Episode Transcript
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Speaker 1 (00:11):
Welcome to the Mant
Waller podcast, sponsored by New
Road Capital Partners, where welook at success at the
intersection of technology,logistics, supply chain, retail
and CPG, which we also call theretail value chain.
I want to clarify that thispodcast is distinct from my
responsibilities as a professorin the Sam Walton College of
(00:32):
Business.
Nonetheless, it aligns with myaspiration to provide practical
insights to professionals inbusiness by showcasing companies
and people that can enhanceyour ability to manage, lead,
strategize and marketeffectively in the retail value
chain.
Before we dive into today'sexciting episode, I'd like to
take a moment to express mydeepest gratitude to our
(00:55):
founding sponsor, new RoadCapital Partners.
New Road Capital Partnersinvests in proven and innovative
technologies, products andservices that serve existing and
unmet needs in the marketplace.
New Road partners withgrowth-oriented companies in
supply chain, logistics andinnovative consumer companies as
experienced entrepreneurs andoperators.
(01:17):
The New Road team prides itselfon the high level of
collaboration it brings to eachof its investments.
New Road's team of investmentprofessionals and operating
partners have deep, relevantinvesting and operating
experience, includingsignificant experience leading
large divisions of enterprisecompanies and building
businesses from scale to conceptto realization.
(01:41):
To learn more, visitnewroadcpcom.
I also want to disclose that Iam an advisor to New Road.
I would like to take thismoment to recognize
podcastvideoscom for being ourprovider of podcasts.
Their mission is simple Tostreamline the process of
(02:01):
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They're equipped withindustry-leading equipment and
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I'm very pleased with theservices they provide me.
Now, without further ado, let'sget started with today's episode
.
I'm so excited about thisinterview today with Stefan
(02:21):
Stearns because he has extremelygreat experience at Barclays
Investment Bank in New York,where he most recently served as
director of communications andmedia coverage group, focusing
on mid and large-cap mediacompanies.
This time he worked on the buyside and sell side, m&a advisory
(02:43):
assignments and debt and equitycapital raises in excess of
$200 billion.
I'll tell you a bit more abouthim later, but I really think
you're going to enjoy this,because I talked to him about
lessons he learned in his eightyears almost 10 years actually
in investment banking, andspecifically about the media
(03:05):
sector.
We get into talking about somenew sectors like retail media
networks Thanks, stefan and wetalk about his experience in
investment banking versusprivate equity and also the fact
that he spent most of his lifein New York City.
(03:25):
Now he lives in Bentonville,arkansas.
He also has an undergraduatedegree from University of
Pennsylvania, mba from ColumbiaBusiness School, and we see
people in Northwest Arkansasmoving from all over the country
and all over the world.
Here we talk a little bit aboutthat.
We talk about the retail valuechain and how there's a lot of
(03:51):
opportunities in that space forinvestments, and we also talk to
him about what he's mostexcited about in the coming
years what are the challengesthat they're facing right now in
making decisions and how dothey source investments?
These are all very importantquestions.
Currently, stefan is a partnerat New Road Capital Partners and
(04:19):
where he's primarilyresponsible for identifying and
analyzing investmentopportunities, leading deal
execution and the management ofportfolio companies.
I think you're really going toenjoy this.
I think well, if you'reinterested in the retail value
chain meaning logistics, supplychain, retail, consumer goods,
(04:42):
technologies associated withthose I think you'll be
interested.
If you're interested ininvestments, particularly
private equity, then youdefinitely should be listening
to this.
So I think you're going toenjoy it.
Stefan, you have an amazingbackground and you were at
Barclays for eight years, andwhat are some of your most
(05:07):
valuable experiences from thattime?
Speaker 2 (05:11):
It was a long eight
years, so I had a lot of
experiences, but I think back inthat time what I most remember,
from the day in and day out,was the opportunity to work with
really smart and motivatedpeople, and so I think that's
what kept me there as long as itdid.
And, honestly, investmentmaking, particularly out the
(05:34):
gates post business school, canbe a bit of a grind.
The hours are long and it'sknown as an industry that turns
through people, but ultimately Ifound that people that stay
past their associate years and Istayed through my associates,
through VP and into director isyou find good people to work
(05:55):
with that are smart and that youenjoy your day to day with, and
so I can think of individualdeals I worked on and I got a
chance to work on some reallybig deals there some $130
billion deal.
I got a chance to work on a $70billion deal, and all that
stuff's really just numbersright and deals.
Those are big deals.
