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Mark Valdez – From a16z to Eads Bridge Holdings

My guest, Mark Valdez, is starting a new permanent capital holding company called Eads Bridge Holdings to acquire small profitable, durable companies with a long-term focus.

Episode Description

My guest, Mark Valdez, is starting a new permanent capital holding company called Eads Bridge Holdings to acquire small profitable, durable companies with a long-term focus. What I found so interesting about Mark is he began his career in venture capital and was one of the early employees at Andreessen Horowitz, an extremely successful and storied venture capital firm. We talk about Mark’s time in venture and parallels to the search fund world, a thesis of Eads Bridge they are exploring, and how we might apply some elements of the venture capital content playbook to small company investing.

Clips From This Episode

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Live Oak Bank – Live Oak Bank is a seasoned SBA lender focused on search funds, independent sponsors, private equity firms, and individuals looking to acquire small companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to

Hood & Strong, LLP – Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected]

Oberle Risk Strategies – Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and Employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.

If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at Or reach out to August directly at [email protected].

My guest Mark Valdez, is starting a new permanent capital holding company called Eads Bridge Holdings to acquire small, profitable, durable companies with a long-term focus. What I found so interesting about Mark is he began his career in venture capital, and was one of the early employees at Andreessen Horowitz, an extremely successful and storied venture capital firm. We talk about Mark’s time in venture and parallels to the search fund world, a thesis of Eads Bridge they are exploring, and how he might apply some elements of the venture capital content playbook to small company investing. Enjoy.

Great to have you on the show Mark. Thanks for joining us. We’ve been chatting for a little while now, and I’ve been excited to have you on the show to talk about Eads Bridge and your time in venture capital. So we don’t get a whole lot of folks so far who go from venture capital to SMBs and search funds, so I’m kind of excited to hear about that. But I would love to first hear about your background so far.

Thanks for having me Alex. Just a quick background on myself. Born and raised in St. Louis, Missouri. And after undergrad, ended up moving to the Bay Area. And this was early 2006. And ended up coming out here to work for Stanford’s endowment in a very traditional asset management role. I spent three and a half years there, did the CFA, and wanted to ultimately make a move in a more of a direct investment role. But this was now 2009, so the economy’s crumbling before our eyes and most people aren’t hiring at this point in time, so I figure maybe business school’s a good way to let the market recover a little bit, go pick up some additional skills along the way. And hopefully there’d be opportunities coming out on the other side of that.

But I knew that it would still be pretty competitive after graduation. And so I went to our CEO, who was John Powers at the time, and I said, “Hey John, here’s what I’m thinking about doing. I’d love to make a move in a more direct investment role. Is there somewhere I can go for the summer before business school? I’ll work for free. I’ll do whatever. I just want to get some exposure.” And he’s like, “Well Mark, nobody’s hiring these days. But there’s these two guys that just started a venture fund. Why don’t you see if they’ll take you on?” I was like, “Venture? I don’t shit about venture, John, and technology. It’s not my thing. I’m this Midwest kid. I didn’t have a lot of exposure to this growing up.” And he’s like, “Well, just go have a conversation and see what happens.” I was like, “All right.”

Turns out it was Marc Andreessen and Ben Horowitz when they were launching Andreessen Horowitz in the summer of ’09. So I ended up joining them for the summer when they were first launching the firm. It was very much a bare metal shop at the time. When I joined, it was Marc, Ben, Scott Kupor, his managing partner, and then myself. And then we quickly hired out a bunch of folks that they had worked with previously. We were just getting the firm off the ground and running, and drinking from the fire hose learning about technology and early stage venture from them.

And they’re not huge fans of MBAs. They tried to convince me to skip business school and stay working for them, which I almost did, but stayed on the path. Went to Stanford for business school, and then ended up back at Andreessen actually working part-time during my second year. And I came back to be Marc’s chief of staff, which essentially just means I was his right hand man, his dedicated analytical resource for anything and everything that he wanted to work on.

So I spent about another two and a half years in that role really just having a front row seat to how Marc and Ben thought about strategically what they building in a firm. And I think only after the fact did I realize how much insight and information I was soaking up from that experience.

