it's a healthy business or
they're going to have the best outcome.
(38:05):
It puts that much, it's like growth at all costs and too big
to fail. There's just too much of that
so. Yeah, totally.
And also it it one of the major issues right now and we've had
so many investors come on this podcast and talk about this is
that the secondaries market for PP funds has really ramped.
(38:25):
Up because. These funds need to return
capital to their LP's and then you have these assets that are
worth more on paper than they are actually worth on the
market. And it's creating this mismatch
and the the key firms are unableto exit these companies and so
they kind of need to. Leverage.
The whole periods are being extended for sure.
(38:45):
Yeah, exactly. And so that's kind of creates a
bit of a problem for the funds because they do need to sell
these companies at some point. To raise their next Bund.
Yeah, exactly, exactly. The show performance and return
capital and all those things. What do you think about?
The AI side, because I think I feel this.
Way about AI as well. Because it is the hot button
(39:06):
topic in private equity and every, you know, portfolio
summit that we go to or speak out like everybody's kind of
talking about I. And one of the things that I
notice is that a lot of the companies obsessing about this
can easily also get distracted by AI as like the new shiny
thing that they should focus alltheir attention on.
(39:27):
And then meanwhile, some of the fundamental things, things that
we've been talking about are notin a great place yet at the same
time, yes, there is an opportunity there, so.
You kind of have to. Capture it and there are some
trade-offs to be made. So how do you look at that for
your portfolio companies? Well, there's two.
I mean, there's two ways to lookat it is there's the
operationally, internally like how is AI being adopted and
(39:55):
successfully to drive usually meaningful efficiency.
Really, it's just about time and.
You know, we see strong use of AI in, you know, the engineering
organizations in terms of reducing time to market in a, in
(40:15):
a big, big way on, you know, just accelerating road map and
product delivery. Um, and that, you know, they
test it, they measure it like, and then if it's working, they
go all in on it, right? So you have to experiment and
see what is this really? Was this really getting you?
I think in sales and marketing, there's the tech stack and sales
(40:40):
and marketing is going to, it's starting to and it will have
more efficiency, you know, capabilities using AI that will
drive efficiencies there as well.
But it's not going to do anybody's job for them
(41:00):
necessarily. So I think it's a, you know,
experiment. I think there's a lot of
pressure on the tech providers to it's not AI for AI sake and
and and then that flips it the other way.
Like all of our companies are doing something with AI in
(41:21):
building it into their product. Their customers expect it, but
it has to be something that's useful will be adopted, can show
the result. It's not just AI for AI6.
So as the tech industry bill, it's an efficiency play first
where folks are going to have the aha and see the result and
(41:44):
then you know, it'll, it'll go from there.
We're not prescribing. I mean, there's definitely,
there's definitely been things that have come up like when we
do diligence on a new investmentand say like, oh, wow, you're
not using AI for that. You should and hear it go talk
to this company who's doing it and it's going to change your
life, you know, But I'd say operationally, there's a lot of
(42:07):
low hanging fruit, I'd say in the product in terms of what
market you're in. Got to be something that's like
really easy to adopt and is drawis aligned with your customers
outcomes that they're trying to drive with your solution.
And anything else is just noise and checking boxes and something
you're trying to put on the homepage of your website, you know?
(42:29):
Yeah, yeah. It's almost feels like every
company's homepage now has a weird eye and it even if it's
nothing that the customers actually using so.
Yeah. And the investors expect it,
right. Like what are you doing with
the, I mean we just had two companies present to IC last
week to new investments that were approved.
One of them was was one on leading and you know, I know, I
(42:52):
mean they all put in their decksand it's part of the narrative
like what they're doing internally, what they're doing
with their product with a I didn't have to ask them to do
that, but it would have been a gap if they didn't invite, if
they didn't include it in our team expects it, you know.
Yeah, yeah, yeah, yeah. It's almost like a permission to
play type of thing now more thanactual value.
So, and I think some of the stuff that you said earlier
(43:14):
about getting some of the fundamentals right, like
retention and making sure that you have a sticky solution and,
and all this and don't have product risk or market risk, I
think those precede things like this.
So that's, that's great insight.As we're coming up on time here,
Kelly, what's the best way if somebody's listening to podcast,
they want to get a hold of you or Edison, what's the best way
(43:35):
they can get in? Touch.
We're, I mean Edison partners.com is our website, our
our team page where our contact info is out there.
So emails there and I respond toevery e-mail I get so.
Awesome. Yeah, we'll be sure to include
(43:55):
that and all the links in the show notes.
But with that said, Kelly, thanks for coming on and sharing
your approach. I actually had wish we had more
time to dive deeper into some ofthese topics, but appreciate you
sharing your wisdom. I think a lot of people will
learn a ton from it, so thanks for doing.