They're big deals in the schemeof investment banking but at
(06:17):
the end of the day, deals aredeals and there's a whole
process to them and you got togo through all the steps,
whether it's a $10 billion dealor a $10 million deal.
But the most rewarding piece ofit for me was finding a good
group of people guys and girls Iworked with day in, day out on
those deals and got to learnfrom, and so it's an industry
(06:40):
that has a reputation, but thepeople that are dynamic for sure
, and particularly at a largebank like I was at at Barclays
that offers so many differenttypes of products and services,
you can stay there for a longtime and continue to learn.
You're not just doing the sametype of deal day in and day out.
(07:01):
Every company you work with hasdifferent needs.
Speaker 1 (07:04):
It's interesting.
You know, one of the firstthings you brought up were the
people you work with motivated,smart people.
And boy, that's true ineverything in life.
When you're around people thatreally want to accomplish
something and they're willing toput in the time and effort and
they're enjoyable to be around,life is so much better,
(07:26):
especially if you're doingsomething that takes a lot of
time, I agree.
Yeah Well, you also haveextensive experience within your
investment banking years andthe communications and media
sectors.
What are some of theinnovations or trends that you
witnessed over that time frame?
Speaker 2 (07:49):
Yeah.
So I'd say the biggest one thatcomes to mind is the, you know,
cord cutting right.
So we were servicing large,diversified media companies and
you know the cable as a systemand a pay model you know emerged
in the 20, 25 years, was thecash cow for a lot of these
(08:10):
companies.
It was an incredible cash cowthat just continued to grow and
grow and grow.
As you know, different networkscontinue to add channels and
got paid for them and you know,as us, as consumers, we're on
the receiving end.
Everyone is paying for theircable bill.
Watch it grow in one direction,for, you know, decade after
(08:31):
decade.
And then all of a sudden, youknow, with the arrival of OTT
and the ability to deliver videowithout a cable box, you know
that model got turned upside iton its head and so the cash cow
for these companies was underdirect threat.
And it wasn't, you know, wasn'tthey themselves, like often the
(08:54):
case, that were disrupting themodel.
It was outsiders, right, youknow, in the early days,
addition slaying, and nowYouTube TV sort of emerged as a,
you know, google owned entityobviously has emerged as a
leader in the space, but not,you know, you got Netflix, not
even cable right and justad-free programming, Hulu and
(09:14):
all these other different, youknow, animals that just didn't
exist, and so that was decidedlyone of the enormous challenges.
You know that the big, largeincumbents were up against.
Obviously, the admin of thesmartphone is a piece of
hardware, and the software thatcame with that fundamentally
(09:37):
disrupted a lot of differenttypes of media but also brought
around new industries.
So I think of those two asprobably you know, we're all
familiar with them because wetouch those in our day to day,
but those are two of the largestthat we were definitely facing
on a day to day basis.
Speaker 1 (09:52):
Well, you know, along
the same lines and maybe going
deeper on the subject of M&A, Imean, as someone who has
experienced leading over $200billion in M&A transactions, you
know what would you say aresome of the key elements of a
successful M&A deal.
Speaker 2 (10:15):
Good question.
You know every M&A deal.
First of all, let me make itquick, clear, because leading
would be a would.
I would be negligent if we sayI led every deal.
Those are the firm we led, butthese are massive undertakings
for an investment bank, Like Ithink of.
you know, we did the Verizon,Verizon Wireless deal with
Vodafone, which was the $130billion deal I mean that brought
(10:38):
in 100 people from the firm.
Sure, but you know,extraordinary, extraordinarily
complex deal and particularlyextraordinarily complex capital
market raise.
But you know, when I think ofM&A and what works and why it
works, both in execution andpost merger, it's really, it's
pretty.
It's pretty much fundamentallybased on high value, oneifiable,
(11:02):
executable synergies and 90% ofthe time that's going to be on
the cost side.
And so it sounds basic, but youwould be surprised how many M&A
deals are put together withother, grander ambitions that
you can't really point yourfinger on exactly how this is
going to return value and whattime frame and what method.
(11:23):
Oh well, these two brands shouldgo together.
They'd make sense together.
Why wouldn't we bundle this andsell it to the customer versus?
You have this asset, I havethis asset, I'm supporting it
with this cost structure, You'resupporting that cost structure,
we put it together.
We can remove that andimmediately, you know, create,
you know, real value that passesdown to the bottom line and
then returns to shareholders.
So all good M&A is based off ofcost synergies.
Speaker 1 (11:50):
So you know shifting
gears a little bit here.
You have this background ininvestment banking and now for
several years you've beeninvolved in private equity.
What attracted you to bothbanking and private equity, and
what do you enjoy most aboutyour work now?
