Private Equity Spotlight: Shaping the Future of Software with Carl Press from Thoma Bravo

(upbeat music) - Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices, and real-time trends. I'm Sean Mooney, Louise Founder and CEO. In this episode, we have an amazing conversation with Karl Press, partner with Toma Bravo. Enjoy. (upbeat music) - I'm very excited to be here today with Karl Press, partner with Toma Bravo. Karl, thanks for joining us. - Thank you for having me. - Absolutely, I've been looking forward to this conversation for quite some time. So I think we're gonna jump into a lot of interesting topics here today. So one of the ways I really like to start these things is to get to know more of the story of you, Karl. So it'd be really helpful if you could tell us a little bit about kind of how you came up, how you eventually got into this private equity industry, et cetera. - Happy to. So I'm originally from Chicago area, Chicago suburbs. And I went to school to study engineering. I was an electrical and computer engineering major. And I had no idea what I was going to do with that, other than to say I liked technology. We had computers and cell phones a little early in my household because both of my parents worked in tech in various forms. And I had some vague idea of Silicon Valley. And it felt like I had to be there. All the interesting things were happening there, all the smart people were going there. I had no clue what that meant. And did a couple internships and engineering and then sort of stumbled into finance, did an internship in banking and felt like this makes sense. If I can maybe do this there, then I'm in really good shape. And so I was able to land a banking job and on the West Coast and kind of translated that into investing in private equity and investing in software companies and I never look back. So I really stumbled into this career. I'm extraordinarily grateful that I did. - Well, I love the background in engineering. And if I had the mathematic capabilities, and could do it all over again. And I petered principled out and pre-cal. But once I got to calculus, it took way too much work. So one, I'm envious of anyone who can do that. And two, I think that degree, is you think about being a problem solver in someone who can kind of figure out complex situations that are interrelated. It's an amazing background. - Yeah, I'm glad I did it. And this would be for STEM with SEXY too. I felt like it wasn't like the SEXY decision at the time, but I'm glad I did it. - You're an innovator. And I felt like a lot of us, we, there's a lot of things that are cool now and that my kids get to do, that I very much so wish they were cool. And I was a kid who would have made my up, made growing up a little easier. - Right. And the other thing I appreciate is your origin story from Chicago is someone who lives in Nashville. I like to think of us now as a Southern suburb of Chicago. - So there's a lot of Chicagoans. And I very much applaud that 'cause I love the Midwestern kind of mentality as we get the waves and waves of people moving in here. - Take the mentality, leave the sports behind that is my only advice. Leave the professional sports in Chicago. It's just nothing but heartbreak. - So you're talking to someone who's both my parents were from Cleveland. - Okay. - Right up in Austin, Texas. So I could have been rooting for like the Cowboys during their heyday when they won. - Right. - I think that's part of what made me resilient and tenacious and helped me during my career in private equity. And so that's one of the-- - Right. - The grit and maybe it's the same with you. It's like you're born with grit. - Yeah, if you wanna be a long-term thinker, be a Chicago Bears fan. - Yeah. - I guess so. - It's always a 10 year cycle. - Absolutely, it's exactly. - So one of the things called, I'd love to feel back then even a little bit more on you and one of the questions that I really like asking people is we would know you better if we knew this about you. What would be one of the things that you would share about yourself? - Yeah, you've got to know right off the bat. My wife and I, we have three boys, five and under. So we are busy at home, our house is chaos. Five and a half, almost four and two. And they are a handful, but we love it. We love this phase. It's a lot of fun, but it's a lot of work. So that, yeah. - So you're skilled at zone defense. You've got to. - We're skilled at zone, although they found the holes in the defense. I tell you that. And they exploit them whenever they can. - The most favorite time of your weekend is probably nap time, but I'm sure it's never coordinated and aligned. - Nap time is never needed to be more efficient than it is, like when the boys go down, that's the time that we get a million things done. And efficiency and productivity is key. - I love it. No, that's a great thing to know. I can empathize, but not understand. My kids are now 16 and 13, and even then with only two, I really can't even, I think I blocked it from my memory in this season. - Yeah, you're mostly out of the woods, I guess. - I'm in the most stretch. I'm going to empty nestin. It's going to be like restaurants every night. - Yeah. Must be nice. Must be nice, Sean. - I'll tell you, I'll tell you about it in a couple of years, how it looks like. - Yeah. So that's something you should know about me. But what else can I tell folks? When I was in business school from 2011 to 2013, I got to do a lot of cool things. One of which was, I was one of the writers for our comedy variety show that we put on every year called The Wharton Follies. And it was just one of the most fun experiences I had, both just in general in my life and also specifically in business school. And I made some lifelong friends doing that. And I got to exercise a part of my brain that I love to use, but sometimes don't get to in our job. And so that was just a ton of fun that, something that people don't necessarily know that I did and that sort of was really important to me. - That sounds like a blast. And I'm curious, Carl, how did you even get into that? Maybe