How Private Equity Pros Build Enduring Value with Discipline & Data | Brian Neider, Lead Edge Capital

[00:00:00] Sean Mooney: Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices, and real-time trends. I'm Sean Mooney, BluWave's, founder, and CEO. In this episode, we have an awesome conversation with Brian Neider, managing partner with Lead Edge Capital. Enjoy.

[00:00:34] I am very excited to be here with Brian Neider today. Brian, thank you for joining.

[00:00:40] Brian Neider: Thanks for having me.

[00:00:41] Sean Mooney: I've been looking forward to this one for a really long time because of the uniqueness of the story of both you and Lead Edge. And I think there's gonna be a lot to dig into during our conversation here.

[00:00:54] And so maybe with that in mind, let's just jump right in. And to kick us off, Brian, I'd love if you could kind of just start with the story of you and where'd you grow up, formative experiences, college right outta college, how you ultimately got into pe, et cetera.

[00:01:09] Brian Neider: Happy to do it. My path, I think it was relatively usual.

[00:01:14] I grew up in New York until I was about 13 years old. My father. Had run a manufacturing business and always loved running his business, managing it, growing it. He started out on the factory floor there, ended up managing the factory, ended up becoming a partner in the organization. It was a thinly traded public company at the time.

[00:01:36] Ended up taking it private and ran the business. Was the only company he ever worked for in his entire life growing up. He ended up moving our family from New York down to South Florida in the mid nineties. And the reason for that was he just was tired of dealing with union issues in New York and Florida was a much better economic climate for hiring factory workers and ensuring productivity.

[00:02:01] And so we ended up moving down there when I was in like eighth grade and that's where I grew up. So I grew up in Bo Raton, Florida. It's a wonderful place to grow up. A lot of people say to me. Gosh, were, were you like the only person that was under 90 years old that lived there? No, I was not. It was a great, vibrant community down there and it's, it's a wonderful place to grow up.

[00:02:19] I grew up there, went to high school. There was pretty competitive growing up. Played a lot of sports, wanted to excel academically. I was lucky enough to get into Penn for college and I went to Wharton for undergrad, and so studies took me back north to Philadelphia and. I think there, I, I just felt like I was surrounded by a bunch of really smart, interesting people and I always wanted to do something entrepreneurial.

[00:02:44] When I was in college, I took on a lot of leadership positions and tried to do some pretty cool, unique entrepreneurial things around fundraising campaigns and charitable endeavors and things like that, and I felt like maybe one day I could do something like that. I graduated from consulting for a little bit, actually had my.

[00:03:06] Startup for a short amount of time. I moved back to Florida for about a year with a friend of mine from Penn, and we bought a small beverage distribution and vending business, believe it or not. And we did pretty well with that. But after a year of doing that, I decided, gosh, it's really hard answering service calls.

[00:03:25] And we had a couple people working for us and it was just a tough business. I really felt like I. The sales skills that I learned, I liked the idea that I wasn't behind the spreadsheet all the time that I was out there talking to people all the time. That actually, believe it or not, led me to private equity.

[00:03:43] We sold our small company and I got a email right at about that time to my fraternity listserv from a guy who had graduated a couple years earlier than me and he said, my cousin is a partner at a firm called Bessemer Venture Partners. And Bessemer is the oldest venture capital fund in the United States, and they need somebody to go out and do deal sourcing.

[00:04:08] And Bessemer had always kind of done their deals the same way. They would take lots of early stage business plans, evaluate them that do 10 or so deals per year, and they had noticed what a lot of other firms started doing, which was they would hire young folks, 22, 23, 25 years old, somewhere in that range.

[00:04:26] To do cold calling and find deals for them and open up the top of the funnel. Bessemer had never done that before and they heard what I had done a couple of my college endeavors and then they heard what I had done in kind of like building this business over a course of a year down in Florida doing book series of vending routes, and they said, it seems like you won't take no for an answer.

[00:04:46] You'll be good at getting out to people. You're just the type of guy that we would want to hire for this job. And they basically gave me a phone and a computer and they said, look, like we don't even know exactly what we're looking for in regard to companies and the types of businesses, but we know that there's stuff out there and there's probably companies that are 10, 20, $30 million of revenue that are on a growth path where we could potentially get involved.

[00:05:09] And those companies are not otherwise calling us. We have to find them, but we have no mechanism to do it. Historically, they had no CRM system, no data systems. We basically built out a series of workflows off of the work that I was doing there. I started out keeping track of my calls over a Excel spreadsheet and then eventually we bought a CRM system and we started customizing it.

[00:05:32] About a month into my working there, they said, look, we're gonna hire one other person to do this job. We feel like it might work really well, and we'll find some really interesting opportunities. And this guy shows up, this guy Mitchell Green, shows up and, and they said, we're gonna hire this guy Mitchell.

[00:05:45] He's gonna share an office with you. That sounds great. I'd love to have a new friend here, and I was like the youngest person at Bessemer at the time, about like eight or nine years. And so having somebody else my own age there was great. We became fast friends. He did the exact same job as me and now almost 20 years to the day, I would say later, we are now partners at Lead Edge Capital and so we've been working together for the better part of 20 years.

[00:06:09] We ended up over the course of three years at Bessemer, between 2005 and 2008. Cold calling. We left about 20,000 voicemails for companies, wrote 20,000 emails, had 7,000 substantive calls with businesses, and I'll tell you, you don't know what makes a good business until you talk to like 6,000 really bad ones.

[00:06:26] Then the good ones really start shining. We learned very quickly, we created a series of metrics to screen for opportunities, and I just loved it because I felt like. It gave me the opportunity to be on one hand, kind of like an investigative journalist. Go in there, find out about these businesses, get people to talk to me, get information, but at the same time, you're selling and you're trying to figure out how can I help you?

[00:06:50] And we did a very good job of that. And that's really how I broke into the industry. And there's a lot more to this story. Eventually we left and both went to business school and Mitchell started a small private equity effort within a hedge fund, and that eventually became Lead Edge capital. And he started calling me saying.

