YouSaid · the spoken record

Tim Sullivan

lines on the record: 96
first: 2025-07-14
most recent: 2025-07-14
sittings or episodes: 1
sources: podcast

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“Upswing, and then you had people that joined late in the game and thought, like, oh, wow, I'm going to be a venture capitalist and make all this money. And now suddenly the business was terrible with the clawbacks who had left the firm and how are you going to get the money back from them? There was a lot of dysfunction in these firms. And it sometimes manifested itself in problems with the LP base. What really made me think, oh, the difference between the oil and gas business and the venture business is the oil and gas business has a boom and a bust every two years as oil prices shoot all around. The venture business has its bust every 10 or 15 or 20 years, and it's when times are bad that you really learn are people good partners. It's easy to be a good partner when everybody is making lots of money. We would have deals with our managers that basically said, this is the way we are going to divide the pie when the profits are realized. The manager would have it in their head that, well, I need to have at least this much pie. And if because the environment was bad for whatever reason, suddenly the”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“That quote is absolutely true. One of the formative experiences of my career disc to the internet bubble, I did a lot of work in the oil and gas industry for Yale prior to the internet bubble bursting in the 90s. The oil and gas deals were vastly disproportionate share of the headaches I had to deal with. Even though we had vetted them very carefully and spent all this time getting to know them, turned out to be not good partners. And I would be like, oh my God, is there something in the water in Houston that causes people to behave this way? And why can't these people be nice like our venture capitalists? Then the internet bubble bursts and a lot of venture firms found themselves in really messed up situations with particularly clawback issues, but portfolios that suddenly had companies that were hemorrhaging cash and having to fire people and having to close companies down. And then you had all these weird dynamics within the partnerships where you had people that had been there for a long time and they'd made a ton of money on the”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“We really liked the idea of being able to know that when our managers woke up in the morning, they were thinking about the fun that we were invested in, not their real estate fund or hedge fund or credit fund or whatever else they had going on, people that focus on doing one thing and being the best in the world at it is what we really like as opposed to people thinking, oh, I've got this brand name that I can franchise and it'll be great for my valuation of my management company, but who cares what it means for the LP return?”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Consistent with that, how do we build out a talent base and a decision making process that enables us to continue to be effective as we grow, spending a lot of time trying to understand is the growth for good reasons or is it because there's a lot of money out there and if we collect it we'll get a lot of fees and we'll figure out how to invest it later. And by the way the carried interest on a $5 billion fund compounding at 15% return is a lot more than the carried interest on a $500 million fund compounding at a 30% rate return. Plus obviously the fees are 10x always trying to understand what is the competitive advantage this firm has is it going to be enduring is the firm getting better as it grows as it cycles through people as it evolves its strategy very very important to us your point on boutiques becoming broader firms we always worried a lot about people having distractions”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“They really hadn't grown out of management team around them that you had confidence that there was a lot of seniority there. We looked at that and said, look, this train is headed in a direction we're just not comfortable with. So we're getting off the train. We asked them a lot of tough questions in that process. And their reaction was, why are you guys being so mean to us? We've done so well for you and all the other LPs are ecstatic that we're raising this big fund because they can give us more money. Why are you guys asking us all these tough questions? So we didn't do that fund. They then 18 months later raised a much larger fund than that fund than 2008 happened. Those two funds certainly didn't match the performance of the two funds we were in. I don't think they were total disasters, but they're very mediocre outcomes. That was to us a perfect example of a firm that was growing too quickly along too many different dimensions without enough thought about what are we good at, why are we good at it, how can we grow in a manner that is consistent?”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“That works with the small company is not. But then the problem for the institutional investor is there are actually some firms that have made that transition well. How do you know which ones are going to be the right ones and which ones are not? It's hard if it was easy. Everyone would do it. We had a firm that we worked with. We were in their first two institutional funds in the early 2000 period. They were both spectacularly successful when they raised their third institutional fund. They set out to raise a fund that was seven and a half times the size of the first fund we had invested in and in the interim, that first fund had 20 companies in it. The fund they were now talking about was going to have 100 companies in it. And the firm had gone from being two head guys and maybe eight people underneath them to now being the two head guys and 80 people underneath them. And this is all in the space of five years. They had often several offices, including at least one in Europe. And the two head guys were still basically making all of the decisions.