Mark Valdez – Software Defined Investing – Ep.183

Ravix Group — Ravix Group is the leading outsourced accounting, fractional CFO, advisory & orderly wind down, and HR consulting firm in Silicon Valley. Whether you are a startup, a mid-sized business, are ready to go public, or are a nonprofit, when it comes to finance, accounting and HR, Ravix will prepare you for the journey ahead. To learn more, please visit their website at https://ravixgroup.com/

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 oberle-risk.com. Or reach out to August directly at [email protected].

Interested in sponsoring?

(00:04:18) Thoughts on Hedge Funds

(00:05:35) Pursuing a Holdco model

(00:07:57) The story of Eads Bridge

(00:14:44) Questions to find problems in processes

(00:16:17) Mark’s first acquisition

(00:19:20) Tools and products that are obvious add-ons to a new business that’s acquired

(00:22:32) Company growth perspectives for mental health companies

(00:25:09) Factors to monitor in a marketplace business

(00:27:49) Marketplace businesses Mark takes inspiration from

(00:29:54) Evaluating Founder fit

(00:34:08) Characteristics of well-run talent networks

(00:37:36) Key roles EBH fulfills for portfolio companies

(00:39:24) Being a software-defined Holdco

(00:41:55) Approaches to take with a long-term hold mentality

(00:44:20) Thoughts on investing in software subscription businesses

(00:45:44) Top of mind focuses for the rest of 2023

Alex Bridgeman:  Did you listen to that My First Million episode with Martin Shkreli? He’s talking a little bit about the life of like being a hedge fund manager. He didn’t set it up properly, it sounds like. He didn’t really charge the same management fees, or maybe his performance didn’t vest his management fee or his carry. But brutal business it sounds like. He just knows a lot of fund managers who’ve gone to prison.

Mark Valdez:  Well, he’s gone to prison.

Alex Bridgeman:  It’s just his crowd.

Mark Valdez:  In some ways, the hedge fund is the greatest business model of all time. And it’s probably one of the fastest ways to make a lot of money. You can also blow them up. And so, sort of pluses and minuses, not as much stability as a venture fund or a private equity fund that has a baked in 10 year lifetime to it. But you can’t make money as fast in the venture or hedge fund or private equity world as you can in the hedge fund world because you’re paying out every year. You’re taking a cut of profits every year. And so, you can just blow it out and then bomb it, shut it down, and go restart and do it again is effectively what a lot of these guys end up doing, which is nutty.

Alex Bridgeman:  Yeah. When you were thinking about starting either Eads Bridge or any other thing you were considering, was hedge funds a part of that or a VC firm a part of that? What was kind of the decision to go the Eads Bridge route versus any these other options?

Mark Valdez:  Yeah, no, I didn’t really explore any other options. To me, I really believed that the holding company was the best way to express the thesis for tech enabling traditional businesses and having a long term time horizon to be able to support it, in addition to really believing that the long term compounding nature of a holding company model would provide a differentiated risk return profile ultimately, so sort of a combination of operationally in order to get the most out of the businesses that we’ll be working with, we wanted to have longer term time horizons to support the tech enablement thesis. And then from an investment perspective, really keep the focus on building and growing fantastic businesses, compounding cash flow in a way that if we create enough equity value, we could take EBH public at some point down the road. And so, really the path for me on that was to say, was really between a company or a fund but deliberately not wanting to go down the fund franchise path. And ultimately, I think, in a lot of cases, that tends to interest between management and investors, LPs and the GPs tend to diverge in the fund franchise model, where oftentimes the focus then becomes on asset accumulation and how do we raise more funds, bigger funds, more strategies, which creates value at the management company level but doesn’t necessarily translate into investment returns for the LPs. And through the holding company construct, really, the LPs and the GPs are kind of one in the same. You’re really the same entity. And so, you’re much more aligned in how you create equity value at the holding company level and having that benefit everybody. So, it’s definitely not the path of least resistance. And it’s not- there’s not a well worn path for doing it. But really believe that, again, that was the best expression of the thesis and what got us excited about what we could ultimately build.

Alex Bridgeman:  Maybe telling the story of Eads Bridge would be helpful and giving a recap, because one thing you also did was you hired a team around you before finding that first acquisition, which is a unique kind of approach to holding companies, relative at least to the ones that we’ve seen throughout we’ve the search fund world or kind of ancillary world. I would love to kind of get a recap and think through building a team around Eads Bridge from day one.