Speaker 2 (12:12):
You know, I first was
attracted to investment banking
because I liked the energy andthe execution of doing deals and
say what.
You will maybe add a shorterattention span than you know.
I needed two at a time, but Iliked that you could put
together a deal, advise on it,get through it and there was a
(12:33):
reward at the end.
You close the deal and it feltlike a sense of accomplishment.
But in executing those dealsyou become a master, not in the
understanding of how businesseswork, but in execution, like
merger execution.
So your value add to thetransaction is shepherding that
(12:54):
deal from point of idea throughcompletion.
But then your hands off, right?
You'll stay with the company,you'll probably remain a trusted
advisor to the company, butyou're never going to be inside
the company, right?
That's not what they're payingyou for and that's not really
where your value is.
That's their expertise, right?
(13:15):
Much like when you go to sell ahouse.
You've probably sold maybe onehouse your life, maybe zero
houses, but the person you'reworking with has sold thousands,
and so that's where you come inand that's where you leave.
What I'm enjoying most aboutprivate equity is that once you
do the deal, that's really sortof the starting point and the
real work comes post-heal and itcomes in those next several
(13:39):
years.
And that, for me, has been bothan education but also rewarding
, because I've gotten I've had achance to work very closely
with management teams in a rolewhere I didn't in my role at
Barclays, and particularly withthe companies at the stage where
we're investing, which I sortof qualify as lower middle
market.
These companies are facingexistential questions day in,
(14:03):
day out, right.
The future success of theirbusiness is directly tied to the
decisions they're making.
This year, whereas, as inbanking, barclays was focused on
larger mid-cap companies,multi-billion dollar companies.
They faced some existentialquestions and usually, if
they're doing a merger, it was avery big deal.
(14:23):
But the products they had, theservices they offered, those are
pretty well established, right,and there was a marketplace for
them and they had competitorsand they knew who those
competitors were and companiesare working with.
Now you've got a product andyou're either going to win or
lose based on the next 24 monthsof your ability to execute,
(14:46):
against how you see the marketand with the team that you have
to execute.
So that's been exciting.
Speaker 1 (14:55):
Well, one thing that
has occurred to me especially.
I know that this is verydifferent, but you do have a lot
of experience in media and thisis different than that.
It's similar in some ways thisgrowing field of retail media
networks.
It's one of the areas that it'svery nascent, but it's
(15:19):
unequivocally going to grow intoa massive business.
We're still so early in retailmedia networks that we really
don't know exactly where it'sgoing to go.
One thing that's interesting isthere's a lot of firms
retailers out there that havetheir own hundreds of retail
(15:39):
media networks and when you lookat a CPG company, they can't
support all of them.
It's just not going to bepossible.
At least, I don't think so.
Again, it's interesting to knowwhat kinds of technologies
might be on the horizon.
Are you very excited about thatfrom an equity perspective?
Speaker 2 (15:58):
I am for certain, and
that's largely a product of
where we sit geographicallywe're in Bentonville, Arkansas,
which is home of the largestretailer in the world and then
also it's a product of some ofthe team members.
I have a chance to work with ouroperating partners at New Road.
We're former EVPs at Walmartand Global Brand Presidents at
(16:20):
Starcom and others, and, knowingwhat they experienced and
knowing the opportunity for theretailer and some of the
challenge for the CPG companies,anytime there's a new industry,
people are still trying tofigure it out.
And when people are stilltrying to figure it out, that
means there's opportunity fornew technologies to help them,
(16:43):
which in turn makes itopportunities for folks like us
to find companies, invest incompanies and help those
companies figure that out.
And so, given the bench oftalent we have, who knows how it
works inside those retailersand those brands, we're
optimistic that we'll be able tofind probably one, maybe two
(17:05):
investments in that space.
That allows us to takeadvantage of that.
But it is very nice and so I'mstudying, I think probably much
the way you are, and I don'tknow how it all shake out.
But where there's challenges,there's opportunities.
Speaker 1 (17:20):
Absolutely One thing
that I had thought of and, by
the way, if you're listening tothis, we're really having a
conversation about this.
At this point, no one knows theanswers to these things, so
we're just talking about it, butinformed discussion, if you
will.
We've all been involved inresearch on this.
But one thing I always thinkabout in nation industries is
(17:46):
what is the problem, and one bigproblem is that consumer goods
companies don't know how to dealwith this.
Where should they invest?
I see that as a problem thatneeds to be addressed somehow,
and I've wondered is there asolution to this?
That's kind of like amarket-based solution.
(18:10):
I don't know.
