Private Equity Judgment, Resilience, and the Art of Business Building

[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 Geoff Faux, partner with Clearview Capital. Enjoy
[00:00:32] it is great to be here with Geoff Faux. Geoff, thanks for joining.
[00:00:37] Geoff Faux: Thank you for having me. Looking forward to it.
[00:00:39] Sean Mooney: I've been looking forward to this for a long time. I think this is gonna be another really, really good one in kind of the art of business building. Why don't we jump right in, Geoff, and so one of the things that I always love to first get before we get into our conversation is a bit about the story of you.
[00:00:54] So can you share a little bit about yourself? Where'd you grow up, formative experiences, college, how you got into pe, all that kind of fun stuff.
[00:01:01] Geoff Faux: Well, I grew up in Atlanta, Georgia, maybe formative experiences. I played a lot of sports growing up before, eventually focusing on swimming. So for the latter part of my high school experience was 4:00 AM wake up several days a week for two a days.
[00:01:21] On Saturdays I could sleep until 6:00 AM So that was nice. But I was fortunate enough to, to get recruited for swimming by several schools. I chose to go to Princeton, swam there all four years, and was lucky enough to be elected one of the captains my senior year. So. When I think back on, on my formative year, the sport was such a huge part of everything that I think I take forward into life and my career.
[00:01:54] I've learned so much through the competition, how to deal with nerves and pressure and stresses. Balancing priorities obviously is, is a big one with that demanding of a sport. And I also think maybe observing others and figuring out what makes them good and applying it to me in my own way and how I can improve what I'm doing.
[00:02:20] And that's maybe not something you hear necessarily very often, especially from somebody that did swimming. But it was a huge part of how I got to where I did. Over my career. And I think the ability to just take that and be able to look around and see what everybody else is doing and what makes them good and what's sort of their superpower that gives them a certain strength.
[00:02:47] And how do you apply that to yourself to either shore up a weakness or emphasize one of your own strengths. It's something that I credit athletics for that initial. Foray into that exercise and, and I continue to take that through all the way through till today. So that was kind of my, my formative years, I guess.
[00:03:10] And in terms of my path into private equity, I would say it's maybe somewhat of a uniquely direct path into private equity. My father was a boutique lower middle market investment banker for a long time, so I grew up watching him represent. All different kinds of lower middle market companies. And so getting to see and have your eyes open to all of these different types of businesses that you never guessed would have existed as a teenager, just going about your daily life in getting a peek into all of the aspects and in our workings of a business that normally as a consumer, especially at at that age.
[00:03:56] All you really see is the tip of the spear in terms of the final product or the service or whatever. And so every once in a while he'd be able to get under the hood of a business that I had a real life connection to in some way, shape, or form a product. I used a store or location that you drive past on a regular basis.
[00:04:17] And as an outsider, I think that's one of the coolest things about doing private equity or investment banking. And I'd say that's one of the things that really hooked me early on. And so I was lucky enough to spend summers shadowing his analysts and just learning the initial ropes of modeling and analysis and writing a memorandum.
[00:04:40] So I knew fairly early that this was the type of career that I wanted to pursue, and from that point, endeavor to take somewhat of a traditional path. Of investment banking training grounds right outta college. I went to Wells Fargo. I worked in Charlotte, North Carolina, and then after one year of investment banking, I was able to find an opportunity at Clearview, which at the time was a lot smaller, and I've been here ever since 13 years.
[00:05:11] I've kind of grown up at the firm. The firm has grown as well, so really worked out and been thrilled with. How that sort of worked itself out ever since. I would say coincidentally, maybe to bring it full circle, my father, somewhere along the way, transitioned his firm from the sell side to the investing side.
[00:05:31] And so we're now sort of quasi competitors, I guess, both in lower middle market private equity, and it's just really fun to share experiences in market intel in context as well. We also have the same name, so it kind of keeps people on their toes a little bit.
[00:05:47] Sean Mooney: Oh really?
[00:05:48] Geoff Faux: He's at a group called Caymus Equity.
[00:05:51] Sean Mooney: Oh, of course. Yeah, I know Caymus. That's great. I was back when I was in, in your shoes, I absolutely looked at deals from Caymus. So what a great way to grow up.
[00:05:59] Geoff Faux: Yeah. So even, even to this day, 13 years later, every once in a while he'll forward me an email that was supposed to go to me, but somebody typed in the wrong Geoff Faux.
[00:06:07] Sean Mooney: You get a hot lead on a deal and you're like, well, sorry dad. The early bird gets to warm here.
[00:06:12] Geoff Faux: Exactly. Exactly.
[00:06:14] Sean Mooney: Well, that's great. I mean, speaking of early bird, I love so much about your background and, and swimming is one of those where you see so many accomplished business people who come out of swimming.
[00:06:24] There's something, no pun intended, in the water, right. As I was thinking about this recently, my daughter's boyfriend is a swimmer, and you think about it, it's a sport that requires a tremendous amount of discipline, tenacity, grit, resilience, and it's one of those sports, it's one of those 1% better sports.