Mark Valdez:  Sure. Yeah. So, kind of quick recap on myself, been in Silicon Valley for 17 years now, started my career on the investment team at Stanford’s endowment back in early 2006. And that was a very traditional asset management role focused on asset allocation and manager selection. And then ultimately fell backwards into venture capital, which I did for 10 years prior to starting Eads Bridge Holdings. And through that process, was fortunate to spend a few years working for Marc Andreessen as his chief of staff. I was one of the early employees at the firm, which gave me the opportunity to drink from the fire hose, learning about tech, early stage investing, and also importantly, what it took to build a new platform from scratch. And I think a lot of that experience has been informative in terms of how I think about building Eads Bridge Holdings as well. I spent my VC career always a part of building and launching new venture platforms in addition to investing in early stage companies, but ultimately decided to leave VC with the recognition that there’s an opportunity to bring the Silicon Valley playbook and toolkit to more traditional non tech businesses. And given how much the software ecosystem has evolved, the opportunity really does exist for every company to be a software company. And that doesn’t mean you need to develop software or hire software engineers. It’s much more about how you think about leveraging software for acquiring customers, delivering your value proposition, and enabling data driven decision making. So, we set out to build a model to partner with management teams to establish a tech enabled leader and leverage software to build competitive differentiation and using those points of differentiation to grow market share and ultimately capture more of the value chain. But a core differentiator for us is that we are not a private equity fund. We have zero interest in building a fund franchise. And as I mentioned, that sort of tends to incentivize GPs to raise more funds, bigger funds, more strategies. For us, we wanted to, number one, create tighter alignment with our investors, and, number two, to keep our focus solely on buying and building great businesses for the long term. So therefore, we structured EBH as this holding company model. This is not lever, strip and flip, the focus is providing the tools and the resources to create an inflection point for these traditional businesses and hopefully continuing to grow and compound them for the next 10 plus years. At the outset, it did look to bring on additional members to the team and folks that I believe that had complementary skill sets to my own in helping build out that platform because we really do believe EBH is a platform. And as we look to acquire companies, we are essentially plugging them in to the resources that we’re building at the platform level. And so, we hired a technology lead, an acquisitions lead, and business development lead, getting close, I think, to hiring a talent lead as well and those being sort of the core functions at the EBH level where we’re building network and playbook components for our portfolio companies to leverage and felt like it was really important for us to have those resources right out of the gate. And whether you’re competing with searchers or lower middle market private equity firms, what are you bringing to the table as a firm that attracts a best in class business and entrepreneur to work with you. And ultimately felt like it was important to have those components and being able to deliver that as our value proposition to a business owner. And it certainly has been the case where you can find these owner operators who have built tremendous businesses, they’ve got customers, they understand their market super well, they built a team, and for us to provide them the playbook and the toolkit from a technology perspective, new tools and resources that they’ve never had at their disposal before, it gets them very excited to partner with a group like us to help take their business to the next level.

Alex Bridgeman:  It doesn’t sound like that software piece is necessarily just for increasing revenue or reducing costs. It sounds like it’s more of a kind of a broad stroke, let’s improve process everywhere with software or at least have a software forward mindset, perhaps.

Mark Valdez:  Yeah, I think that’s true. And we’re actually- the next newsletter that’s coming out is about operating with a software mindset, which isn’t just about building software or even buying software tools. It really sort of digs deeper into the fabric and the DNA of your business. And you’re right in that it’s not solely focused on growth or cost cutting; we do think about it much more holistically. And ultimately thinking about it as how do you build the business engine of your company? And if you think about the flywheel of a business, where can software be used to push on the levers of the flywheel or reduce the friction of the flywheel so that it spins a bit faster? And I do believe that having that long term perspective leads you into reframing how you think about the impact that software can have on a business. It’s not just quick hit operational improvements to help service the debt, put lipstick on the pig and shove it back out the door again, but how can we create a true inflection point for a business, have them develop new points of competitive differentiation, and ultimately, leveraging data to drive the business. A lot of what we think about the job that we’re doing is instrumenting these businesses with software, with the tools to inform the strategy and the operations of the business in ways that a lot of traditional business owners just really haven’t had the tools to do. And so, you can do that with off the shelf products and services. We certainly don’t want to reinvent the wheel and believe that there’s a lot of opportunity for impact within these businesses in that way.