So this kick started me down this venture capital career path. I guess it’s better to be lucky than good in many ways. Most recently, I was at a firm called Playground Global, which was founded in early 2015. And I joined Playground at a pretty similar time to when I joined Andreessen, just getting the firm off the ground and running. The fore-founders were entrepreneurs and technologists first and foremost. Nobody had worked at a venture firm or in a professional investment environment. So my job was to come in and help build out that venture platform. The team, the strategy, the deal flow, run the due diligence processes, and then lead deals, and sit on boards myself.

So I was there for about five years. We raised two funds, a little over $800 million under management in total. Focused mostly on deep tech stuff. So this was quite the learning experience for me. A lot of AI, robotics, biotech, quantum computing, very much on the bleeding edge. Long story short there is we went shy away from things with significant technical risks, assuming there was a massive market opportunity on the other side of that. So I was there for about five years, and ultimately decided to leave venture to pursue a new investment strategy, which is Eads Bridge Holdings.

What made you think about leaving the venture?

A few things. One is, I was ultimately excited about the market opportunity that I identified for Eads Bridge Holdings, and felt like it was a massive opportunity that wasn’t really being addressed by investors. And it wasn’t something that really fell within the venture context in many ways. But also leveraging a lot of the experience in the network that I had built over my time in venture.

And I also just felt like to be honest, the amount of money that was flooding into Silicon Valley, that there was a more compelling risk return profile in these lower middle market businesses in actually bringing a tech enablement strategy to them. So it’s not that I’m short Silicon Valley, far from it. I still think there’s massive opportunities and a number of compelling new companies being built each and every day. But I felt like there was a segment of the market that wasn’t being addressed and offered a really attractive risk return profile for us to build and execute a strategy around.

So tell us a little bit about the opportunity that you saw. How did you actually see it if it’s not related to venture and the work you were doing daily?

Well it’s definitely related to the work, but definitely not a venture capital strategy specifically. I would say the high level observation that I had during my time in venture was that the tech revolution over the last 30, 40 years has been extraordinarily powerful. Tons of wealth and value creation. Yet, it wasn’t evenly distributed. And there were a lot of great businesses, management teams that no fault of their own, just lacked the time and the resources to be able to effectively leverage the best of what’s coming out of the valley. And yet over those 30, 40 years, technology has matured an extraordinary amount. You don’t need a massive IT budget or IT staff, you don’t need to take technical risks. All the things we talked about in the ’90s actually work today, which is fantastic. But it was easier said than done for a lot of traditional non-tech businesses to cut through the noise that Silicon Valley pumps out in the world and figure out what products and services can be meaningful for you in driving your business forward.

And given the pace of innovation, I felt like there was a wide and growing information divide between technology and more traditional non-tech industries. And we needed to build a mechanism, a bridge between these two worlds to essentially allow these companies to also participate in the tech revolution.

And if you think about what happened with COVID more recently and the effect that the pandemic had on a number of different industries, how do we make a more resilient economy? And I think technology and tech enablement plays a critical role in resiliency and also maintaining competitiveness on a global scale as well.

Was there a moment, or meeting, or experience you had in venture that pushed you over the edge and made you decide to start Eads Bridge and not continue in venture?

There no singular moment I would say. It was a series of events. And a lot of this, I would say accelerated while I was at Playground. Because if you’re looking at AI and robotics companies, generally speaking, what these entrepreneurs are targeting are areas to reduce labor intensity. How do we automate these particular functions? And therefore, you start to look at businesses like manufacturing, warehousing, agriculture. Industries that historically speaking, were not generally early adopters of Silicon Valley technology.

And it was a real challenge from a sales and marketing perspective for our startups to enter these segments, and build a trust and rapport, and accelerates from a sales perspective. And that makes sense. These businesses generally are not early adopters. They don’t want to take risk. Things need to work. And ultimately, that just created a little bit more of a longer path for our companies to achieve product market fit, which is ultimately what we’re trying to target. And then therefore, a repeatable sales or marketing model on top of that.

And what became clear to me was that the traditional industries want and needed the technology. The entrepreneurs were delivering it. But they had different ways of how they would do business, how they would talk about technology, and the expectations around that. And again, felt like there’s just this divide that we needed to bridge the gap between them.

And we would spend a lot of time with entrepreneurs trying to make sure that they had spent time on the ground with these types of businesses and understood what it would take to solve their challenges. But it was still easier said than done. So I think seeing that enough times Alex led me to say there’s a different path. These companies need technology. We need to deliver it for them. The traditional venture models may not always be the right path for delivering that. So there needs to be another way.