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Most of the firms that we invested with did stay as boutiques. The change was more in assets under management and consequently the size of company they were buying. We were very cognizant of our firms growing in ways that are appropriate. In the bio world, people by definition start out small because when you don't have a track record, you can't raise that much money. If you're successful, you can raise more money. You have bigger funds. You can buy bigger companies. And buying the bigger company feels good while you're doing it because bigger companies just tend to be better companies. They have deeper management. They're not as reliant on a few clients. They have better systems. They're easier to finance. They're easier to sell. A lot of buyout managers, as they're growing, they think, oh, this is great. I'm buying these much better companies and I don't have to go spend six months as the emergency CFO in the middle of nowhere at some company because we don't have a CFO. The challenge along the way is that sometimes the skill sets”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Leading into the financial crisis, and particularly in private equity, you had this period of time where firms, the ale invested within, started to grow. There had been these boutique firms and they started to take on more capital, do more things. How did you think about managing up until 2008 as firms that you had invested in as a boutique became less boutique and making those decisions of whether to stay with them or not?”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Find people that want to buy your crummy font. That's another big risk with illiquid assets that I think people do not think about properly is what is the risk that my money is stuck here for some very long period of time earning a very mediocre rate of return. That makes it all the harder for you to generate good total programmatic returns. Your winners have to work that much harder to make up for if you've got your money stuck in a fund for 12 years and it generates a 3% return. That's a really bad outcome.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sequoias of the world. So I'll invest in emerging managers because I think you may find that it's very hard to find the winners and you may not find the winners often enough to pay for the losers or the mediocre. You have to be very, very realistic about what competitive advantage do you have in terms of accessing that world. The bio world's not quite so hard to access. You need to think a lot about is this going to be worth the time and effort and illiquidity? Am I getting paid for the risk that I'm taking? One of the risks that people do not think about is if you hire a public equity manager and two years later you've decided, oops, I made a mistake, you fire them and you get the money back. And oftentimes because it's liquid, the cost of selling is not particularly high. On the private side, if you make a mistake, you're stuck with it for 15 or 20 years or you have to take a huge haircut in the secondary market. Sometimes you just want to.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Need to be very realistic about the results that they can generate, particularly in the venture world. It's a lottery ticket business and the lottery tickets systematically end up in certain places. If you're an institution that doesn't have those existing relationships or a good reason why you think you can access those firms, you really have to ask yourself some serious questions about, well, what results am I going to get here? Is it going to be worth the brain damage, the illiquidity, the time? and what results am i going to get if i cannot invest with those top tier venture firms the list of who's a top tier venture capitalist is maybe a little broader than it was 15 or 20 years ago and there are probably more people that have from a standing start been able to move into that realm than was the case for a lot of my career you want to be very realistic about your probability of actually finding those people if you're saying well i can't get into the established”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“The biggest problem is they're not really in the hands of the venture capitalists. They're in the hands of the entrepreneurs. If you're an entrepreneur who doesn't want to bother being a public company, the real questions for institutions about how do they ever get liquidity and how do they get the premium pricing that you sometimes get in the public market? That's been a challenge in the venture business for the last 15 years. Occasionally, there are periods of market exuberance that draw companies out. There are still going to be IPOs. I think there are going to be systematically companies that want to stay private as long as possible. And in some cases, that might mean for years and years and years. Stripe is at least 10 or 12 years old now. Every year it's on lists of, oh, here are companies that might go public this year, and it doesn't, and it's been able to raise huge amounts of capital, and the entrepreneurs and the employees have probably all taken lots of money off the table in secondary sales, so they haven't felt that pressure to exit. So you do wonder if you're a venture fund or an institution in a venture fund.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Those were actually probably more often sold to strategic buyers. The strategic buyers, big corporations are like, oh my God, we're missing out on this. We need to have our play on the internet or in fiber optic communication. It would be AT&T buying a networking startup or Time Warner saying, oh, we need to have some online thing. So we'll buy this platform. There were certainly IPOs that were not barn burners. 98-99, most things that went public went public and then tripled and went up from there. And the key there was more, how do we control our exposure to those things? How do we get as much money off the table as quickly as we can in those? And we certainly got caught holding the bag at the end with some of them, but again, we had taken so much money off the table previously that it worked out very well start to finish.