This. Great.
Thanks for having me. You're listening to today's
episode. Before you take off, just a few
requests from our side #1 if youhaven't done so already, please
(44:17):
subscribe to the podcast on iTunes or Spotify or YouTube or
wherever you go to listen to your podcast #2 If you are in
the market for due diligence services, strategy consulting,
or fractional CMO services, please get in touch with us at
www.hassas.com. And 3rd, please buy a copy of my
(44:39):
new book, Exit Ready Marketing. It covers a ton of concepts that
we take our customers through private equity investors, B2B
companies, CEOs, operating partners and marketers.
And there's a ton of great valuein there that expands on my
previous book post acquisition. Marketing as well, so.
With that said, I hope you enjoyed today's content and
we'll see you on the next episode.
Hey everybody. Before we jump into today's
episode, I just want to point out a few ways in which you can
work with us here at hassas #1. If you're an investor and you're
in the middle of a transaction and you want to figure out what
is the marketing potential of the target investment that I'm
looking at, you can engage with us in the due diligence
engagement or within two weeks, we can give you a very clear
picture of all the levers withinthe marketing function of that
(00:22):
organization for them to drive more revenue and pipeline for
the business while being incredibly efficient #2.
If you're the founder, CEO, operator, or investor of a
company or marketing is just under leveraged and it's seen as
a growth lever where that requires more investment.
We can come in and do a deep dive across three to four months
and analyze all the opportunities within that
(00:43):
business on the marketing side by looking at demand Gen. paid
media, account based marketing, content marketing, product
marketing, SEO, website, and much more.
And come back with a set of recommendations and a road map
for what marketing needs to execute against to drive more
enterprise value for that business.
And #3 if you're the CEO of a company that doesn't have a CMO
(01:05):
right now or there is a gap in the organization because of VP
marketing, CMO was recently transitioned out.
We can come in in a fractional CMO capacity and partner with
you on that business and lead the internal team and the
operational plan so that the marketing function continues to
make progress and drive more pipeline and revenue.
And will also help you hire yournext CMO by being part of that
(01:28):
hiring process and on board thatnew person once they're ready to
join the organization so that they get a running start.
These three types of engagementsare some of the most common ways
in which investors, CEOs and companies work with us.
And we have a proven track record of driving a ton of
enterprise value and revenue growth across those companies.
To learn more, go to www.hassas.com where you'll get
(01:50):
a lot more information in terms of the types of engagements I've
described. And you can see case studies and
other examples of the work that we've done.
So you have a lot more confidence in partnering with
us. And with that said, let's get to
the episode. Enjoy the show, come to the
Private Equity Value Creation podcast where we interview
leading investors, operators, bankers, and advisors to help
(02:11):
you answer one question. How do we increase the
enterprise value of our companies?
My name is Shiva Narayanan and each episode I will dive deep
with a guest to help you become a better value creator and
capital allocator. So with that said, let's jump
right in and let's get started with today's episode.
My guest today is Kelly Ford Buckley and she is the General
(02:34):
partner at Edison Partners and what I really loved.
About this episode is that Kellyhas.
A ton of go to market expertise that she brings to investments
that they make over at Edison and Kelly and I had a great
conversation on the order of operations on how companies need
to approach value creation so that they're driving as much
value as possible along with minimizing the risk involved
(02:57):
with investments. That cause deals to fall.
Apart. Kelly brings us insight that
they. Don't really.
Want to take on product risk or market risk?
But they're happy to take on execution risk.
She talks about how they go about making sure that.
The plans that they. Layout in value creation.
They're actually go about executing them and mitigating a.
Lot of the risks. That they've identified on the
(03:17):
execution side, but they don't. Really want to.
Focus on fixing problems on. The.
Market side or the product side because they're just heavier
risks to take. On as an investor and.
So when we talk about the execution side, Kelly brings a
lot of. Detailed.
Perspectives on how Edison brings.
Their. Their.
Team and their operating partners and how they actually
(03:38):
create a ton of enterprise. Value for the companies.
That they're. Investing in along with making a
lot of these essential. Trade-offs that are necessary
that you need to prioritize the right initiatives to create as
much value for these companies. As as possible so.
I think there's a lot to learn from it, especially as you're
thinking about. What type of risks?
You take on with your particularinvestments because.
(03:59):
I really like that perspective. From Kelly, because execution
risk is something that we can control, especially after the
capital has been deployed. You can figure out OK companies
marketing is not great. OK, well here's how we're going
to solve it. We're going to hire an ECMO.
We're going to bring on a partner like.
How to SAS or? Bring on other vendors to.
Support that or we hire. Additional headcount inside.
The team or make some. Adjustments and and then from
(04:21):
there you execute. Right, whereas product risk and
market. Risk is just harder to kind of
get. Rid of, so I thought.
