YouSaid · the spoken record

Savneet Singh

lines on the record: 77
first: 2018-03-06
most recent: 2018-03-06
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

“I knew you were going to ask that, and I was struggling with it, but during the beginning, it reminded me of a story. So it's really hard for me to say outside of my family, it's hard for me to say anything kinder than what my parents have done and my brother and my sister have done or my uncles or anything like that. But there's one story that just pops in my head that was, I think, one of the things that I'll always remember. I don't know if it's the kindest. And that was my mom passed away in 2008, and it had a massive impact on all of us. We were way too young, and we'd gone through a lot of trauma before that. And there was a family friend of ours who we were always close with, but we'd never been sort of spent lots of time together. I remember it was six months later or a year later, and they invited our family over for the weekend. And they had three amazing little kids who were lots of fun, running around the house, playing games. And it was like the first weekend that we as a family had fun since my mom passed away. And it was totally unexpected. This wasn't a family we'd ever been to their house before. It wasn't someone that we always loved them. They were amazing people. But I will always remember that for the rest of my life as like, that was the weekend that we all sort of started to recover and be normal.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“What I would say is the following. So I think whenever you have a new platform business, something that you talked about a lot over time, everyone always runs to the platform. It doesn't look at the ecosystem. And so in the way my mind works is sort of saying, okay, the obvious trade is I want to go buy Airbnb stock or buy shares of Airbnb. I'm sort of like, what are the derivatives of that that people aren't paying attention to? And so I have like seven ideas in the back of my mind that I would feel to Ali and team to go operationalize. But today's mission is to sort of build this software powerhouse.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“It was a site that gave a directory of marinas. And it's like literally like a miniature private every story. The business has been around for a decade, had never raised price. And so the way they made money is they put an ad when you pull up to a marina, you can pick which place to dock into. They put ads there. The ad rates hadn't gone up in 10 years. And the website wasn't mobile friendly. And so those two enhancements and revenue's up 50%. And it's a great little way to build a cashless stream. When I left GBI and sort of had time, I got some friends together and said, hey, let's scale this up. Let's actually make something of this because it's a pocket of the world where I don't think the next small business.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“As I mentioned, part of doing a startup is you build this big illiquid asset. And when I looked at investments outside of that, I said, hey, I've got this investment into my company plus all these angel investments that I sort of fell into. And I'm like, they're all valuable, but I can't really do anything. And so I became obsessed again with this idea of finding cash-flowing businesses. And so when I was literally investing my retirement, I started thinking about, well, if I just owned a bunch of small businesses that gave money and that led me to this discovery that I guess a little bit similar to Brent, you can find lots and lots of small cash-flowing websites online that are interestingly, if handled the right way, relatively sticky businesses that you can buy for three times earnings. So I and some friends that took a little bit of our retirement money and we bought one site. And I did this like seven years ago”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“In our business, we often say it's the combination of culture and process. We are obsessed with process. But if you don't have the culture underneath it, it becomes like process for the wrong reasons. And so combining the two is really, really powerful.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, but they're not, I wouldn't say there are traditions that are fairly different. So most Sikhs go to the equivalent of their Ghurdwar temple once a week. Part of that is adjusting to, I think, Western society. One of the things I think that is rooted, very much rooted into the culture is the idea of giving back. So Sikhs from day one are really taught that you should give back. In fact, on my right arm, you'll see that I have a steel bangle, and most Sikhs do. And it's literally a reminder every day to do good and to help others and to act in a righteous manner. And so a really interesting observation is they sort of look around the world, you'll be shocked at how many politicians are Sikhs in countries where there are extreme minorities. 20% of the Canadian cabinet is Sikhs. And the observation is because it came from this culture that was rooted in justice and taking care of others that led for them to sort of follow that path. So I think, I don't know if there's a particular practice that's unique in any way, but I think culturally it's very much about serving others and doing the right thing.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“It created this idea of resilience that psychic residue, whether you're religious or not, you hear these stories of people who sort of fought for you to be here today. You've heard these stories of people who've done great service to others. And it just becomes part of your culture, part of who you are. And I always said, I felt really lucky that I was a Sikh person born in America because it's like the best place in the world to practice this faith. Everyone believes in quality, everyone believes working hard, and everybody believes in actually giving back. And those are actually the tenets we're taught from day one. So it's a really unique faith. I think it's a very young faith. And so it's still fun finding its place in the world. But it's definitely been an interesting experience.