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“A huge mistake. Having some faith in the managers that we worked with was important, we knew that there would come a reckoning when returns would not be so great, and we were okay with that. I think that's been true in the venture business ever since. I had a conversation with one of my colleagues after I turned over the venture portfolio to him six or seven years ago now, and he was saying the same thing. Oh, things are getting crazy. This is when Snowflake went public and traded up and was selling it 200 times revenue. It's a fantastic company and a fantastic product, but 200 times revenue is what the heck.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was a tough question. One of the problems with success is it causes people sometimes to lose track of first principles pretty much all of the venture firms we worked with if in 1995 they were managing a $200 million fund by 1999 they were managing a billion dollar fund and then they were investing the billion dollar fund in nine months which again proved to be a very bad idea we were very cognizant of There's some crazy stuff going on here, but we also knew that we were not going to be good at calling when the crazy ended not that long after the Netscape IPO, I think we started thinking, wow, things are getting kind of nutty here. And that was probably 1995. And then instead of the market cooling off, things got even nuttier over the next four years. Again, we made an absurd amount of money, literally billions and billions of dollars when the endowment was single digit billion dollars. We could have pumped the brakes in 1995 and it would have been.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“And they were all working like crazy. The timeframe to do deals compressed dramatically. Somebody with an idea could put together a couple of slides and raise what then was a huge amount of money over three days around the barest outline of a deal. Predictably that all ended very badly. But we made so much money on the way up that it ultimately didn't matter that it ended badly. We had some spectacularly bad funds in the late 90s that we committed to, but their predecessors more than paid for what we lost in that period of time.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was definitely the craziest time of my career. You would go out to Silicon Valley and visit the firms we were invested with, and they were all making absurd amounts of money. I just said it was okay if half of your deals lost money, they'd have funds where 90% of the companies they invested in were profitable deals. So it wasn't just that they had some big home runs. Everything worked. One of our venture capitalists had a famous quote, our winners we sell for 20 times our money and our losers we sell for three times our money. And it was true. We'd go from door to door up and down Sandhill Road. You would think all of the venture capitalists would be absurdly happy that they were doing so well. And instead they were all miserable. There was just so much stress that if you took the afternoon off to get a haircut, well, what if the guy with the next great idea was going to come to your office that day, but you missed him? And then he went across the street and somebody else invested in Yahoo instead of you. No one was happy.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's okay to have half your portfolio return nothing. In the bio world, typically your winners are somewhere between two and a half and four and a half X, and then occasionally maybe get an outlier above that. You cannot have too many zeros in your portfolio or else the net returns just really start to collapse”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Between the two segments Inventure it's all about winding up in the category defining businesses that go on to become multibillion dollar enterprises, a lot of which are still around today. The biop business was a lot more about blocking and tackling and grinding out three and four X's on good solid businesses, but not businesses that the guy on the street is necessarily going to have heard of. Sometimes the businesses that did have that profile like RJR would be the poster child for this. Those wound up not being great successes. So occasionally we'd have something like Snapple Beverage back in the 90s, which was a huge success for Thomas H. Lee. That was probably a pointy X deal over a pretty short period of time. So occasionally there'd be something that would break through like that from our bio portfolio, but that was very much the exception. It was much more grinding out win after win. It also points to, in the venture world, the winners pay for a lot of”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's interesting. I gave a speech at a conference which I almost never did, but I went to this one for some reason. I was talking about our private equity program. For both venture and buyout, I wanted to have a slide of here are some of the successful companies we invested in and things that drove results. It was very easy to put that list together for the venture program because there are just so many prominent companies that have come out of it, starting with Apple, with Sequoia way back when. And then there were all these household name. This was probably in the late 1990s, so I think Netscape was on the list and compact computer and Genentech, the first biotech company. A bunch of things that were household names at that point in time. On the bi outside, it was a lot harder to come up with a list like that because a lot of them were just these obscure manufacturing companies or a cable television operator or a company that owned a group of radio stations. It was striking how different those lists were. And I think it points to some of the difference.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“In those early years, what were some of those successes? You think you go through the 90s up until early two thousands? What are some of the things you look back on and said that was either a company or a firm that drove a lot of those results?”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because something has worked for a particular set of institutions over some period of time, it's not a guarantee of future success.