Alex Bridgeman:  When you look at any particular part of a process within the company you acquired or in other companies you see or peers of yours are running, what kinds of questions are you asking to figure out the root cause of why a process isn’t working as well as it should? And perhaps the answer is software, perhaps it’s something else. But what kind of questions do you ask to get to the bottom of it?

Mark Valdez:  Yeah, it’s true. We don’t think of tech being a panacea in this way. A lot of this does come down to people, processes, and systems. And oftentimes, there is a software solution, but it doesn’t necessarily have to be the case. Again, if it’s not broke, we’re not looking to fix it. But it tends to be the case that there is a lot of low hanging fruit and getting into a business at all levels. This isn’t just at the management level, but talking to the individual contributors and understanding what are the pain points for them, what’s taking them longer than they feel like it should, where do they spend their time that, on processes or functions that are low value, and it doesn’t take much to get people talking to recognize where they struggle or where they’re spending time that they shouldn’t be. And at least so far to date, I wouldn’t say there’s been a magic question or anything like that that creates an unlock. But as you have these conversations, sit side by side with folks, understand their workflows, the pain points become pretty obvious.

Alex Bridgeman:  And so, the first business you bought is this mental health business, which has a lot of interesting dynamics just happening broadly in mental health companies. I’d love to hear about this first company and kind of how it fits in the broader mental health industry and landscape.

Mark Valdez:  Sure. Yeah, absolutely. So, in November of last year, we completed our first acquisition, which is a company called Stokes Counseling, which was the largest independent provider of mental health services in Connecticut. The business was founded 12 years ago in 2011, started as a single shingle and now has 200 clinicians on the platform. And this industry had gone through a really interesting transition through the course of the pandemic. And pre COVID, was really a brick and mortar business. Patients would show up at the office, spend an hour with a clinician, and go on their way. And through the course of the pandemic, really became a telehealth business. And now we can serve any patient in the state without having physical proximity to them. And so, viewing this business now through a software lens, it starts to look a lot more like a two sided marketplace. And we think the role that software plays within the business will be much more meaningful. So, the thesis for us is very simple. We believe that software is going to play an increasingly important role in making mental health services more accessible and more effective through the tools for communication, assessment, and treatment. Today, fewer than half of Americans receive the care that they need from a mental health perspective, yet more than 80% have a smartphone in their pocket. And so, the role of technology is to now optimize the interaction between patients and clinicians, the two sides of that marketplace, and maintaining the balance and the health of that marketplace. So, in order to maintain the efficacy of the system, it’s critical that both sides of the market work in concert together to create that virtuous cycle. And so back to the flywheel construct of the business, how does software play a role in pushing the levers of the flywheel and/or reducing the friction so that it spins a bit faster? So, we think about the flywheel of this business as hiring clinicians to increase coverage and care specialties, that leads to better matching and utilization for patients. And effectively, that leads to better patient engagement because they’re getting the care that they want and need, which then builds the reputation and the referral sources for the business, which further then increases the patient intake requests and leads back to hiring more clinicians. And so, we think software can play a role on each component of the flywheel, building that business engine so that it operates seamlessly and effectively, balancing the two sides of the marketplace so that as we continue to grow and evolve the business, we’ve got the right foundation in place to be able to support that growth.

Alex Bridgeman:  In this first company, are there certain tools or software products you’ve come across that you’re kind of trying to maybe reach for first that seem like the obvious first components to add software into the new business?

Mark Valdez:  Yeah, there was for sure. And the first, one of the very first things we did for the company was help implement an applicant tracking system. One of the main levers for growth in the business is hiring additional clinicians. And this is something that historically the company did through a very manual hiring process, printing out resumes, having folder systems to track where they are in the funnel. And while that was effective, that’s certainly hard to scale. And what we wanted to be able to do is help reduce the friction on the hiring process and have a system that gathers all of the- is connected to the job boards, gathers resumes, and automates some of the workflows, candidate communication, etc., but also, importantly, really generating data through the funnel – what are the best referral sources for candidates? Where is there friction in the hiring process? What’s taking longer than it should? Is there a high number of candidates that are falling out through the process? If so, why is that happening? And so, it’s a great example of taking an existing process, instrumenting it with software in order to reduce the manual burden, automate some of the workflows and ultimately generate data that can be insightful for us to further improve that process out into the future.