[00:06:44] Every day you just gotta get a little bit better, a little bit better, and you build this kind of muscle where you're always just looking for little incremental improvements over time, and then they compound. I think if there's any kind of parable in business, it's kind of that right? You, every once in a while you get these big gains, but most of it's about just getting these little incremental improvements.
[00:07:05] And then on the flip side, what I really appreciated with my daughter dating a swimmer is that swimmers go to bed early. They wake up early, they don't drink. They, they live very clean lifestyles. So you, what else could you hope for your daughter? So that's a different conversation, but the, the swimming thing is just, I think it's such a great training ground for, for business because of those inherent traits that are required to be successful at swimming.
[00:07:32] Geoff Faux: Yeah, I think that's right. And I think one of the unique things about swimming compared to any other sport is for the most part. You only have two meets per year that really matter. And the way that the training cycles work is, is your coach basically beats the crap out of you for six months at a time and you swim a bunch of meets in between, but your body's nowhere near ready to perform at the highest level.
[00:08:03] And so you put in day after day meet after meet. Practicing the same thing over and over again. To your point, getting incrementally better each time, but you don't really get to see the fruits of that labor at any intermediate point within that cycle. And then for the last meet of the season, you taper off in your training, you get more rest, and all of a sudden you have these huge sort of quantum leaps, I guess in in your performance and.
[00:08:38] You really get to see everything come together all at once, and I think just the discipline required to go through that training cycle and in many cases not really know where you stand and whether or not you're getting better just requires a certain level of focus to get you through. It's taught me so many lessons and it's so worth it.
[00:09:02] I wouldn't trade it for anything.
[00:09:04] Sean Mooney: As I was thinking, as you were sharing that. It's not a perfect metaphor, but there are some similarities to the deal cycle, right? You're doing all these laps, you don't know if there's anything there, but one or two times a year you're gonna have a deal that you're gonna make the investment in and it, everything's gotta come together, and you have to have this incredible intensity to kind of work through a modern day process to get it across the finish line and, and prevail, right?
[00:09:27] It's really you like kinda, you said one or two meets. It's one or two times a deal. When? When I was a deal partner, that's pretty much what you get a year and you don't really know what you're gonna get after that, but you have to continue to get back at it every single day. How off is my metaphor on that?
[00:09:42] Geoff Faux: I think that's a really interesting metaphor. You just continue to hone your skills. You never know where a particular deal is gonna go. There are so many different elements of it. You can have a deal that you really like and you're really excited about, and you get further along in diligence and something doesn't pan out and you're back basically at square one.
[00:10:03] But you put in all that work and eventually you find something that that works out and, and when you do, it's incredibly rewarding and it's really exciting to then be able to close that and embark on a new journey that I'd say. Maybe also has some similar dynamics where you just continue to put in work and put in work and put in work over a certain whole period.
[00:10:26] And sometimes it can be hard to see the results on a, on a day-to-day basis, but you solve enough issues, you continue to put the right investments and the people in the right places, and eventually you step back and look around and realize you have something pretty good.
[00:10:44] Sean Mooney: Hey, as a quick interlude, this is Sean here.
[00:10:46] Wanted to address one quick question that we regularly get. We often get people who show up at our website, call our account executives that 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.
[00:11:14] 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.
[00:11:33] And so Geoff, we've learned a lot about you here, I think, in ways that I certainly didn't know you in terms of some of your background. What's maybe one more thing that we would know you better if we knew this about you?
[00:11:45] Geoff Faux: Not sure I have anything else, all of that interesting. I've certainly slowed down from my swimming days, so I have two young boys, 2-year-old, and a six month old, so.
[00:11:56] My wife and I just try to spend as much time as we can with them and taking as in as many moments as possible.
[00:12:03] Sean Mooney: The way we know you better is we know you're sleep deprived.
[00:12:06] Geoff Faux: Yes.
[00:12:07] Sean Mooney: Yes. At any given time. That's amazing. I'm on the other side of it. I'm, I'm heading towards empty nest stem, so now I'm looking for hobbies.
[00:12:16] I'll take some notes for you. So when you get down, it goes fast to this part of my life. Exactly,
[00:12:20] Geoff Faux: yeah. Everyone says it goes fast, so we're trying to soak it all in while we can.
[00:12:24] Sean Mooney: So Geoff, let's talk a little bit about kind of the art of business building. I think most people like yourself, and certainly I know I did when I was in business, kind of had a bit of a, a rubric or a scorecard of here are the elements of value that I'm looking for.
[00:12:40] Maybe the hardest part was that I knew there were things that I was looking for, but they were never kind of equally distributed. And you're always making choices and trade offs. For you. What I'd really be interested in learning more about is like what are those kind of core elements of value as you think about assessing a company, and then how do you think about how they all kind of interact together?
[00:13:01] Geoff Faux: Yeah. I'd say I've become maybe re fascinated lately with sort of this delicate balance in any particular investment of what I think of as four key evaluation criteria. Those being sort of the, the market or industry favorability, that's things like underlying industry demand growth. How cyclical is that demand?