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sikhism evolved out of India 500 plus years ago, and it really rooted itself in the idea of equality. India as a society is not one of equality. It's a caste system. Women are treated differently than men. And it sort of challenged the norm by saying everybody is equal. One of the funny examples is most Sikhs have the last name sing, and most women have the last name Kor. Singh means king or lion, and Kor means princess or queen. And the idea was your last name signified what caste you were and how you were treated in society. And the idea is if you remove last name from society, then there's no telling the difference between you and me. And so it was rooted in this idea of equality, hard work, and giving back. Interestingly, not traditional values at that time or that place. And I think what sort of happened over time was because it was different, it's gone through lots and lots of prejudice, lots and lots of genocide over time. And what that did to the community, I think, probably impact on me, although I've never thought about it in deep way, is”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“The idea that a currency could be used that it would be used to treat as currency, I think, is just that argument is like out the window. Same reason why gold is not currency. The third reason I felt sort of bearish, a little bit bearish on this market was it's a little funny to me and a little bit ironic that the biggest business in crypto is Coinbase. It's like the modern version of a bank. And so that was the antithesis of what Satoshi was trying to create. He didn't want it to be a bunch of bankers and Wall Street guys coming in and essentially that's what we have. I think people making all the money are sort of traders and hoarders. And Coinbase surely charges me a lot more than my bank charges me. And then I think the last point, and this is one that I think taps into why crypto has been successful, is it came with the perfect time of low interest rates, inequality, anti-establishment?”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“At the time, Bitcoin bugs that became crypto bugs. And so I remember meeting some of the early movers and shakers of the crypto space, it was anything, and now seeing them become billionaires. And so I say this all for the preface that I still believe there's a reason to be bullish, but I'll give you the bear case. So the first is, I think the single most bearish thing about the crypto businesses is you're now 10 years into it, and there's still not an application that depends on a distributed ledger that anyone uses regularly or has any mission critical part to it. And that is a little bit alarming to me. And so have we developed this amazing technology that just has no use case, potentially. The second thing that I just think was the original use case everyone thought was, hey, it's going to replace currency, it's going to be using Kenya and Zimbabwe and all these countries. And I just think that was like so short-sighted. If you're a country that has a weak currency, you're not incentivized as someone running that country to have another parallel currency. In fact, one of their greatest controls over you is forcing you to use that currency. So India, China, Argentina, Zimbabwe, they do not want a parallel currency challenging the rule of government.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, so I'll give you, maybe I'll break it to the bear in the bullcase, and then my overarching view. So, and again, prefacing that it was a little fortuitous that I got into crypto because I was in a business that sold gold. And a lot of gold bugs are...”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“When you go to the founder and you say, how many of those are engineers? He'll very probably be like 80, 85 of them. And then you're like, well, how many of them are salespeople? I say two, and I'm one of them. And so in the beginning, you're like, oh my God, this is crazy. Your lifetime value is a million dollars for your customer. Why don't you have 10 salespeople? But when you talk to 100 of these companies, you realize that they are culturally run by engineers. And so the reward for that culture of that organization was, let's create more widgets on a product. And the reason I bring this story up is so we coming in there realizing that there's probably a mismatch and there's a cultural fix. You have to be able to be humble and relatable to the founder to convince them to make that cultural change where you're saying, listen, let's look at the data. You have a product. Your customers are using widgets one through 20. Why are you working on widget 300? Let's right size the engineering department. Let's build a culture on ROI and sales and let's build something great. And that cannot be done by the stick. You really need to work collaboratively to build that. And so we think a lot about how do we sort of create a culture, a quote at the top.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. I mean, I think we are similar to Brent in this time where we're able to build these very close relationships with the founders because we're spending so much time with them. Part of trying to spend the money to find really great young talent is that we're not the only ones doing that. Over time, I think it'll be competitive. What I think won't change is the culture. And so I guarantee if you meet anyone who works with us, they will be no different than I. They will say, listen, I'm in this not to make, I don't get a fee for closing my deal. I'm invested in equity that business to compound for a long period of time. Another great example is the average company we go to is about 100 employees.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, we are not scared of debt. I think if, again, one of the differences we have with any of these big holding companies is other than Jamalone, most of them don't use lots of debt. I actually think software is a beautiful business to use debt because you have great visibility into that revenue. And so if you can lower your cost of capital by taking on debt, it's a beautiful thing. And so I think we intend to use lots of debt. We intend to, in most of the deals we negotiate, there is a form of seller debt. And then I think over time, we will bring on investors because I think the opportunity set was so much larger than we expected. When we got going, we said, wow, there's a lot of private equity firms, there's a lot of search funds, there's a lot of people going out for the space. And what we've been, I think, most excited by is how many people said, I will never sell to private equity. I really need to find a partner like you. And Eddie mentioned this before, but every single deal we do, we're the only party at the table. There's no one competing on the other end because it's very much a partnership.