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“It would certainly depend one thing that changed companies undergoing leverage buyouts as multiples went up consistently for the 40 years of my career. The multiples in the public market went up a lot too. Some of the success that our managers generated in the 90s and the first half of the 2000s was due to equity multiples going up in general, the whole 40 years until very recently was a story of declining interest rates and multiples ought to go up in a market like that. That's something people need to be realistic about as they're thinking about returns from alternative assets and looking back over the last 40 years and saying, oh, Yale and people like Yale generated these fantastic results from leverage buyouts and related things. If we're in a period of rising interest rates for the next 40 years, that might not be such a great place to be. And it's obviously very hard to make predictions about the future. Institutions need to be careful to think that something is a panacea.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“As long as we thought our managers were going to be delivering premiums to public market alternatives that we were okay with that, 40% returns were great, but I think we knew that that was not going to continue forever. Obviously, you wouldn't expect those kind of numbers from the public equity market, and returns had to come down. We also always had an appreciation for what does leverage mean relative to your return. And David was one of the first people to think about We ought to be measuring these managers, not just against absolute return, but to say, well, how do they compare to a levered S&P 500 or some benchmark like that?”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“They were used to underwriting deals to 40% returns, and they'd see others undercutting them on that metric, and they'd naturally be upset and think that, oh, those people are overpaying. We had a firm in particular that said explicitly to us, we're still looking for deals we can underwrite to 40%. And the deals that they want up underwriting turned out to be pretty risky situations. And a fair number of those risks wound up blowing up in their face. It was not the right decision to say we're going to stick to our traditional metrics or at least do that without considering this isn't just a one-dimensional measurement of what we're trying to do. There are other factors of play here, ignoring the risk of failure turned out to be a big mistake for that firm. And it took a long time for them to recover from that.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was a time probably in the early 90s where people stopped talking about Ebit multiples earrings before interest in taxes and started talking about EBITDA multiples heading in depreciation and amortization. I think they hoped nobody would notice. They were probably right to change the terminology, but it was sort of a way to pretend that valuations weren't creeping up. And the returns from those deals wound up being for the most part very good. So it was all fine. But it was also in a period of a long bull market, so that certainly helped. You could see that competition was getting more intense as more people entered the business. Nature abhors a vacuum. If there's a world where firms are generating consistently thirty, forty percent IRRs, people are going to notice that. And some people are going to say, hey, I should do that too. And then the returns inevitably get bid down. One thing that some of the early firms we worked with had a real problem.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“That turned out to be a good thing for us. It's not unlike the venture bust in the early 80s I just described. Suddenly leverage buyout in the Wall Street Journal was sort of a dirty word. It was a good time for us to be talking to leverage buyout firms and saying, hey, we're actually interested in giving you money when a lot of other institutions were not doing that. We tended to avoid firms that did big things in the public markets. The whole bidding war that erupted around RJR and similar assets in that period, we were pretty insulated. Some of those deals didn't wind up working out very well and RJR proved to be a very mediocre deal for KKR. So our portfolio never really suffered from that because we weren't really working with firms that were in that part of the market. It just made it a good fertile ground for us to be out there looking for smart people doing smart things.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“You saw 2% Venture and buyouts of interesting relationships. And then around 89, a couple of years in, you have the huge KKR, RJR Nabisco deal. What was it like being in that space when all of a sudden there's a deal that's so much bigger than anything that happened previously?”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Going to ignore all the work we did, then why did we do all of that work? And what's different now about anything that we thought about as we put this together? He really insisted. He was 33 years old at the time and he'd been in the job for probably two and a half years. So it was a pretty gutsy thing for him to do. We wound up having to do some things to modify the chairman, which David wasn't exactly thrilled by, but we mostly got what David wanted. And it proved to be exactly the right thing to do. It really set David on the course to success. That he had the courage of his convictions and stuck by them in a challenging time and with a lot of pressure on him. And he made the right call. And it was the foundation of his success.