in the back of my mind kind of like, that would be so much fun to do. And I wouldn't even know where to start. I'd always done some forms of creative writing in one way or the other. And I'd call them in the high school newspaper, which was kind of a comedy column that we did. And so when I got to school and they actually did the performance for us at the Admit Weekend, I just said, these are my people. These will be my people in business school. I just knew it. And I was right. And they ended up being, I don't know, more than half my time. We spent working on that show, but it was awesome. It was a lot of fun. - One, it sounds like you've got some friends for life out of that, this group of like-minded kind of a fun people that be probably really clever people too. And then I guess with that in mind, are you all thinking about getting the band together again because no doubt you have some amazing source material in your home these days? - Well, we always try and get the band together, but it's mostly impromptu, imprompt amongst us, back to just making each other laugh as opposed to an audience. But all the same, we have a blast doing it and so. - It sounds like it was a really good time, and probably also you're conducting so much motion and commotion. And I'm sure at some point there's some sort of like applicability to having three boys under five, but also even just the motion and commotion of the career now, kind of how do you bring order to these seemingly disconnected things? - Yeah, and how do you fail quickly, right? Like you write something, maybe the works where it doesn't and if it does create and if it doesn't, you move on quickly. - Yeah. - And it's kind of like in our business where you see a lot of deals, you see a lot of velocity and you make quick decisions and you learn to be decisive when you learn not to dwell on maybe mistakes or chasing something that isn't there, so to speak. - That's a really nice way to think about it. So Carl, before we get too much into the conversation, I'd love to take a moment and just learn a little bit more about where you sit in the Toma Bravo organization 'cause I think it's gonna form a lot of our conversation. One, because Toma Bravo is such a dynamic organization and two, it'll give us a better sense of your lens into some of the topics that we're gonna talk about here. - So for the listeners who aren't familiar with us, so Toma Bravo, we're a private equity investment firm based in San Francisco, Miami, also in Chicago. We have 135 billion of assets under management and we exclusively focus on enterprise software. That's where we cut our teeth as a firm in the late nine years early 2000s. We realized it's the best market and we've never looked back. And so today we have a bunch of different funds that invest in software. We have a group of funds that focus on control investing or buyouts. And within that, we have kind of small medium-large, which is our flagship funds, our latest being $25 billion. Small is our explore funds. I started the explore effort in 2020 as a way to get Toma Bravo really back to that middle market, which is where we started and where we feel like there's so many of the, what we call the emerging category leaders in software that are under a hundred million of revenue that are looking to scale, that are hitting an inflection point or looking to do M&A. So the latest explore fund is $1.9 billion and the companies and the underwriting and the approach and the diligence is all identical to what we do in the flagship fund just scaled down. And so as the co-lead of explore, I'm actively looking for those emerging category leaders in software. - I really appreciate that context 'cause I think it's gonna give us a helpful lens into some of the topics that we're gonna talk about in just a moment here. And maybe, I think that's a great segue, Carl, if we kind of go into the way that you think about business. And one of the things that I enjoy most about these conversations is I get to talk with really some of the best business builders in the world like you. And then I get to liberally borrow them in my life as I think about building blue events. I'll be taking notes here, but I'm curious to get your perspective on kind of this yardstick that you might have. And when I was in PE, I would look for common things to try to make the world a smaller place. And realizing that every business is different, every situation is different. But there were some first principles, there were some themes that I'd look for in companies. And I'm curious to understand and know more about what do you look for when you're looking at a company as a potential investment opportunity in terms of what a company is, but probably more importantly, what it could or should be in the days ahead. - Yeah, when we meet a company, there's developing a vision for what it could be, right? And that's kind of part of our job is how to allow that company to achieve its potential to become what we think it could be as far as scale and market leadership and margins and so forth. There are some critical things we need to see in order to even attempt to go on that journey with that company. Right, I was talking about screening companies quickly. Well, there's three things we have to see in every deal that we invest in and it sounds so simple, but it remains true, it's been true forever. As long as we've been doing this, one is just having a really strong leader at the top. Having a CEO that you can partner with that is like-minded, that will challenge you, that you can challenge and that you can grow together with on this journey. That is so, so, so important. If you don't have that, you will not succeed, period. And so that's number one. I think second is, is this company a category leader? In whatever category it's in and however big or small you want to define that subset, are they the best at what they are doing at their core or a close number two? And if the answer is yes, then we know we're on the right track. And if you look across our portfolio of the 100-odd plus platforms we've done in enterprise software, virtually