[00:07:06] You've gotta come join me, this is gonna be amazing. And he raised the first fund on his own. It was a remarkable feat for him. And I came to help him run it right after that. And we had a, a third partner, Neme Meta, who was from Insight Partners, and it's been the three of us running it for the last 13 plus years.

[00:07:24] We've got an amazing partnership now with a bunch of other partners that have come along that are doing deals now that are better than any of us are. And it's been really cool like building a business and building an investment franchise together.

[00:07:38] Sean Mooney: Hey, as a quick interlude, this is Sean here. Wanted to address one quick question that we regularly get.

[00:07:44] We often get people who show up at our website, call our account executives and say, Hey, I'm not private equity. Can I still use BluWave to get connected with resources? And the short answer is yes, even though we're mostly and largely used by. Hundreds of private equity firms, thousands of their portfolio company leaders, every day we get calls from everyday top proactive business leaders at public companies, independent companies, family companies.

[00:08:08] So absolutely you can use this as well. If you want to use the exact same resources that are trusted in being deployed and perfectly calibrated for your business needs, give us a call. Visit our website@BluWave.net. Thanks. Back to the episode.

[00:08:27] I love your story there. There's, there's so many themes that kind of jump out at me and one, I think we shared a little bit of some common themes between us coming up as kids. My dad and my mom were from Cleveland and they started off working with the family, business, manufacturing companies, and eventually we moved down.

[00:08:44] We didn't do Florida, you had better water in beaches, but we moved down to Texas for the same reasons, like the business climate is better opportunity and really to move there to build a business. No Osha listening aside, like I, you know, as soon as we were old enough, we were all working in the plant.

[00:08:59] And so I was, uh, there you

[00:09:00] Brian Neider: go.

[00:09:01] Sean Mooney: It's like, I, I, you can still see if you look close enough, there's like safety yellow paint under my nails.

[00:09:06] Brian Neider: So it's funny. I'll tell you, my, my partner Mitchell, his father also ran manufacturing company. It was like a fourth generation family business, and we would always talk about it and be like, man, both of us thought one day we might run our family businesses, but now here we are investing and, and I think that it's worked out really well for both of us.

[00:09:24] Sean Mooney: It's so true. Like as I was listening to you tell your story, you could tell you grew up as a business builder from day one, and even when you're brought into Bessemer, one of these oldest things, you're like, how do we turn this into a business? Because a lot of the investment firms in the early days were kind of like round tables of really smart people that there were enough inefficiencies or there's just a different time where it wasn't maybe as hyper competitive.

[00:09:47] It's still always really hard. But from day one, as I heard you tell your stories, like, oh, we're gonna bring in CRMs and then we're gonna do the really hard front of the top of the funnel stuff. And then as part of that, you're getting like the world's best MBA in talking to 6,000 companies that no one could ever get.

[00:10:05] It's this whole idea of like hustle culture and compounding, and there's no way you could replace that. And then that led you to building this ecosystem and then starting a company of your own. It's led into, you know, one of the top investment firms in the country, if not the world today. I loved hearing that.

[00:10:21] It's one that warms my heart. So, but it's common, like you said, it's like people who get into your position, you kind of have like business building died in the wool almost.

[00:10:31] Brian Neider: I've always enjoyed it and I will tell you like the way in which you describe how investment firms were maybe 20 years ago, and today it's a little bit different, but back then I almost would describe it as like, it's like a series of fiefdoms.

[00:10:43] You have a guy who does. Infrastructure software, and then a gal who does application software and somebody else who does telecom and equipment and semis and healthcare and whatnot. You could see almost like a federation where nobody knows exactly all that much about anyone's deals, but you're pooling together and asking the right questions.

[00:11:01] And I think that a lot of what Besser had in mind at that time was how do we continue to engage the entrepreneurial spirit, but at the same time mechanize the operation of finding interesting opportunities. And calibrate on what an interesting opportunity looks like more from a metrics based standpoint than from a gut feel standpoint.

[00:11:20] And I think that that's a lot of the differential between what I would consider growth, equity investing, and early stage venture.

[00:11:27] Sean Mooney: Any new team members here, I tell them kind of the story of Blu wave, right? And it always starts with me starting off in investment banking and then the early days of pe.

[00:11:37] Part of me was saying, dear God, I wish I was 10 years older. Oh my God, I missed it.

[00:11:43] Brian Neider: But I was just having this conversation with my partner and look, it has not hurt us to have a 15 year bull market or a 12 year bull market that helps everyone. But I do remember, and probably about 2011, I'd worked for one other firm called FTV Capital, which is an amazing firm, right after I graduated business school and before I started with Mitchell.

[00:12:03] And I remember saying to one of the partners like, man, you are so lucky. You know, you graduated college like like a dozen years before me, 12 years before me. You just like hit it. You hit it at the right time. And it was amazing to be investing right after the internet bubble and getting into things in oh 2, 0 3.

[00:12:20] And he looked at me and he said, Brian, every single person who's ever worked in private equity. Has always said that about the generation before that, and there's always opportunity moving ahead and whenever anybody says that to me now, man, you know, you, you're so lucky. You kind of hit it at the right time.

[00:12:36] Like you're right, I did hit it at the right time, but there's always an opportunity ahead and it is incumbent upon you to identify what that opportunity is and then place your bet on it. That's what you gotta do with your career.

[00:12:48] Sean Mooney: No, a hundred percent. I, I call it my 10 years ago story, like every, like five years.

[00:12:52] I say it was easier 10 years ago and totally, but it is like, it'd be fair if I were 10 years older, I wouldn't even known private. I could have existed. I would've been just like an investment banker for life or something like, but I love that story and, and I don't even know if we peel the onion back a lot here, but I always do like to have what's maybe one other thing that we would know you better if we knew this about you.