I thought that was. A really interesting insight and
I think it. Applies to all areas like.
Product and sales and customer success and everything else that
goes. Into.
Creating value for companies so.With that said, I'll leave you
to it. Enjoy the episode.
(04:47):
Alright, Kelly, welcome to the show.
How's it going? Going great.
Thanks for having me. Yeah, excited to have you on.
So why don't we start with your role and Edison, and then let's
go from there. Sure.
So Edison Partners is a growth equity firm.
We have been around for 39 years, um, investing in high
(05:10):
growth, mainly software companies, vertical software
businesses located in secondary market.
So we prioritize between the coasts and the majority of our
portfolios outside, we don't invest in Silicon Valley and
majority of the portfolios also outside you know, New York.
(05:33):
And in major markets we are, youknow we write, we make minority
and majority investments. Companies are typically 10 to 30
million revenue at the time of investment and our checks are
15,000,000 plus and we're big believe we're very engaged as
(05:57):
investors. Our team is a pretty diverse mix
of both longtime investors as well as operators, former
operators like myself. So I joined the firm almost all
what 11 1/2 years ago, spent 20 years operating primarily in
(06:18):
good market roles in high growthtech companies that look a lot
like the companies we invest in at, at Edison.
And one of those companies was actually an Edison company.
So that's how I got to know the my now partners and they
recruited me over as the companywas making a, a strategy sort of
shift in evolution from venture to growth.
(06:39):
So we started on that journey with on the 8th, which was 2015
vintage and I joined in in, in 14 and now we're investing out
of our 11 fund and which is essentially fund for, for our
growth equity strategy. And I've worn multiple hats
here. I started and built out Edison
(07:02):
edge or value creation platform,started taking boards, putting
capital to work. I focused mainly on vertical
software and in Fintech as a specialty, as an investor and
still very much involved though are you know, I was sort of
employee one on our value creation platform building it
(07:23):
out and now we have lots of resources, you know, doing it,
but I'm, you know, I, I like putting the operator hat on when
I can so. And what?
Would you say really separates out Edison from its counterparts
or other firms that are chasing similar investments?
Like what is really your secret sauce?
(07:45):
I think the domain it's probablya couple of things.
It's a the domain expertise vertically where in the, in the
sectors where we invest, even prior to becoming your growth
equity investor in when we were doing venture deals, it's the
same industries. So, um, you know, there's kind
(08:07):
of a long tenured team with deepdomain expertise in the
verticals where we invest. I'd say the stage where we
invest is very specific and you know what it takes to accelerate
and scale growth for this growthstage.
And that goes hand in hand also with the operating chops of our
(08:29):
team and and the way we work with our companies.
I think pound for pound, we invest more in value creation
than most firms and funds of ourour size and and we don't charge
for it. It's, it's part of our formula.
We know it works and it's, you know, it's of no cost to to the
(08:52):
companies we work with. Hmm.
Yeah. And and so talk about that piece
like just expand on the verticals where you feel like
you add the most value or where you're focused and then the
stage of businesses where you specialize or you feel like you
can add the most value to these companies.
Yeah, sure. So I mean, vertically, we've
been investing in Fintech, you know, from office of the CFO to
(09:19):
payments technology to wealth and trading and democratization
of financial services sort of broadly as in so various themes
within Fintech and the evolutionof, of all of those markets for,
(09:39):
you know, 25 plus years, 30 years.
So my, my partner Chris always says, like I've been doing,
we've been doing fintech since, you know, before fintech was
cool. So, you know, we're deep in
fintech, also healthcare IT and we don't invest in life science
or devices or biotech, but healthcare technologies,
(10:02):
software essentially that sells to payers and providers.
And that also it's not uncommon to find an intersection between
Fintech and healthcare technology and where we, where
we invest. And then otherwise, you know,
we're in vertical sass. Generally, we like specialized
(10:24):
supply chain, you know, technologies.
We, we like anything that's digitizing critical
infrastructure for the United States, whether it's around
water or energy or, or supply chain, frankly, 911 security
and, and, and safety or orientedtechnology that's, you know,
(10:50):
powering the next generation of infrastructure for America.
These are all categories where, you know, we go really deep and
have had, you know, decades of experience investing in.
Value creation side, as you're coming into these companies and
are you building out standardized processes or
(11:10):
benchmarks or frameworks as waysto help these companies and
create value across the board? As you start to kind of
recognize some patterns that arethat are the same?
Or is it more about the approachlike how do you, how do you, how
do you address those types of opportunities when there's
potential similarities between these investments?
Sure. We have 5 centres of excellence.
(11:33):
So we go pretty deep on go to market product and tech
leadership and people finance and and then just broadly like
good governance and we have a, aframework for assessing the
maturity and capability across those five areas.