Alex Bridgeman:  Yeah, it seems like a great way- I’m a data geek, but it seems like a great way for you to like uncover data about your business where like tracking a manual process is pretty hard, unless you’re like writing on your notebook on the side of what’s happening during your process. But I don’t think that really happens. It seems like a great way to just track and add data to processes beyond just the efficiency of it.

Mark Valdez:  Certainly. And that’s been one of the core initiatives for us is gathering the data, creating KPI dashboards, and having a bit more of a real time look into the business. And it was just not how the business operated historically. They had heuristics and particular data points that they would look at, but we didn’t really have a clear picture into the core functions. A big part of our early effort was not just for the applicant tracking system with the overall operations of the business, creating those KPI dashboards, having more day to day, week to week picture into the business. And so, we have a better sense of what’s working, what’s not, where we need to course correct, and not having to wait for monthly or quarterly financials to paint the picture for us on the operations of the business.

Alex Bridgeman:  Given your VC experience and knowing about all the interest in mental health from venture capital backed companies, how has your past experience informed the way you look at growth in a VC business and how maybe you change or adjust the way you grow this business in comparison? Like what lessons do you take away and what things are less relevant?

Mark Valdez:  Yeah, absolutely. So, there’s no doubt there’s a ton of venture capital dollars that are pouring into mental health and behavioral health companies. And I think it’s largely a recognition that the need is so great. And I do believe that there’s a role for lots of different types of companies and certainly many venture capital backed companies to provide care to patients. I think the big difference is if you take venture capital dollars, then you need to be on a path to a multibillion dollar outcome. And the currency for justifying those types of valuations is growth. Therefore, the focus of a VC backed business is how do we go broad? How do we expand to all 50 states as fast as possible? How do we acquire as many patients and clinicians as fast as possible? And for us, the focus is quite the opposite. We want to figure out how do we go deeper and do the things that the VC companies would never do since it’s sort of contrary to their business model. How do we go deeper into the communities, into the schools and the police and fire departments, the community centers, and really be a part of the fabric of the community and a trusted resource within the community. And certainly, we want to expand and we want to grow as well. We  think about that growth path much more methodically. We don’t need to be on an exponential growth curve just to justify the next round of financing. And so ultimately, I think there are very different paths. I think we can be more complimentary than competitive with a lot of the venture backed companies that are out there. But certainly, different modalities and ultimately different focus areas for us as companies and what the metrics of success will ultimately be.

Alex Bridgeman:  The two sided marketplace model is pretty interesting and I’m sure is one that you’ve looked at a lot from a venture side. How do you manage the health of this marketplace business? What are the kind of key factors you’re looking to keep track of and monitor?

Mark Valdez:  A lot of it comes down to just ensuring that the two sides of the marketplace, the patients and the clinicians, are operating in a healthy manner. And so, at some level, it’s easier to think about how this can get off the wheels. If you don’t have enough clinicians, and you’ve got patients that are on a waitlist for three months, six months, longer, and they really want and need care, but you can’t provide it to them, and that can lead to frustration, that can lead to them going elsewhere for care. And similarly, if you’ve got a bunch of clinicians but not enough patients to provide them the utilization, the revenue, the income that they want and need, they’ll go elsewhere to try to find a resource that does bring them the patients that they need. I mean, they’re trying to make a living, too. And so, we want to reduce the friction between both sides of the marketplace. How do we onboard patients in a seamless manner? How do we provide them the insight and the resources they need to understand what it’s like to have mental healthcare, and what the outcomes are that we’re building towards. And on the clinician side, we want to be able to onboard them seamlessly as well, reduce the burden of their workflows, create a better experience for them. And that can be through continuing education, additional benefits, etc. It’s a tough job. And there can be a lot of turnover if you don’t make the time and the effort to really ensure the health of the clinician population. And so, really, that’s why we have to continue to find this balance and creating the data and the insights that ensure that we can get out in front of any potential imbalances that may start to exist. And so, that can lead to patient acquisition and clinician acquisition and tracking the progress that we’re making and ensuring there’s alignment in how those patient populations and clinician populations grow and evolve.

Alex Bridgeman:  What are some marketplace businesses that you study and admire and think are run well or at least have lessons that you can take away?