[00:13:14] Brian Neider: It's funny, we took these like personality exams, like our leadership group within Lead Edge and one of the things that I scored like a hundred on, it was like off the charts. It was so directional was my tradition score and I think that I'm somebody who's very traditional. I believe in just like hard work should equate to the right results.

[00:13:38] I met my wife when I was 17 years old. She's really the only person I've ever. I think we had one brief breakup in the last 25 years, and that was during college. But I think I'm a very traditional person. I have a lot of deference for understanding what came before me, trying to learn what that was, derive lessons from that, and then incorporate it into my own spin on things.

[00:14:02] And I just really believe in tradition. And I would say I'm also relatively regimented. People make fun of me sometimes, like. It's Brian, I know exactly what he's gonna eat for lunch. I know exactly what he's gonna eat for dinner. And it's the same thing all the time. And I own it and I'm proud of it. And I think that it works for me and what works for anyone, they should just continue to do so.

[00:14:22] Sean Mooney: That resonates on many levels first, but it, it's this whole idea. I was talking with somebody the other day and they're like, what's like some of the defining factors of people who get into private equity and growth equity in the investment world? And I always said is the people are all smart. They're smart enough.

[00:14:37] Really it's this concept of discipline, tenacity, resilience, grit, just kind of keep on moving forward and kind of overcoming obstacles. That's in some ways what I heard is, I kind of was thinking what you were saying. I was like, that makes a ton of sense. And I had a really kind of embarrassing thing happen to me about two years ago and I'd say mentioned lunch.

[00:15:01] There's a's deli near my office. It was on a walk, but it was like a farther walk. So it forced me to get a little bit of exercise and I go there and the server there goes to me as I'm picking up my order. At that point, they know my name and they probably like hug me as I come in. You go, do you know that you have been here?

[00:15:17] I. 199 times in the last, you know, X days. I'm like, what? I, I was like, I immediately stopped going. I was like that I can't be going to Jason's Deli 200 times. I don't think I ever went again. I mean, I get

[00:15:31] Brian Neider: scared when I open up my DoorDash. I'm like, they only gimme three recommendations because those are the only three things I need, but I, you gotta own it.

[00:15:37] Sean Mooney: That's great. So I, I think that's a really good thing to know about you, and thank you for sharing that, Brian.

[00:15:41] Hi, this is Sean. Wanted to take a quick moment to tell you a little bit why BluWave exists. It's based on this whole notion that assessing opportunities and building business is really hard. We all know third party expert service providers can dramatically help, but at the same time, it's hard to know who's good.

[00:16:01] Usually leaving you, like I would do, and call friends and ask, Do you know someone who does this? Or just go the square peg round hole route. So after nearly 20 years in PE, I decided to solve my own problem and create a BluWave. Today, many hundreds of PE firms, thousands of portcos, leading public companies, private companies, All call BluWave to instantly get connected with the exact third party service provider they want that's pre credentialed by BluWave and perfectly calibrated for their need and really good.

[00:16:32] You too can give us a call or visit our website@BluWave.net. We're free to use and you can benefit the same way other top P firms do act the show.

[00:16:42] So maybe let's turn the page towards the next chapter here. One of the things I always love when I get the opportunity to speak with folks like you who have kind of been really, really successful in in the world of business building is get a sense for what's your scorecard on the company? Maybe what are some of the things that you look at knowing that these are kind of the elements of value, right?

[00:17:06] And this is kind of in some ways. How the world of business is done. And so I'm curious if you could share like some of those things, like what are some of the traits you look for that share? Like can this business be really good or more importantly, like what's its full potential after you're able to apply resource and capital?

[00:17:23] Brian Neider: What I would say is that over a long time period, two decades now, we've really applied like a very specific methodology to how we think about investing and then that. Coincides with what we think makes successful companies and ultimately successful investments. So I'll, I'll touch on that a a little bit as, as part of the answer to this, but I talked about our deal sourcing efforts at Bessemer, and I spent three years pounding the phones, talked to all these companies, and what we realized is it's very easy to have a lens on something that you might like that's entirely subjective.

[00:17:59] When you're talking about early stage investing, I could say, wow, this company's amazing. And you might say, nah, I don't think it's that great of an idea. And it's hard to like argue too much because it's pretty subjective. However, once you find companies that have a little bit of traction and some metrics and whatnot, you really could actually start identifying and force ranking the quality of those businesses based upon certain historical factors.

[00:18:24] And so a lot of what we've done at Lead Edge is really creating a framework. For investing and for what it is that we look at and what types of pitches we wanna swing at. So I'll tell you a quick anecdote. When I was working, doing cold calling 20 years ago, the guy that I worked for, a guy by the name of Jeremy Levine, who's a now a partner at Bessemer and was back then too, he said, look like just find companies, talk to as many businesses as you can.

[00:18:48] We're looking for software and internet businesses. That's our ecosystem. But. Each Monday we're gonna just talk through, and you and Mitchell are gonna tell me how many companies you spoke to. We'll have a record of it and, okay. Brian left 152 voicemails and he wrote 173 emails, and he had 12 calls with CEOs.

[00:19:04] Wonderful. Good job. That's what we're expecting of you. Fine. He'd then say, look, just present to me the companies that you think are the most worthy of follow up. I don't want all 12. I don't need a synopsis on all 12. Most of them are probably not gonna be very good, but if you have one or two that we should follow up on, that's what I want to hear about.

[00:19:20] What would happen when we started was everything was subjective. So we would say, I've got this great company and let me tell you a little bit about its product. And by the way, the CEO was amazing. She went to Harvard and she's a genius. And he'd say, all right, like there's a lot of people that went to Harvard.

[00:19:35] That's no big deal. Like, what do you know about the business? I'm like, I just told you about the product. And he'd say, no, no, no, no. Hold on. I didn't quite think this through. But only find me companies that have like $10 million plus of revenue. And I'd say, okay, fine. And the next week you go back, you go call a bunch of companies and you come back to 'em and you say, I found another company.