(11:56):
We, we often get to know the companies we invest in for 2
plus years before we invest. So we get to know them early.
So we've had some exposure to their evolution and where
they've invested what the level of operational maturity is, you
know, the the quality of the team.
(12:19):
But when we're really, you know,sort of post term sheet really
digging in during diligence, we evaluate the maturity and the
capability across each of those five areas.
It's quantitatively driven basedon criteria of key components
of, you know, let's say and go to market components of the
(12:41):
strategy, components of the position and the market,
different components of how they, how they plan and perform
and also processes and then people or design and, and the
capability of, of the teams. So all of those things are
(13:03):
evaluated and scored and then it, you know, we output a based
on the score, plot them on a maturity scale and based on
where they are and based on the investment thesis in terms of
where does, where is value creation?
Where do we think it's going to happen and where does it need to
(13:26):
happen? We'll marry that investment
thesis with the value creation plan to prioritize the key items
to optimize or in some cases fixor build or create or establish
if it doesn't already exist. Hmm and and walk through those
(13:47):
quantitative areas just I think I think this is a great place to
kind of dig into. You mentioned the the five
biggest series, like you said, go to market, product,
governance, finance and leadership.
Is that right? So I'll help us understand kind
of how what you what you're looking at quantitatively to
assess the maturity level and then how do you figure out what
next steps would be? Sure.
(14:07):
I mean it's, it's by centre of excellence, right.
So for go to market, there couldbe 30 to 50 areas of assessment
and and that scores are applied against and as an example, let's
say the go to market model and the sales dynamics, right.
(14:32):
So is there approach aligned with what buyers in each segment
of that they're targeting need to make a purchase decision like
is it or are they, so is their model and their motion and you
(14:52):
know, their strategy and therefore model and motion lined
up with the level of complexity that their ICP comes with,
right? And and also aligned with the
willingness to pay the economic value of of the deal or that
ICP, right. So there will look at you know
(15:14):
what kind of specialization theyhave in their, you know,
vertical sectors or segmentation.
We'll look at sales cycle dynamics, we'll look at is there
channel involved partners at all.
We'll look at the average deal sizes by segment, by sector,
look at win rates, right. So we also look more deeply at a
(15:35):
lot of other unit economics on as we contemplate strategy and
planning. But based on the answers or the
complexion of the the model and the motion, like they think
they're going after this ICP andthe go forward strategy and use
of capital is to double down or diversify here or there where
(16:00):
we're looking for proof of repeatability and hopefully
predictability in the business. And if we're not seeing that
your score is going to be low onon how your execution is lining
up with the model and the the needs of a what the model needs
to look like to address what youwhat you are stating your ICP
(16:24):
3D, if that makes sense. We'll get back to the show in
just a moment. But before we do, one of the
most common and important value creation levers that we hear
about on this show from private equity investors and our own PE
partners is go to market. Yet when these same PE partners
bring us into their portfolio companies or new target
investments that they're exploring, we find that the
(16:46):
marketing function is quite immature, underutilized and
under optimized. And so that's a huge opportunity
that we see inside these companies.
And if you have a portfolio company that you feel like it's
scale a lot faster to drive morepipeline and revenue or you're
looking at a new investment where you feel like that could
be core to your investment thesis.
But we'd love to explore that with you and figure out how we
(17:07):
can partner with you to drive more enterprise value creation
on the marketing side, similar to the way that we've done with
major PE firms like TA, App Data, HGST, G and many more.
At this point, we've done hundreds of engagements across
hundreds of industries and verticals, and we have a ton of
benchmarks and frameworks that we bring to these engagements to
(17:27):
help you drive as much enterprise value as quickly as
possible. So if that sounds like something
you might be interested in, you can just e-mail me directly at
Shiv at how to sas.com or go to our website and schedule a demo
and we'd love to speak with you about it further.
And now with that said, let's get back to the show.
Totally. Yeah, that's one of the things
that we talk about with our clients and private equity firms
(17:49):
and portfolio companies that we work with is just that you can
have let's say a high ACV and limited total addressable market
that you're going after. And then in in those cases, the
companies are not investing enough to do 1 to one marketing
or account based marketing or partnering with sales in order
to reach out to those companies.And on the flip side, if you
(18:10):
have a company that is more transactional, if they try to go
to customized in their outreach,like there's a mismatch and the
go to market is not aligning in the spending way too much on
acquiring customers. So I guess my my follow up to
this would be that what are someof the areas that you're seeing
when you're coming in and you'rerunning this type of an
assessment? And I think it's great that you
(18:31):
are doing that in front of scorecard and figure out where
the areas of strength are, what the gaps are.
What are the biggest areas of improvement that you see or even
red flags that you're spotting that may potentially like make
it that you can and actually invest or they become the first
areas that you're actually investing into to improve those
(18:51):
businesses? Yeah.
