Letter #272: Bill Chisholm (2014)
STG Cofounder and Boston Celtics Owner | Interview
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Bill Chisholm is a Cofounder, the Managing Partner, and the Chief Investment Officer of STG (fka Symphony Technology Group), as well as the owner of the Boston Celtics. Prior to founding Symphony, Bill had been a Founding Partner of The Valent Group, a joint venture venture fund between Accel Partners and Bessemer Venture Partners that focused on investing in and building enterprise software companies. Before founding Valent, Bill was a Manager at Bain & Co., where he cofounded Bain Ventures (Bain’s Internet early-stage investment arm) and founded and served as President of Servicys (a supply chain software and services company). Bill started his career as an investment banker at PaineWebber.
Today’s letter comprises the transcripts of a series of video interviews Bill did introducing Symphony and his role with the firm. In his introduction video, Bill shares his background, what separates Symphony as an investor and partner, the two dimensions of Symphony’s approach to transformation, how Symphony separates itself from its competitors, Symphony’s investment into MSC, and what gets him out of bed in the mornings. In the subsequent videos, Bill discusses starting with a strategic perspective, the distinction between management and partnership, being a successful executive, redesigning the client value proposition, STG’s vision, mission, and strategy, going beyond capital, and their investment in IRi.
I hope you enjoy this interview as much as I did!
[Transcripts and any errors are mine.]
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Transcripts
Introduction
I'm Bill Chisholm, I'm Managing Director at Symphony Technology Group.
So in terms of my background, I had been, prior to Symphony, had been investing in early stage technology companies. I had also been a consultant at Bain and Company, had started a company and managed that company, and had also been an investment banker. And I think that's a pretty interesting combination for what we're trying to do--as a backdrop for what we're trying to do at Symphony, which is, it's not just about financial engineering, it's about actually putting together the relevant financial structure, but probably more importantly, working around the operations of the companies that we invest in, trying to improve those operations, both in terms of the cost structure, but also the growth. And I think that experience with early stage investing was important for that growth dimension as well.
So when we debrief with our executives, maybe after we've hopefully transformed a company, what you hear pretty consistently, and why I think we've had good success partnering with our companies, is that we get it. We understand the sector that we're investing in. We understand enterprise software. We understand these business services, these data services type businesses. And having an investor and a partner that gets it and can actually be helpful, as opposed to be the armchair quarterback is, I think, really compelling for an executive.
Our approach to transformation has really two dimensions to it, and I think maybe a little different than some people in the way they think about transformation. There are firms that actually focus on, really, on trying to transform the cost structure and drive profitability out of businesses. And their firms that really are growth investors that are really looking for growth through their companies. For us, we're really looking for both. And we believe that you can accomplish growth in the context of that kind of profitability enhancement as well. And we really feel that the profitability enhancement--through that, you can build a decent company. But in order to build a great company, you really need to have growth along with that as well. And that's where the real magic happens. Every company is different, but there has to be an innovation agenda in order to build that great company that we aspire to build.
In the end of the day, I think there really are one or two things that set Symphony apart from from our competitors in the investing world. I think first is the focus that we have. We're not a broad investment firm. We're not even a broad technology investment firm. We're really focused around a couple key areas. And that's allowed us to build our team, our network, and our investing platform around this space. And I think we're just much more relevant to companies in the space, both evaluating as well as operating those companies, or helping to operate those companies. I'd say the second thing is really that operational focus. If you look at the background of the team at Symphony, it's not Wall Street. It's the operators of technology companies that understand how to transform these companies, how to add value in this particular space.
So we invested in MSC about 18 months ago. And MSC had been a great company, and had all the ingredients to return to greatness, which drew us to the company in the first place. Had great customer relationships, had really incredible technology, but had lost their way from an execution perspective. And through a combination of refocusing the company on what made them great, their tools business, and through actually taking an aggressive approach to where money should be spent, we've been able to really transform that company--both returning it to growth, but also enhancing the bottom line, which, again, is a pretty, pretty unique outcome.
In terms of what gets me out of bed in the morning, gets me energized, and my passion around Symphony, I think ultimately comes down to our ability to build great companies. Romesh often says, It's sort of like the Field of Dreams: "If you build it, they will come." It's not about enhancing revenue, it's not about building profitability. Those things will happen if you build a great company. And that's what we're about: trying to build great companies.
