YouSaid · the spoken record

Robert F. Smith

lines on the record: 85
first: 2021-07-05
most recent: 2021-07-05
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“It's been interesting. We've been able to do some real interesting pioneering work in the capital markets, which we can get to in a little bit, for people to recognize what these businesses actually can do. If you think about creating true operating leverage, not financial leverage, operating leverage, you then have the ability to dial up and dial down what we'll call your go-to-market resources and manage that relative to what sort of profitability you think you want or can capture in the company. For instance, we just sold one of our businesses. It was quite interesting going into the pandemic that company was growing 30 plus percent. And quite frankly, it had some interesting profit margins in there. We were kind of at zero, et cetera, because we were really growing this business. Well, the pandemic hit, and we said, okay, let's do this. Let's throttle back just to make sure that if you have any losses, you don't end up with capital losses or lose any money in that business.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Back of whatever challenge it is that we might have. And then the frequency goes down and it'll go to once a week, once a month, once a quarter, whatever it might be, depending upon where they are in implementing some of these best practices. So in depending upon how heavy the lift is. So every engagement model is different. It's bespoke based on not only what we're underwriting to and agreed to with management, what are we going to do, how are we going to do it, and then over what period of time, and then who's responsible for the company, who's responsible at VCG, who's responsible within the operating MDs to make sure this all occurs. There's some things you have to put in place like everything else before, something else that you can do, the building blocks. And so that's why we put that whole flighting together and work with the management team to make all that happen.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“The way to think about it, we've got this is the unique piece, you know, investment team and then our value creation team. Our value creation team has operating MDs and Vista Consulting Group working in concert. Every portfolio company has some operating MD assigned to it and some set or collection of VCG Vista consulting group resources that are assigned to whatever value creation dynamic that we've agreed upon with the management is going to be accomplished over some period of time. And so then there's an engagement plan, an engagement model. And again, we're not there to do it for the management team. We're there to educate, inform, and bring forward what I call the resources to enhance their ability to accomplish the goals that we've underwritten to. And it's literally, in some cases, our value creation team is talking to senior management team people every day for periods of time until we kind of broken.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so that leads to a really interesting deal dynamic for us, which is we get a number of deals that no one ever sees because executives will come to us and say, hey, I saw what you did with JAMP and Ping and et cetera and just spectacular performance and with that. So help me learn how to do that. And then we bring them into the ecosystem and say, okay, call these five senior executives and have your chief marketing officer call these 15. And then we bring them together. pandemic has actually been interesting. Used to do a lot of it in person physically. Now we can actually do a lot more of it virtually. It's kind of an interesting. So there's a higher frequency of engagement that can now occur in that context, but the content and the quality, because we built out all this content for so many years, has been quite effective in that regard.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“About their challenges. You're kind of focused on your own world, your own challenges, and you're trying to glean whatever insights come to your podcast to hear words of wisdoms. You take those nuggets and you say, okay, how do I take that nugget and actually create something? Well, we have the unique advantage of having, in many cases like today, 71 ecosystems, 71 separate software companies, but we bring the C suites together. We bring the middle managers together in certain best practice solution summits and those sort of things. And they share those best practices. And I'll tell you, that is probably the greatest tool that we have that decreases any resistance to change or to improve. And now what's happened in the marketplace is we get inbound calls from companies and executives who say, I want to be part of your ecosystem because I saw what you did with these five companies. And we're similar. I want that. How do I get into that?”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I'll tell you what works well for us is now that we've been doing this for 21 years or so, we've got literally hundreds, I think it's over 400 executives who've been on their second, third, fourth, fifth, sixth tour of duty at Avista Company. One of the best things we do is now bring those new executives in contact with existing executives and say, okay, let's talk about how we're going to implement whatever the best practice might be. And here 15 people who've done that over the last two and a half years, why don't you spend some time with them and talk about what worked well? What didn't what did they wish they knew going into it that they can tell you now? And when you have that socialization experience from software executives, and it's kind of interesting, like all things, if you're in a software company, how often do you talk to another software company?”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm curious what the dynamic is between your investment team and the operating executives of companies you buy, right? They're coming into an ecosystem where you've done this over and over and over again. And whether it's software implementation, hiring practices, all these things you're talking about, what is that dynamic look like between you and them?”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“And sometimes they're hiring based on who's available. Versus actually knowing what's the right sort of characteristics that you need for person in that job. So I think we've become very effective at that and kind of finding the right characteristics for the right role in that company at that period of time. And sometimes the company is outgrowing the people that were in that role. They may have been great when they were selling to the small to medium businesses. And now they need to move to a larger enterprise class sale and they may not have the right skills. Well, we build training systems, which I think we're also quite known for is our training systems and capacity across all kind of the strata of an organization. But in some cases, they may not be able to make that leap. And so then you have to augment the management team with people who had that experience or come from another portfolio company who's done it before.