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was a scary time. The person who was chairman of our investment committee was certain that this was 1929 all over again. Wasn't alone in that feeling either. There were a lot of people in the world who were worried about that. And it was really the period in time where David made his reputation. We had spent the prior two years doing a lot of work on laying out what should the asset allocation look like at Yale and institutionalizing that, then immediately we're presented with this challenge where the publicly traded equity part of the portfolio, which back then was 70% of the fund, was suddenly 25% cheaper. So we were way off of our allocation. And David said, we're going to buy equity. And the chairman of the committee was not excited about that opportunity. David said, look, we just went through this exercise, spent a lot of time on this. And if the minute we're presented with a challenge like this,”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd love to go through some of the historical perspective that you've lived through, really the entire meturation of this industry from the early days. You joined Yale in 86. The first notable event was the 87 crash. What was that like inside the office?”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it just comes down to spending time with the GPs and trying to get a sense for who's doing what and how are they doing it together. We had a meeting with a group that has undergone this evolution and they have four verticals. We sat down with the four different teams and it was pretty striking how each vertical had a different approach to the market in terms of how they were accessing deals, the size companies they were looking for, the way that they were working with operating talent. You really got the sense that is this really a cohesive firm or are these four people that now share an office and have some historical connection but have gone their separate ways that wasn't really what we wanted to see it's something a lot of firms are going to have to deal with. Some of the firms that verticalized 10 or 12 years ago are now creating subverticals. The industrial team is not the industrial team anymore. There's the aerospace team and the packaging team.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're looking at re-underwriting the next fund of one of those firms, how do you try to get an understanding of whether that dynamic is working or not within that firm that goes from specialists to the next generation?”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“To some extent, now you have a much more verticalized organization. The people who are at the top of the organization who worked together closely 10 years ago, they know each other, they respect each other. That probably still works. But as those people start...”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Lot of the firms we work with have grown quite a bit over time, particularly in terms of headcount. One thing a lot of firms have done is firms that used to be generalists have verticalized, and instead of there just being a group of people that get together and talk about the deals that they're working on, you might be talking about a manufacturing business one day and a technology business the next. Now they have dedicated vertical teams. There's an industrial team and a technology team and a healthcare team and a retail team and whatever sectors they've decided to focus on. So to have that industry knowledge is a step in creating that understanding and intuition about do I want to own this business at this price. A lot of people have done that and there are obvious advantages to that. I think the thing we worry about is what does that do to the cohesion of the firm in the long term? It's one thing when if you have a firm that 10 years ago was a generalist, the partners all worked together.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“But to have a long enough period of time to think about an asset, understand it, understand the industry, understand what you can do with it while you own it. Is it the right asset for you to own? Is it the right asset for you to pay the price that it's going to take to win the auction? So having several months or a couple of years to figure that out instead of just showing up in a six weeks investment bank run auction where you have very little access to management and very compressed timeframe, it's just a much better way to control the risk of, whoops, I paid the high price and it turns out that was a big mistake. That was definitely something that's evolved over time. And I think become a lot more important in defining success for firms.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“We'd always had this focus on operating capability pretty much all of it now has adopted that model because it's become table stakes. And if you don't have those abilities, you can't pay the price that it takes to win an auction for an asset these days. So you need to have those skill sets internally. One thing I've become more appreciative of is the deal making process. 20 years ago, 30 years ago, we dismissed that as important, but it's really not key because it's hard to differentiate yourself. And there are a lot of smart people who can play in an auction and leverage a balance sheet. In a world where it is so crowded and competitive and expensive, firms need to figure out today a way to get ahead of those processes, not so that they're necessarily buying businesses outside of auctions or buying them at bargain prices because the sellers are pretty sophisticated and they know what their businesses are worth and they know how to get several people engaged in a process and get a fair price.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Undermining the CEO and creating confusion about who's ultimately responsible for success, that became pretty evident. It was one thing to say you have operating talent, getting it to actually produce is another thing. I think a lot of nuances firms had to learn in that process, particularly as firms evolved and grew. Sometimes the people that were good at working with smaller companies then weren't so good at working with larger companies. They sometimes had to change these people out and that would be a complicated process too.