[00:13:26] How much competition is there? All the things that are, that are basically out of your control as a business or an operator. The second being a company's competitive advantage and how big or small that competitive advantage is. I think third, the strength of the management team. For, of course, the price that you can invest at, and this certainly isn't anything novel.
[00:13:53] It's basically investing 1 0 1, but now that I am 13 years into my investing career, when you kind of think back to the basics, you see 'em differently. And I think what becomes really interesting is figuring out. What is the right balance between those factors and, and where and when can you make trade-offs and what combinations of those tend to work well over and over again?
[00:14:21] And so I think reflecting on some of our past deals, both those that have done really well, and those that are just okay, I think it's interesting too. Take a look back into maybe scoring those when it's sort of all said and done, and we've done really well on some investments that actually didn't have all that much differentiation, but the management team was incredibly strong and just executed flawlessly, and I think that would be a little bit counterintuitive to what you might hear from a lot of investors out there.
[00:15:01] And everyone touts competitive advantage and differentiation, and that is incredibly important, don't get me wrong, but I think just the fact that there are different ways to have a successful investment in, in different balances that you can strike to make that work. I think we've also done well on deals where management was maybe good, but not absolute rock stars, but the business had a nice little differentiated niche and the industry tailwinds were strong.
[00:15:33] And I think you can also have situations where the management team is really strong. The business has a really good differentiation, moat, if you will, but those can still be tough slogs if the industry or the market dynamics aren't great. And so I think figuring out what the right balance of those four factors are and what strengths can trump certain weaknesses, what can't you live without?
[00:16:01] I've just found more and more recently to be just a captivating exercise.
[00:16:07] Sean Mooney: 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 businesses 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.
[00:16:26] 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 BluWave. Today, many hundreds of PE firms, thousands of Portos, leading public companies, private companies, all call BluWave, to instantly get connected with the exact third party service provider that they want.
[00:16:52] That's pre- credentialed by BluWave, imperfectly calibrated for their need and really good. 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 PE firms do. Back the show.
[00:17:08] I really like how you did that and, and you said it's investing 1 0 1, but it really isn't.
[00:17:12] I mean, in some ways you summarized a years and years of experience in PE and what you articulated there. You know, in 20 years in PE I probably couldn't have so succinctly summarized like what to look for. What I really also like what you did, Geoff, is we kind of added something that was much more nuanced to the equation and it's is kind of like almost like a weights principle.
[00:17:33] I always think of the world through kind of this concept of expected value. It's kind of size of outcome times probability of success, and what you've kind of turned it into as more of a multi-variable equation. You're looking for all of these things and then there's kind of a weightings factor and then a probability factor on each of those.
[00:17:50] To get you to a threshold of yes or no, and maybe that's way too simplifying. The really tough part of your job, right, is there's so much judgment in this multi-variable equation, but what you're saying is that like you can, if you have some things that are off the charts good, you don't need to have the same score on each one.
[00:18:08] You can be really successful if you have outsized management team or you have this market that's amazing in this really good position in it, but maybe you don't have the team yet. Or you can get a company that's pretty good, but you're gonna buy at the right price. You know, the old school value investing.
[00:18:24] And so it gives you a lot more capacity to look at your opportunities in a more nuanced way.
[00:18:30] Geoff Faux: I think that's right. And from the outside, a lot of people might look at. Investing 1 0 1, if you will, and say, well, I only wanna invest in the best companies, in the best markets with the best teams at a reasonable price.
[00:18:45] Okay, well you're probably not gonna be in business that long because I don't think you're gonna find too many opportunities that that sort of fit that bill. And so how do you find combinations that still make sense knowing those trade-offs? And also, I think fit your skillset as an investor. And as a firm and the resources that you know, you can bring to the table.
[00:19:10] I think there are certainly some absolutes, I guess that I've started to sort of circle around in my own mind when, when kind of making these investments. I think the two absolutes that I think are critical for an investment is industry stability, being the first one. I think when an industry experiences challenges, it's really, really hard to overcome that no matter how good your business is or how strong your management team is, and sometimes that's the easiest one to overlook when you're enthralled by, uh, competitive advantage that seems head and shoulders above the competition and a management team.
[00:19:58] That's really strong. It's sort of easy to overlook the fact that an industry could potentially be volatile and that could come back to bite you, I think. And I think the second is just having a minimum bar of, of management strength that you need to be successful. It's interesting because that's the one area as a private equity investor that you probably have the most control over once you're in an investment.
[00:20:27] How to shape that and augment your management team over the life of your investment. But I think the downside of at least not having a certain level of management strength at the outset can still trump a business that has a strong competitive advantage in a good industry.
[00:20:47] Sean Mooney: Yeah, I think those are really, really excellent additions to the formula.
[00:20:51] And it's really hard to catch a falling knife. Like don't, don't try to do that. And as I think about it, as like deals passed and people would always talk about like the last survivor in the industry, like, oh, if you can be the last one standing, then you're gonna own it. It's like. That is a perilous road to success.