Speaker 2 (18:12):
I don't know either.
I mean, we looked at somecompanies to date that are sort
of just trying to put themselvesin the middle of it all and
sort of be the facilitator toallow that online and offline ad
inventory come to life.
This is a higher marginbusiness than the retail
business, so if you can add thisto your income statement, it
(18:38):
has a material impact.
Where you find those dollars inthe CPG, I think it's still
being navigated, but there is noquestion that if you've got the
footprint, the customerrelationships, the customer data
, there is a way to engage withthe customer as a retailer and
(18:59):
to monetize that, and so I don'tknow if it's a marketplace, but
there are currently softwaresand other advertising sectors
that serve as digital platforms,allow you to buy ads cross
channels, and so you can.
If you can take this inventory,which is still sort of being
(19:24):
built up on a bespoke basis, andmake that inventory available
to advertisers who are launchingcampaigns and just haven't
thought to put this tap intothis channel because it's a
nation channel, bringing thatonline is necessarily
opportunities.
Speaker 1 (19:40):
That's a good point.
It makes me think there'sprobably some existing
technology out there that maybeisn't perfectly designed for the
old approach, but with retailmedia networks, maybe this new
phenomena would close the gapfor them in terms of the
(20:02):
application of their technology.
We saw that so much during thedot com boom back in the 90s,
when there were all thesetechnologies that were created
at the advent of when theinternet was well, when the
World Wide Web was nascent, thatlater we realized oh, this is a
(20:23):
great application for whateverthe business is.
But it took years to really seesome of these things.
Speaker 2 (20:31):
Yeah, if I could tell
you the timing evolution, we've
all been in Vegas right now.
We should do that.
Speaker 1 (20:39):
There's so many
trends that are at a confluence
here, because if you look atlike the Omni-Channel approach
with buy online pickup at store,you're talking about
disruptions and industriesearlier, and one thing that came
(21:04):
to mind and part of it again isthis podcast is focused on the
retail value chain, as you know,which is about supply chain,
logistics, consumer goods andretail and their overlap.
And but you know Walmart, eventhough they're the biggest
(21:25):
player, they really have been adisrupter in this way because
they were creating buy onlinepickup at store before the
pandemic.
During the pandemic, it wasobvious that it was a brilliant
move.
You know they weren't doing itfor that purpose, but now you
realize, oh my gosh, that wasthank goodness they did that.
Speaker 2 (21:47):
I find that I mean,
this is a personal view, I'm not
saying it's right or wrong it'sobviously had some success.
I find it fascinating that theyendeavor to in some ways have
changed the customer behavior.
They had to teach them to buyonline pickup at store.
That was not a naturalphenomenon, you know, and you
(22:09):
know, just given their presenceto be able to have the stats,
like you know, 90% of thecountry lives within 10 miles of
Walmart.
You know, if anyone's gonnasort of you know, make that
available and sort of train thecustomer, it's gonna be them.
But yeah, not a lot of peoplehave made a living telling the
customer how to shop or behave,but obviously they had the data
that's for that.
(22:29):
It would work.
And then certainly the pandemicserved as a catalyst, but yeah,
it'll be curious to see howthat evolves.
Versus, you know, continued sortof the shrinky of the
last-bought delivery windows.
Right, I know I live half amile from a Walmart and I've got
Walmart Plus and I could haveit delivered.
I could have it by onlinepickup at the store.
(22:50):
But I still go in the store,you know.
But I also buy a lot of stuffonline.
So I think you know, like a lotof problems.
The answer is you got it.
You know.
Multifaceted, yeah, it's notjust everyone's gonna do one
thing, you gotta have everything.
Sounds like a cop-out, butcustomers want everything
everywhere all the time, and soit's not.
It just becomes it's new for ayear or two and then it becomes
(23:14):
brass tax.
You have to have it right, meetthem where they are, and
they're all not in the sameplace all the time.
Speaker 1 (23:20):
You know, we.
I remember I was working on aproject with an alum at Walmart
and at one point he said I'vegot to discontinue working on
this project.
I called into a new project andit was by online pickup at
store and back then they calledit grocery pickup, where they
(23:40):
expanded it.
But I thought, oh my gosh, thispoor guy.
I don't know if this is such agood deal.
You know it's like who's gonnado this.
But one of the firstexperiments they did with it was
a believe in Denver and theyfound out that a single parent
with children you know they mayhave shopped at two or three
(24:02):
grocery stores per week, but assoon as they tried my online
pickup at store, then theythat's all they wanted to do.