What’s the model of Eads Bridge?

I spent a bunch of time upfront thinking about how best to actually tackle this thesis. And whether that was going to be from a venture construct or something else. And ultimately, what I decided was that looking at the landscape, talking to a ton of different types of investors, what became clear to me was that in the lower middle market, you have these traditional businesses where they’re cashflow positive, they’re trading on multiples of EBITDA, not multiples of revenue or future revenue like in the venture world. And that there was an interesting opportunity to then acquire those businesses and then help drive them down the tech adoption curve to create value. But also essentially take advantage of the price disparities that exist between these two worlds. But I also assume that private equity was probably doing a lot of this already. So I went out and talked to a number of different private equity firms just to understand how they worked with their portfolio companies from technology perspective.

And a couple of things became clear to me. One was that many of the firms have hired tech operating partners at this point in time that are smart, sophisticated technologists. But they were really constrained in many ways by the traditional private equity model. Their job was to come in and look for the quick hit operational improvements that would show up in six or 12 months, help service the debt, put lipstick on the pig, shove it back out the door again. And while that model is effective, private equity obviously makes a lot of money. People have done quite well with this. I really felt like there was a lot of value being left on the table by not investing with a longer term time horizon in mind for the tech enablement strategy.

And sure, there’s the low hanging fruit that can be captured. Six or 12 months, we want to be that too. But if we’re able to take a longer term time horizon and think about how do we build data and informational advantages within these companies that build over time and allow us to steal market share, or capture more of the value chain, acquire more of the laggards, then we could ultimately have a very different value creation path that at least to me becomes much more compelling.

But we needed to break down the arbitrary hold periods of the typical private equity model in order to be able to do that. So what we’ve done is actually developed each bridge as a permanent capital holding company vehicle in order to be able to invest with this long-term time horizon. So we would underwrite companies with an indefinite time horizon. It doesn’t mean we’ll never sell, but it’s not the primary objective of when we make an acquisition.

The other piece of this is that what I really liked in having come from the institutional LP side of the table is how do we develop a model that has really tight alignment between us as the management of Eads Bridge Holdings and our investors as well. And I think through this holding company model, we can really effectively achieve that. Through traditional private equity, the way that you build equity value at the firm level is by raising more funds, bigger funds, new strategies, etc. And start to play this assets under management accumulation game.

That’s all well and good. But again, that’s not what got me excited intellectually to go do. So, because we are aligned with our investors as equity holders of Eads Bridge Holdings, and we don’t have a carry structure, it’s just equity. So this is where some of my bias from venture capital comes from is we’re financing Eads Bridge Holdings like a venture backed company in many ways. So our job is to create equity value. And when we do need to raise capital, hopefully we do that at higher valuations and reduce our dilution, and maintain that alignment with our investors. In longer term, this becomes much more of a capital allocation exercise rather than a fundraising exercise. And that’s what gets me really excited.

Talking about how venture capital firms help their portfolio companies use technology, what does that functionally look like? So with your experience working in venture capital firms, what would you do with a portfolio company on a month to month, quarter to quarter basis that you don’t see a lot of private equity firms using, or what you’re looking to pull over into Eads Bridge?

I’m not sure. Actually, there’s a lot that’s directly applicable from the venture model into what we’re doing on a day-to-day or month-to-month. Because a lot of what we’re doing is supporting teams of technology. And oftentimes, whether it was at Playground or Andreessen Horowitz, we love the technical founder that had a unique insights into a particular technology or industry. And they were going to be phenomenal at building the technology. What they may not have as much experience in is how to build a sales pipeline, or how to hire those first non-technical executives. So customers, capital, and people are ultimately what the venture backed companies needed. And both Playground and Andreessen were built in ways to help support those functions for those entrepreneurs.

I think a lot of the insights that I bring into this segment of the market is a lot around how Marc and Ben thought about building Andreessen Horowitz, where it was no longer just a traditional partnership. We built all these functional areas to support our entrepreneurs. Historically speaking, if you went to the venture capitalist, you got that one VC, sat on your board. You got their time, their Rolodex, and that might be split across 10 or 12 different companies. Andreessen Horowitz brought a new model to the table, which was actually based off of CAA and the talent industry to take much more of a firm approach. So you as the entrepreneur, you don’t just get that one individual that partners on your board. You get a team of functional experts that can help you go deeper in any one particular area. So anytime we brought on a new portfolio company, they were plugged into this massive network that we were building on their behalf.