[00:21:10] There's not a very high probability of success on my little expected value equation. And then at the end of the day, what we see at Blue Wave every day, no matter how much we talk about AI or need all these other things, we get two to one calls for people. And so people are still what really, really matter in these companies.
[00:21:25] And you get that right, and you have an industry that's not a falling knife, then you certainly, your preconditions and your probability of success are greater.
[00:21:33] Geoff Faux: I would agree with that, and I would say the combinations, I guess, that we think as a firm tend to be the, the best fits for us, I would say are probably those where the industry dynamics are good, but maybe not excellent.
[00:21:54] I think we've found that if the industry dynamics are excellent. It generally pushes prices really high because everyone else knows how good that industry is as well. So I think industry dynamics that are good, but stable as to avoid any of those sort of insurmountable industry challenges that we mentioned.
[00:22:15] And then I think within that, having a strong competitive advantage and a strong management team, we've just found it easier to find reasonable prices. In those types of situations, and those sort of tend to be nichey businesses that are better than their competitors in an industry that you just might not really think about all that often.
[00:22:39] That I think is one combination that's worked well for us, but otherwise, I think there's many combinations that can work well, and I think that's one of the really fun and most mentally stimulating parts of private equity is just dialing in that acceptable balance.
[00:22:55] Sean Mooney: Once again, very, very well said. It's the idea of when you're looking at industries and businesses, the glamorous ones, the, the handsome or beautiful ones get all this attention, but they might not necessarily dance.
[00:23:08] And so if you can get one, maybe not as fancy, but you get one that's a little more footless and fancy free, you can do well. So maybe let's talk about one kind of adjacent topic here. One of the things that, maybe going back to our, the original part of our conversation where you talk about the business of private equity is, I think it's an industry filled with hardworking people, smart people.
[00:23:32] But I think one of the more defining characteristics is tenacity, resilience, overcoming obstacles and challenge. And I'm curious, Geoff, is there something that you've kind of experienced through your career where you've had to overcome challenge and adversity?
[00:23:49] Geoff Faux: I'll tell a story that I think is a big piece, maybe the biggest defining piece of my short career thus far.
[00:23:58] And I think there are a lot of really good themes here and and also parallels to Clearview and I'd say Clearviews ability to have success over many funds. But I guess to jump right into it, my first deal, so the first deal that I really led start to finish. I'd say was a little bit of a contrarian play.
[00:24:21] To some extent, it was an industry that maybe carries the perception that it's declining, but I think if you're willing to look past that initial perception, there are pockets of the industry that really continue to actually be quite strong. So this particular business was a very clearly differentiated.
[00:24:46] Market leader had a better process. It could prove better outcomes than its competition. It was a fast growing business, but it also had a little bit of customer concentration as well. So all in all, I think a really special business. Certainly some issues to get comfortable with and, and issues that we were willing to do the work to get comfortable with.
[00:25:10] But I think a strong thesis to find value in a place where others. May not have wanted to do the work with, again, a clear competitive advantage that this business enjoyed. Fast forward six months. Our largest customer undergoes a management change, new management comes in, brings in all of their own vendors.
[00:25:33] We're out, never had a chance going to zero on our largest customer. Not too long after that COVID hits, which hurts the whole business obviously. Specifically, we had a decent chunk of our business that served an industry that couldn't open its doors during COVID and when they could, no, consumers actually wanted to visit these sites of this industry that we serve, so that goes to zero.
[00:26:02] We had brought in A CFO as part of the investment, who we eventually tap to lead the business as the CEO. He realizes that he may not have the skillset to deal with this particular situation, so he leaves to go become a CFO again elsewhere. And so at this point, the value of the business is so far below zero.
[00:26:26] It was hard to even see the light of day, and I am crushed, just absolutely soul crushed. Wondering how all of this could have possibly happened. Easily what felt like probably the biggest failure of my life, this series of events that seemed so improbable, I could barely wrap my head around it. And then on top of all that, I had to become the interim CEO of the business.
[00:26:55] I was probably 29 at the time, knew nothing about being an operator, but it was the middle of COVID and we couldn't recruit anybody. So I got an extreme crash course on how to operate. Through a crisis, jumping on a plane every other week, half empty planes to do what I could to hold this thing together, and that mostly consisted of an extremely difficult balance of trying to convince all of the employees not to quit while at the same time making sure that they were still motivated to do their jobs to the best of their efforts on a day-to-day basis.
[00:27:36] And I think as hard as that experience was, it just taught me and reinforced that you just have to take one problem at a time, one day at a time, one week at a time, solve one issue, move on to the next, and do it over and over and over again, and eventually. We were able to convince a new CEO to come in and take on this challenge.
[00:28:07] He helped put the right talent in place, really leaning into and maximizing the competitive advantage that the business had all along, and we started to build our way back and fast forward again. That business won our best performing portfolio company two years in a row. We've nearly tripled it since our original investment.