every single one of those fits that category of being a category leader. And so that's super important. And the third is just really, really high quality revenue. That's defined in a lot of ways. It can be the renewal rates, the quality of the customers that they're serving, the ability to upsell those customers over time and how that revenue grows sort of on an effortless basis within your base. But fundamentally is the revenue high quality. If you've got high quality revenue with a strong leader in a category leading platform, we'll take it and then we'll go and try and make that company as great a business as it can be over time. But those are kind of unassailable qualities of a business that we want to see. I think that nailed it in terms of, if you get those things right, like how do you not win? There's still a bunch of ways you can not win as it turns out and we've learned those lessons too. But those are necessary but not sufficient qualities of a winning investment. I'd love to dive a little bit deeper into the first one. And one is you look at this current now that we're living in. There's ongoing kind of talk, consternation about AI and the robot's taking over. And what we see through our lens here is the more and more people talk about kind of those type of things, the more and more calls we get about leadership. And the more and more we talk about on this podcast. And people in some ways matter even more now as we're going through probably one of the bigger shifts in kind of the kind of commercial history of certainly the modern era we live in now. And maybe that's a topic for another day. But when you say you're looking for a strong leader, can you unpack that a little bit? Like what are the attributes and characteristics kind of a level further down? There's so much there to unpack. I mean, part of it is is this person driven by a passion to grow and make this company special. There's sort of two types of CEOs we tend to see in this market I'm going to weigh over generalized. One is someone who is driven by that mission. And yes, they're economic animals and yes, they want to make money. But they are absolutely committed to making that company special. And they are tireless towards that end. That's one type of CEO. We meet the other is more of the mercenary. You come in two or three years, you do what you need to and you get out. And that doesn't work for us. We almost never succeed in that setting with that type of partner. And as a result, we tend not to look for opportunities with those types of folks. I think two is, is this person aligned with our vision of how to build a great company? And I think in the absence of that alignment, you're going to have friction for the next many, many years. They may think more about growth at all costs. We may not. They may think only about organic opportunities. We want to pursue M&A or vice versa. They may only want to do deals. And we think there are opportunities to grow margins organically just by being thoughtful and more efficient in sales and so forth. So having somebody that's like-minded, I think is really, really important. And then more than maybe both of those is just a CEO sets the tone of the organization. Are we going to be focused and resolute in our goals for the year, or are we going to chase shiny objects? Are we going to be measured in how we hire and promote from within, or are we going to grow at all costs and grow too fast? And as a result, take on too much and have responsibility diffusion across the organization. And so setting that tone at the top is just so important. And so as a result, you can't overvalue a great leader. You just cannot. And we have so many examples of that. I really like how you kind of frame that. And you're so right on, is someone committed to this mission? Are they going to be focused? Are they going to be aligned? All of those things, it's almost like in many ways, I think you're entering to a marriage with your partner. And you're going to have to work together. You're going to have to be better together than apart. You're going to go on this marriage. Maybe this is a three to seven year marriage. But it's still going to be something where it's so important to get all of that right and spending time in those preconditions. And if you do that, magic can happen. But sometimes when you compromise your principles or your standards, things can go off track. And I think we've all experienced that in probably the whole variety of our aspects of our lives and work. And so the way that you framed it there, I thought was really nicely done in terms of not only for people who are aspiring to be future private equity investors, but also executives of companies who are hoping to work with private equity from so understand what's important in terms of how to be successful in this transformational type of investing that takes place in private equity, which has historically been highly successful, more so than almost every other asset class, if not all others. Yeah, absolutely. And part of why we love working with the existing teams of the companies that we invest in is you don't lose time. You said it, these partnerships are like marriages, and the breakups are really messy. And then bringing someone new on board, but that takes six months, at least, for that person to acclimate to the business, for the business, to acclimate to his or her leadership style. That's time burned. That's time that could be spent building new products, doing acquisitions, getting into new markets, cross selling customers, et cetera. So we tend to want to say, let's go find those great businesses that happen to have the leaders that we can work with. And they may not have all of the weapons that we want them to have. But if we're aligned and they're mission driven, and they set the right tone, we'll work with them. We'll figure it out from there. Yeah, I really appreciate your thoughts there, because it makes a ton of sense. And it's something I think everyone should really think about in terms of, how can you be successful together this idea that if you can, but you're