[00:19:54] It's amazing. Person went to Harvard. It's got a great product and they've got 11 million of revenue. I met your threshold. And he'd say, okay, all right, that's good. How fast is the company growing? And I'd say, oh, I didn't even know that I was supposed to ask that. He goes, look, only find me companies that are growing 50% plus year over year.

[00:20:10] Okay? Come back the next week. You say, okay, I got this person. They went to Harvard. They got a great product. They've got. 12 million of revenue and this business is growing at 75%. And he says, okay, well how many customers do they have? Do they have any concentration? I'm like, oh man, I was supposed to ask it.

[00:20:24] And basically we started creating a set of frameworks for what made a good company. And at Bessemer we had like five specific metrics that we looked for. And when we started Lead Edge, and initially when Mitchell started and then we started formulating our ideas. For what we should be doing in terms of investing.

[00:20:43] We created a a framework of eight metrics that we care about, and those metrics end up being size of companies, so we want companies that are 10 million plus of revenue growth rate. We like companies that are growing at least 25% year over year, and the reason for that is we don't take on a lot of leverage, and so we need operational growth to fuel the growth of the company.

[00:21:03] We look for high gross margin, so we like businesses that have like a 60% plus gross margin. It's a good indicator for future potential profitability. We like companies that are at or near break even. We don't love businesses that are burning tons of money. We look for recurring revenue models. We look for high retention rates.

[00:21:20] The other things that we look at, number one, a diverse customer base. I talked about that earlier. If a company only has two or three customers and you lose one, you're gonna lose a lot of sleep at night when you lose that customer. If a company has lots of customers, not such a big deal. Lastly, it's capital efficiency, and we identify how much capital has a company burned life to date, historically, relative to its size.

[00:21:41] We see way too many companies that have burned through a hundred million dollars to get to five or 10 million of revenue. It might be a great business. It's just not exactly for us. And so those eight criteria are what we deem as our strike zone. We have 18 people today at Lead Edge that do cold calling, talking to businesses.

[00:21:59] We have a very wide top of funnel. We speak to about 9,000 businesses per year. And from that, basically like the top one to 2% of businesses meet all eight of our criteria. And that's a good screening mechanism for us. But the problem is that's not a big enough sample set because a lot of those companies, they don't wanna do a deal that year.

[00:22:19] They have crazy valuation expectations. The founders aren't that interested in talking to you. There could be a whole multitude of reasons that things don't get done there. So we open up our aperture and we widen it, and basically we look for companies that meet six, seven, or eight of these criteria that's about a top 10% business, and we have to find a nexus of the right business, which meets that quality bar, plus the right valuation and structure, and those things combine to make the right investment.

[00:22:46] And the way that I articulated it to our team and to our limited partners and for people that follow us, is I look at that as our strike zone and I'm a baseball fan. I think about it in those types of terms. I'm looking to swing and we as a firm are looking to swing at pitches inside of our strike zone, and it's very much incumbent upon us to know what our strike zone is.

[00:23:07] Define that and swing there. Now the thing is you're gonna miss stuff along the way. We missed Bitcoin. It doesn't fit into any of these things. We would've missed Amazon 25 years ago. It would've been like a two criteria deal. Those things are things you could hit a home run off of, but you shouldn't be looking at it saying, I'm proud of myself for hitting home run.

[00:23:27] We would look at that and say, I'm not so proud about the fact that I swung in a wild pitch relative to where I thought that my strike zone is. And that's how we think about the world. And when I talk to our team, I say, look. I don't get too bent outta shape if we miss a deal that's outside of the strike zone and it becomes an unbelievable opportunity for somebody that's great.

[00:23:46] Where I get bent out of shape or where I get frustrated is if we miss deals that are directly in our strike zone and we've either decided not to swing or we never had the opportunity to swing, that's when there's a breach of our own responsibility to LPs to do everything that we can to see the deal opportunities.

[00:24:02] And so that's sort of the framing and that's really kept us honest and out of trouble. Over a 13 year period and I think will continue to sustain us well into the future.

[00:24:12] Sean Mooney: I love that articulation. And for our listeners here, Brian gave like an MBA masterclass on business there, so listen to this stuff that he talked about because he's right.

[00:24:22] So, and then, because I only know how to speak metaphorically, as you were kinda sharing the baseball analogy, which I love, I used to describe to people like what's the difference between kind of really good investment firms and others. And I'd say like really good firms, they're playing Billy Ball. This is Moneyball, where it's just like you're gonna do things consistently and it's like just get on base and work the runner's around and you're gonna be right more often than less.

[00:24:45] And then when you multiply the outcome times of probability you win.

[00:24:49] Brian Neider: I totally, by the way you said Moneyball, I did not. I will tell you, I must use the term Moneyball a thousand times a year in meetings because whenever our LPs ask us about what it is that we do, I talk about a Moneyball approach.

[00:25:04] You're defining a strike zone. You're defining what you're looking for. You're sticking with your knitting, and you're going for it. And that's what we like to do.

[00:25:11] Sean Mooney: Yeah, it's so true. Think about it from a probability weighted outcomes perspective, and more often than not, if you can stay disciplined, you're gonna win.

[00:25:19] And clearly you all have. I applaud you all for that approach, but that's not easy, right? Being disciplined is hard.

[00:25:26] Brian Neider: There's a lot of opportunities that are out there, and when you talk to 9,000 businesses a year, it's easy to be attracted to shiny objects and to have your head on a swivel. And part of where I think that we've been a really great partnership is all of our partners kind of believe in the same mission and they are very understanding of the strike zone.

[00:25:48] And so we have eight people at Lead Edge now that do deals, and it's a very unified mission. Because of that, I think that that's led to even more success because we have unbelievable people who are looking for the same types of things. We could turn over more rocks. It's worked very well for us, but you have to have at least a close enough religious belief amongst an investment team, because once you start changing things and people are chasing outside of the strike zone, it's not really a healthy dynamic at a committee level.