Because, it's so much easier,you know, if you've got little
kids with you, it's quite easyto just pull up into a space and
have someone put it in yourtrunk.
Speaker 2 (24:23):
Yeah, this is
anecdotal but or a side.
But you know, I moved down toBen Valerkin's show from New
York City and so I had owned onecar in my entire life before
moving here at the age of 37,and really didn't have like a
ton of drive-through experience.
And I was always and I'vealways marveled since I got here
is that you can pull into adrive-through, you know, and
(24:45):
there can be 10 cars, and thenyou look inside the restaurant
there's not a single person atthe counter and everyone just
doesn't wanna get out of theircar.
I just want they're justconvenient as king and they just
wanna stay in their car nomatter what.
So, and that's probably withkids too.
I've got two little kids.
A guy out of the car with kidsis gonna have a lot of time.
Speaker 1 (25:04):
Well, yeah, and you
know, you've spent most of your
life in New York City.
What year did you move toNorthwest Arkansas?
Speaker 2 (25:11):
December 2019.
Speaker 1 (25:13):
Yeah, so right before
the pandemic Exactly?
Yeah, what a change and what agood time to move here.
Speaker 2 (25:22):
Yeah, yeah, obviously
did not know that was coming,
but turned out to be a very gooddecision.
Speaker 1 (25:27):
That is a big change.
I know your wife is fromKentucky, so this is not too far
from where she was from.
Speaker 2 (25:37):
Nope, no, for her it
wasn't as much of a stretch
which she did, you know, grow upin Connecticut and had spent
the last decade in New York City.
But you know, benville'scommunity is multifaceted, like
I know it's one thing to say,but I think just so my friend
group here and you know thepeople we've met through schools
and otherwise and you've gotfolks from all over the country
(25:58):
moving here and I try to tell myfriends back in the Northeast I
think it very much feels likethe first semester of college
where everyone's sort of fromsomewhere else and meeting
people introducing themselvesand you know, you strike up
conversations and obviously someof that is selling hospitality,
which I wasn't, you know,familiar with but I've been
(26:19):
joined, but a lot of that's just, you know, people who are from
somewhere else and just sort ofkeen to you know meet new people
and I think that sort ofextends into the business
ecosystem here.
You know you've got a lot ofsuppliers who are coming down
here for two years.
They're trying to integrate andmaybe they've got families,
maybe they don't.
They're away from where theytypically were.
They may be going back, youknow, and they still are looking
(26:41):
for some community and soyou've got I think you've got a
level of sort of curiosity, andthen you also have heard someone
describe this well today, likethere's a level of trust in the
business community here, and I'mstill trying to figure out
where that comes from, but it'sa great thing to have if you're
trying to get things done.
(27:02):
No kidding, trust facilitates alot, and so when there's, you
know plenty that reach trustbecause people aren't worried
about you know things being azero sum game and the area is
growing and you know Walmart'sdoing well and Walmart's growing
and JPMH is doing well andTyson's doing well, and so to
get energy, you know.
Speaker 1 (27:22):
I wonder now, of
course, you being at New Road
and New Road being focused onthe retail value chain, and most
of your investments have beensupply chain logistics but also
some other areas related to that, including media and consumer
(27:46):
goods types of companies.
But Northwest Arkansas has whatI would characterize as the
highest density of expertise inthe world in the area of retail
value chain and so there's lotsof confidence.
You were talking about trustand I always think you know, I
(28:08):
think back to this article Iread a while back.
It was an academic article kindof looking at what are the
variables that really buildtrust between businesses and
organizations, and there's threethings one is that you have
confidence.
Two, that you the other sidebelieves you have their best
(28:29):
interest in mind.
And then the third one is thatyou will do what you say you do
integrity kind of a piece of itand I wonder sometimes you know
our community, although it'sgrowing and there's abundance,
you know there's so much valuebeing created here in so many
ways and a lot of early stagecompanies are popping up around
(28:53):
here, way more than if you wouldhave told me it was gonna be
like this when I moved here in1994, I wouldn't have believed
it you know, but it is happening, but I wonder if some of it is.
Yeah, there people really have alot of competence here.
You know, I know as a professorover the years I always liked
(29:13):
it when our students at least inan internship or took a job at
Walmart, because Walmart's sogood at giving you lots of
responsibility.
You know, a lot of times yourfirst job, you're doing
something, but you don't havereal responsibility.
But you know, at Walmart youreally do, and sometimes it's
(29:35):
massive.
And I know, sometimes when Imeet these young people who I
had in class a couple years agoin there managing a billion
dollars worth of buy, it's likeit's hard to believe.