Mark Valdez:  Yeah, the ones that immediately jump to mind are pretty obvious, businesses like Airbnb, Uber and Lyft, Instacart, where you do have multiple constituencies that you’re trying to balance. And I think if you think about car sharing, certainly very different than mental health services, but just given the example I just described, if you have to wait 20 minutes or 30 minutes for an Uber to show up, well, you might go look somewhere else to try to figure out your ride, just as mental health patients would ideally want to see a clinician as soon as they can. And if you’re not taking care of the drivers, the drivers will go find somewhere else to look for rides. They’ve got a livelihood that they’re trying to maintain, they might have car payments that they need to make. And similarly for us with clinicians, it’s not just about finding patients, but it’s the right types of patients, the patients that are suitable for them to care for. And I think there’s lots of lessons learned from many of these marketplace businesses. Again, I think, when you’ve got the venture backed model, you’re on a very different type, or at least you’re attempting to be on a very different type of growth trajectory. And so, we do want to take a much more methodical approach. And we don’t- this is not an opportunity where we can just throw money at one side of the marketplace to incentivize it. And so, we have to be really cognizant of what else we can do to ensure that we’ve got the best matching, the best utilization, the best onboarding and off boarding experience, and ensuring that we get the right types of outcomes for patients as well as clinicians.

Alex Bridgeman:  One thing you’ve also talked about is that that first company or that first founder that you partner with is really important and sets the stage for a lot of different relationships going forward. How did you evaluate and make sure that this was the right fit?

Mark Valdez:   Super, super important for us because it is core to our model that we’re not trying to implement ourselves as CEO into the business. We’re looking for owner operators who want to roll equity and continue to grow the business partnering with us over the long term. We recognize that we don’t understand their team, their market, their customers as well as they do. But we do provide toolset, playbook, and resources that we bring to bear that they may not have had access to previously. And so that partnership can become really powerful. And so, that’s certainly the case with Michael Stokes, the founder of Stokes Counseling. He’s rolled equity and continues to run the business day to day. And it also certainly helps ensure that there’s more of a seamless transition. It’s not like we’re bringing in an outsider that can create a little bit more havoc within the transition of the business. The day to day really hasn’t changed all that much. And we tried to be particularly helpful on developing the strategic plan, the opportunity for technology within the business, helping with vendor selection, implementation, best practices. But as I mentioned before, a lot of this does come back to people, processes, and systems. And so, wherever we can be helpful in diving in and working with Michael and his team on further developing those components, that’s what we’ll do. And I’m so excited to continue to build a partnership with him. And it’s been going great so far.

Alex Bridgeman:  When you focus on companies that have founders or CEOs who’ll want to stick around, does that limit the universe of companies you can realistically look at?

Mark Valdez:  It does. Yes, certainly. And a lot of the businesses we see today, it’s the silver tsunami. Its owner operators who have reached retirement age, they may not have somebody to hand the business off to within the family, and they’re looking to wind down and retire ultimately. And sometimes, folks will stay on for a transitionary period. And that may or may not work for us in our model. Ideally, we want to have that person who rolls equity and continues to grow the business with us long term. Michael Stokes was a little bit of a unique situation in that while he built this business from a single shingle to 200 clinicians, he was only 38 years old. And so, still had the desire, the runway, the energy to take the business to the next level and looking for a partner to help him do that. While it certainly can limit the opportunities that we can look at today, we do think that can change over time, particularly if we have tuck in acquisitions where maybe there are owner operators that are looking to retire. But we’ve now got a management team built out that can bring those tuck in acquisitions into the fold. Or as we start to develop more of our talent network ourselves, will we have folks that come from particular industries that we might be able to put in a leadership position and then transition into more of a CEO role as an owner looks to roll off, or they actually become the CEO right at the outset as somebody’s looking to retire. So, today, our focus certainly is on finding those business owners or these management teams that want to continue to run the business day to day. But we do think we can continue to evolve our model and deal with different types of management situations as we go. But certainly, that’s the primary focus today.

Alex Bridgeman:  The talent network piece is really interesting. What are some characteristics of well run talent networks that you’ve come across or seen?