[00:26:18] You have to have sort of a north star that you're at least aiming towards.

[00:26:21] Sean Mooney: I think it's perfect and once again it makes me think of all these things. So we give books out to every team member who joins and this is kind of a stack of six books and one of 'em is, Collins is Good to Great. We tell everyone here, it's like, be a hedgehog, not a fox.

[00:26:34] Like be better at fewer things. Like let's just like stay focused. And clearly like once again, that's just something that I think is so foundational to success with that in mind. And this kind of like outcomes in mind. I'm curious, Brian, how do you think and how does your firm really think about the concept of value creation and how you're gonna bring resources that bring in addition to the capital and the fuel that you're bringing that are helping these companies kind of not only with their safety, but their success and their transformations that are underway as you're partnering together?

[00:27:06] Brian Neider: A lot of this goes back to our original construct, and we haven't really touched upon this yet. One of the things that we saw when we were cold calling talking to companies, and I know that my partner Nima saw while he was at Insight was when you find a company that you really like, you have to figure out how you can help them.

[00:27:24] Everybody's money is green. Everybody has the opportunity to to potentially finance a good business. The question is, how do you become the preferred partner and what types of value can you bring to bear relative to other groups that make you attractive? And when we're at Bessemer, we used to consistently connect companies with one another.

[00:27:42] You might hear one company say, Hey, I'm having some trouble building out my team in Europe. We haven't figured that out yet. You have another company that you're talking to the next week that's doing wonderfully that says, we've been killing it in Europe, we're doing great. And you sort of connect those companies together and all of a sudden the CEOs really appreciate it and they say, man, this is very helpful.

[00:28:01] You're think, you know, the one who's having some trouble in Europe is saying, you're thinking of me. You're remembering that I told you that I was having an issue there, you're trying to help me. That's a partnership mindset. The one who's doing well in Europe is more than happy to talk about how things are going for them, because usually people like talking about the things that they're doing well, and one of the things that we want to do at Lead Edge, and it really was the brainchild of my partner Mitchell, was how do we create a system or a framework for our business, for our organization?

[00:28:30] Where we have a unique value add and a unique value creation lever. And what we came up with that was really hard to build in the beginning, and I think now we're very much mechanized to do it, is we have a really unique limited partner base. So most funds go out, raise their capital from a disparate group of like pensions and charitable foundations and the like.

[00:28:51] We've taken a little bit of a different approach and so when we started out. Our first fund was a $52 million fund. It had about a hundred individual limited partners. Many of those LPs were people who had built businesses that Mitchell had cold called while we were at Bessemer, or people that were on the boards of the universities he went to.

[00:29:09] And it started out with him sort of asking them for money and doing things on a deal by deal basis, and eventually it turned into a fund. And the message to our LPs has always been don't invest unless you're willing to help. The portfolio companies and help us throughout our deal life cycle. And today our firm has blossomed.

[00:29:28] We have about 700 individual limited partners. So our last fund is a $2 billion fund, and about half of the capital comes from 700 individual limited partners. Half of the capital comes from some traditional institutional investors. The 700 individuals are quite helpful, and we really think about building them out and building out that LP base on three distinct axes.

[00:29:48] One is geography. We have people in basically every major city in the United States, most major cities in Western Europe. Second is functional skillset, and the idea there is we have CFOs, CEOs, CIOs, chief marketing officers, and then lastly, we have people in lots of different industries. So we have people in automotive and aerospace and retail and healthcare.

[00:30:10] And what that does for us is it creates quite a broad, limited partner base with a broad set of experiences and expertise, and it's somewhat deep as well. And so when we have a portfolio company that says, look, we're looking to hire a new CFO, we'd love for somebody to help us create an interview guide and maybe help do some interviewing for us.

[00:30:30] Maybe we could tap some of the CFOs within your network that are LPs to help us do that. We say, great, let us introduce you to a couple. Or maybe it might be some tactical guidance where one of our companies says, we're trying to crack this business and they're a potential customer. We don't really know anybody there.

[00:30:49] Do your LPs know somebody there? Could they make an introduction? And we're able to help that way. And by having that amazing group of 700 LPs who are communicated at. And sort of understand that they're gonna give in capital, they're gonna be a true limited partner, but that we are gonna ask them for some help along the way, but without bothering them.

[00:31:09] That's a very powerful thing, and that has served us well. And so if you talk to any of our portfolio companies, I think a lot of what they'll say is, Lead Edge has a very unique model where they tap their LPs, the LPs helped throughout the lifecycle of the deal, and they could just add value in unique ways that other firms probably can't.

[00:31:28] That has been a unique selling feature for us. I think that that gets us into deals. It has put us into orbit with other firms that have been around a lot longer than us, and I think most importantly, it's driven great results, which become then a self-fulfilling prophecy because our management teams like working with us, and then once they have exits, they actually end up investing with us.

[00:31:47] We have over 70 LPs that at one time were portfolio company executives that are now LPs. It's turned into quite a good network. That can be uniquely helpful. And it's just as simple as allowing people to understand what are the expectations coming in, how we're gonna try to leverage them, and then doing what we said that we're gonna do.

[00:32:08] And that's been probably the biggest driver of value creation out of anything that we do.

[00:32:12] Sean Mooney: I love that. Particularly, as you can imagine, I given the business that I chose to create here, I fully appreciate the power of network effects, right? And what you've done is create this symbiotic expert network.

[00:32:26] It's directly tying your LPs, the companies that you're investing in, and making sure everyone has mutual skin in the game that can do nothing but drive excellent results. And so the p from before this, I was coing our information data kind of marketplace practice. And one of our businesses was a large expert network that created the industry.

[00:32:48] And so you can imagine who that is. The power of that was just so substantial, right? Where you could talk to anyone that you needed within an hour, you'd at least get you up to speed. But what I really like what you're doing and somewhat what we were addressing here is like, I need something more than that one hour.