Speaker 2 (29:49):
Yeah, you know, I
think of the, the R-Team members
, and I think of the experiencea lot of them have at these very
senior enterprise, you know,leadership roles, and many of
them are for war executives,some JB Hunt, but I sort of want
to attribute that humbleness tothe region.
(30:10):
You know, maybe it's some SamWalton DNA and otherwise, but
yeah, these are like the topechelon of operations of
companies.
And you know, from New York, Idon't know if I'd see people in
those similar positions with thesame sort of humbleness.
(30:30):
And I Mean the DNA of Walmart,you know, goes into everyone,
everyone here, and it seeps ineveryone in some way, and that
frugality and that, you know,modesty of living and whatnot.
But you know, maybe some of itis, some, it's definitely that.
And then I think there's just,you know, there's a maybe it's,
(30:53):
you know, the south, or there'sa willingness or eagerness to,
you know, help others and teachothers, almost like there's.
You know there's more, there'smore time of the day for that,
whereas in New York it felt likeeveryone's right out of time
every single second.
And if you weren't, you know,if it wasn't a clear sort of
(31:14):
Return on my investment of timein this moment and maybe I sort
of start questioning.
You know it's time well spent,so how it's interesting insight.
Speaker 1 (31:25):
We know you, you are
Unusual, but there's more and
more people, as you've said,that are moving from all over.
You know place here.
I know when my neighbors arefrom literally all over their
country in the world, but so youknow you spent most of your
(31:45):
life in New York City.
You've lived in almost everyneighborhood in New York City
and Manhattan, yeah, and you'realso an alumnus of both the
University of Pennsylvania andColumbia Business School, where
you got your MBA.
Would you mind telling us justa little bit about how your
(32:06):
academic Experiences influenceyour approach to the world of
financial investment?
Speaker 2 (32:13):
Yeah, sure, you know
I went to undergrad at Penn, but
I didn't study finance there,so I wasn't in the Wharton
School.
You know that that's sort ofinterests in Finance grew out of
the first role post Postundergrad in which I was working
(32:36):
at a in media, at a at acompany that had just raised a
billion dollars of capital andwe, you know, we had investment
bankers in our Office everysecond to help us raise that
capital then to do a bunch ofdeals that we did after that,
and so I sort of got turned onthrough it and through that lens
.
And then, honestly, there'sjust energy in New York within
(32:59):
finance, like it is the dominantsector, sure, and so you know
much the white people in thistown talk about.
You know container shipping andyou know and less.
You know LTL and you know TEuse and all the, yeah, every
other variable under theiracronym under the Sun.
Yeah, you're there, you'retalking finance, like that's the
sort of you know what you hearIn the street.
(33:22):
And so I got Visibility intoyou know that one through.
You know work, but also had alot of friends who had gone into
the industry and so then I madethe transition to banking
through through.
Call me business school and myeducation for you know, to
specifically, if I had startedreally there and I joined at a
(33:44):
unique time.
I joined, I started at Columbia, 2009, right right after the
right after recession.
Speaker 1 (33:51):
Yeah and so yeah
because I think the recession
officially ended in June of.
Speaker 2 (33:57):
So I think, yeah, I'm
at stock market low was March
6th or 9th of 08 or something.
Yeah, I think Maybe was 09.
Regardless, it was right thenlike, and you know we even
brothers collapsed Park wasactually bought, leaving
brothers, leaving brothersBarclays in Abbey, us, and mess
making presents, really any realcapacity.
(34:18):
They just picked up leaving thenext day and, you know, took
every, took everyone, all 10,000employees with them and just
changed the color of the carpet,really.
But the education, you know,for me was through business
school and then, you know, youknow, through my network, but
you know, clemsi had a greatfinance program.
They always have.
You know it's one of the sortof feeder schools into finance.
(34:40):
You know, it's based in NewYork, in particularly sort of in
that time, you know, we studieda lot about the financial
collapse and so it's interestinghere as we sit, probably, you
know we're definitely in acorrection, certainly within the
venture capital space, fromright the highs of where we were
(35:02):
12 or 18 months ago.
And I work alongside, you know,team members who, you know, no
fault of their own, has spenttheir entire career in a and a
boom right and and that's it's afunny place to grow up Because
it's not a reality.
You know zero percent interestrates never work a reality, and
(35:24):
certainly an extended zeropercentage rates Haven't been
reality, nor should they bereality really.
But that's where we've been.
And you know, if you grow up inthat you can only, you can only
help it, sort of have thatinfluence how you think about
investing and how you think theworld sort of ultimately shakes
out.