And I think there’s some similar aspects to that approach that we’re bringing into more lower middle market, where it’s no longer just a traditional fund structure or fund functions. But how do we break down what a traditional private equity firm might have done back to first principles, put technology at its core, and the way you would think about sourcing, and underwriting, and value creation, and the team you would hire would all look fundamentally different. So I think that’s the opportunity that we have to build at Eads Bridge when taking a very fresh and brand new approach to the market.

Yeah. I’d be curious on those firm building pieces. As you saw Ben and Marc build Andreessen Horowitz or their structures, or beliefs, or philosophies from building that firm that you’re working to apply to Eads Bridge, or you think could be applied to other similar holdcos?

Yes. In some ways, I would say the big ethos at Andreessen Horowitz was the support of the entrepreneur. And how do we ensure that we’re acting founder first or founder friendly in many ways. Because we recognize that everybody’s dollars are green. So why did the best entrepreneurs want to work with you? And so we spent a lot of time almost in some ways productizing venture capital so that it could be more attractive to the best entrepreneurs.

And one of the things that we also did very effectively that I think was a really brilliant move by Marc and Ben was something called the reverse pitch. Which was when we were getting ready to make an investment in a company, we knew that we wanted to invest in them. We would actually bring the entrepreneur in to meet with our functional experts, sit around the table with our team. And we would pitch them on why Andreessen Horowitz was the right partner for them.

And it just blew people away, because that was never how the venture industry would have acted historically and became a really effective mechanism for us. So a lot of what I think about Alex is how do we ensure that the best companies want to work with Eads Bridge Holdings? How do we build the brand and the narrative in a way that is attractive to those management teams and those business owners? And I think obviously the tech enablement side of that is a big piece of it. Particularly going through the pandemic, it’s been a massive forcing function for every company big or small to think hard about their IT strategy in a way that they weren’t a year ago. Ultimately Eads Bridge Holdings, we can be not just preserving an owner’s legacy, but also building upon it. And I think that’s one of the really attractive components of the permanent capital type structure. And this is a gross overgeneralization, but we can say to an entrepreneur, :Look, we’re not here to leverage, strip, and flip your business. And then in five years, it looks totally different than the baby that you had built. We’re here to help preserve what you’ve built, further enhance it. And whether or not you’re involved in five or 10 years down the road, it’s something that you’re proud to look back upon and say this is what you built.”

Yeah certainly. Is there a thesis you’d want to dive into a little bit that you’ve started to put together at Eads Bridge?

Sure. Yeah. There’s a few areas we can talk about. Just at a high level, we try not to outsmart ourselves in terms of what we’re looking for. So durable industries that we don’t think can be easily disrupted by Silicon Valley startups. That generally means they interact with the physical world in some way, shape, or form. The whole end-to-end product can’t be completely digitized. Also like areas that we believe are historically under-invested in technology. And then we do like a degree of fragmentation as well. Potentially if there are areas that we can create geographic modes around and take much more of a buy and build platform type approach.

So what this translates to is we’ve been spending a lot of time on industrials, site manufacturing, healthcare services. And then more recently, we’ve also started scratching the surface on real estate services. Things like title insurance, appraisal, etc. And we can dive into more of the healthcare services.

In particular, we’ve been spending a bunch of time has been fertility. And there’s a number of reasons why we’ve been attracted to this space. But at a high level, great macro trends in terms of the growth of this segment of the market, fertility market is expected to be driven by demographic tailwinds. Including couples waiting longer to start families, and the rise in single parent and same-sex couple families.

It’s also a highly fragmented industry. There’s approximately 300,000 IVF cycles performed annually. Yet 60% of clinics perform less than 500 cycles annually. It’s obviously an inherently local geographically constrained industry. And we do think there’s lots of interesting opportunities for tech enablement as well. In particular around how do we create an enhanced patient experience? This is a process that can be very stressful, and it’s obviously highly personal. And if there’s ways that we can help ease the burden for patients and provide them a much more consumer first like experience that hopefully you can actually see improvement in success rates through this. And then in addition from a marketing perspective, believe there’s an increasing importance of digital marketing and social media as more patients look to the internet to educate themselves and research potential providers before making that decision of which doctors and which clinics that they want to work with.

What are the different business lines within fertility, and what are perhaps some of the business models and economics behind those? So which area of fertility do you find most interesting?