[00:33:03] I need something where there's more meat to the bone. That's more complex, that's more nuanced, that has multiple variables. And what you all have done is very, I think artfully created something where you address that more. In a really supportive, as I said, kinda like symbiotic way.

[00:33:17] Brian Neider: Well, everybody always talks about like, what is the moat around your business?

[00:33:20] And I look at us and I say the moat around Lead Edge's business is that we're very strong at communicating with our limited partners, identifying what it is that we're gonna try to leverage them for, and then following through on that and then having a unique limited partner base. So when we first started, it was just really an idea and it was, let's go find the limited partners that.

[00:33:41] Are willing to invest and today we could go to our LP base and say, look, we need more chief information security officers. Does anybody have context there? We'd love to have them as part of our base. And not a week goes by that we're not introduced to one or two executives that some of our existing LPs might say, Hey, my friend was CFO of such and such, or CISO such and such.

[00:34:03] They would be great LPs. You should meet them for the next fundraise. That's been a great hallmark of ours and I think that's worked quite well.

[00:34:09] Sean Mooney: It's really, really thoughtful. Maybe with that in mind, as you think about creating and seeing the future, right? I'm curious about what are some of the top value creation opportunities that you and your team are thematically engaging with your portfolio companies on that maybe other business leaders should also be thinking about?

[00:34:30] Brian Neider: There's a lot of them. I think that there's the things that relate very specifically to our network, which I've already touched upon a little bit around. Helping drive customer introductions and customer contacts, partnership introductions, partnership contacts, things along those lines, which I think are quite unique to us.

[00:34:47] But a lot of the ways in which we can help our businesses is really by helping with the instrumentation of the business itself. And what we find is a lot of our businesses are, are bootstrapped before we get into them. They really have a small cap table and ownership, and a lot of them are sort of flying blind in a way, which is.

[00:35:06] They have good results, but if you press them on how those results were obtained, they don't always have a specific understanding of exactly what led them there. There's definitely a gut feel. There's definitely hard work. There's definitely passion, but it's not always mechanized in a way that's immediately recognizable.

[00:35:26] And because of that, once you start doing some of that instrumentation, you could actually end up drawing insights out of that. Then pressing on the gas harder over here and stepping on the brakes a little bit harder over here. And it makes for a much more streamlined experience that could actually help the business avoid speed bumps and go faster at the same time.

[00:35:48] And so a lot of what we end up doing is saying, what are the KPIs that we actually care about? Are we able to pull those out of the systems? Are we able to track those? Are we doing it correctly? Are the numbers that are being spit out of the systems accurate? Then using that to draw logical conclusions about where to allocate capital within the business.

[00:36:08] To say, Hey look, we've got X number of leads coming from Europe and we've only got two salespeople there. We've got Y number of leads coming from the Southeast and we've got 10 salespeople there. Europe has way more leads than the southeast of the us. We need to do something about this. We need to reorient.

[00:36:25] We need to think about how we are spending our money. And a lot of times companies. Don't necessarily know. They just know that they started with X and they've ended at Y and that Y is better than X, but they don't necessarily know exactly how they got there. And that is not a knock on the entrepreneurs that are doing it.

[00:36:44] It's amazing the journeys that these guys go on. But once you start having the tools and the data sets to be able to do the evaluation very quickly, your eyes open and you say, my gosh, I've been flying blind the whole time. Like, to me, that's the best way that you could help a company, which is what is the right mechanization of the instrumentation and how do we get that reporting on a regular basis so that we're not overly correcting, but that we're charting the right course and we're flying in broad daylight as opposed to in the dark.

[00:37:16] Sean Mooney: I really, really appreciate that you shared this because I. So much about all the discussions is ai, ai, ai, and it should be right. It's a tectonic shift in human history probably, but none of that is done unless you've got the data in a way that's structured, that's clean. You gotta visualize it first.

[00:37:36] 'cause you wanna know where to point all this other stuff and you gotta understand what's driving left and right. It's like history might not repeat itself, but. Boy does it rhyme and like, and so what you're saying is so important. 'cause everyone wants to jump right to neural networks. I'm like, no, like do the other stuff.

[00:37:52] And by the way, and then it gamifies your business and everyone starts like trying to every month be better, better, better. So I think what you shared is really, really important.

[00:37:59] Brian Neider: I totally agree. And by the way, the AI thing. What we're trying to figure out in our businesses is how can the businesses leverage AI to do these things better?

[00:38:08] But it has to start with an honest set of conversations around what information and data is important for us and what are we trying to get out of it? And what you'll oftentimes realize is. It's just the result that people are looking at. And if you start breaking down what they're looking for in the data, they might not necessarily have as much of an inclination and we could help guide them on that.

[00:38:31] And there's very specific things where, to your point, the business is rhymed. Many of them look quite similar to one another. And if you could instrument in that way, man, can you unlock some great potential?

[00:38:41] Sean Mooney: Very well said. It's not the sexy part of it, but it does so well.

[00:38:46] Brian Neider: It's a sexy part for me. If you could track and start showing, hey, we're incrementally getting better every single day.

[00:38:51] I mean, to me it's like you're on a diet, you're going on a scale, and every single day you're looking and you're saying, okay, well what did I do today to, to lose that weight? Okay, great. I ate properly. I ate my vegetables instead of eating a bunch of sugars. Okay, great. This is what I did. Let me do more of that.

[00:39:06] And then over time you say, okay, I'm gonna add some exercise in. Wonderful. I'm gonna not eat past 6:00 PM Great. And each one of those different steps leads to a result that you're seeking, but at least you understand what the inputs are and that ends up being the most important,

[00:39:20] Sean Mooney: I think. Very well said.

[00:39:22] Brian, maybe as we bring our conversation full circle here in kind of back to kind of the introspective more of the stories of you and, and one of the things that I'm also a curator of is other people's hard-earned lessons learned in advice because if. If the world were up to me, I would've been in a lot of trouble a long time ago.