But you know, I was in New Yorkduring the dot-com crash and I
(35:47):
was in New York during, you know, you know, great recession and
so sort of have a little in 9-11and 9-11, yeah, yeah, and then
so you have all those things andyou understand that you know
this is sick, like everyindustry.
You know it's cyclical,cyclical.
Speaker 1 (36:04):
So you know, I had a
soft venture capital based back
software company in the late 90s, early 2000s and I remember we
were closing our biggest dealever on 9-11, you know, and, and
everyone started leaving themeeting and I didn't know why
(36:30):
and, but after that everyone puttheir IT budgets on hold and we
really are.
Our sales went down fast.
We I think I laid off half.
We were up to about 120 peopleat that point.
I think I laid off half of thepeople by December and to your
(36:53):
point, I mean I got into thatbusiness at it during growth.
That was unfathomable, yeah,yeah that late 90s growth was.
And it was easy to raise money.
I mean, I remember literallythe first presentation we made.
We got $2.5 million in 1998.
(37:16):
And I thought, well, this isnot so bad, little did I know.
And then we raised 7.5, andthen 20 on the third one, and
then not laugh to.
That is when everything camecrumbling down and we were so
focused on, well, planting theflag in that space.
(37:37):
Sure, yeah, but it really is toyour point.
It's good to have experiencedsome ups and downs.
Speaker 2 (37:46):
Yeah, yeah, it's
never as bad as you think.
It is never as good as youthink it is.
And so staying level headed, Ithink as an investor, is one of
the hardest things to do, bothin the when things are going
great don't drink your ownKool-Aid and when things are
going badly, the world's notfalling apart, it's so.
(38:09):
I mean, you always have to writeit down or put on a note in
your desk or get a tattoo, butyou just you can't get too
caught up in the swings.
And so where we are and it'sthe way that companies should
have always been thinking isyou've got capital, and that
capital is you've got to almosttreat it like it's going to be
(38:31):
your last capital, Right, Likeyou got to.
You can't be just reliant onthe market for the next race,
and so you've got to think aboutthe top and bottom line, and
certainly I think the industryas a whole lost focus of the
bottom line, without a doubt,for a couple of years there.
But I'll tell you what.
(38:51):
Right now that is definitely oneveryone's mind.
I'm in an extending runway, youknow, unsure, being unsure
about what the capital marketslook like at any given moment.
It's keeping a lot of CEOs andboards awake at night.
Speaker 1 (39:06):
We know to that point
.
You know the investmentlandscape in so many different
dimensions is constantlyevolving, and how do you stay up
to date with industry trendsand developments?
Speaker 2 (39:23):
You mean within in
the S-pins, like an instruction
and things like that, or morejust with the you know how do we
find source and deals.
Source, okay, yeah, you know welook.
Sourcing is legwork, right, yougot to take that and the
meeting You've got to, you know,track your companies.
(39:46):
You got to figure out wherethey are.
You got to meet them beforeothers too.
There's just a level ofblocking and tackling that needs
to be done, which I sort ofjust good business practice
management.
Yeah, we've got our own CRMs.
You're out there identifyingcompanies early at conferences
through, you know, onlineresearch, through our own
(40:08):
networks of other investors thatwe, you know, partner with.
That we like that may come astage, you know, earlier than us
, who feed us deals and say, hey, this is not a deal that you
know fits us because it's grownout of our size threshold, but
would fit you and we know thatyou guys can add value, so we'd
love to you look at it andpotentially be on the board.
That is brass tax for being aninvestment firm.
(40:31):
Like, you have to do that.
You have to do it well and youcan put resources against that,
you know, myself included.
But you know we've got a teamthat you know as well, I guess
well oiled at this point that'sdoing that day in and day out.
You don't want to miss the next.
You know Airbnb, right.
But the other piece that I thinkis unique to us is that we've
(40:54):
got this operating partner model.
So they keep talking aboutthese.
You know guys and girls withlong-stoyed careers and they've
got their own networks that theybring to the table and through
those networks, you know, theyhave deal flow that they share
with us that we may nototherwise see, because you know
they might be, you know, have arelationship with someone who's,
(41:15):
you know, inclined to share,and I'd invest my deal with them
earlier than you know, sort ofbringing it to the you know
others like out, like you knowothers, or just maybe other
firms that are more just pureinvestment firms, right, not
necessarily having the samevalue at expertise.
Also, I would say what's mostimportant, like anything in life
, is focus, and so if you knowwho, you are sourcing a lot
(41:39):
easier than if you don't,because if you don't, everything
could be a good investment.