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“The second part is because so much of our value is trying to create operational strength when these businesses, you need time to build again that musculature that what works, what doesn't work, what sort of looks good on paper, what doesn't work. And so we are nowhere near the idea of having portfolio construction. I think in a dream world, of course, we'd have something sort of industrials, whatever, telecom, et cetera. But for now, we're very much focused on what are the most defensible businesses that are just going to be there forever that have these stacks of cash flow underneath it, where there is massive inefficiency that we can help fix.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'd be lying if I said we've given it more than like a 2% thought. One of the things I think we're doing differently is as we sort of start talking about this thesis and developing it and building these playbooks, we had lots of money thrown our way. And we made this consciousness and said, listen, let us go figure this out ourselves. Let us go buy the first deal ourselves. Let us go spend that time recruiting and amazing talent, recruiting, making this deal happen. And then we'll come back to you because we wanted to build the right musculature around the culture. So as an example, our first hire was we're an MBA who literally came on to work for free and he had no interest at all besides learning. And so this is a guy who worked who has more years of software private equity experience than I and my partner combined times five. Yet he was willing to come and work for free because he said I love the vision of what you're building and I want to help do it. And so he does everything for making photocopies to getting on planes with us. And so that's something if we were trying to buy 10 companies and create a portfolio, it would be harder and harder to create that type of culture day one.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“It was a really big decision early on to try to be a holding company, not a fund. And obviously, when you do something different, it's not always easiest to raise money. So what we decided early on was the beauty of these businesses is that recurring stream of cash flow. There is a stack of cash under each one of those recurring revenue streams. And it would be unfortunate to buy one company, take that money, dividend it out, and then pay taxes on it, and not be able to reinvest it. And so what we said is let's create a holding company where we...”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“You assume that there's endless money. You assume that the problem is throwing money at it. And so I remember one of our first transactions we were excited about, we're sitting with the founder and he was growing 100% a year, and then he started going 15% a year. And it was a market size issue. It wasn't because the VC mistook the market size. And so we're saying, hey, we'd be a great alternative for you. We were going to build this business. And he says, yeah, I need to hire a dozen more people in marketing because this marketing tool is working. And I'm like, well, where's the money from that? He's like, we'll go raise another round of funding. And so you develop these really bad habits about throwing money at the problem. And then second problem is your talent doesn't want to stay anymore. Because when you're no longer, your options aren't worth what you thought they were. You got a complete redo of the employee base. And so I think VC will be a place to play in at some point. But right now, I think those two issues make it harder.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Backpack, so we say, here's exactly how we think your business it's not just a pile of money, and that's been a huge advantage. The other two ways that we so that's direct. So we just are ninjas at sourcing. We will find a nugget and chase that person down. Half these companies don't even have LinkedIn accounts. I mean, it's kind of amazing. And we get on the planes. We've been on 70 flights in six months. And we really, we try to meet them in person because I think that's how we can show our value. The second way we look through is intermediaries. Everybody looks at intermediaries, and we haven't really gone down that path because it's a bit harder to give our pitch, which is, listen, we're probably not the highest bidder, but we're going to be the most value-added person too. And the last is venture. And we originally, when we started, we said, hey, venture capital is the best place to be because if I'm the GP of a venture firm and I have that company that I've owned for seven years and it's topping out at $15 or $20 million of revenue, that's not going to return the fund. And every day that doesn't sell is probably going to hurt my IRR. And what we found, though, is the problem with taking venture money is you develop really bad hygiene.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's sincerity. So you come off with a sincere interest in what they're doing and what you could add value. Another great example is, I think one of our biggest advantages in sourcing is when we go meet a company, we go in as ourselves. We go in the same clothes that every time I've seen you. I wear jeans and a bun down shirt and a sweater and I go meet a company, I'm exactly going like that. And I make a joke that the person who's sort of connected me and Row, my partner in this endeavor, his younger brother works at one of the best software private equity firms in the world. And we happen to be going seeing the same company one time, which is very rare. And I see him sitting there and he's 25 or 26 years old. You know, I love him, but I can make fun of him. But he's going in with a pocket square, an Armani suit, a fancy watch, and flying first class. And I'm pretty sure when he goes and meets that 65-year-old who's retiring and wants to sell his business, it's not the right impression. I don't know if you want the guy, that guy sitting there saying, wow, this guy is 26 years old. He's flying nicer than I ever have. He's got a nicer suit than I ever had. He's nicer luggies than I've ever had. And I think that relatability really helps us. We walk in the door and we come in.