[00:39:40] And so, so it's like know thyself, you know? So if you could go back in the way back machine and meet 22-year-old Brian and give yourself a piece of advice that you wish you knew then that 22-year-old Brian May or may not listen to, put that aside, what might be one of those pieces of advice you would share?

[00:39:57] Brian Neider: I do get asked for advice from 22 year olds often now. So I do have some perspective, 'cause I have thought about it. I think that it's really identifying every piece of your life sort of as an investment. And I don't mean to sound like a robot, I don't mean to sound like I'm one of these people that overthinks everything, but each decision that you make has consequences to it.

[00:40:18] And I think oftentimes young people go into decision making. In a relatively rash way. And so what do I mean by that? Well, you could look at it in their professional lives, right? They take a job without fully thinking through like, what am I gonna learn from this job? Who exactly am I working for? And what do I believe that I'm gonna learn from that person?

[00:40:37] Do I feel like it's really going to excel me to the next place that I might want to get to? And it's okay not to know exactly where you're going or what your goals are. That's fine as a young person, but you should at least be able to very concretely answer. I'm going to make this jump and do this job.

[00:40:52] I'm gonna take this offer. Why am I taking it? What am I trying to get out of it? And trying to at least gain an understanding of what that's gonna look like is particularly important. And where I've seen people falter in the professional ranks is they've oftentimes sort of like as great of a student as they might be, as intrinsically smart as they might be.

[00:41:15] You ask 'em like, why do you take that job? It's the one of the biggest decisions in your life. I don't know. You know, I just sort of, um, it was a good opportunity that kinda like came along. I'm not sure that's the answer. Like, no, you are worth more than that. And you owe it to yourself to know what your worth is and to try to figure out what is it that I'm doing here?

[00:41:35] And I see it. Furthermore, in personal relationships, I see people that have spouses or that they go dating folks and it's great. And oftentimes you don't know exactly what you want, but. You have to make a decision on kind of what you're looking for in the future. And it's important to understand what it is it that I want for my personal life, and what do I want my spouse to eventually have.

[00:41:59] And I see all too often people like they're getting married or they're getting very serious and they don't take the time to create like almost a shared vision of what it is that you want in the future. And I think that there's a lot of people that would give the advice. Hey, you fall in love, you go with it.

[00:42:16] You figure it out later, and I actually have seen a lot of people now that I'm in my forties, they get married. They never actually had the really hard conversations. Early on. They never talked about, Hey, this one wants to live in this location. That one wants to live in that location They never talked about.

[00:42:34] The husband wants to work and the wife also wants to work, but the husband actually wants the wife to maybe raise the children or vice versa by. They never necessarily spoke about whether or not their kids would go to public school or private school. It's not a list of a thousand things that need to be discussed, but there's probably 10 or 12 cornerstone things that I think that anybody getting into a relationship should sort of understand.

[00:42:58] And I see a lot of 22 year olds that sort of just let it take its course and then they end up unhappy on the back end. And it's like, why don't you just like discuss those things early on? And then if there was not a match. You at least know what's going on. And I think it's relatively harsh and black and white.

[00:43:16] It's something that I think would end up making people in general, like a lot happier over time. If they thought of every relationship that they were putting a lot of time in or job that they were taking sort of as you wouldn't investment, you can't paralyze yourself, you don't wanna overthink it too much, but there's probably three or four or five or 10 big things that you want get out of it.

[00:43:36] Just know the answers. And once you know the answers, you're making the decision. You should never go into it without at least trying to explore what the answer might be.

[00:43:44] Sean Mooney: That's really, really, I think, very thoughtful and in some ways profound advice as on thinking about it in some ways because one, it allows room for the serendipity of life as it goes through, but be intentional.

[00:43:56] Think about it. There's a couple major way points and the sailboat of life. Maybe you get one lap around the globe, right? It's gonna take you to all these different places. Don't just be a passenger with the sails down. You like get into the helm and have your hand on the wheel and you're gonna go left and right and you're gonna attack and all these things.

[00:44:12] And you can, and that's fine, but be thoughtful and like look forward, don't, versus just kind of sitting and saying, well, the winds are gonna take us where they go, and then blame the wind for it.

[00:44:22] Brian Neider: Totally try to figure out where you're going. If that is you alone, then figure out what the right answer is.

[00:44:28] And if that's you with a partner, whether it's in business, whether it's in personal relationships, whether it's in romantic relationships. Figure out what you're looking for and just at least go in eyes wide open. And that's the diligence process in investing. I don't wanna sound overly corny, I don't wanna sound again overly mechanistic, but that's what you do.

[00:44:48] There's always risk to everything, but at least there a little bit of homework so that you're not going in entirely surprised down the line.

[00:44:55] Sean Mooney: Oh look, it doesn't mean there's not gonna be lefts and rights, but like think about which way you want to go and where it's gonna take you. I think that's really good advice.

[00:45:02] I'm gonna borrow that and have a conversation with my kids this weekend. And, but I mean that seriously, it really is. And so maybe the last question here, 'cause I've taken a lot of your time. The other thing I'm a kind of a connoisseur of is life hacks, gizmos gadgets, things that make life a little, just a little easier and better.

[00:45:20] And so I'm curious, are there one of those things that you have in your day-to-day life that comes to mind?

[00:45:25] Brian Neider: Yes. I'll give you a couple. And these are like super niche, but like. I don't know if people are listening, maybe they'll be interested in it. Number one I bought a while ago, one of these like walking pads for my desk.

[00:45:39] I don't know if you ever have used one of these things, but it's like a little mini treadmill that goes underneath your desk and my desk sort of like raises up. And what I realized was I have a lot of Zoom calls from my office that are with people that I know really well that I do business with, that like I don't necessarily need to be on camera all the time and.