going to go further together, you might go faster along. And then you can think about calling Carl or Toma Bravo and transforming these companies into something probably much better than a lot of people could even envision in their mind before they kind of enter into these quote unquote marriages together. Yeah. Today's episode is brought to you by Blue Wave. Building a business is hard. Top third parties can help you create value with speed and certainty. But it's difficult to know who's best. That's why you need the Business Builders Network. Visit Blue Wave at BLUWAVE.net to learn more and start a project today. Next, I'm curious to maybe go a little bit further. You've brought in a company. You're working together. You've made the investment. And I think as we all know, that's when the real work starts. In some ways, the easier part is kind of closing the transaction and getting started, the hard part. And in some ways, the fun part is when you get the business building. And with that in mind, I'm curious how you and Toma Bravo think about value creation and the resources that you bring to bear to help support the success of your portfolio companies and your teams. I'm happy to unpack that. So even before we sign a deal, we will, during diligence, as we're kind of getting closer to a decision where we want to pull the trigger and make an investment. We'll put together a four-year plan that sort of serves as a roadmap for the journey ahead between the investment team and Toma Bravo and the management team. And that, for your plan, it outlines revenue and earnings and growth rates at a very high level. And it's just the organic plan. So any M&A would get layered on top of that. We then shake hands with the CEO on that plan before we sign on a deal. And as soon as we sign, then it's off to the races to go and try and hit that plan, right? And it's break-by-break. It's step-by-step for four years or more sometimes. And so then right away, what we do is we engage our operating team, which if we haven't already, which is a group of ex-executives, typically our ex-executives from Toma Bravo that work with our companies across our different funds. And we typically assign two to every investment. Usually we're including them in the diligence process. So they're up to speed by the time we sign a deal as to the quality of the business, the strengths of the company, where the management needs help, et cetera. And usually that pairing is one former CEO that typically serves as a chairperson. And then one kind of finance-oriented former CFO that serves as a driver and keeper of metrics and sales ops and rev ops and reporting and so forth. And that pairing we found, we started that in the mid-2000s when we started investing in software and we haven't moved away from it because it's just been so powerful. And so we install that pairing at the board level and then off we go, but the first 12 months, we do monthly board meetings, four hours each meeting, and every meeting has the same cadence. We start with the CEO's letter, which is typically the three or five things on the CEO's mind. What are the big rocks that we're trying to get around? We're trying to move through. We then move into the traditional board session. We'll do the governance, we'll go through the numbers, we'll do the quarter of a quarter of your compares. And then the meat of it is really a full deep dive function by function operating review, where the CEO brings in the deputies each of the functional heads. So product, engineering, sales, marketing, and so forth, customer success, and we just go deep on each of those. And each of those senior executives is empowered and has their own P&L and has their own set of metrics that they're being measured against. And so they're own little CEOs in a way. And we give them the opportunity to present on their business and then offer them feedback and guidance and making connections between the challenges that they're having and the challenges we see in our portfolio. Because chances are, whatever challenges our companies are facing, at this point, we've seen some flavor of it. We may not have seen it exactly that way, but we've seen some flavor of it where we can offer some insight. Like, hey, we actually ran into that with XYZ company three years ago. Let us connect you with that head of customer success or with that product lead. And we can figure out how their learnings apply here. That sort of thing. So that's our board cadence, that's our operating partners. I should say we have a group of what we call operating advisors as well that help with all the onboarding and the reporting that goes into our portfolio. There's a lot of reporting that we put in place right from the jump, right when we do an investment. And it allows us to keep score in the right way. Our view is if we're not keeping score, we're not going to see problems early enough. We're going to see them too late. So we want to see the leading indicators. And we have a pretty good sense now having done this for years and years on what those indicators are. We look at the full purpose of reporting that exists. We scale it down for the company in question. And then we go and apply that in our operating partners and advisors really drive a lot of that. So I give them a ton of credit for the value that they create in that effort, which is sort of ongoing, right. We always say the reporting is never perfect. Even the day we sell the company, there's still things that we wish we'd been reporting on a little bit differently, but it's an ongoing journey. We also do functional summits for each of our functional leaders within our portfolio. So once a year, all of our chief marketing officers or chief product officers or heads of engineering all get together for one day in a conference room somewhere in Vegas or wherever. And they talk about their problems and their challenges. And they'll find that a lot of the issues that they're facing are the ones that other companies are facing and that the challenges that our $2 billion P&Ls companies are facing are the ones that are $35 million P&Ls are