We’ve been generally predominantly looking at the fertility clinics themselves that are performing IVF. There are other ancillary services around surrogacy and egg banking as well. We haven’t spent as much time in those spaces to date. We’ve been mostly focused on the clinics more directly. And they’re pretty straightforward businesses, to be honest. They’re predominantly cash pay. So there is some insurance coverage in this industry, but it’s had relatively slow penetration. And we do expect that to increase over time. But to date, many of the clinics that we’ve looked at would still be 70% plus cash pay with pretty healthy margins. But one of the things we also start to think about is how do we further democratize IVF? That’s a very expensive procedure. It’s not something that everybody can do today. So if there are ways that we can further drive efficiencies or improvements through technology, might that open up to market expansion opportunities by being able to reduce the price? TBD on how that might work and what that might mean for the impact of the economics of these businesses longer term. But to date, they’re very straightforward and very simple businesses to evaluate at the end of the day.

Do you want to grow that? You said 30% of revenues typically from insurance versus 75% for cash pay. Do you want the insurance side to grow, or do you like the cash pay element in terms of just your desire to grow the market size?

I think ultimately, we do want it to grow just in terms of growing the market size and the opportunity for families to have IVF as an option at their disposal. That being said, we also have to be cognizant of the overhead and the difference in economics between cash pay and insurance base. And that definitely can create some headaches within the clinics of even being able to just provide a best in class experience for their patients. Because when you have a third-party that enters into that mix, it creates some additional headache and complexity in order to be able to serve those patients. And ultimately, what’s reimbursable, and at what rates, and what’s coming out of pockets. And making sure that people are eyes wide open on what that ultimate cost is going to be to them at the end of the day.

So it’s a little bit of a double-edged sword, Alex. It definitely creates headache and complexity, and the economics are not nearly as attractive. But at the same time, you’d love to see this from a patient health perspective, you’d love to see further opportunity for people to have IVF and other procedures at their disposal.

So you have healthcare, real estate services, and some manufacturing. What’s kind of the common thread between those industries that made them attractive to you?

I’d say the common thread is really just our belief that these are durable industries. They can be fairly labor intensive. It’s not that we’re looking to automate labor by any stretch, just that it’s not a space that is generally well served to a startup that might be looking to disrupt one of these spaces. Part of my thesis is that Silicon Valley disruption works extraordinarily well when you can truly disrupt the business model, you can create a totally new distribution channel, or you create a fundamentally new experience.

And I think for many businesses within healthcare services, manufacturing industrials, it doesn’t really serve the mantra of move fast and break things particularly well. And yet, all of these companies should be leveraging technology to the furthest extent possible to help drive their business forward. So the common thread is really just the belief that they’re not easily disruptable. They provide really critical products and services that will stand the test of time. And there’s an opportunity to really help drive them forward through a tech enablement strategy.

Switching gears a little bit, Andreessen Horowitz has gotten some attention recently for growing out their media business and that content side. I’m curious since you were at the firm from the beginning, is that kind of a vision you think would have naturally evolved from that? Or do you think this is kind of a change in direction? And then secondly, do you think there’s applicability to search and buying small companies on the more SMB side?

There’s a couple of things I would say there, and I don’t have any inside baseball to offer up of what the firm’s current strategy is. So it’s more of just as a casual outside observer trying to read the tea leaves and seeing what they’re doing.

One of the things that I learned from Marc that has always stuck with me is he’s a big fan of a book called Boyd, which was about this guy, John Boyd, who was a brilliant fighter pilot and innovative military strategist. And he had something called the OODA loop. And it stood for observation, orientation, decision, action. And essentially, what you would apply this as a fighter pilot is to win a battle, the pilot needs to operate at a faster tempo than his enemy. And as the environment is changing, whoever can handle that rate of change will be the one that survives.

And it’s always stuck with me in thinking about disruption and starting something new, and the thought process that Marc and Ben have had over the years at Andreessen Horowitz. And similarly trying to apply some of that similar mentality with Eads Bridge Holdings.