I mean, it's not uncommon. I would say it's very common
that when we're investing, if there's capital going to the
balance sheet, which they're almost always is, they're
looking to the companies lookingto diversify and maybe they're
on there, they've got some earlyproof of the ability to go into
(19:14):
a new vertical or move from mid market up to enterprise or SMB
to mid market. Maybe they're going there's
multi product, multi channel. So there's a, there's an element
of. Does the business have the
muscle Bill around multithreading in go to market
(19:39):
or just across the business in general?
And that is usually, we do see that they do have some element
of that. But if they've been single
threaded, like 1 product, 1 customer profile, one segment or
sector, and they haven't yet proven they can multithread,
there's huge execution risk in that.
(20:00):
And that would be a warning sign.
I mean we don't take product risk or market risk and our
deals, we we take execution risk.
So then it's OK. Well, what kind of execution
risk would we be comfortable with to your point, like where
is there opportunity value creation opportunity even if you
have to optimize something versus, you know, a real warning
(20:22):
sign where you're just not goingto, you know, pay that
enterprise value or, or, or or lean in because it's just too
much execution risk. I have a lot of appetite for
transforming a pricing model or business model.
Like I can see something so clearly and say where where some
(20:43):
investors might say, oh, that's like a pivot or that represents
too much risk. There are signs and and there
are signals where I could just see so clearly that moving from
a usage model to, you know, a subscription model or
transactional to subscription would make so much sense and you
(21:07):
could do it with relatively low risk.
I also just personally have helped a lot of our companies
with that successfully. So I'm not afraid of it.
Even though for some it may feellike, whoa, that's
transformation or that's a pivot, it's not.
So I would be very comfortable attacking that opportunity for
(21:28):
value creation where we might have real concern on taking on a
risk. Even if there's low hanging
fruit to fix, say a retention issue, it's usually multifaceted
and can run deep with it. You know the metrics are telling
you that, and you know that tends to be a big obstacle.
(21:52):
Yeah, I, I like what you said there, which is that taking on
product risk or market risk is much more unlikely for you, but
taking on execution risk is something that you're willing to
do because The X Factor there, they're way more controllables
in that type of an environment. Whereas for example, if there's
a retention problem, you may have an overall product market
(22:13):
it finish, you might need to do a bunch of development to get to
a better place. But on an execution side,
there's a lot more levers that you as the investor can actually
pull. Yeah, absolutely.
I mean there's, there are other.We're just thinking of a couple
of other quick examples too, where value creation opportunity
versus kind of that warning signand the high risk sign, you
(22:36):
know, does does the ELT, the executive team, you know, there
are a couple of roles that you may need to top grade or fill.
Like there's a gap. Like that's OK, right?
Like, OK, you've been, you've gotten to this point and you
haven't had a complete ELT, no big deal.
But it's like the entire ELT hasn't done this before at this
(22:57):
stage. Like that's a huge, that's it a
huge problem because you just can't move fast, fast enough
when you're like top grading an entire team.
And then I'd say another point, I mean just goes back to the
multithreading piece and having the muscle like if you're moving
up market to enterprise from midmarket and there's a lot of good
(23:21):
signals that you could be successful doing that with some
investment and additional focus.That's not that much of A
stretch using our capital to do that, no big deal.
But if the companies coming in saying, oh, we've been
successful with enterprise and mid market or and we actually
now are going to introduce PLG motion that we've never done
(23:46):
before, but we're confident thatwe can, you know, we can pivot
or evolve in this direction. I mean, PLG is requires a lot of
experimentation, a lot of time and a lot of and it it tends to
be capital intensive. So if you're having success,
you're reasonable repeatability in the business and mid market,
maybe even in the enterprise or even frankly in SMB, but it's
(24:09):
still deal sizes that justify talking to a sales Rep.
Like can you compliment that with PLG?
Sure. But if you're going to if the
strategy, the growth strategy isto go kind of all in on that
when and the capital is supposedto be, you know, applied to that
or that's what the team is proposing like that's that's
(24:31):
huge risk. Yeah, Yeah.
I think, I think that's a, that's a great insight because
in a lot of cases ideas seem good on paper, but then when
companies try to become something that they're not that
and they're asking you as the investor to take on that risk,
it kind of changes the return profile of an investment like
(24:51):
that. So how do you?
How do you? Prioritize there because
companies always have all kinds of great ideas and you have to
kind of really be focused on your value creation plan so you
have a framework for narrowing down which opportunities do make
sense. To pursue versus others.
Yeah, we do. So when we go through, so for a
(25:14):
new investment and we go throughdiligence and we run these
maturity assessments and the scores come out and there's
always more to do. Like you really get due after
prioritize. Like you can't paralyze A-Team
post investment. The whole idea is to get a fast
start and focus on the right things.