facing, just in slightly different flavors. So we do those and those are a big effort that we're now expanding over time to add more functions to that effort. And then lastly, I'd say M&A is an ongoing effort at every one of our companies. For our very large companies, they have dedicated CorpDev folks at the company that work with our deal teams. For the fund that I lead, our middle market fund, our companies tend not to have those functions internally. And so our team, my deal team, including myself, we act as a outsource CorpDev. So we're scouring the universe for really great acquisitions that could be a million dollars of revenue. It could be equal to the revenue of the company in question and go and try and chase those. And of course, those have a funnel to them that we have to, just like a sales team would, we do biweekly calls on those and we work those funnels and each of us have responsibility over different names, but that's a big function. But that's a big part of what we do after we sign a deal. So hopefully that shed some light on kind of our approach. There's so much more that goes into it. But at a high level, those are the key initiatives that get kicked off when we sign a deal. Carl, I really appreciate how intentional, comprehensive, and integrated your approach to value creation is. And as I was listening to your thoughts there, it's one, value creation starts before you've even made the investment to the thoughtfulness of how you actually kicked things off by a getting alignment first. And then going through what sounds like a very intentional onboarding process for these executives and bringing these kind of huddles together with the portfolio company, not on a quarterly basis, but this monthly doing very intentional deep dives. So you're heavily investing in getting things going right at the very beginning. And that's really hard to do. But if you take that time in your intentional as you are, it's got to profoundly help the success of kicking things off. - The investment is made in the first year, really. Your make or break moment is the first 12 months. And so we've got to get that right. If we get off to the wrong start, it's hard to achieve our four year plan. It's hard to go create the capacity and the capabilities to go consume and absorb M&A and we'll end up falling behind in a real way that will set the investment back. So that first year is so important. - I remember even to go back, like in the early 2000s when I started PE, whether you're doing a new deal or an add-on, you're like, all right, everyone's exhausted. Let's just give them a couple months to settle in. And in retrospect, as we learned, that was the exact wrong thing to do. Because then it's just a, they're very nervous. They don't know what's going on. And then waiting for this first board meeting and then B, you're just wasting all of this opportunity and time to get things going fast in the right direction versus like if you apply that rudder and that intention and everyone's kind of going out of the gate, strung together, you're setting things on the right track and then that velocity just picks on itself and the flywheel gets spinning right away. So I really appreciate how you frame that. And the other thing that I think was really important that you shared was the intentionality with the data. And I think a lot of companies, particularly middle market businesses, they don't quite fully appreciate A, what they're getting into with the data, but be the power of it. And I think as the larger cap firms, they've been through several cycles, they get it, they have the full-blown teams, but lower middle market teams, it's such a huge value creator for them because it shows you exactly how the business is working in real time. And if you can figure out where to look at the right times, not only does it show you how you did, but it helps you predict the future where you can bend space and time to your will versus being a victim or a reactor to it. - Yeah, the last thing we wanna be is reactive to a problem. If that's the case, then something went wrong somewhere. Particularly with software companies, you have so much of it. And if you're intentional and thoughtful about how you can use it, there's amazingly powerful things that you can do to get very quick ROI. And then the hard part is, how do you keep the data clean? I started off an industrial privately. And I fell in love with Lean Six Sigma. And I originally would invest in like, high precision metal grinders essentially. And anytime I developed this philosophy, anytime there's rotation and force in a process, it wants to lose calibration. And then you get a recall from Ford. And so that's what you'd like. - Hard to tech. But it's the same way with technology and software and data, there's also a big investment that's required to keep your data kind of useful to you. - Absolutely, yeah. - So we're in this period of time, I'm calling it like a washing machine economy, where it's kind of like good news, bad news, good news, bad news, and it's kind of agitating back and forth. And at least personally, from our vantage, it seems to be two good news is now for one bad news on the macro cycle. And so, Carl, I'd be curious, what are some of the top pieces of advice that you and your colleagues are offering your portfolio companies to successfully manage through the period that we're working and living through right now? - Yeah, we ask ourselves these questions in our own staff meetings all the time is, what are the pieces of advice that we give our companies that are working right now? - Well, we end up realizing is the advice that works now has been working for 15 plus years. Sometimes some messages resonate more in certain markets than others, whether we're at a fraughty stage in the market or near a trough, but we always tell our companies a few things that I think are universal. One is if something isn't right, fix it immediately, address it immediately. If we feel like we don't have the right leader in a certain seat, if we feel like we're spending time on an initiative that isn't yielding enough. If