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“After we've sort of become friends and got to know them, what we have realized is they resonate with us because we're not coming in there as capital. We're coming there as like, listen, we're some operators. We started these businesses. We love to kind of help you build your business and they respond. And the data here is pretty incredible. Our open rate on a cold email is 20 to 25%. And I think, and when we sort of interview our friends that work in private equity, it's closer to 5%. And so I think it's the combination of having all the science when we reach out, but also more of just coming in. That first email, that first outreach is so deep. It's not just, can I have a cold phone call with you? It's like, I looked at your business. Here's what we think about it. We'd love to talk to you.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“We think worldwide there's probably 100,000 software companies that are in the target range and size that we're looking for. And what's interesting about that number is it's growing. It's number think about the VC darling of seven years ago that caps out of 10 or $20 million in revenue. That's an amazing target for us. And so these cycles of venture capital are actually great for buying quote unquote boring businesses later on because not everything becomes a unicorn and so there's lots of great, so that pool is growing every single day. So we think that market size is just enormous. And the way we source as follows. We've built a database of 10,000 companies. We literally went through every single company and put it in a bucket of, do you think it'll have the recurring revenue that the retention rate we want? Do you think it's in the size range we like? Let's go reach out to the founder. And so we just, as you can imagine, as when we go into companies and give them the sales tool, we have the same type of analysis. And so if we're reaching out to a compliance software business, we have a science on what the highest open rate of that is. But more than anything else, I think sort of when we do the redux and talking to the”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Have an amazing structure there. I think the second thing that's sort of interesting about the way he's done it is it's a process. It is not we are experts in software. It is not that we have a vision of the future. It literally looks for is your retention right here? Is your revenue here? And can we buy your company here? Okay, we'll buy you. And by making it completely process-based, you can hire hundreds of people to keep finding deals for you. And so when we look at that, we said we learned a lot that the model of buying recurring revenue at cheap prices works really well to compound capital, particularly if you can reallocate it. But what we also said is that probably works less favorably when you have larger amounts of capital and when there's lots of people that have figured that out too. And that's where this operating lens came in for us, where we said, imagine if you had that many businesses and the power that that has, but you said, guess what? 200 companies of ours, here's this playbook for sales and marketing that's working for the company why. And you're in the exact same space. Why don't you try this too? And trying to figure out what are the best practices we can apply across that and then taking the talent to do that, which is another thing that I think”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Discipline. So constellation was started 23 years ago by a former venture capitalist who realized that the stack of maintenance revenue on software is really, really, really sticky. And so he said, I'm going to go buy these companies with high maintenance software. I'm going to keep the management in place, but I'm going to tell the management you have to get the 40% cash flow margins, and then you're going to get a bonus. And so he would buy a company, get it to 40% cash flow margins, take the money that business money off, and buy the next business. And it was very much the cigar butt-like scenario where you're milking the existing asset every single year. You're raising price 8%, you lose 8% of customers, so your lose 6% of customers, you still grow 2% a year, and you're able to get this amazing cash flow engine to keep reinvesting. And what I think we have learned from studying constellation and interviewing tons of people from Constellation is they're the most disciplined buyer I have ever, ever seen. One penny above that story of Warren Buffett in ABC, if you're 25 cents above that price, you won't go. These guys are by the penny.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Built an app. Yeah, so we built an app where, so one of the funny things we did is we worked with them to build the app. And then if the salesperson did not fill in the app within 24 hours of meeting Patrick, he would not get that, he or she would not get that commission. And so you crate buy-in day one, and then you collect this data and you're constantly analyzing to see different patterns. And some of the patterns are obvious. There are certain salespeople that are amazing at female but not great at male and vice versa. But the more subtle ones are, hey, do you know what Patrick's profile? They don't like the cold call. They love watching the recorded webinar or the people that like our thesis for that reason X. They love our product for reason X. So let's feel that that guy gets the white paper, but the person that's doing it because you heard other people are doing it. Let's send him a packet in the mail. And so you cut your constantly collecting data and optimizing for everything from your leads to your end salespeople. And we've created such robust playbooks behind that. So when we're talking, if I'm trying to pitch you to sell your business and say, hey, let me buy 75%. You keep 25%. They can see that there's going to be value added from that.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Close rate on the Ivly educated guy that lives in New York is like 90%, but your close rate on women is like 2%. So guess what? You're no longer the sales guy for New York. You're now the sales guy for the guys that are just like Patrick and who like the product for the thesis that you're the best at selling at. And so we gave this away and that company after a quarter, it was a dramatic increase, a little bit of luck. And lo and behold, we end up getting a deal out of that. And so we are incredibly data intensive about qualifying everything from the lead to the salesperson so that that random email you get has been tested hundreds and hundreds of times with the characteristics of what kind of response rate will the guy like your profile open or not.