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have some which are aptitude, personality profile, and those elements give us a sense as to is that individual in the right seat for the task that's ahead of them. And so you can have somebody who is a brilliant person but actually working in the wrong role for that organization or has the wrong sort of touch to be in customer service, the wrong sort of touch to be in sales. And so the way I like to think about it is more lock and key approach. So it isn't just a, oh, you got to get smart people to do certain things certain ways. It's really certain people are very effective in certain types of jobs. And so you really want to try to find the right sort of people to fit in the right jobs. And sometimes you have to move them around and sometimes you have to augment and support and sometimes they're just because of where they are in their life or something. They're not a good fit for the job that they're in. And often we'll go in and partner with a company. Sometimes they do an exceptional job of their talent management.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Capabilities in order to do that effectively? And if not, what are we lacking? Is it skills? Is it number of people that we need? Is it organizational capacity and design? And then that's what our VCG organization will come up with and then work with the operating MDs and investment principles and say, okay, here's a change we need to make in order to make that happen. Get the buy-in with the management team and move forward. It's a highly iterative process, an engaged process with our team, with the management team of the companies.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, it's ongoing, so our operating MDs, our investment principles, as well as our VCG subject matter experts, that's what they talk about. this particular best practice in the company and then you say is this manager that's currently there capable of doing it well if you've done this a few hundred times you have some references you have some benchmarks to see if they're able to do it or able to learn to do it or do you need to bring in or augment their managerial capacity to get that done and a lot of it is feel on the one hand sure we've got assessment tools that we're kind of known for but a lot of it really has to come through the discussion with its senior executives and saying here's what you now have to do for instance you need to migrate a product into aws or azure or something of that sort or a platform and you just have to look at your team and say okay we've done this i don't know 75 times is this 76 time do we have the right people tools”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Methodologies that we should do a little more work on. And then the next time we do it, we do it a little differently or a little better, a little faster, or implementing our quote to cash systems. In some cases, in the early days, it would take six to nine months to get those implemented. And today, in some cases, we're able to implement five or six of them in a couple of months across portfolio companies. So that feedback, feed forward capacity with the organizational design has always been something that we've held as a hallmark of who we are and what we do. And then as you get better at it and you build more people capacity, you can actually do more and more faster and faster and then kind of enhance what you can actually deliver to your portfolio company. So it's been a design point all along. It's just a question of how effective we've been in scaling it, which is really always the challenge.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“It has been that way from the beginning, from the first three, four, five portfolio companies that we invested in, we would bring those CEOs together and we'd have shared experiences around, okay, well, how did you actually manage your product development or your services? And you've got 10,000 customers. This is a time when everything was on premise. And you've got 10,000 customers. You need to send updates. How did you do that effectively? And how did you, when you send those updates out, not get deluged on Monday with thousands of calls because it wasn't installed properly? And those are some of the problems of the past that we've solved and the way we do things today and going forward to the time in which we actually started to really migrate businesses from on-prem to the cloud. And so I think we've done more of those migrations in probably any institution on the planet today. And those are the sort of shared best practices when you do it once. We take it back and we find it, okay, what went well? How should we refine this?”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“One point in time over that trajectory of the last two decades did you go from having a series of individual companies to having this centralized VCG and the ability to institutionally share this across your portfolio companies?”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Design, the construct, the methods by which we engage with our management companies and our management teams, quite unique in the industry and I think has that effect of constantly being able to evolve not only our best practices, but evolve relative to the way that the technology industries continue to evolve using different tools and methodologies and platforms. So I think it's quite unique structure in the industry that has been quite effective over the last 20 plus years.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Creation best practices. And so we will buy a new company, we'll engage with the management team, and they may have, look, we'll go and we'll deliver a plethora of best practices to be more efficient in your product development and go to market strategy and customer service or managing the way your go-to-market motion might be and outside of a geography that you're currently in. But you will often from them learn things that they're doing that are particularly effective in the markets that they're in that have some applicability across the broader portfolio. So the way I like to think about it as an engineer is we have very effective feedback and feed forward loops and we actually have structured times when our senior management teams get together. They learn from each other. They have shared experiences. We'll take the data from that. We'll enrich that data within VCG and then redeliver it across portfolio companies that may need that sort of applicability. So the organization.