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Certainly, we would spend a lot of time with the managers trying to understand what it is they were doing with their companies once they had bought them, meeting the operating talent and trying to understand what role they were playing. I think one thing we learned pretty quickly was not straightforward to bring in a guy who'd been a successful CEO at a big Fortune 500 company and have him parachute into an LBO situation as a board member or operating partner. You had to find people with the right skill set and mentality. A lot of CEOs are used to being the boss having their way. They're used to having a lot of resources around them if they're from bigger companies. And particularly at that point in time, the buyout world we're typically buying much smaller businesses. So to take some ex-CEO of General Motors or General Electric and expect him to be on the board of a hundred million dollar company and add some value was not a great strategy. Finding people with the right backgrounds, skill sets, wanting to be mentors and resources for company management, but not.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Could you then do something with a business when you owned it to make it a better business? And that would be a really powerful thing. So we very early on focused on firms that brought more than just financial skills to the table, really brought some operating capacity. That was really something we looked for right from the start that was great insight on David's part. I think we were fortunate too that we met that Clayton and Dublier people early on in that process and they're sort of a prototype of that model of combining the financial expertise with real operators. That was a good template for us.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“It wasn't that hard. It is such a feedback loop business where success begets success. The best venture firms would attract the best entrepreneurs. They had the best corporate relationships. They could hire the best partners. If you were an entrepreneur needing help with your startup and capital, and you'd look around and say, this group backed these successful companies, I should talk to them. It's a lottery ticket business, and the winning lottery tickets tend to make their way to certain places. Firms don't always keep that franchise. They can blow it along the way. And we had a few of those over the years. But once you create that positive feedback loop, it's a pretty powerful thing in the venture business. Buyout business was harder. A lot more of it is just financial engineering and less differentiated a skill set. So maintaining your edge there is probably harder. One insight David had early on particularly was financial engineering as a commodity. Wall Street was teaching lots of people how to do fancy things to balance sheets.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yale had actually been investing in both venture and leverage buyouts since the mid 1970s. Some of the long time investors in the venture business at that point who were mostly insurance companies looking around saying, you know, this is kind of complicated and expensive and illiquid and the returns haven't been great lately. And we were looking at it and saying these firms that we've been with for six or eight years now have produced amazing returns. We should learn more about this. We hadn't sat through the prior three or four years where the returns have been mediocre for a while looking back over the longer term the returns were fantastic and we said, hey, this is really interesting. Let's learn more about it. We were knocking on people's doors at a time where not that many other people were. And then we also had this existing roster of managers that we could call up and say, hey, who else in the business should we get to know? Who do you respect? Who do you like to work with? So we made a list of 15 different firms, went out and met all of them within five years. We were investors with virtually all of those firms. And most of them did fabulously well for us. In the 90s and many since then.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Had a security lending operation that we shut down years and years ago because the spread's got too tight in that. Apples and apples, there were five people. The investment office versus today Over Plus support staff Assets under management literally orders magnitude different. It was one and three quarter billion when I started and over 40 billion when I left.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Totally different David Swenson got the job in 1985. There were no articles in the Wall Street Journal about him getting a job at the endowment. Years, I'd have people from Yale's School of Management or wherever. Email me about how do I get a job in the endowment management industry Say, well, I'm not really sure I can help you because there was no endowment management industry when I started. I just needed a job. Office was 12 people Half of a floor Couple stories up from the Burcher's office at Yale in this fairly old building with no air conditioning, which wasn't very pleasant in the summertime, especially because we all wore suits back then. The 12 people that were there are really on Or six at the most. What we do today. Of the other people Involved”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of that history as Tim shares lessons from how Yale managed its portfolios alios along the way. Tim carries a quiet conviction and a sharp analytical mind developed from the front line of the greatest success in institutional investing for decades. Any weighs in on the increasing challenges of repeating that past success going forward.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today's show features one of the biggest industry legends you may never have heard before. My guest is Tim Sullivan, who recently retired from overseeing Yale University's private market portfolios for 39 years. He joined the Yale Investments Office upon graduation from Yale College in 1986, just one year after David Swenson took the helm. Tim worked alongside David to build and manage the most successful institutional private equity and venture capital programs in history. Tim lived through the 1987 crash, the early years of allocating to privates when no one else did, the dot-com boom and bust, the institutional adoption of alternatives after David published his book in 2000, the GFC, the ZERP aftermath that created a bigger boom until the hiccup in 2021. We weave in and out of the game.”
2025-07-14 · Capital Allocators · Tim Sullivan – Yale's Private Portfolio (EP.456) · IDENTIFIED FROM THE TRANSCRIPT · source