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think this is the one that you were referencing is sales territories. And so I've always struggled when we ran, I remember running GBI, the New York region was always the highest point reason. And even though I love the salespeople, I always wondered, is that really the best salesperson or is that because they have that territory? And I think if you talk to people generally in sales, there's a few regions in New York, Chicago, there's a few areas that are always the highest performing. And so in the same exact company, we said, give us all your sales data. And we had no transaction with this business. And we said, listen, we took the data and we said, you know what? Now going forward, you need to collect this information. For every meeting you have, you have to say, I met Patrick. He lives in New York. He's a really big Jets fan. He likes our product for a reason why. And he hates our product for reason Z, and he's married and he's got two kids, and he went to an Ivy League school. And after you collect this data of attributes every single meeting you go to, you notice some interesting patterns. And so what you find is you say, hey, New York sales guy, you've done an amazing job. But did you know that you're...”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Small ones. And so an example of how we help this company grow is we said, listen, every day if that outbound salesperson makes 30 calls for the entire week, they get a 50 buck bonus. And we said, if they're successful, the process is you make the phone call, you set up a conference call, you set up a demo, you set up an in-person meeting, and then the contract. You have these five steps. And so instead of just commissioning that person on the final step, which is signing the contract, you said, okay, I'm going to come to you on the quantity of calls. Then the number of demos. And then I'm going to conference you on the number of in-person meetings. And it's a step function difference. So if you're putting numbers, you'd say, okay, if you do your 50 calls, I'm giving you $50. But if you get four in-person demos, I'm giving you $1,000. And if you get those meetings to contract, I'm giving you $10,000. What you do is your personnel on the phone is not just focused on what can make me the quick sale. He's like, listen, I just make the calls. I'm going to get more meetings, more demos. And so they're incentivized to continue to grow that's better for the company. And so we've found this to be an incredibly powerful tool for those people to kind of build their businesses. Another example.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's probably best done as an example. So we've been on 70 flights in the last six or seven months across the country meeting software businesses and uniformly everyone says I want help in sales and marketing. And remember, we're generally going more to enterprise software, not I'm selling to the end consumer. And you sit down with these businesses, and so literally the first deal we're doing, it's in an interesting space, and the founders complaining to us saying, listen, the hard part is it's like a year before my customer says yes. And so how do I motivate the Salesforce? What do I do? And so we said, well, let us give you our plan and how to do that. And so we gave them two playbooks. First, we gave them, here's our idea for leads. The problem is when you have a guy on the phone calling to get leads for the guy that's on the field making that sales process, the guy on the phone is really focused on the low-hanging fruit because he knows he's not going to get that commission for a year when his partner in the field closes that deal. And so he literally self-selects for what could be the possibly the lowest hanging fruit, but not the thing that actually drives the most value, which is probably getting that long sales cycle customer that's worth a lot more than that.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the average software multiple of some of the companies we compare ourselves to are quantities businesses for anywhere from one to three times recurring revenue. And everyone's like, that's crazy. Three times revenue. I would never pay three times revenue. But if you believe the steady state and margins are 50%, you're really buying it at six times steady state cash flow. That seems like a pretty good deal, particularly on a business where you think you can raise the price every year. And so what we love about our model is we think we get in, we definitely get in cheaper than traditional private equity given the story and what we commit. We think we can drive that value by helping them build that process. And so we oftentimes say our advantage is we're the 3G of sales and marketing. We're not cost cutting, but sales and marketing. And then by having scale, you can sometimes centralize some of this value over time to create economies of scale across all the businesses.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a great point. I think the first time I met Brent, I joked. I love the price you buy stuff, but I'll pay more because my business will be around for 50 years. And I believe that. And so I think you pay more for that business. And so in software, I think maybe I'll back up. So software is broadly sold in two different ways. The license maintenance historically the way it's done where you sell a dollar of software and then you charge 20 cents for maintenance every year after that and then you stack that maintenance revenue on top of each other and that becomes your sticky recurring revenue base and the other part of software is SaaSion where you're basically charging an annual fee the same price every year and then hopefully if you're really good you can raise that price and build that over time and in both those models the the end state recurring revenue generally has anywhere from 30 to 50 percent cash flow margins and what's powerful about that is you can look at the type of software you can understand the market they serve and you can pretty quickly figure out okay when that company is steady state it's going to have the type of margin and so if you're willing to make that that jump you can end up buying these companies”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of extracting value. And it is really game changing. I mean, I think we've had numerous discussions with people that literally come to us and say, I have a bit at XYZ private equity from, come in 20% and it's yours. And it's been very powerful. So I think we ground the conversation day one and saying we intend to hold the thing for a long time. So if your interest is to flip it, we're not the right guys. We tend to actually tell you build this business and we intend to grow it. And if you're okay for all that, let's go do this together.