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a key part of who we are in our organizational design. I think you know this. We've got over 150 or so investors, and we spend a tremendous amount of time training our junior people, our mid-level people for the areas that we know are important for them to be senior folks to execute across each of our platforms. We've had the great fortune, quite frankly, of being able to create new and different products because we've been able to train some of these just fantastically talented young people and then give them an opportunity to increase their leadership potential in that regard. The other part of the equation, quite frankly, is Vista Consulting Group. If you think about it, we've got almost as many people in Vista Consulting Group as we have in our investment team. And what they really do, the way I like to think about it is VCG engages with our management teams, our investment professionals, our operating professionals to really deliver and enhance, call it the value.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you've gone that deep in a vertical like you have here, how do you think about institutionalizing what you know so that you can deliver those benefits to the next portfolio company that enters your portfolio”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“experiences or relationships to enable them to grow those businesses. And probably seventy, eighty percent of the companies that we buy is led by someone that this is the largest company either they've been in or the largest company they've ever led that day. And so often they're moving off into a sphere that they have no experience and they're looking for some construct, for some help. And I think that's one of the things that we provide as Vista. We provide an infrastructure and an ecosystem to support all of the C-suite executives as well as rank and file to help not only achieve their financial objectives, but also frankly their development.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, the most important thing is really, does this provide a real sustainable value to the customers that they're serving? You got to look at the must-have versus nice to have kind of rubric of decision-making from the customer's perspective. So that's kind of point one. Point two, does the management team really understand not only the value that they are creating for their customers, but how their customers are actually using that product and how in using that product it actually enhances their relationship with their customers. So that's kind of point number two. Then we look at some of the other elements that are recurring revenue business. Does it have high retention rates with its customers? Why does it have high retention rates with its customers? Is there an opportunity to upsell existing products to that customer base? And then you have to look at the management team. Does this management team have the capacity to scale and grow? Or do they need a different set of training or tools or experience?”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“So along those 500 transactions over the years, what do you look for in your due diligence that leads you to think this is one of those enterprise software companies that you want to own for your portfolios?”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because when we're going to move from a small and to medium business to an enterprise, we need to have the ability to scale our product with fewer deficiencies and frankly at the end of the day, fewer bugs so that it has higher reliability, which you can then drive across an enterprise. So I wouldn't say there's just one instance, but we have hundreds of instances now. We've done this now over 500 times. And each time it's proven out that product superiority is probably one of the most important things that you can focus on, which is very much a heart of our best practices methodologies.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things that I think we did very well early on, still do well, is focus on product development. And what I mean by that often enterprise software companies, they were started by a person who was really good at developing some product to solve some problem. And in some cases, that person wasn't necessarily professionally trained to be a product development manager, but actually was a good product developer. And so one of the things we do was actually bring some system and structure associated with it. And the aha moment is it isn't that every single product developer is the best at actually doing product management. And so putting professionalized product management across portfolio companies and within those portfolio companies yields massive benefits. And you have to often in those dynamics engage very clearly with that management team and saying, hey, here's why this matters.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“So take me back theoretically, you've stumbled upon a great industry with great dynamics and you understand how it works. Is there a story of one of those early deals that you can still hold up today and say, aha, we were right.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Every year, just to give you a point of example across all of our portfolio companies. And today, the average ROI return on investment of the products that we sell to our customers. So this is the customer's benefit. It's over 600%. So there's just very few innovations or products or activities that give you that sort of ROI, but software does it fairly consistently. And so you have the ability to deliver that. And then if you continue to innovate off of that, you can continue to drive continued adoption of those products into your customer set and provide benefit for them.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Raises their hand. I said, Why is it I could walk in anywhere in the world and say the name of that spreadsheet? And everybody uses the same thing. Well, that's a consolidating dynamic that occurs. Now, when I started, there were five or six different spreadsheet companies. But ultimately, there was one winner. And that one winner on the one hand patched Product Superiority as well as Execution Excellence in the way that they delivered it to their customer set. And then everybody converged in the entire industry on that product. Well, that's a dynamic that actually exists in enterprise software broadly. Now, often what you have to do is figure out the taxonomy of the industry as to who's going to be consolidated, who's going to be the consolidator. But ultimately, if you actually provide high ROI benefits, which is the key to it all, you're creating massive amounts of productivity for your customers, then you have the ability to actually be in that industry, not for quarters or for years, but for decades. And we do a survey.