Interview Q&A

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1. You spent over a decade investing across Goldman, Waud Capital, American Capital, and Silver Point before founding Spring Rock - what made 2009 the right moment to go independent?

While the Great Financial Crisis was a unique time to initiate a first portfolio company investment, it was my belief that deals done in tough markets offer unique entry advantages if structured right. That, coupled with a building desire to derive what I believed to be important operating company experience to complement my investment background, combined to build my conviction in kicking off my efforts with Spring Rock Capital at that time.

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2. Most sponsors stay on the investment side. You packed up and moved to Hawaii to run Alert Alarm as CEO for seven years. What drove that decision and what did it teach you?

My father displayed entrepreneurial behavior in my formative years, buying a very small commercial printing company (2 employees) to help raise our family of six children. I spent most of my younger spring break, summers and Christmas breaks working for him as the company grew to about a dozen employees – collating, stapling, numbering… whatever repeatable labor processes could help.

I saw that in my own earlier career, the familiarity I enjoyed with those that worked at my father’s company was quite different as I didn’t have much interaction outside the C-Suite of the companies we invested in. While at first this was exciting, in more challenging economic environments, I felt somewhat disconnected to the people that ultimately drove these companies beneath the Executive level. Part of moving to Hawaii to get that operational experience was driven by that desire to reconnect.

I learned in my 7 years of running Alert Alarm as CEO and President, that while I believe I am a better investor now as a result of that experience, and that I can step in if needed to resume that type of role, my best and highest use is on the investment side. There are more proven, dyed-in-the-wool, operators that I prefer to partner with, and hope I bring a different and desired investor/operator perspective to the table as their partner.

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3. Having been both the investor on the board and the operator in the seat - how did that experience change how you evaluate management teams today?

The ability to manage up (to the board) as well as down (to direct reports and the broader company base) is a critical skill that engages many skills and characteristics that are often overlooked – empathy, and the ability to listen as well as inspire, to name just a couple.

There is no singular formula for success in leadership, but I like to think that having seen both sides of this equation helps inform the “you know it when you see it” conviction in evaluating management teams.

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4. Spring Rock has a clear focus on security, life safety, and defense tech. How did you develop that conviction and what keeps you there?

Security & Life Safety was quite literally the first industry white paper I wrote as an industry of interest when I first stepped into Private Equity at Waud Capital after my Investment Banking Analyst program at Goldman Sachs. That was the late ‘90s and it culminated in us acquiring a business I sat on the Board of Directors for in 2002. Ever since that time, I’ve been somewhat attached to that industry until I made it my sole focus with the purchase of Alert Alarm in 2009.

While at first, I think I desired to draw on several other industry experiences as I charted Spring Rock Capital’s direction and expansion; over time, I began to see the uniqueness of both my role and industry experience to a broader investment mindset – including Venture Capital within the industry.

With the opinions and perspectives built over time, and the network I regularly engage with, I felt I could be a better arbiter of capital leading to better risk-adjusted returns within this industry with conviction around gaps that required a combination of technology, talent and capital to fill, and perhaps what was around the corner that needed addressing in the industry. What keeps me there is how technological change has typically only increased the opportunity in the industry, rather than disintermediating it. The evolution into DefenseTech is a good example of how exposure to these opportunities and markets really grew organically from the commercially-focused Security and Life Safety businesses I’ve been involved with.

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5. You've invested across the full capital structure - from first lien to control equity - in both healthy and distressed situations. How does that flexibility - shape how you approach a deal?

I’d say it probably shapes how I’ve structured my investment approach – namely, not raising a dedicated vehicle to allow for the flexibility to move to where the best risk-adjusted return presents, which can often change and exist for much smaller periods of time than are required in a traditional fundraising and deployment cycle.

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6. Alert Alarm was eventually acquired by Zeus in 2022. What was it like to be on the selling side after spending so much of your career on the buy side?

We have another one of our portfolio companies in the market currently, and in both cases it is quite a learning experience. There are so many sophisticated buy-side groups out there, and it's imperative to find uniqueness in what they do that can perhaps propel the company to another level.

It’s often said that strategic buyers have a unique advantage over financial buyers in the market, and while that may be true for a number of reasons, there exists an increasing number of financial buyers that bring there own unique advantages as buyers as well. It's perhaps human nature to believe that the company you found and grew is best served within your own portfolio; however, if you are honest about what you are best at (stage of investment, growth needs of the company, areas you plan to improve), it’s quite likely there exists a better partner for that next phase of growth for the company - the key is identifying that right next partner.

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7. What's something about running a business day-to-day that you couldn't have appreciated just from the board seat?

I’ve said I believe an effective business leader might benefit from a Master's in Psychology more so than an MBA and I’m only half joking about the comment.

So much of business comes back to people and the interactions we have – a Stanford professor once told a group of us at a YPO Conference that “Management is just a series of difficult conversations”. Those that get this, and are most equipped to thrive given this, will likely do well in the leadership chair.

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8. How has the Independent Sponsor landscape evolved since you founded Spring Rock in 2009 - and what's different about competing in it today versus back then?

The term that existed when I formed Spring Rock Capital was more “Spin out” from a larger institutional fund, and I knew several others pursuing a similar charge. Once I completed the acquisition and met others, I became aware of the still young Search Fund efforts driven by recent MBA graduates starting in about the mid-2000s.

Today, that has evolved into Entrepreneurship Through Acquisition (or ETA). All these strategies sort of exist within the broader Independent Sponsor universe and Continuation Funds are yet another vehicle for the Independent Sponsor tool belt. Over that 20 year span, things have become way more sophisticated and institutionalized. Without a unique network or calling card, I think it would be quite hard to break out in this universe today – as competition both among the much larger Independent Sponsor universe as well as the much larger Private Equity industry makes it that much harder to stand out. That said, all it takes is one deal to get started – it’s just critical that one deal is a successful one!

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9. What do you look for in a capital partner now that you've seen the relationship from every angle?

Each business has different needs, but I’ll go back to my comment above about identifying that next partner. In our business lives, self-awareness is a critical attribute. Within our portfolio of investments, we need to have a similar self-awareness of what our companies are good at and what they need improvement in. Knowing that helps underscore the attributes of the right capital partner – be it an industry familiarity, a consultative approach to a specific area of need, a geographic presence, or material IP-like component.

At the end of the day though, I think you have to operate from a point of mutual respect and understanding, so just as an entrepreneur is choosing a partner they don’t want to regret, seeking partnership with a capital partner has a similar element of due diligence and assessment to insure alignment of interest and compatibility of personality.

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10. What do you know now that you wish you'd known going into your very first deal as a Principal?

Most successful people in the investment industry have a certain degree of acumen in sales skills. I spent sub-optimal time earlier on in my first deal as a Principal trying to be a connector and providing introductions that might lead to future sales and customers. The reality is our companies have people that do that all day, every day, and are good at what they do.

Similarly the best and highest use of my time was and is to do what I do best. I still make introductions and act as a connector when I can, but I’m cognizant of the time I spend attempting to do so and try to be extremely efficient on how I pursue that desire.

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