Mark Valdez:  My view on talent networks is really mostly informed by my time at Andreessen Horowitz. And this was something that we spent a lot of resources on right out of the gate in building the firm and launching the firm. And the model was very different, which I think people, it took time for them to really understand what we were trying to achieve because certainly there’s plenty of exec search funds, even other VCs had executive recruiters as part of their firm. But the Andreesen model was totally different in that the primary focus for the individuals on the exec talent teams as well as the technical talent teams was to develop a close trusted relationship with the talent. Whether or not we had a job opportunity for them now or in the future didn’t matter. Let’s meet the best in class talent, develop that trusted relationship, find ways to inject value into their career path. And you never know, at some point down the road, maybe there is an opportunity within the Andreessen portfolio or maybe it’s external that comes across our radar that would be a perfect match for this talent. And we help facilitate that match or that introduction, and ultimately, taking a very long term perspective in how we develop those relationships and where the value could potentially come back to Andreessen in the future. But it wasn’t transactional, which is the key, and counter to most executive search firms, which is the whole goal is to put butts in seats. Somebody hires you because they need a new CMO, and their job is to go fill that seat as fast as possible. And nothing wrong with that. There’s certainly a role for that within the ecosystem. But we felt like we could build a more differentiated approach by really just keeping the focus on building the relationship with the talent. And so that’s how we think about the opportunity for Eads Bridge Holdings as well is how do we develop the trusted relationships with best in class talent outside of the tech ecosystem. And whether or not they’re part of another CXO program or doing a search themselves or in business school, wherever they are on their path, like we don’t really care about, we just want to try to find ways to be helpful and inject value into their career, and maybe at certain points in time down the road, that will overlap with EBH as well. And so, we haven’t really kicked this process off in earnest. We’ve been looking for the leader to help implement and execute the strategy. And as I mentioned, I think we’re getting close to making that hire. But really excited to have that be a part of our platform and finding ways to inject value into the ecosystem. And hopefully, ultimately, that’s goodness for everyone.

Alex Bridgeman:  You talked about a couple different roles that EBH fulfills for its portfolio companies, one being a talent center or talent referral source. What are kind of the other key roles you view EBH fulfilling for portfolio companies? Not necessarily for the sellers who are selling and you’re a capital provider to them, but just for that once they become a portfolio company, how do you view the different roles for EBH?

Mark Valdez:  I would say the two primary ones are really on the technology playbook as well as the talent network. I think there’s also a role for how business development plays into that as well as we’re looking for additional acquisitions. So, if we have a platform, how would we- EBH can help with looking for those tuck in acquisitions. And that’s what we do today with Stokes. But ultimately, as we think about the goal being to have two to three vertical platforms over time, each platform would have its own management team and technology playbook and M&A strategy. It’s just that at the holdco level, we’re always constantly building that playbook and that network for these companies to be able to tap into to help accelerate those processes. So those are sort of the core components of the holdco platform. And then as we make those acquisitions, we essentially plug them in and continue to grow and evolve them through the technology playbook, through the talent network, as well as additional M&A components.

Alex Bridgeman:  What have I not asked you about in terms of EBH that is important to discuss or mention?

Mark Valdez:  It’s a good question. I think one of the things that we don’t talk too much about but I think is ultimately one of our core differentiators is how we describe Eads Bridge Holdings as a software defined holding company. And that means a few different things. Primarily, what we talk about is that tech enablement strategy and playbook. But there’s more depth to it than that. And the main source of that is how do we implement our own data pipeline warehouse and analytics platform at the holdco level? And again, thinking about as we bring on a new platform, how do we instrument that platform with the systems to generate the data so that we can make more informed decisions? That’s at the platform level. But how do we take that up to the holdco level as well, especially across different types of companies that might be even in different industries. And so, there’s no standardized infrastructure at the portfolio level. So, the job for us is to build those data pipelines into the systems we have at the vertical level, pull that data out, drop it into EBH warehouse and have our own analytics dashboard on top of that, so that we can be much more informed about what’s happening across the entire portfolio as well as the individual platform level as well. And I think that’s a massive opportunity for us to build real core differentiation longer term, because again, think about it, it would never make sense for a private equity firm to do this because if they took the time and the effort and money to do it, and then they go sell the business three years later, it’s like, well, that was all for naught. And I think that provides us a much more differentiated path and allows us to make smarter capital allocation decisions, portfolio management decisions, and operational decisions by instrumenting these vertical platforms in that way. So that’s something that we’ve already started implementing today and continue to look to build out in the future and something I believe will be a core value driver for EBH long term.

Alex Bridgeman:  Yeah, when you compare yourself to a private equity firm where you don’t have that same long time horizon, what other things can you do because your time horizon is longer than the three to five year holding period?