[00:28:35] And looking back, it's sort of hard to imagine we were in the place that we were. But I think it just speaks to being able to put your head down, solve one thing at a time, get up every day, no matter how hard it is, and just continue to grind. And eventually, if you can do that for long enough, the environment will get better.
[00:29:00] The tide will turn, and if you continue to have a strong thesis to begin with, that will come back and it will help you out, and you'll be primed to accelerate out of the tough times. And so I think there's so many just lessons in that experience. It's hard to probably cover all of them, but I would say one is maybe.
[00:29:26] A broader theme at Clearview and just the ability and the grit to grind through big challenges with our businesses. And we've had at least several investments that have encountered significant challenges along the way. And we've put our heads down like this example and worked through those with our partners, and they've ended up in actually very good outcomes for us.
[00:29:55] At the time, it was really hard to see that that was ever gonna be a possibility at all. But I think just that spirit resonates really well with founders that we work with, or that we would like to work with in any sort of future investment. And they know better than anybody else that nothing moves in a straight line.
[00:30:19] And I think the other, just as I said, was to be able to wake up every day and to keep going and to keep solving issues when it feels like no matter what you do, you can't win. And I'd say prior to that experience, I've never really been big into motivational quotes or anything like that, but since then, there's one, and maybe to some degree it helped me get through that time period.
[00:30:47] One that I love, which is excellence is the capacity to take pain. And I think once you internalize that, you realize how many just different iterations there are of some form of, of that quote with different words out there. But you see it from some of the most consequential leaders out there. And without having lived an experience like that.
[00:31:14] I think it's hard to really understand what exactly they're saying and what they mean by somebody who looks so successful, but is telling you about how hard a particular time was in their career. If you've never experienced that, you can't really put two and two together and understand what they're saying, and I think that lesson just continues to pay dividends lately, especially over the past five years.
[00:31:41] You look back and it's just this constant barrage of COVID interest rate, hikes, inflation, tariffs, potentially some more macro risks on the horizon.
[00:31:54] Sean Mooney: I love that story.
[00:31:56] There's just so many lessons there, and I think we've all been through this at some point in life, something really hard happens and your medal gets tested and there's one of two things you can do.
[00:32:07] It's fight or flight, and so often cause of human nature. You choose flight, I'm not gonna deal with this. Or you roll up your sleeves, you double down, you look at all your challenges and force rank 'em and just do one at a time. Keep on taking one step, one step, one step. And then before you know it, you're out of the valley, on top of the mountain again.
[00:32:28] But those companies are the most battle tested ones in the world that survive that. And so you think about when I would look at companies, one of the things I would say is always like, tell me a time where you went through a tough period. Particularly so many of the businesses from like 2011 or 12 to 2022, there was no bad time.
[00:32:45] I mean, the market was just up and to the right. And so you look at a business like yours where it encountered a challenge, they demonstrated this ability to take that huge multi-pronged challenge on the is no doubt a hundred times stronger than what you bought it, and now it's flying and it's probably more resilient than it ever was in the history of its company.
[00:33:07] With a better opportunity ahead of it than any of their peers because this team is so battle tested and ready to go, everything else is kind of easier. Does that kind of make sense?
[00:33:16] Geoff Faux: It absolutely does, and I think this business having to have taken as big of a step back as it did, really forced it to double down, I guess, on the things that made it special to begin with.
[00:33:33] And as they came out of some of the toughest times, really going back to basics and leaning into the things that nobody else in the industry had and the advantages that nobody else had. Just continuing to build on them and putting more distance between us and the next person. And I think that work that was really done probably three, four years ago.
[00:34:03] On lengthening the gap of that advantage between our competitors when the market was certainly horrible for everybody, but maybe for some unique circumstances worse for us, that's allowed us to, I'd say, have a much, much stronger growth trajectory today than we probably ever could have hoped for. Back then, and if you look at the business today, it looks easy.
[00:34:37] It looks really, really easy, but it's all of that work and having to go through such a difficult period that just forces you to make really tough decisions in terms of where you're gonna spend your time and your resources, and where you're gonna try to double down to survive.
[00:34:58] Sean Mooney: A hundred percent. It's a great story, not only about business, but about life, right?
[00:35:02] It's like you're gonna encounter hard things. It's not up into the right, right? Most companies go through it. The question is, what do you do when you get to that point? And I used to have an investment that made automotive parts, and one of the things that you would do to make them stronger and better and more tenacious is you would put them in this kiln.
[00:35:20] You would heat treat 'em, you put 'em in this fire. And like the fire makes that thing better and it changes the material composition of this component in ways that it almost makes it superpowered. And then I think the same way that your company went through it, it went through that like heat trading process and it's come out like so much stronger than it ever could be.
[00:35:38] In this case, maybe it was a flywheel right now, now spinning even faster. Now I'm super mixing metaphors. Those are the things that matter. You stare fade in the eye and you take it on and you overcome it. That's when magic happens. So maybe if we, we turn the page here in our conversation. One of the things I'm curious about is in this kind of modern PEH, is how PE firms are kind of approaching value creation for you, Geoff, I'm curious, how is Clearview really approaching value creation?