we feel like we're losing out on opportunity because we lack focus in a certain area, go fix those issues immediately. Don't wait for tomorrow, don't wait for the quarter to end and for us to hit the bookings number that we think we can achieve and for the stars and moon to align, it's better to address those issues quickly and not wait for things to be totally 100% fully buttoned up. Sometimes done is better than perfect, as they say, and that absolutely applies to our companies. And so we encourage our CEOs to move quickly. That's good advice in every market, I think. And some of the more challenging markets like we had in say, 2022, like we had and during the great financial crisis, where we do have to pull back on costs and those don't happen often, but they do happen those windows of time, those moments. We always tell our leaders, if we do need to make a cost adjustment to our employee base, do it quickly, do it swiftly, do it once and do it deeply. But by doing it quickly and deep, you avoid this cadence of every year, sort of the GE style, bottom 10%. We fundamentally reject that approach and we believe that when the company feels settled and when people at the company feel empowered to then get back to their work and not worry or look behind their back, we get the best results. And so in those moments, we've tended to go deep with our cost initiatives and that's tended to work. And without fail, every time we've had it to do that, when the market turns back and we're healthy, we've got good cash flow, we hire back. And we end up with more heads on the back end than we did at the beginning before we ever did, took any action. So that's a piece of advice we give. And I think that's worked pretty well for us. And sometimes when we're debating an investment decision, I'm just going through this right now, in fact, with one of my companies, one of my newer companies, is you're trying to make an investment decision, whether it's an organic investment and you product something with respect to your IT infrastructure or MNA for that matter. And it's a tough one that puts in takes on both sides as to whether you make the investment. The tiebreaker is what's best for our customers. What will empower our customers to want to spend more and renew at higher rates over the medium to long term? If we use that as our north star, we tend to make the right decisions for the business and in turn for the investment. And so that's an important lesson that I personally have learned more recently when you're wrestling with these tough decisions could go either way, what's best for the customers? Lean into that direction. - I really, really, really liked what you had to say there. And on your first point, if something doesn't feel right, if we all have this intuition, there's this analysis going in our subconscious that we can't always understand, but you're usually right, and it's that gut feel that is unbeknownst to many of us. You just, there's lots of analytics going in there, and usually both on the surface and behind the thing. And I think about 20 years in PE, every time in kind of those situations, in retrospect as I analyze to try to get kind of continuously better on the next one, I don't think once I said, whoa, I really wish I waited six months more. And it just never happened. It's the scarier thing to do to take that action earlier, but almost invariably is the better thing. - You completely nailed it. Like the advice seems obvious. Anyone listening to that would say, yeah, duh, there's a problem, go fix it immediately. I mean, the problem is sometimes those are really scary decisions. That's a leader in the organization that's been there for 15 years, and they've got a lot of loyal followers at the company, and there's a lot of tribal knowledge that's with that person, and that's a really hard decision to move on from them, or to bite the bullet and re-platform your product. Well, this is the product that you've been selling to your customers for 10 years, and this is the 98% of our revenue today. How can we start to re-platform that and move away from that and migrate customers away from that? - It sounds obvious, but sometimes it's really, really scary. And this is where having a really strong mission-driven leader is so, so important to be able to say, no, this is the right decision. We've weighed the risks. We know what the opportunities are. We're gonna go execute on that, and we're never gonna look back. - Your whole point there, Jell's also so nicely with your second point. When there's something that needs to happen, be decisive about it, be assertive. Do what you need to do, and don't do these kind of action by a thousand little cuts, because to your point, I think you so eloquently said it is, it creates toxicity and fear. Everyone has fear over time, but to have a lasting perpetual culture of that can be nothing but bad for outcomes. And so I really also appreciated that, and people I'm sure are going through that, and have been going through that over the last several years, and over periods of their lives over the last several decades. And so just like that same kind of consistency of thought, of like be decisive, be assertive, and have a bias towards action versus kind of, maybe it's easier to kind of like think and post your over things and perhaps, as I look at my former self and I kind of ring my hands. - And then it lastly, just to kind of put a bow on this, this whole idea of like your North Star being, what's good for your customers? Inevitably, what's good for them is, and there's always gonna be ties sometimes, you gotta kind of work them there to get them the right place. But at the end of the day, if you do what they want, and what's good for them, you're gonna be in the right place. And even as I think about, like when I was, after nearly 20 years in P, I started a blue wave, and I thought I knew exactly what all these P firms wanted. And I'm gonna show you. And then I went out and immediately we like, tumbled out of the gates, like, and I almost shut the thing down like three times, like this is the craziest dumbest thing