I think the prioritization becomes easy.
(25:38):
There may be a lot of things to do.
There's a first 180 day plan andthere's a second 180 day plan.
And then and then frankly if there's a follow on investment
18 months, 24 months, whatever it is in the future M&A you're
doing, there's another first 180day plan, right?
Like there's, there's we're looking at, we're not just
scoring this at the initial investment one and done.
(26:01):
It's engagement and progressing the maturity of these functions
and the team and the capability and the result over the life of
the investment. So from a prioritization
perspective, it, it's, it goes back to OK, well, what are, what
are we assuming in terms of our expected case outcome and
(26:23):
optimistic case outcome. And we were back from that in
terms of what the revenue growthis.
And you know it spends profile the business and is going to be
if there's I look 1st through the lens of if anything needs to
be fixed or optimized, it's the things that would slow us down,
(26:43):
things that are preventing getting a fast start post
investment. So any sales and marketing
misalignment, right, like you, you brought up a good point
around, you know, kind of account base being super, being
snotty. You know, I think, I don't know
if you used this word, but like just being sniper focused, right
(27:04):
from a, I mean, we're investing in vertical software businesses
that are usually target, you know, targeting large, mid size
and large companies. We don't have a lot of SMB.
We have a little bit, but not a ton of like high velocity SB
motion in our, in our portfolio.You, you define your CP, you
(27:26):
need to be sniper focused, not casting wide Nets.
Otherwise your sales and marketing is just going to be
inefficient, right. So I'm it's not uncommon,
though, you see marketing on an account based Bernie and sales
territories are loosely defined,right?
Like what? What are we doing?
(27:48):
Like that's, that's misalignmentor there's a lack of shared
goals between marketing and sales and or marketing's not
measured on the ultimate outcome.
You know, it's just passing oversomething that may be qualified
to, to the early stages of a, ofa sales pipeline.
(28:08):
So really getting the interlock in place and that alignment on,
on motion and metrics is super important.
And that can really be in the way of getting that fast start
post investment. So we'll absolutely prioritize
that. Yeah, I think, I think that
order of operations is, is just so important.
(28:30):
What we've seen in the work thatwe've done with P firms and
especially on go to market side,it's almost like as a baseline
starting with what have you spent on historically, what's
worked, what hasn't worked in, in a lot of cases and I'm sure
you've seen this inside of your companies, you can have a $50
million business or $100 millionbusiness and they don't really
even have their data in order. And so getting that organized to
(28:52):
a point. Where you can.
At least say, OK, we're spending$5,000,000 or $2,000,000 on
marketing and or, or on sales. And here's the return that we
get on that. Here's our efficiency, here's
what we should scale up, here's what we should scale down.
And just that step back and figuring that out can reveal a
lot of insights into where the company should focus going
(29:13):
forward. And then as you identify what's
working, then you can start to look into, OK, what are all the
net new things that we can do and.
You need to adjust right to drive.
Yeah, the numbers absolutely drive it.
I think the example I just gave was, you know, certainly
qualitative where you can just see there are misaligned and
(29:33):
motion. And it's a big part of our job
to surface the data to show themthat if you get alignment, what
you can move, you know, accelerate the sales process by
acts, you can improve your cat and your CAC payback by Y.
You can, right. So yeah, it's not uncommon that
(29:54):
we're having to sell the priorities with metrics to help
them see, yes, This is why you can't keep doing things the way
you're doing them. And even before you go in and
expand your base of all the things that you are doing and
start a new initiative that's going to require different sets
of resources, people or campaigns and projects.
(30:16):
Like have we really nailed down our core business and core set
of activities And, and are we doing that to the best of our
abilities in terms of how strongthe go to market engine is?
And we at least we found that a lot of companies are not close
to maxed out and everybody's kind of drowning an opportunity.
So it's almost like you risk getting distracted before you
(30:36):
actually get really good at the things that made you a great
business that's worth acquiring in the first place.
Yeah, absolutely. There's, there's a, there can be
a back to basics like slow down before you speed up and make
sure we all understand where we are and what we're building
from. It's, it's interesting too, like
(30:58):
it's, it's not uncommon that areafter, you know, especially some
of our best companies, you know,the larger PE's that play above
us come in and, and you know, we'll get some partial
liquidity, but we roll with themand we remain on the board.
And some we've we've witnessed where that next level of value
(31:23):
creation capability at other firms come in, which is
certainly valuable. The big teams, lots of lots of
capability and and lots of engagement, deep engagement in
the company like swim lanes withall the different priorities
post investment. It can pair like especially in
(31:44):
recent years where sort of thesemega funds come down into, you
know, they might pay up and comedown into slightly less mature
businesses and it can paralyze abusiness.