[00:36:08] What are the resources you're bringing? Whether you're taking on a huge challenge or something that's just every day?
[00:36:14] Geoff Faux: Yeah. Well, I think where Clearview plays in the market, we typically tend to be the first institutional capital into an investment. So we're generally early in a company's maturity cycle.
[00:36:27] In the same vein, we're looking for businesses that we think have the potential to, at a minimum double, but hopefully more like triple or more in size over our whole period. And so our approach tends to center around what I would call a professionalization infrastructure building and strategic prioritization playbook.
[00:36:52] And in our segment of the market, we see so many founders and management teams that have done a really great job getting the business to a certain level. They tend to have similar bottlenecks that could otherwise restrain their ability to then again, double or triple the size of the business from there.
[00:37:15] And we see those bottlenecks being things like the need for additional management capacity, either to free up more of the existing management team's time to focus on the most valuable responsibilities, or it could be adding a new skillset to the team. Upgrading antiquated systems, you may see a lack of kind of a mature business development function at that size business.
[00:37:42] Or it could just be hesitancy to invest in things like greenfield expansion or or add-on acquisitions. And so our approach is really about trying to remove some of those bottlenecks to catalyze or accelerate the growth of the business for the next three, four or five plus years. And so oftentimes that means we're helping our partners augment and upgrade their teams and systems, as well as working with them to figure out how to take prudent risks to invest in a handful of promising growth avenues.
[00:38:19] And we've just done that over and over again as a firm over our 25 year history. So, it's a little bit maybe back to the basics. I would say despite the world continuing to evolve at a rapid pace with AI and technology and everything else, we still tend to see the same issues over and over again in the same things that you can solve and fix to allow a business to go from the size that it is that we invest to where it needs to go, and also set it up for.
[00:38:55] The next buyer, or its next 10, 15 years worth of operating future.
[00:39:02] Sean Mooney: I really appreciate that approach. The types of companies that you're investing in, once again, I appreciate like relieve the friction, relieve the constraint, the bottleneck, and then everything kind of flows so much easier. It means it's never easy, but it's easier when you're able to apply that.
[00:39:17] And I appreciate your kind of systematic approach to saying we're gonna give you. Access and confidence to tap resources to make the entire company better. My experience is most of these founders are often, they know where they're suboptimal, but they don't have the fuel. They don't necessarily have the perspective on how to do things.
[00:39:36] They don't necessarily know where they may have it more of a intuitive, intuitive perspective, but a group like yours comes in and you're gonna say, no, we're gonna not only help you find where those areas are from an objective, third eye perspective, but you are also gonna come in and give you the fuel to do it.
[00:39:51] And candidly, I feel that as a business founder and owner, you're like, there's no safety net. And so when you have a group like Clearview Bound, you're like, no, we got you, but let's go, let's you know, let's go over the horizon here.
[00:40:03] Geoff Faux: I think that's right. And I think that sort of hits on a couple of things that you could maybe build out a little bit more detail around maybe the first being just bringing the prioritization and focus to a strategic plan generally at the outset of investment.
[00:40:19] There's a lot of things that you and your management team wanna accomplish together. Everyone's really excited when you close a deal. That's probably the, the point of peak excitement before the real hard work begins. But I would say through our experience of encountering similar situations over and over again, we generally know what the end point looks like in terms of the sophistication that a platform needs.
[00:40:49] The infrastructure that it needs to have. Again, not only for our hold period, but well into the future. Defining how exactly you get from point A to point B isn't quite as obvious and really focusing early on to define with your management team, what should you do first? What should you do second? What can you wait to accomplish next year or the year after that?
[00:41:16] I think it's really important because if you try to do everything at once, it's gonna be really hard to focus and be successful on any one given thing. And then I would say maybe the second broader theme in that is helping founders build the right team around themselves. Founders and leaders have just such an incredible talent for how many roles they can play within a business.
[00:41:43] And sometimes it's easy to lose sight of the fact that they themselves may actually run out of capacity or they already know that, but they're not really sure what they need to do first or where to find the talent to surround themselves with. And so I think being able to help those founders and and leaders of that size business define what skill sets they really need to add.
[00:42:07] When to add or to upgrade those skill sets around them is probably one of the most important things that we do. You have to have the right skillset at the company in place to be able to execute on any other value creation initiative, whether that be exploring or implementing AI use cases or entering a new market or some other growth initiative.
[00:42:30] We're not operators at Clearview. We don't have an operating partner. Model. We strongly believe in leaving the management of the business to the team who's on the ground every day. And along with that philosophy, that means that the business needs to stand on its own two feet and executing whatever improvement to the business that you're trying to make.
[00:42:53] And that's not to say that bringing in outside resources aren't appropriate at times. We've certainly done that in many cases, to bring in outside help. But you need a team that can then. Take all of the outside advice and actually implement it, and maybe more importantly, maintain it over a long period of time.