I've ever done in my life. And then we had the audacity to ask our customers what they wanted. And the surprising thing to me was they told us. And so I think once again, the three things that you share are just so foundational to business and even beyond. - Yeah, and let me say again, on doing what's right for the customer, sometimes that it sounds obvious, sounds like a nice piece of advice. Hey, that's great, Carl, but sometimes that's hard, right? Sometimes you need to raise prices. Sometimes you need to charge more for professional services. Sometimes you need to unbundle and upsell your customer. Well, those don't seem like the right decisions for your customers. And yet in the long run sometimes they can be because you use some of that incremental profit to invest back into the platform to build the solutions and the features and the capabilities that those customers want. Some of our best companies when you go to their user conferences and the customers, it's like it's evangelical. You get a room full of people or a convention center full of people. All they do every day is live inside this software. And now they're all together. And it's so wonderful to hear the stories about how our software makes their job so much easier and makes their lives so much easier. And that the new features and the capabilities that we've delivered have really met the promises that we've made. Those are the best conferences and meetings you can take as a private equity investor. And we love going to those user conferences. And in each of one of those cases we raise prices, we unbundle, we charge for new features. We do all the things that make sense for the business, but that ultimately also makes sense for our customers. And so there is a healthy balance there and we always try to strike it. To your point, it sometimes this sounds easier than it is in practice, but we mostly get it right, I think. - And Carl, I think you brought up a beautiful and important nuance to that last point. As some of the things that you might be doing is you think about the customer like right out of the cuff when they say like, no, we don't want you to raise our prices. But you're thinking and moving three to five steps ahead. We're like, yeah, but we're gonna be able to reinvest that. And this product is gonna be so much better in ways you don't even know yet, but you've told us what you wanted. And so having that perspective also of like thinking in a multi-dimensional way and multiple steps ahead is so important too versus kind of sometimes, a lot of things that you're gonna do there, but good for your customers, maybe from an instant gratification standpoint, won't immediately get the whoa, but two, three, four moves down the board for them is gonna have profound impacts that benefit them. - Yeah, maybe to kind of turn the page here, one of the things that I'm a huge collector of is other people's wisdom. And that's probably been one of the secrets to my modest success in life is if I had to figure out all these things myself, I'd be in a lot of trouble. 'Cause I'm always kind of like doing what I call the Walmart form of innovation with myself where I'm just like borrowing things that other people have figured out and kind of attaching them to myself. And Carl, I'd be curious if you were to go back to 22 year old Carl and-- - Oh God, and talk to him. It's very scary. - Not that guy. - Be careful, and acknowledging 22 year old Carl may not have listened to this when you come back onto the back to the future mobile, but if you were to come back to 22 year old Carl and give yourself a piece of advice, what's one of the things you'd share? - Oh, man, probably a lot, but starts with, trust your instincts more, I probably didn't do that enough. If you're generally doing the work and you're working hard and you're accepting good feedback and you're listening, which is probably something I also didn't do enough of when I was 22, your instincts will generally be more right than not, even at a young age. And so if I had to go back, I would tell that person, trust your instincts a little bit more, which is another way to say be a little bit more confident, kind of believe in yourself, that is so cliche, but it is so true, and it's so much easier to say when you're late 30s and when you're in your early 20s. So I would probably tell that kid that, along with many other pieces of feedback, like listen a little bit more, talk a little bit less. - I love that advice, and it's one of the things too, is I kind of like when I hear you talk about that as I think back in time, if you've done the hard work, you're kind of positioning yourself to catch these ways. There's so much going on, there's a calculus in your mind that's going on that you're not even aware of. But as you think about the instincts in some ways, it's like you just know it, I mean you don't know why, but you've done a lot of work both overtly and subconsciously to know it, and to have that trust and kind of what you're concluding, you know, not only in the top of your mind, but also behind the mind. - I think you're right, and when you're young, sometimes you just don't have the confidence to go with that instinct. You have imposter syndrome, you're saying, well I'm new to this job and I'm learning, so that can't be right, I can't be right, and that person is wrong, that can't be possible. Well as it turns out, if you've done the work and you're the deepest in the numbers and you spent all night analyzing it, you might be. So speak up, and it's an asymmetrical trade as we would say in investing, like the benefit of being right and speaking your mind and trusting your intuition is a lot better than being wrong. If you're wrong, okay, that's okay, move on, right? It's not a big deal. It didn't feel like that at the time, but that's probably the advice I would give myself or anybody in that position. - I'll share that with my kids, and we'll see if the 13 and 16 year old version for their future selves will listen, I don't know. - Sure. - But no try, no get, so let's see. So maybe to wrap things up, Carl, the other thing that I