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Doesn't sit right with them. It's a bit of that Berkshire Hathaway pitch. And so in that bucket, a lot of our value add comes from listen, we're long term hands, we're committed to it, and more than anything else, we're going to help, we're going to be transparent of how we intend to build and grow the business with you. On the former, the ones who want to continue to build, which is surprisingly the majority of the ones that we've come across recently, is very much how do you add value. And so to your point, the single biggest differentiator we have when we go sit down with a company is we come in with incredibly detailed operational plan. We're not going there and said, hey, let's buy your company. Here's a big check where you say, hey, we'd love to buy your company. And here's our plan to build it. And here's exactly how we intend to do it. Everything from here's how we'd run sales and marketing to here's how we intend to create the culture of return on investment thinking. And oftentimes what happens in that conversation is it's not so much about, okay, what price? It's like, well, talk to me how we're going to create that value. Talk to me how you're going to change the culture of the company. Talk to me about how that impacts the remaining equity stake I have in 20 years. And so you ground the conversation and the idea that you're adding a lot of value and you're not coming in there.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and maybe I'll back up and actually give you the typical profile of the person's company we're trying to buy because it probably helps put this in context. So we are not going after high flying 100% growth companies. We're generally not finding venture-back companies. I can give you the rationale behind that. We're generally not going after stuff that's sexy. We're going after the company that's been around anywhere from 10 to 30 years that's built a really, really sticky solution for an industry that it knows incredibly well. And the founder is generally somebody who's looking for one of two things. They're looking for a partner to help them grow and build that business, or they're looking for a really smooth transition. And for the latter, it's oftentimes I'm not looking to say I want to sell the business because I'm retiring and I want to go live on a beach, but I want to sell it to the right hands because I care about the employees. I care about my customers. And I really care about my legacy. And my name is on the fire department. And I wouldn't feel right if someone bought my company, fired half the team, and raised prices on the customers that got me in business and then flipped it three years later.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's huge. And so I think when you're doing that analysis, as an example, if you're the energy company and oil prices are down 40%, are you going to take away your accounts payable software? Probably not, because what are you going to do? And so you try to find those pockets. Another great example that we've spent a massive amount of time is in compliance. So there could be another great sell-off on Wall Street. JV Morgan is not cutting compliance spend. And if they are, they're not cutting it on the product that they sort of depend to run their email and KYC checks. And so you try to find these businesses that, yes, there's cyclicality in the end industries. You may not grow that as fast that next year, something that next incremental customer that's moving from paper and pen to your software, but that recurring base is so sticky that you're plenty good on your outcome.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Great job with your customer. The desire for being disrupted is not you don't want to deal with that. So think of the dentist, the guy that runs the dental practice. He installs the software when he starts his practice. It now does his billing, his scheduling, his accounts payable, his practice management, everything's in the software. And so if someone comes to him and says, hey, I'm going to give you a 25% discount if you take my product, there's almost a 0% chance that dentist is going to go for that. Why? Imagine the disruption of saying, what if I miss Pendex payroll? What if my billing gets screwed up for the week that you're changing the software? What if my schedule gets messed up and all my patients get canceled on? For a very incremental benefit of price, it doesn't actually make sense to switch because the switching costs are so, so, so high. So we try to find these pockets of the world where you don't actually have to worry too much about the external competition, and instead you can spend that time creating a better product for that customer.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, let me add a little more. The defensibility. Yeah, let me add a little more color to that. And so another key attribute we look at is the underlying asset that it's serving going to be around for a long time. So we look for companies that services service utilities, service governments, service healthcare, service industries that last for a long time. A great example is dental practice software. Dentists have a 1% failure rate, the lowest failure rate of any small business in America. So if you're the software serving the dentist, you're probably going to be around a long time because that dentist is around for a long time. But if you're a marketing technology solution, the chance of you having a low turn rate is almost impossible because the technology changes so fast and the end asset you're servicing is changing so fast. So your product's probably not worth as much. The other part of the thing that I was remiss not to mention was we look for businesses with small TAMs. So we're not looking for the $10 billion market that SAP, Oracle, or Workday is trying to go out after. We're going for like the $400 million TAM