Mark Valdez:  I think the big thing is just not having to focus on quick hit operational improvements. Most of the private equity firms out there, they’re smart people, they understand that there’s an opportunity for software and technology within these businesses, and many have hired tech operating partners who are smart and sophisticated from a technology perspective. The challenge is that they are hamstrung by the traditional private equity model, which tends to be focused on cutting your flowers and watering your weeds. Many of them sell their best companies as fast as they can to return capital to LPs, go out and raise the next fund and continue to rinse and repeat. And if your hold period is three years, four years, your focus is on the quick hit operational improvements, help service the debt, put lipstick on the pig, and we’re going to shove this thing back out the door again. And I think that prevents you from taking a longer term perspective on where software can ultimately drive value within these businesses, how do you overlay more of a software business model onto these businesses, and the work and effort that’s going to be required to do that will take longer than three or four years most likely. And while a private equity firm would never do that because that only benefits the next buyer, it doesn’t benefit them, that’s absolutely something that we want to be building towards at Eads Bridge Holdings. And so, we really believe that the holding company model was the best expression of our thesis. We needed to have a structure that supported that long term approach. And that was what was going to provide us, ultimately, a very different value proposition for a business owner. Back to our positioning relative to a private equity firm for a business owner is to say we’re here to preserve legacy of what you’ve built, further enhance it with this tech enablement strategy, and provide you new resources, new capabilities you never have had at your disposal before. And that tends to get people pretty fired up and excited to partner with us.

Alex Bridgeman:  We talked about software a lot. And I think when I think of software, I think of subscription business models most often at least. Is that a type of business model that you’re looking to acquire on the investment side?

Mark Valdez:  It certainly could be. And it doesn’t necessarily mean you have to take a traditional business and make it a SaaS business or subscription business. But maybe there is a complementary product that you can launch that has more of a subscription type model to it. The marketplace business that we’ve talked about with Stokes, that is very much a software construct that we’re now overlaying on what was a traditional business model. It could be a data business where you find there’s opportunities to extract and produce data and insights that may be complementary to the core business, and you sell that as part of your business model, or maybe it just becomes an enhanced part of your value proposition. So, I think there’s lots of different paths for taking what we’ve learned from the software ecosystem, the business models that have grown and developed out of Silicon Valley, and applying that to traditional businesses. And so, it doesn’t necessarily mean it’s a software company, per se. But you leverage a lot of the learnings and the business models to be able to provide ultimately a stronger value proposition to your customers.

Alex Bridgeman:  What’s top of mind for you in the next half of the year at Eads Bridge?

Mark Valdez:  Certainly a continued focus on building and growing Stokes Counseling and working with the team. We have a number of initiatives that we’re still getting going on for that business. A lot of our focus today has been on building a more robust finance and FPNA function, hiring an HR best practices, we talked about the applicant tracking system, data analytics and KPI dashboards, also just very core infrastructure, basic stuff, a VoIP phone system, more stable Wi Fi, which turns out if you’re doing a lot of telehealth calls, like that stuff matters, and then also web presence and performance marketing. And it’s something that we want to create a much more modern look and feel for patients, for clinicians. And having the landing page for that is really core. The website is the storefront for your business to the world. And so, we want to make sure that we get that in a much better place. So lots of different operational initiatives where technology is core that we’re focused on for the first half of the year and we’ll continue into the second half of the year. Still continuing to look for potential tuck in acquisitions, particularly those that are in surrounding states in the Northeast where we find an opportunity to partner with a clinician who has built out their patient population, the clinician population, and has payer contracts in place. We think that’s the path of least resistance for continuing to expand geographically. But again, doing that in a very methodical manner and trying to keep concentration within the Northeast. And then, we are, have been, and will continue to spend time looking at what could be the next platform opportunity for EBH, have been looking at a number of different opportunities that have come in through our deal pipeline, and would love to be in a place where we’re ready to take on the next platform in the relatively near future. But certainly, we need to make sure that we’ve got the right infrastructure and foundation in place with Stokes to be able to support its continued growth and having a great reference customer with Michael there is also very helpful in attracting the next entrepreneur as well. So very mindful and focused on making sure that we make Stokes successful.

Alex Bridgeman:  Yeah, certainly. Mark, thanks for coming on the podcast. It’s really good to see you. I always enjoy getting to chat. So thanks for sharing a little bit more of your time.

Mark Valdez:  My pleasure. Thanks for having me back, Alex.