think is a very common kind of feature attribute, habit of people who have been successful and continue to be successful over time is that they're voracious readers and kind of similar to what we've talked about here, kind of borrowers of wisdom. And that often comes through the lens of books that people write. - Sure. - And I'd love to hear what are some of the things, some of the maybe books that have had an impact on you. - Yeah, and I wanna get your answer on this too, Sean, because I suspect you're extremely well read and I know that, so I wanna get your opinion. I'll give you a couple, how about that? I'll give you one kind of professional and one sort of non-investing related. My favorite investing book is the most important thing by Howard Marx. So Howard is the founder and chairman of Oak Tree Capital, which is where I started my investment career. So back in 2009-- - He's a legend. - Yeah, I can 2009, kind of in the depths of the financial crisis, I had an opportunity to work in the special situations group at Oak Tree. It was kind of a once in a lifetime opportunity. I was very blessed to be in that position. So I moved to LA and I started working at Oak Tree. I knew nothing about investing and around the time that I was leaving in 2011 is when he released this book. And if anybody knows about Howard and about Oak Tree, they may know about his memos that he releases every so often. The book is kind of a compilation of all the philosophy and insights that he kind of pours into his memos. And it's just a fantastic book. It's not a technical book. It's not a business school guide, but it's more about the philosophy of markets and second order thinking and market inefficiency and bubbles and the psychology of bubbles and the psychology of pricing assets. And it's just a wonderful book. I revisit my notes on that over and over. I encourage all my team to pick it up if they have a chance. And in the spirit of Warren Buffett, it's kind of a no nonsense, very clearly written set of philosophies around how to think about investing that you can then apply to whatever markets you're in. Public, private, credit, distress, equity, whatever it is. I absolutely love that book. And then something more fun. We talked about I'm a little bit of a comedy nerd. We talked about that. I loved Born Standing Up by Steve Martin. It's kind of one of those books where if you have enough people tell you to read it, it's like, okay, what am I missing here? I gotta go read that book. And so I finally read it about three, four years ago. And it's just a phenomenal book. First of all, I just, I love Steve Martin and I love comedy. And so the book is in part about his journey through show business and becoming the biggest comedian in America in the 1970s and 80s. But it's a book about resilience and believing in yourself. And kind of one of those books that shows, hey, if I can do it, you can do it. It's exactly that. And he has so many awesome little pieces and nuggets of information and wisdom in there about his journey to the top. And one of the ones that I absolutely love this advice is be so good that they can't ignore you. Be so good that people cannot ignore you. I think that is such good advice. And so I highly recommend that book. - Oh, that's amazing. Both of those. And so I had not read Howard Mark's book. I read his memos. I listened to his podcast, which is also really good. And let's call the memo. And it's a great lesson for someone who is kind of a legend in his own time. So what an amazing experience, particularly during the 2008 or 2009 time period to see kind of a my show at work and work with people who I'm sure have got common philosophies. - Yeah. - And then Steve Martin, when you said that, my face lit up and is a child of the 80s where we were in some ways raised by movies. And it's probably the only way I know how to communicate with our team is through movie quotes that for movies they haven't seen. But it's like, if you looked at what was on our reel at our house, it was plain strains and automobiles and father of bride and dirty rotten scoundrels, hugely underrated movie. People haven't seen that. Three Amigos, Roxanne, my Blue Heaven. And then a circuit of his Saturday Night Live hosting shows over time. And so I love that you had that. And somehow I haven't read that book either. So I've got two more that will be one click Amazon right after this. - Love it. - And hopefully I'll be able to cut through it. My wife is getting more and more, not putting up with my habits as much with these piles of books that are stepping up. (laughing) So this has been an amazing conversation, Carl. I've learned all sorts of things I wish I knew before. So thank you, thank you, thank you for joining us and sharing really some pearls of wisdom here. - No, thank you for having me. This was a lot of fun. I really appreciate you giving me the opportunity to share our thoughts in what we do at tumble bravo and we're really proud of what we're building as our founder, Orlando Bravo says we're just getting started. And it's absolutely true. - And I think what you share here, clearly and tangibly illustrates why tumble bravo is one of the most successful private equity firms in the history of private equity. So we appreciate you and really enjoyed our conversation today. So thanks again, Carl. - Thanks, Carl. (upbeat music) - That's all we have for today. Special thanks to Carl Press for joining. If you'd like to learn more about Carl and tumble bravo, please see the episode notes or links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcast. We truly appreciate your support. If you'd like what you hear, please follow, rate, review and share. It really helps just when you do this. So thank you in advance. In the meantime, if you wanna be connected with the world's best in class, private equity grade, professional service providers, independent consultants, interim executives that are deployed by the best business builders in the world, give us a call or visit our website at blueave.net. That's B-L-U-W-A-V-E and we'll support your success. Onward. (upbeat music)