For sure. And it's and and I we've seen
growth slow as a result. So the prioritization is key,
(32:09):
the the adapting and tailoring what we're looking to optimize
or establish or fix so that the business can keep doing while
what it's been great at and what's been driving the growth
while diversifying into that next market or optimizing how
(32:33):
customer success works. Or I mean, whatever the
initiative is, it just you gottalet the business continue to do
what it's so great at. And by adding new things or
fixing things that could be optimized, you can't parallel
the business. I mean parallelized, sorry and
parallel. In that even more so now because
(32:58):
with a lot of our clients and private equity firms, we're
finding that especially in the last, I would say 12 to 18
months as growth has slowed on the in the macroeconomic
environment for a lot of companies, it's even more
important now than ever where a lot of companies are maybe
closing. Fewer deals or they're.
Trying to be more efficient withtheir spend that this.
(33:19):
Topic of. Focus is more important where
let's say four or five years agowhen money was easier to find,
like you could be doing more stuff and it looked like you
were being productive. And now those same companies are
being forced to make sacrifices.Maybe they've made Hecktown
adjustments or reduced spend in other places.
And it's almost like coming backto the core business and and
back to basics almost. Yeah, 100%.
(33:42):
Companies have had to get religion on bottom line.
The good news is the companies that are coming to market to
fundraise or founders looking tosell or whatever it is, they
tend to be businesses with healthier profiles than they
were, you know, 18 months to twoyears ago.
(34:03):
So maybe the top line, they're not growing 60%, they're growing
35 or 40, but they're doing it on break even.
And I mean, we've always prioritized capital efficient
businesses. If if my view personally, I
won't and vast, some of us here will say like if they raise more
(34:24):
than two X their revenue, that is capital inefficient.
I personally, if you've raised, if you've raised more than
you're what you're generating inrevenue and I'm saying like gap
revenue, then your capital inefficient.
And I I won't invest in those. Those businesses they couldn't
(34:46):
have, they can have low losses. I'm OK with that for a while
while we accelerate even a loss,but event we have to see a line
of sight to break even to profitability and you know
capital efficiency at investmentand capital efficiency at exit
on on the way and in a good portion of the journey on the
(35:06):
way to exit is really important.And the good news is because of
the macro companies have had to get religion on how to how to do
more with less, be more focused.And we are we're now seeing that
in our pipeline. The deals we're looking at,
which I really appreciate because there had been a lot of
(35:28):
capital raise and a lot of inefficiency and really venture
profile companies with a ton of product and execute and
execution risk coming to market.And because of their growth was
so great. You can be sort of dazzled by
that. But there's no there's so much
to do into to figure out how to right size it and continue to to
(35:53):
grow and take advantage of the market opportunity, but do so on
lower losses or no losses. And it's been a real shift for
for companies. And I think it's actually why
also we focus in secondary markets like.
Yeah. The the founders and executive
(36:13):
teams with businesses in places like Birmingham and Indianapolis
and Grand Rapids, MI. And, you know, whether there
once was less availability of capital or just the mindset is
build a great business and focuson the business and not becoming
(36:37):
a professional fundraiser. Is, is the mindset of of the
founder and CEO that we that we want to back.
And they tend to exist in those,you know, outside of places like
Silicon Valley and New York and and Boston.
And that's been true historically.
I think that remains true now, but it has, it has been.
(36:58):
I think a lot of companies had awake up call where they realized
they wouldn't be able to sell their business at a price that
they want or raise capital from maybe the right investors and at
the right price because they were just burning and it looked
too ventury and there was just too much risk.
(37:21):
Yeah, I totally agree with the the idea of the secondary
markets like we we know a lot ofpeople in Birmingham and Atlanta
and Norfolk and a lot of these kinds of Provo where there are
great companies, but there's much less capital per capita, if
you will, a number of companies that are out there.
And so those companies are forced to build for
profitability and and make a lotof those trade-offs that some of
(37:44):
these companies that are raisingventure capital didn't have to
make at least in the earlier days.
So. The media, I mean, still the
press celebrates and even some investors, those who have raised
the most money and it doesn't mean it's a healthy business or
they're going to have the best outcome.
(38:05):
It puts that much, it's like growth at all costs and too big
to fail. There's just too much of that
so. Yeah, totally.
And also it it one of the major issues right now and we've had
so many investors come on this podcast and talk about this is
that the secondaries market for PP funds has really ramped.
(38:25):
Up because. These funds need to return
capital to their LP's and then you have these assets that are
worth more on paper than they are actually worth on the
market. And it's creating this mismatch
and the the key firms are unableto exit these companies and so
they kind of need to. Leverage.
The whole periods are being extended for sure.
(38:45):
Yeah, exactly. And so that's kind of creates a
bit of a problem for the funds because they do need to sell
these companies at some point. To raise their next Bund.