If you do, it allows you to, youknow, not go a mile wide, an
inch deep, but rather, you know,really understand a sector and
then identify all the potentialcompanies and opportunities in
that sector.
And so where I feel fortunatein my role which you know is an
(42:04):
affirm without our level ofoperating expertise is my job is
, you know, more difficult,because I've got to identify the
subsectors, write the thesisand make a bet on that, on that
sector.
Where I get to do now is lookto 150 years of operating
experience and say, hey, what'sbroken, what needs fixing it,
(42:30):
what's changing?
And then from there we you knowthat starts us off from a sector
focus- you know, perspectiveand then we can dig deeper and
figure out okay, those parts arebroken, People are trying to
fix them.
Do we believe that thesolutions that are coming to
market now are the right ones?
And is this industry going toget quote unquote fixed in the
(42:54):
next, or this problem able toget fixed through technology
over what is our investmenthorizon, which would be sort of,
you know, typically five, six,seven years max.
So, but gosh, that's a toughjob to do.
If you're just reading whitepapers and you're not, you
haven't spent 30 years inindustry.
Speaker 1 (43:15):
Yeah, well, that is
something really interesting.
That intrigued me about NewRoad was just the I mean the
people you have as operatingpartners as well as in the
financial area, but theoperating partners having the
focus on the retail value chain.
You know someone like ChrisSultemeier who was EVP of
(43:36):
logistics globally for Walmart?
Really, I don't think anyone.
There's no other company withmore logistics breadth and depth
globally than Walmart.
I mean it's private company.
Speaker 2 (43:52):
Yeah, notice that
they ship three times as many
goods as UPS per day orsomething.
Yeah, there's some.
Speaker 1 (43:59):
And also, I think,
the innovativeness that comes
from all of that experience aswell.
But, looking ahead, what areyou most excited about in the
coming year or years?
Speaker 2 (44:15):
for the, for any
investment landscape.
I'd like to figure out you knowwhere the bottom is here.
Right, this market, I thinkwe're still.
We've got this.
You know public marketsobviously been doing all right,
(44:35):
you know, the last couplequarters.
Yeah, I would.
I would love a little bit moresort of normal times, if you
will.
I'd love to figure out if youknow, now is timing's everything
and investing right.
And so, if I figure out, isthis, is this next six month
(44:55):
period, and I won't know untilit's really over, but is this
next six month period sort ofthe right time to invest?
Or, you know, is there further?
Is there room to sort of for itto further?
You know evaluations to sort ofreturn to more normal?
What is the quote unquote, newnormal, right, and I don't you
know.
Look, you don't have to get itperfectly right.
(45:16):
You know, to have a great fundand great investment, you can't
get it absolutely wrong, right,doesn't you?
Look at what you know?
some of the larger investors youknow, not going to throw out
names there, but you know whothey are like.
You know we've had massivewrite downs and their largest
funds, yes, in the last couplequarters, like, and they were
(45:36):
just they were in market for youknow quite some time just doing
a lot of deals at pretty frothyevaluations.
You can't do that On the.
You don't need a bottom tick tomarket.
But I'm we're still trying tofigure out, you know is is, is
there more room for it to to goout?
I think that when we're seeingthe market is that higher
(46:00):
quality companies there's plentyof appetite still for right and
companies that don't have themetrics that they should have or
you know to warrant a superiorvaluation aren't getting them,
and so that starts to feel likesort of the way it should be.
You know good companies getrewarded.
(46:20):
You know less good companiesget lower valuations.
That feels a little bit youknow and act intrinsically like
the way valuations work.
I think what's going to be aninteresting to watch over the
next 12 months is just how manymore companies, frankly, are
going to go under.
(46:40):
You know where there's just nomarket for them, right, not like
a lower valuation, but nomarket.
And that's where, honestly, ifyou've got your M&A hat on, you
know M&A often happens whenpeople are feeling good about
their stock price and you knowtheir currency is very valuable
(47:02):
and they're buying things inshares and or they've got a big
balance sheet, you know, greatcouple years, or because they've
raised additional capital forM&A.
The M&A could also happen indownturns out of necessity, and
anyway it happens.
If it happens, you knowstronger companies can emerge,
particularly if there's a lot ofyou know value in those mergers
(47:25):
on the synergy side, the mindmarket sharing costs.
So I think there's going to befor the smart folks out there
some good opportunities to rollup some industries and put
together some companies for thenext few years.
Speaker 1 (47:39):
Stefan, thank you so
much for sharing with us.
This has been outstanding,really appreciate it my pleasure
.
Speaker 2 (47:45):
Thank you very much
for having me.
Speaker 1 (48:15):
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