where it's not really worth the time of the big guy to come in there. The other element I think that's important to sort of understand the risk of disruption is if you do a really”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“We can talk about sourcing too, which is an interesting dynamic in this world. But the key thing we look for in a business is the product solution or tool mission critical. Is it something that you can't live without? The second is, as the retention rate very high. And if you can figure that part out, you've pretty much figured out the business. And so any business with a high rate of recurring revenue and the retention rate being very high is a really, really good business. And I give this often example of two, I think of businesses as apartment buildings. So if you have building A, which is filled with doctors and lawyers, and you have Building B, which is filled with tourists, summer vacation counselors, startups, what building would you pay more for? You're always going to pay more for building A because there's great visibility in that revenue. And I think sticky software is that. So we look for businesses where the recurring revenue is very high, the retention is very high, the price point is high, NPS scores are very high, so the customers are happy with the product. We look for businesses that are integrated into many different points of solution. So it's not just I use it for one thing.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“So that your baby always stays, that the heritage, culture, and legacy of that business never changes. And is that an opportunity? And what we discovered very quickly was it was a much bigger opportunity than we'd ever imagined. So while I think every company in the world has been called on by software, there are plenty of opportunities for business that don't desire to be sold through private equity and are excited at the opportunity to work with something different.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“That business trade below six times recurring revenue. And so we were like, wow, if Warren Buffett was 30 years old, this is all he'd be investing in because he has a business that has clearly has a moat because if your customer lasts for 50 years, it's almost definitionally a moat. You can raise price every year and no one's going anywhere. And you have the ability to reinvest for growth. That sounds like an amazing place to be. And so we spent the time at the public market and said, okay, wow, that's an amazing fact. Software is great, but it's already priced in. So then we looked at private equity and said, hey, is private equity figured this out? And short answer is, you know, six of the top 10 performing private equity funds have a very high focus on software. And so he said, okay, private equity's figure this out. Is there anything for us to do here? And so when I left my job and my partners later left their jobs, the first thing we sort of did was like an exploratory tool, a listening tool. We went around and we just started calling software company after software company, private equity guy after private equity guy. And we said, listen, we're not private equity. We want to be the Berkshire Hathway of Software. So what does that mean for you? We want to buy your business and we never want to sell it. We want to reinvest in it. And we want to create a trend.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, after we did this analysis of, okay, can you copy Buffett and redo it? I think we left it being like, no. And so we started thinking about, well, what if you could just find the right pool to fish in so that you could pick the horse and not the jockey? And I was running a technology business that had heavy bents on software. My friends were all software investors. And we started saying, well, what if you created the Berkshire Hathaway of software? And as we sort of started to look through it, we started saying, well, let's first look at the biggest software companies in the world. And so we looked at a company like SAP, which is, I think, the oldest publicly traded software company in the world, one of the largest. And what's a fascinating about that business is every customer of SAP complains about SAP. There's no one that says, oh my God, this is the greatest product ever. Nobody. Yet if I was to ask anyone on the street, what do you think the renewal rate of SAP is, you'd be shocked to find out it's like 98%. And if you remove bankruptcies and mergers, it's 99%. And so what that's implicitly saying is the average customer stays for 50 years. And as a result, the market never...”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Lesson for me to learn. But then, if I sort of think about today, a brand means a lot less today than it met yesterday. The brand of my father is probably not the brand of me. And then as I think as you look at the disruption of commerce in general, if I had a pet, I'd subscribe to Chewy. I'm not buying the brand that my families to buy. When I'm buying clothes, I'm looking on Instagram. And so that idea that the brand becomes the mode I think is a little bit challenged. I'm not saying it's over, but it's definitely a little bit challenged. I think the other lens, which I found challenging or I think could be challenging for, to repeat that idea of Brooke Shathaway tomorrow, is finding businesses with high fixed costs that have reinvestment modes. So railroads are a great example. The utility business that you have has, you know, we're living in an area where there's like asset-like businesses. And so building a skill set around that, I think could be challenging. And so in no way would I ever say don't invest in Brookshire Hathaway. I own it. I love it. I've learned so much. But I just think that Berkshire of tomorrow will be very different than the one of yesteryear.