Yeah, exactly, exactly. The show performance and return
capital and all those things. What do you think about?
The AI side, because I think I feel this.
Way about AI as well. Because it is the hot button
(39:06):
topic in private equity and every, you know, portfolio
summit that we go to or speak out like everybody's kind of
talking about I. And one of the things that I
notice is that a lot of the companies obsessing about this
can easily also get distracted by AI as like the new shiny
thing that they should focus alltheir attention on.
(39:27):
And then meanwhile, some of the fundamental things, things that
we've been talking about are notin a great place yet at the same
time, yes, there is an opportunity there, so.
You kind of have to. Capture it and there are some
trade-offs to be made. So how do you look at that for
your portfolio companies? Well, there's two.
I mean, there's two ways to lookat it is there's the
operationally, internally like how is AI being adopted and
(39:55):
successfully to drive usually meaningful efficiency.
Really, it's just about time and.
You know, we see strong use of AI in, you know, the engineering
organizations in terms of reducing time to market in a, in
(40:15):
a big, big way on, you know, just accelerating road map and
product delivery. Um, and that, you know, they
test it, they measure it like, and then if it's working, they
go all in on it, right? So you have to experiment and
see what is this really? Was this really getting you?
I think in sales and marketing, there's the tech stack and sales
(40:40):
and marketing is going to, it's starting to and it will have
more efficiency, you know, capabilities using AI that will
drive efficiencies there as well.
But it's not going to do anybody's job for them
(41:00):
necessarily. So I think it's a, you know,
experiment. I think there's a lot of
pressure on the tech providers to it's not AI for AI sake and
and and then that flips it the other way.
Like all of our companies are doing something with AI in
(41:21):
building it into their product. Their customers expect it, but
it has to be something that's useful will be adopted, can show
the result. It's not just AI for AI6.
So as the tech industry bill, it's an efficiency play first
where folks are going to have the aha and see the result and
(41:44):
then you know, it'll, it'll go from there.
We're not prescribing. I mean, there's definitely,
there's definitely been things that have come up like when we
do diligence on a new investmentand say like, oh, wow, you're
not using AI for that. You should and hear it go talk
to this company who's doing it and it's going to change your
life, you know, But I'd say operationally, there's a lot of
(42:07):
low hanging fruit, I'd say in the product in terms of what
market you're in. Got to be something that's like
really easy to adopt and is drawis aligned with your customers
outcomes that they're trying to drive with your solution.
And anything else is just noise and checking boxes and something
you're trying to put on the homepage of your website, you know?
(42:29):
Yeah, yeah. It's almost feels like every
company's homepage now has a weird eye and it even if it's
nothing that the customers actually using so.
Yeah. And the investors expect it,
right. Like what are you doing with
the, I mean we just had two companies present to IC last
week to new investments that were approved.
One of them was was one on leading and you know, I know, I
(42:52):
mean they all put in their decksand it's part of the narrative
like what they're doing internally, what they're doing
with their product with a I didn't have to ask them to do
that, but it would have been a gap if they didn't invite, if
they didn't include it in our team expects it, you know.
Yeah, yeah, yeah, yeah. It's almost like a permission to
play type of thing now more thanactual value.
So, and I think some of the stuff that you said earlier
(43:14):
about getting some of the fundamentals right, like
retention and making sure that you have a sticky solution and,
and all this and don't have product risk or market risk, I
think those precede things like this.
So that's, that's great insight.As we're coming up on time here,
Kelly, what's the best way if somebody's listening to podcast,
they want to get a hold of you or Edison, what's the best way
(43:35):
they can get in? Touch.
We're, I mean Edison partners.com is our website, our
our team page where our contact info is out there.
So emails there and I respond toevery e-mail I get so.
Awesome. Yeah, we'll be sure to include
(43:55):
that and all the links in the show notes.
But with that said, Kelly, thanks for coming on and sharing
your approach. I actually had wish we had more
time to dive deeper into some ofthese topics, but appreciate you
sharing your wisdom. I think a lot of people will
learn a ton from it, so thanks for doing.
This. Great.
Thanks for having me. You're listening to today's
episode. Before you take off, just a few
requests from our side #1 if youhaven't done so already, please
(44:17):
subscribe to the podcast on iTunes or Spotify or YouTube or
wherever you go to listen to your podcast #2 If you are in
the market for due diligence services, strategy consulting,
or fractional CMO services, please get in touch with us at
www.hassas.com. And 3rd, please buy a copy of my
(44:39):
new book, Exit Ready Marketing. It covers a ton of concepts that
we take our customers through private equity investors, B2B
companies, CEOs, operating partners and marketers.
And there's a ton of great valuein there that expands on my
previous book post acquisition. Marketing as well, so.
With that said, I hope you enjoyed today's content and
we'll see you on the next episode.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!