So what I do think is, you and I have talked about this previously Alex is that what’s really interesting now today with the mediums that exist to get your message and your narrative out to the world. Whether it be Twitter, Medium, Clubhouse, LinkedIn, etc. That you are no longer beholden to third-party gatekeepers to get your message out to the world. You can really do that all directly yourself today. And building that content, and building that brand and that halo effect can help build an audience and capture attention in a very differentiated way. So if you think in some ways, the investment business is a business just like any other type of business. And if you start to think about what you can do from a sales and marketing perspective or a narrative and brand building perspective, it’s really interesting. And I think historically speaking, that’s not something that many investment firms really spent time or effort and focus on. That’s 100% change within the venture industry. I think it’s going to continue to spill over into the private equity world and the hedge fund world as well.

And it’s generally been an afterthought, but I think it will have to become a more of a core part of many firms’ strategies. You see this happening a little bit with the mega private equity firms, because they’ve all gone public. So now that they’ve gone public, they have to cater to a broader shareholder base and reach a broader audience. And I see there being no reason why that doesn’t start to come down market. Even if you’re not going public, you want to take control of your brand and your narrative in ways that maybe historically you didn’t care as much about.

I agree. So what does the lower middle market investor look like? What does their marketing strategy look like in maybe five years from now?

Such a great question. And I don’t know if I have the perfect answer for it, but what I would say is I think, and you’re already starting to see this today. I think there are a number of firms that are starting to do some really interesting things for building up content, and a following, and an audience around their strategy and around their firm. And I think today, it feels like most of those firms are the early thought leaders in doing this. But I think over time, it will become table stakes. And seeing how that has evolved in the venture world, I believe that will carry over into lower middle market as well.

And it kind of comes back to what I said earlier about everybody’s dollars are green. So why do people want to sell their business to you? Is it just because you’re willing to pay the highest price? Fine. That’s a strategy. That may play. But I think if you’re able to develop points of differentiation that make you the most attractive buyer for particular reasons, even if your price isn’t the highest, well that’s a heck of a lot more interesting. And I think that’s the opportunity as I see it, is for Eads Bridge Holdings. How do we build that brand and that narrative around tech enablement? And our holding company, permanent capital structure. The combination of all of that is what I hope to be a really key differentiator and capture the attention of fantastic business owners that would want to partner up with us.

I don’t believe historically speaking that many private equity firms have really viewed their portfolio companies as customers. And I think that’s the dynamic that Andreessen Horowitz not singularly, but in large part changed within venture capital. Where they really viewed the entrepreneurs as their customers. And if you believe that, then it changes your perspective on what you’re going to do and how best to serve those customers. And how you build the firm, how you operate, the functions that you’re going to have, etc. And I think that will apply into private equity.

But it’s again, gross overgeneralization. But within private equity, a lot of folks went up through banking, and from banking to a private equity firm. And they’re more transaction oriented. And again, there’s nothing wrong with that. But you don’t see many people that have actually worked at companies and thought about the customer experience, and how do we sell and market to those customers. So if you take that mindset and approach and apply it to investment management, it’s totally different than how people operate historically. And I think more and more, firms are going to have to be further along this spectrum of treating their businesses, their management teams like customers. Again, if the dollars are green, you got to find different paths for people that want to work with you.

And ultimately, I really do believe that investment management is a people business. You want to partner with great management teams. You want to attract great talent to come work at your portfolio companies. So how do you go build that halo effect in order to be able to do that?

I’m going to go into some closing questions before we run out of time here. What class would you teach in college if you could teach about any subject you wanted?

It’s a great question. And what I decided on this is history. And in particular, business history. And this is something that Marc Andreessen impressed upon me as he was a voracious student of history. The inside lobby of Andreessen Horowitz is actually a library, which is super cool. And he told me once upon a time that if he’d go back to college, he would actually be a history major. And that always struck me because he’s such a computer scientist and the guy who wrote the first browser, but is such a student of history. And I think as an investor, it’s really important because history doesn’t repeat itself, but it does rhyme. And I think what history allows you to have is an important perspective and a prepared mind to say why now? Or maybe what’s different this time when making an investment or evaluating an opportunity.

And there are topics that are popular today that have come up in the past that we can learn from. Big tech antitrust didn’t just start in 2020. You can go back and read about the Microsoft antitrust suit in the ’90s. And there’s a fantastic book called World War 3.0 by Ken Auletta that takes a really detailed look at the government versus Microsoft’s case. And one of the things that I took away from that is a PR battle, as much as it illegal legal battle. And I think you see that playing out today as well. And I think there’s a lot of lessons learned from that. So if I could go teach a class in college, business history would definitely be it.