[00:43:13] Otherwise, it can often be off or not.
[00:43:16] Sean Mooney: I think that's very well said, and maybe to turn the page on our conversation here to kind of the next chapter, there's a lot going on, and this has been one of those periods in time where every day there's seemingly something new going on in the world, and so as you think about right now, what are some of the top pieces of advice that you are offering your portfolio companies today to kind of manage through this time and find opportunities within the churn that we're all living in?
[00:43:46] Geoff Faux: I would say every business is different and every circumstance is different, so there's certainly no magic bullet across every company. But I think from what I've seen in times of uncertainty or recessionary periods, they have a tendency to expose bad habits or sloppiness that you might be able to otherwise get away with when times are good.
[00:44:11] And so when working with my portfolio companies, that's a big point of emphasis for me is being able to use some of these times. Where the revenue is not quite as easy to come by, to really look internally and lean into identifying those areas. And a lot of times we see that in things like sales and marketing or sort of business development, efficiency, customer service and and customer satisfaction.
[00:44:41] When you're in uncertain times, you're under higher scrutiny from your own customer base than you otherwise might be. Your customers have to do more with less, and so then they turn around to you and they're expecting you to deliver more value, and they're paying a lot closer attention to what you're doing for them as they're going through their own p and ls and evaluating what they need or what they don't need.
[00:45:05] So I think using these periods to really focus on shoring up and fixing those sort of execution issues and do it early and quickly. Make sure you have the right team members in the right seats. Make sure you have the right incentives in place to incentivize the behavior and the outcomes that you want from your team and organization.
[00:45:28] And I think if you can do that, you're gonna be that much better prepared to accelerate out faster than others in the market when the conditions improve.
[00:45:36] Sean Mooney: It's great advice. There's times here where the whole phrase, kind of like, whether it's like paraphrase by Winston Churchill or Rama Manuel or whoever, it's like never waste a good crisis.
[00:45:46] Right. Like when you have these moments in time, like there's such great opportunities to just become better. You need the right people. Get the right people. If you gotta like talk to your customers, find these little moments in pockets, and then really make sure you remember the lessons you've learned.
[00:46:01] Once it gets easier,
[00:46:03] Geoff Faux: That's absolutely right. And I think when, when you think about what do you do when, when times are good, you're focusing on growth, it's almost all about growth and growth initiatives, how you can grow faster and it is easier to lose sight of your ability to execute and your ability to be efficient and making sure that you're keeping an eye on ultimately the delivery of your product or service.
[00:46:32] And so I think what you said about never wasting a crisis, that is the time that all of a sudden growth is harder to come by, and that's not. All that you're talking about anymore. And so use those moments to look sort of introspectively, to make sure that you're operating as as efficiently as possible to shore up your own business and prepare for the next expansion period,
[00:47:00] Sean Mooney: A thousand percent.
[00:47:02] Speaking of introspectively, one of the things that I'm constantly doing is grabbing and embracing the hard-earned wisdom of other people's lessons learned, and so. Geoff, if you could go back to your 22-year-old self in a way that 22-year-old Geoff may or may not listen to, but let's just say he does, and give yourself a piece of advice that you wish you knew, then what might one of those piece of advice be?
[00:47:29] Geoff Faux: I think probably a couple of things come to mind that I think are really important. I'd say maybe first, the importance of relying on a team, which I certainly appreciate now many years later. When you're young and 22 years old and ambitious, you want to try to prove that you can do everything yourself.
[00:47:50] But the reality is that everyone on the team has different strengths and weaknesses. You can't be the best at everything. You just can't. It's impossible. So how do you work together to take advantage of your strengths relative to somebody else on your team? Where can you pull in help to take advantage of their strengths and get the best outcome for the team and the organization?
[00:48:15] I think even today, it's still an urge. I have to fight at times, and I think a lot of people that are in an industry like this, a lot of high performing individuals that want to seek control over as many things as possible probably have the same issue, but I think it's important to, to step back and, and realize that.
[00:48:37] As much as you want to do everything yourself and develop your skillset to be as broad as possible, there are certain situations where it just makes sense to have somebody else come in and help you out that has a better feel for that particular issue. I think the second thing is maybe the importance of evaluating people.
[00:49:03] It's such a huge part of private equity. I know everybody says this that's in the industry, but evaluating your investments, building out additional pieces of your management team, even building and hiring your own team for yourself at your firm at Clearview, for example. It sort of amazes me when I think back that.
[00:49:28] The industry spends broadly, so much money and resources, training and teaching junior and mid-level hires and team members about valuation, excel skills, modeling, analysis, even legal training, but hardly anything on developing people evaluation skills. And it's one of those things that. I think most people just have to learn by doing and getting experience because there's really no other way to do it.
[00:50:01] But I'd say if I was speaking to my 22-year-old self, I'd say be more deliberate about trying to develop that skillset as early as possible, probably earlier than I did. And then I think maybe the third is just that sometimes success. Means being able to withstand feeling like you're getting kicked in the teeth over and over again.