[00:46:00] I just wasn't getting enough activity. 'cause I'm sitting in the chair all day now. I go to the gym and I do have some activity, but I'm like, is there something that I could do to get myself moving a little bit more? I went from averaging like 5,000 steps a day or something like that to now I'm averaging like 15,000 steps a day by putting this thing under my desk.

[00:46:20] I have it right here. I flip it out. It's like a little mini treadmill. You could walk at two, two and a half miles an hour. And whenever I'm on calls that are just normal calls with people that I know, turn off the camera, just tell 'em, look, I'm absolutely paying attention. In fact, I'm paying more attention 'cause I'm not looking at my email and stuff.

[00:46:36] I'm just gonna be walking while we're talking. And they're like, great, no problem. And that has been amazing. So that's life hack number one. I'll send you the exact one that I bought 'cause it's been great. I've loved it. I have these Monday meetings where it's like a five hours of like investment committee and our pipeline meeting and everything.

[00:46:54] I've been averaging walking like 12 or 13 miles every Monday 'cause I'm just on the treadmill, like the entire day doing it. So it's, it's been great. The second thing, super niche. I have all these airline miles because I end up traveling a ton, like an unbelievable amount. And so I'm always trying to figure out how to use these airline miles.

[00:47:15] There's this website that I found that I absolutely love called Seats Arrow. Seats dot a ERO. And what the website does is you could put in extremely broad searches for different trips that you're looking for and it will spit you out. It's like a meta search engine for every single airline of every single, one of the different flights that you could have using miles.

[00:47:38] So if you say, look, I'm going to Europe this summer, I don't really care. Like I'll fly through any city. It doesn't really matter. Show me all the flights using less than X number of miles on the Star Alliance and show me any flight to any from New York to any European city, and it will spit you out like a thousand different options from every single airline.

[00:48:00] And I could figure out where I have my points and I just go on and it's always right. And so it's pretty unbelievable. That's changed my life a little bit because I have a large family. I'm oftentimes going on vacation with them. I use my points. You're just asking for a simple hack. That has been awesome.

[00:48:17] Sean Mooney: I love that. And I wish I had that early last fall 'cause we were planning our trip and I was looking at all the flights to go to like Portugal and everything was a bajillion dollars for like economy Plus I'm like, kids, we're going to Puerto Rico. It's like, we're not going to Portugal. I'm

[00:48:34] Brian Neider: telling you.

[00:48:35] You got, you sign up, it's like $10 a month or something and I signed up and you can just put in anything. And I've. United Miles and American Miles and Air Canada miles and like just from all the travel, it'll tell you just put in whatever airlines you want. It'll run everything all at once, and it's all in real time.

[00:48:53] It's been awesome. I don't know who owns that website, but it's great. I'll give you one more if you want it.

[00:48:59] Sean Mooney: Yeah, yeah, of course. I'll love this. One

[00:49:00] Brian Neider: more that I'll give a plug to that I absolutely love is there's a company called Follow Up cc, which my partner Mitchell introduced me to years ago, and this is not such a recent hack, but it's something that's helped me a lot over the years, which is there's a software platform called Follow Up cc, and basically what it does is in your email, like if I send an email and I say, huh, like I don't know if this person's gonna respond or not, but I'd like to remind myself.

[00:49:26] All that you do is you send an email to some period of time at follow up cc with a note. So I would say four days at follow up, cc, and then I'd just put in the subject line, did Sean get back to me Four days to the minute I'll get an email that pops up in my inbox. Did Sean get back to me? So it's constantly reminding me of things, and so I use it many, many times a day, every single day, and it's just an unbelievable reminder tool.

[00:49:52] But they make it so easy because all you have to do is the nomenclature is just whatever amount of time you can put two hours, five hours, two years at followup cc. I've put stuff for a year out and it just slingshots it back to me. So I'm constantly writing notes to myself for the future, and it's been amazing.

[00:50:10] Sean Mooney: You're three for three because that's, that's the other big thing that drives me nuts. I'm getting in the point where I'm like, I'm gonna go use windsurf or VO and create an app. That's just my virtual memory 'cause I can't remember stuff anymore. And so it's like, so this is a lot more practical than me, like breaking my pick on a

[00:50:27] Brian Neider: app.

[00:50:28] Got follow up cc. Also something like 10 bucks a month. It is absolutely excellent. Total game changer. Allows you really not to drop balls and it's just so easy to use from your phone or from your computer. I absolutely love it.

[00:50:42] Sean Mooney: We got three things coming up, new ads to my credit card coming very soon.

[00:50:47] Alright, Brian, well this has been a insightful conversation but also fun and so I appreciate you taking the time. I know you're really busy, so this is a tremendous gift from you investing your time here. And I've learned all sorts of things that I really wish I knew before and so. That's been tremendously valuable and appreciated by me and I think our our listeners as well.

[00:51:07] So thank you so much.

[00:51:09] Brian Neider: Thank you for having me.

[00:51:21] Sean Mooney: That's all we have for today. Special thanks to Brian for joining. If you'd like to learn more about Brian Ider and Lead Edge Capital, please see the episode notes for links. Please continue to look for the Karma School of Business Podcast anywhere you find your favorite podcast. We truly appreciate your support.

[00:51:38] If you'd like what you hear, please subscribe. Five star rate, review and share. This is a free way to support the show and it really helps us when you do this, so thank you in advance. In the meantime, if you wanna be connected with the world's best in class private equity grade professional service providers, independent consultants, interim executives that are deployed and trusted by the best business builders in the world, including many hundreds of top PE firms and thousands of their portfolio companies.

[00:52:04] And you can do the same whether or not you're in the PE world. Give us a call or visit our website@BluWave.net. That's B-L-U-W-A-V-E and we'll support your success onward. The views and opinions expressed in this program are those of the individuals presenting and do not necessarily reflect the user positions of any other persons or entities, including those referenced here in. No representations, warranties, financial, legal, tax, or other advice are made herein. Consult your advisors regarding any topics discussed during this episode.

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

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