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, but I'm not sure how much of that is emotional versus logic. So here's what I'd say. So after we did this journey, and this is again something we're just doing as friends on the weekends, thinking about what makes great pounding businesses, we then went back to Berkshire and said, let's find the pattern of how we invest. So let's dig through the companies he's bought, there's public refining, public findings, and let's look at every ratio, let's look at every single signal we can find that gives us logic to why he finds these companies. Maybe there's like something hide in there that you can copy. And the short answer is it's really hard to do that. There's truly some genius there that it's hard to figure out what it is. But the thing that I think that was more eye-opening for us is the few things that we could pull out of that. We actually felt a little bit challenged in today's world. So I'll give you an example. One of the great questions Warren Buffett's asked at meetings is find me a business other than a brand that can keep its margins for 30 years. And it's really, really hard because at some point everything becomes commoditized and that brand becomes the difference between a 10% margin and a 30% margin business. And I've always thought that was just an amazing amazing.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“The three things we observe were a long term vision, very strong focus on being tax efficient and culture. And underneath culture is probably there's a fourth one or it's part of culture is this idea of adding operational value. And culture, I think, like you said, is by far the least talked about, but I think...”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so I think it differs by different persons, but the way I look at it is as follows Is your compensation for your team and your employees geared around what's happening tomorrow or the future? And as a result, is your culture then wrapped around how do you create value in the long run so that every person in that team is mentally wired to think what creates value five years from now, not tomorrow? And so the way you see things manifest is like recruiting. So one of the interesting things we discovered in many of these companies was they all had really robust recruiting functions. And so it wasn't about filling the spot with the guy with a quick resume. It was we're going to wait to find the right person. I'll give you an amazing example. My brother works at one of these high-flying tech companies and it's super fast growing company and they really needed someone for a hyper fast growing market. And the company literally waited six months for that hire because they needed to find the right person. And I always say, that's now so imbued in the culture of that business that they know we'll never sacrifice hiring. And so I think you look for signals like this that say, hey, we're trying to invest for five years from now or 10 years from now. Not now.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think when we looked at a dozen dozen plus companies, it's really hard to find patterns. I think some of them were in good industry, some of them were just great allocators, some of them were great operators. And the three things I think we saw uniformly through all of them was the first was they had all had very long-term visions. They were not focused on the next quarter, the next year, the next two years, or three years. That actually underlines everything that they've done.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“When I went to Berkshire in my study of it, I've never been able to define why it resonates. It just did. It was one of those things where I love the hunt to find the company that someone didn't know that was undervalued for whatever that reason may be. And I love the dynamic of trying to understand that something was undervalued or not. It was just natural to me. I joke that if you live in an immigrant family, you're kind of like taught to be a value investor at a very young age. And so maybe it was that, I don't know. But it just was naturally there for me. And as I sort of studied more and more, the more I just became obsessed with it. And so I would spend hours and hours with a group of friends just dissecting John Malone, dissecting Danahert, dissecting 3G, and trying to figure out were there patterns that we could pull from these to educate our own lives.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Being in the arena that Teddy Roosevelt quote of You have to take action. I think one of the great lessons I've learned is that those that don't raise their hand, those that don't ask the girl, those that don't actually take that plunge, it never works out. And so I think the quote I think I'm going to butcher it, but I'd rather be the guy on the ground with blood, sweat, and tears than the shy and timid souls on the outside of the ring. And I always take that to mean, yes, you have to raise your hand, you have to jump into it, but it's actually the life experience of putting your all into something that's valuable. So you may go quit your job at Goldman Sachs and do a startup and fail, but that journey and experience of actually trying to pave your own path is so valuable from a life perspective. Your financial outcomes may never be the same as they once were, but that like journey is so, so valuable.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's funny, culturally Indian, but born and raised, I had never really gone to India until I think when I was a kid and I never really gone until I was 12 or 13 years old. And I remember I was in eighth grade and our parents took us there for a month. And when you're at that age, you can actually understand what's happening. And I remember just being shocked by the poverty. I remember our mom just walking us around the neighborhood and you just saw, I mean, it was amazing. It was just so sad and amazing that people can live like this. It was just complete happenstance when we came back home. The first English assignment we had to say is why we're proud to be an American. And I was an incredibly quiet kid in eighth grade. I don't think I ever said a word. And I remember we got this assignment and we were talking about it. And a few people started like, I'm not proud of American America, sucks, this, that. And I stood up and I, again, an incredibly shy, quiet kid, and I just went off for like 20 minutes of how lucky we were. And so I would say without question, that was the most impactful thing in my life.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source
“Other people. And so I think I don't know why on a personal basis it always mattered, but when I'm bored, I go on GoFundMe and I find campaigns of people doing real interest things and I fund them. And so I think it starts from being a community that was very much part of our DNA to when you get older sort of just realizing how lucky you are.”
2018-03-06 · Invest Like the Best · Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79] · IDENTIFIED FROM THE TRANSCRIPT · source