It has been about two weeks since FlexPoint Capital announced its launch. I’ve found the launch to be invigorating. I find myself wanting to share the sense of purpose behind FlexPoint Capital with anyone willing to listen. But, I can’t possibly reach everyone I know one-on-one; hence this post.
I started FlexPoint Capital with a point of view on what it will take for FlexPoint to be successful.
Start modestly And with a BHAG
Starting modestly (and alone) is humbling and really good. For now, FlexPoint Capital is just me and a big hairy audacious goal (BHAG). As we wrote in FlexPoint’s introductory blog post, FlexPoint sets out with a clear sense of purpose and a BHAG to build a world-class growth equity firm. What does it mean to be world-class? For me, being world class means:
- Consistently Producing Top Quartile Returns: Consistency is the key. How we produce those returns matters too. We seek lower loss ratios than venture and comparable IRRs.
- Succeeding Beyond My Tenure: I may have founded FlexPoint Capital, but FlexPoint’s purpose is bigger and longer-lasting than I am. If the firm doesn’t excel beyond my tenure, I will consider the firm to have missed an objective.
- Be Held in High Regard: I launched FlexPoint with a public statement of our values. To be world-class, the entrepreneurs, capital providers, and others in our ecosystem must feel we’ve lived them.
I’m going on record as saying that all three of the accomplishments above are required to be considered world-class. Note that nowhere in this definition of success does it say that FlexPoint has a stated objective to raise $[insert fund size] by [insert date]. We do not believe that success in gathering assets is, in and of itself, a goal to be achieved. FlexPoint will not compromise achievement of the objectives above in favor of gathering assets.
pursue a Durable Investment STRATEGY anD Stay True to it
FlexPoint Capital’s investment strategy is to invest in growth-stage technology-enabled service businesses. FlexPoint’s investment thesis didn’t come to me yesterday; I’ve been honing it for years. It is a reflection my cumulative experience and input I’ve sought and received. The thesis will continue to grow and evolve as the firm does, but the core of the thesis is non-negotiable.
My prior firm went through no less than two major changes in investment focus – forced by changing market conditions – including changes in both stage and sector. Each time, gaps emerged between the firm’s skills and resources, and what was required to be successful. The firm powered through it, because it had a capable and committed team that was also malleable. But there is no denying that the changes in investment focus created significant difficulties.
I’ve come to believe that a compelling, executable and durable investment focus is required to be successful. FlexPoint’s investment focus is designed accordingly.
- Compelling: Because technology-enabled services businesses are value-creation machines and the lower-middle market that FlexPoint serves is chronically underserved.
- Executable: Because FlexPoint is purpose-built to execute on the strategy. All of the firm’s efforts are aligned with a single purpose. The lower-middle market that FlexPoint intends to serve is a target rich environment. Nearly every successful, large growth equity firm started in the lower-middle market. FlexPoint intends to stay true to the lower-middle market in the hopes of doing it well forever.
- Durable: Because the term, “technology enabled service“, describes a value-delivery model, not a vertical market or sector. Sector’s wax and wane; and when they do the attractiveness of investing in them changes dramatically. FlexPoint’s focus on a value-delivery model, rather than a sector, mitigates this risk. There will always be attractive technology-enabled service investment opportunities, because they are found in nearly every sector of our economy that is a consumer of technology.
Start with Non-Negotiable Values
Every organization has values, whether stated or not. FlexPoint has taken the approach of publicly stating its values from the start. FlexPoint’s team is responsible for delivering on the values, which is why Our Values are found at the bottom of our team page. One of three elements of our definition of success hinges on whether the entrepreneurs we back and the investors who support us believe we have lived up to our values.
FlexPoint’s values are non-negotiable; they are enduring. If you ever feel we’re not living up to our values, we expect to hear from you.
Put Systems in Place to develop an information advantage
FlexPoint already has implemented tools and technologies that many more well-established firms don’t yet have. We have already implemented a CRM. We already have a CRM-linked deal-log. Our CRM is integrated into our communications infrastructure and email marketing platform. Our decision to implement these tools and technologies should tell you two things about FlexPoint’s approach: 1) We’re consumers of the very types of technology-enabled services in which we’re passionate investors; and 2) We recognize that putting this information infrastructure in place starts the process of developing the firm’s knowledge assets.
FlexPoint’s BHAG is to build a world-class firm. World-class firms develop an informational advantage over their peers. Technology and information are the enablers for FlexPoint to develop a knowledge advantage.
The support and words of encouragement I’ve received since announcing the launch of FlexPoint are humbling and heartwarming. I receive them as confirmation that I am pursuing a path that is authentic to who I am and compelling. Of FlexPoint’s path, I know only the point of departure and the destination; to be a world-class growth equity firm. All of the points in between are wonderfully unknowable aspects of the journey. I’m excited to learn what unfolds. Regardless of where the path leads, I’m personally committed to the FlexPoint’s purpose.
Our Purpose: Support the next generation of technology-enabled services market leaders with growth equity capital.