[00:50:27] And I think this one is hard to understand until you live it. But even in great outcomes, the number of things that still goes wrong or causes significant frustration or feels like there's an existential threat that could wipe you out is really hard to explain. But. Like we said before, you gotta keep getting up every day, keep working to solve one issue, then another, then another, and then at some point you're gonna look around and realize that you have something pretty good.
[00:51:02] Sean Mooney: It's really sage wisdom on each of those. And the first one, it's like the African proverb. You might go faster alone, but you're gonna go further together. And that for all of us who've been through these kind of like. Earlier days where we're just hard chargers. You learned that for? It took me probably a long time.
[00:51:21] The next piece of advice I'd be curious to dig into is, I a hundred percent agree on the people evaluation is as I came up through an analyst and investment bank and an associate and then associate at firm and all of that was just like you're learning the craft of evaluating companies. The hardest part for me was suddenly I'm hiring my first CFO over a portfolio company.
[00:51:44] And I had never done it before and I interviewed the entire market only to figure out I was the second person I spoke with a month ago and that person already taken a job. So are there any kind of like on that topic, any kind of like tips or tricks that you figured out? Like here's how you learned the Art of humanity.
[00:52:02] I dunno if you read some books or how did you kind of go about that to hone your system?
[00:52:06] Geoff Faux: I'd say it's certainly a question that. I'm continuing to hone my skillset on, and there's certainly more development to do. I'd say a couple of the things that I've learned that I probably didn't focus on enough early is maybe focusing on some of the indicators that a person is a high performer through either the detail that they can speak to their experience.
[00:52:38] Or at times what they do outside the business. Tinkerers, for instance, that have a hobby that they just take to the absolute maximum. That becomes somewhat of an, an obsession and maybe things like understanding what motivates a particular person, how hungry they're gonna be to accomplish what you wanna accomplish and what you've incentivized them to accomplish.
[00:53:05] I think some of the periphery items like that, I just didn't have a sense for early in my career. And when you're interviewing people, there are people out there that are really good at talking and they're really good at interviewing and, and sort of dodging questions and, and sort of not giving straight answers.
[00:53:28] And I think what makes interviewing so hard is to somehow be able to work your way through that. To find the high performers. So certainly still a work in progress as I think it is for everyone. 'cause it's such a hard thing to do. I think maybe one of the hardest things in private equity is to find the right person to bring into a company.
[00:53:53] But those are maybe a handful of the things that I've learned.
[00:53:57] Sean Mooney: That's great advice and something that I think we, and I've learned here, certainly building something from one employee up. You eventually learn that it's the died in the world traits that matter so much more. And does that get reflected, like you said in the passions?
[00:54:14] I never really thought about connecting that actually. And I think that's a, a really nice way to do it. But people are who they are and their traits are so important about who they will be. Particularly now they, everyone probably has some sort of like cha PT window around the skills that they're like having piped into them.
[00:54:32] But you know, demonstrating like who you are. Is really incredibly telling, and we've had a lot of success doing exactly that to look looking for, like who are you and those types of things. So I think that's great advice.
[00:54:45] Geoff Faux: Yeah. I think the other thing that I would maybe add to that as well is evaluating the person from a cultural perspective.
[00:54:54] That's probably easier to say than it is to really do in practice, but at the end of the day. Even if you have somebody that you feel like has the skillset and the drive and the strategy, you're dropping them into a company that already has 50, a hundred or more other employees there. And if they can't work together and do you have sort of an organ rejection there, you're wrong.
[00:55:24] Just as easily as if you hire somebody without the right skillset. And I think. Being able to have that experience to sort of evaluate that fit is I think another piece that is really important and that I continue to try to develop
[00:55:42] Sean Mooney: Another pearl of wisdom there that's so often lost is like the culture piece.
[00:55:46] And I think the best companies will tell you, and they'll interview to their cultures and it's just like the organ rejection thing is a great point too. 'cause so often it's just, it's not that one culture's better than the other, but each organization's is unique and if you don't have that alignment, it just creates, as we've talked about earlier in our conversation, like this concept of friction and bottlenecks and just makes everything harder.
[00:56:09] So I like the easy button, like why not just make everything flow like water downhill? That's another, I think, amazing piece of advice.
[00:56:16] Well, Geoff, this has been a really, really awesome conversation. I've learned all sorts of things that I wish I knew before, and that's a tremendous gift. So thank you so much for sharing the time, pulling back the curtain, and kind of shedding some light on the art of business building here.
[00:56:32] Geoff Faux: Thank you, Sean. This was a lot of fun. Hope this turns into some good content.
[00:56:37] Sean Mooney: Absolutely. Well, we appreciate it once again and look forward to talking again soon.
[00:56:52] That's all we have for today. Special thanks to Geoff for joining. If you'd like to learn more about Geoff Faux and Clearview Capital, please see the episode notes or links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcast. We truly appreciate your support.
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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.