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. So there's a couple inherent advantages of enterprise software that are now just being realized. And I think that's why you see the rerating of these software companies and the valuations at the levels that they are and they continue to expand. One of which is if you really think about it, it's a business, it's a 95% gross margin business at the end of the day. Okay, how many industries are 95% gross margin? You build it once. You can sell it as many times as you can. There's no inventory. So as a result, you never use it up. There is negative working capital associated with the business. And when you think about how the mature industries at the time were consolidating, it still is a winner-take most type of a market. I chuckle Ted every now and then I have the opportunity to work with people and investors and companies all around the world and sometimes I'll walk into an environment and haven't met these people and I'll say, okay, how many people here? And I'll use a certain spreadsheet software.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Become more profitable. So when you start to realize that not very many folks at that time in the private equity industry were actually focused on that space, I said, this is one that you could actually create a sustainable competitive advantage for something we all learn in business school by approaching one market, becoming an expert in that market, and actually bringing a unique set of tools to that market to maintain that competitive advantage, hopefully for decades, for as long as I'm going to work. But that's really what gave me the spark of inspiration.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I started to understand what investors, private equity investors were doing out in the marketplace because I was actually pitching companies and selling companies to them. And I realized that none of them, like any in that period of time, none of them are really thinking about software as an area of investment. Some may have had one or two software investments, but they were thinking about technology broadly. And at that time, there's a lot of focus on semiconductors and services business and those sorts of things. And I realized that there was just frankly a lack of awareness of the impact of software. Because when you, as an engineer, having gone through that experience, I could actually see the actual ROI of the products that software companies sold. When you actually, for instance, implemented a payroll system in a large company, you eliminate massive numbers of waste in the system or inefficiencies in the system that actually can then be repurposed in other parts of the organization to help the company grow.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“What was that entrepreneurial moment for you? So you're at Goldman Sachs, you're looking at all these different businesses in this area you know what was the trigger to say, you know what, I think I need to do this on my own.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Value creation mechanisms that can scale and that we can actually have economies of scale and scope across the portfolio companies. We have an opportunity to partner with.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, in that process, really started to evaluate see how software companies were run. And in that dynamic, started to see that same sort of inefficiency, shall we say, in how software companies were run. Well, it was a new industry. And because it was a new industry, there were very few, call it operating procedures that were how do you run a software company. So I had the good fortune in that regard to actually evaluate hundreds and numbers of software companies. And one in particular I saw had some standard operating procedures that were used to actually make software companies efficient and then took those and really adopted them into a methodology of driving it across a number of software companies, not just one, kind of the McDonald's model. So one great restaurant, but how do you do it in a franchise sort of a way? And in essence, that's how Vista was born. So what we look to really do at the end of the day is innovate and create.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Started my career as an engineer, chemical engineer. And it was neat in that time being a chemical engineer because we were actually now moving beyond what I'll call trying to invent new unit operations, but actually putting in control systems of these unit operations. So what that really meant was implementing computing power into the environment of process engineering. And one of the greatest, call it discoveries that you find when you do that is how much waste is eliminated when you actually put computing power against those sort of things. So as I started to realize that while inventing things was a great way of life, I learned that capital and utilization of capital can actually be much more effective. And I went off to business school, went and joined Goldman Sachs and mergers and acquisitions department and was asked to move out to San Francisco to help start our tech group. So it was our first M&A bank around aground focused on technology back in 1997 or so.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“Employing operational and financial leverage and exiting investments. We then turned to managing Vista and the competitive landscape and close with reflections on Robert's past mistakes and impact through philanthropy. Please enjoy my conversation with Robert F. Smith. Thanks so much for joining me.”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on the third episode of Private Equity Masters is Robert F. Smith, the founder, chairman, and CEO of Vista Equity Partners. Vista is a private investment firm that focuses entirely on enterprise software companies and manages $75 billion in assets across private equity, permanent capital, credit, and public vehicles. Taken together, Vista's current portfolio companies are about 70 in number and house 70,000 employees, 700,000 customers across 175 countries, and 200 million global users. It's combined revenue would make the portfolio one of the largest enterprise software companies in the world. Our conversation covers Robert's background, the special characteristics of enterprise software, screening potential targets, adding value through industry expertise, assessing management teams,”
2021-07-05 · Capital Allocators · Private Equity Masters 3: Robert F. Smith – Vista Equity Partners (Capital Allocators, EP.202) · IDENTIFIED FROM THE TRANSCRIPT · source