I like it. What’s a belief you used to hold strongly that you’ve changed your mind on?

So we’ve talked a little bit about this. I’ve brought up the topic of narrative a number of cases. But I used to think when I first started learning about investing and the way you’re sort of taught as a junior woodshop coming out of undergrad is very quantitative, very model oriented. Run your DCF and if the expect the value is different than the current price, then you can make your buyer sell decision.

But what I’ve come to believe over my time in venture and now with Eads Bridge Holdings is that narrative is if not the most important, one of the most important factors across all forms of investing. And it’s not to say that numbers aren’t important. Numbers are still critical, but they’re just part of the narrative. And if you think about this … so one of my favorite authors and thinkers in the investment world is Howard Marks. And he had this idea of the two by two matrix. And on one access, it’s consensus versus non-consensus. And on the other, it’s wrong versus right. And the only way to generate amazing returns is to make a non-consensus investment and be right.

But in order for that to happen, your investment had to go from non-consensus to consensus. New investors had to come in and buy into your thesis. Whether that’s long or short, it doesn’t really matter. Whether this is public markets or private markets, who’s going to be that next buyer, and what’s the narrative that gets them excited about coming in at a higher price than where you bought in at?

So I really believe that narrative is important today and will again become critically important further down the road. You can look at opportunities today where you say, “Wow, that company’s got amazing narrative and the numbers don’t back it up.” And you also have counter-examples as well. I’d much rather have a business with great numbers and a poor narrative, because I think the narrative can be fixed. But I do think narrative is really something that drives a lot of investments’ outcomes. And it’s something that people, whether their management teams or investors need to be much more mindful of how they build that and how they project that out into the world.

I completely agree. What’s the best business you’ve ever seen?

So I decided to approach this from a tech enablement thesis, because there’s obviously many different directions you could take this. Domino’s is the example that gets all the love when people talk about tech enablement, because it’s just been on such an extraordinary trajectory. And I think the stock has outperformed Google even over the last 10 plus years.

So a different company that I love to use as a great example of tech enablement is a company called Builders FirstSource. And it’s headquartered in Dallas. It’s a manufacturer and supplier of building components. So think roof trusses and things like that. Pretty low margin business, largely undifferentiated products at the end of the day. But what I love about this is that they’ve taken a commodity product and made it a highly valued service, providing solutions that make their customers more productive and efficient at the end of the day. Whether it’s your labor savings or just in time delivery.

And they’ve done this through four key technology initiatives. Enhanced business analytics, a pricing management tool for their sales reps, customer portal, and delivery optimization technology. So what they’re able to do is use these components of technology to ensure efficiency through the distribution process. They improve inventory days through higher turns and reduced cycle times. They’re able to increase online payments through the customer portal for faster and more efficient cash collections. And then they use these improvements in the cash conversion cycle and this incremental free cash flow to reinvest in the business through the acquisition or development of new facilities in strategic geographies. That again, help them better serve their customers.

And they’ve done this with no AI. There’s no robotics. It’s very basic blocking and tackling, but they’ve done it extraordinarily well. And the shareholders have definitely benefited. The stock price is up something like 40% annualized over the last five years. And it’s an example that I love to give because again, commodity product, it’s not a recurring revenue business per se. But when you build such a fantastic service for your customers, you’re going to find repeat customers and people coming back. And that’s done phenomenally well for them.

That’s a fantastic example. It’s wild how they take different components. And then together, they take little bits of each of those expertise and combine them into a business that on the surface, might look a little boring, but has a lot of really interesting nuance built that’s designed for a better customer experience.

Yeah. You can very easily map their flywheel. And it’s technology initiatives, generates a better service, better cash conversion, so the incremental cash flow allows them to acquire facilities or build new greenfield facilities in geographies that are closer to their customer so they can further better serve them. And you just keep rinsing and repeating that model. And it’s worked phenomenally well for them. I think in many ways, the key is can you map out a flywheel for a business? And how do you use technology to push on the levers of that flywheel? And if you can identify that, no matter what the company does, what industry you’re in, you’ll be able to create some really compelling value.

Love it. Thanks Marc for joining us. It’s been great to have you. I’ve really loved hearing about your Eads Bridge thesis and what you’re looking at on different industries, and then just hearing about venture capital experience. It’s one I haven’t explored very much. So thank you for sharing that as well.

Thanks Alex. I appreciate you having me on.

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