Starting with a Strategic Perspective
Start with a perspective, a strategic perspective on an opportunity, a sector, that sort of thing, and then go out, proactively, and find a company that fits that strategy, that’s where we’ve had our most success.
Management vs Partnership
If you look at a company like Netik, for example, developed a relationship with the CEO there, as well as his senior team, and they were looking to spin the business out of Bank of New York. And very important criteria for them, because it really was kind of a management buyout, if you will, was what--who am I going to be working with, and what's the relationship I have with this investor that we're kind of teaming up with. And most of the folks that lined up were true financial kind of buyers that were going to come in and financial engineer a deal to spin this out of Bank of New York. And for the CEO, that's that was not really what he was looking for. He was looking for a partner, if you will. And so that was something--we brought--we actually had another business that we brought to the table as well, and we kind of combined with that business. That was part of it. But it really was a relationship and the shared vision for what we were going to kind of do with the business, and we kind of worked that process through and developed the relationship and the shared vision through the initial stages, once we made the investment, then we've actually spent the last six months actually executing on that vision, looking at acquisitions, that sort of thing. And really fine tuning the value proposition, as we kind of set out to do.
Being a Successful Executive
If folks are just sort of willing to roll over and let Symphony tell them what to do, that’s not a workable solution. On the other hand, if they’re not willing to listen to our perspectives—which, by the way, are not always right—and we’re willing to admit that, but we really want them to engage with us in the dialogue.
Redesigning the Client Value Proposition
Redesigning the client value proposition, whether it's kind of taking the innovation process to a whole different level through investment and rethinking of priorities and that sort of thing, whether it's taking the organization and restructuring the organization to better accomplish objectives of delivering superior and high levels of customer satisfaction and value. So it's all those things kind of rolled together. And ultimately, transformation--the ultimate objective is really to create what is a great company. And that's really what we're after, ultimately, at Symphony.
STG’s Vision, Mission, and Strategy
If you think about what our objective is, and what our mission is--our mission is really to build great companies. Our mission is not to create incredible returns, or that sort of thing. That is a byproduct of building great companies. And we've kind of taken that approach, and sort of, "If you build it, they will come," kind of thing. It really is--it's about building great companies. And that can't happen overnight. I mean, you could make an investment, get lucky, and someone wants to buy it the next day from you for a gazillion dollars, 10x what you paid for it. And that's interesting, and that's a nice outcome, but you didn't necessarily build a great company in the process. And it's not repeatable. It's not going to happen every time. But if you set out to build great companies that are both growing and delivering real client value and that have high degrees of profitability, then those other things will take care of themselves. And that takes--that's a journey. That's not a quick shot down the block. That's a long, long journey.
Going Beyond Capital
The capital is the--in these these days--and not to be cynical, but it's sort of the easy part. It's what you bring beyond to these companies, beyond just the money. I think there's plenty of capital out there between the the traditional private equity guys, and that whole that space is very crowded in terms of dollars, chasing opportunities. Really the differentiation for us, not only in working with and attracting the best companies to work with us, become part of our group, but also to get those company--turn those companies into great companies, from maybe good companies into great companies is more than just capital. Capital doesn't solve solve, or help with that transformation, necessarily. And I think it's really the way that that we've differentiated ourselves. And it starts with Romesh, where he's got an operational background. We're not a bunch of Wall Street guys on the team here. Even the investing side of the group comes from either an operational or a consulting kind of background. And it starts at the top, with someone like Romesh, where it's, "How do I make the biggest impact on this business," and it's not through throwing money at the at the situation. It's through thoughtful investment, but also through bringing something more than just money, whether it's the analytic technologies that we've developed, which sort of serve as almost a utility for the group. It doesn't work in all situations. Some companies it works for, and some companies it doesn't. And that's certainly not mandated, by any means. And then you have the services component of what we're doing, helping companies drive innovation through, whether it's offshoring or that sort of thing is something we also can bring to the table.
On IRi
Through our experience with with IRi, and some other things that we've done, we continue to have a fond place in our heart for companies that are managing complex data sets and trying to make sense out of those with analytics and software and that sort of thing. So taking industries that have kind of consumer centric, data intensive kind of qualities to them, trying to take data sets out of those industries and make sense of them to help companies better market to consumers, or better analyze risk associated with taking on consumers in a financial services context, all those type of things are really interesting to us, and trying to take the experience we had at IRi and port that over to other industries and other areas.
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