Transcript | podcast (Wisdom Board as guest)

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Speaker 1 (00:00):

This is Scott Becker with the Becker business and the Becker private equity podcast. I am thrilled to be joined by R. Adam Smith, the greatest name in capitalism. So pleasure to visit with him today. He is the entrepreneur and founder of the wisdom board. He's also the operator and founder of Circle Peak Capital – I intend to visit with him for a few minutes on each of those things today. Can you take a moment to introduce yourself?

Speaker 2 (00:26):

Thank you, Scott. Good to be on your podcast here. I'm a big fan. I am a 25 year veteran….still young enough hopefully to have another 20 years left to me in the private equity business. It keeps evolving and,  uh, I've been investing in consumer companies, for 20 years and in about 15 companies, um, also helping venture founders on their boards, giving strategic advice. And then recently we've been building a digital platform for holistic knowledge for private company board of directors.

Speaker 1 (01:00):

Take a moment. I'll come back to Circle Peak Capital in your investment areas and so forth in a second. Tell us a little bit about the company you founded, called Wisdom Board. Just take a moment and tell our audience about that.

Speaker 2 (01:12):

Yes, thank you. Um, we were fortunate enough to, uh, find that name - because what it allows us to do is to focus on the constituency, which is the board, the board of directors of private companies, but really build a platform with content, information, research tools, B2B partnerships, uh, research media for giving wisdom to the board, the board….. as we know you have, uh, been on the board of your own firm, McGuireWoods, and probably been on sitting on boards of lots of your clients. The board is a living, breathing animal and often a very complex, uh, there's a lot of subjective elements of a board and there's lots of different people and personalities and backgrounds and bosses - our mission is to package that together and be the go-to destination for knowledge and wisdom for the board of directors.

Speaker 1 (02:06):

What a magnificent effort! Talk a little bit about …. you get sometimes boards of directors sometimes, you know, four, six, eight people - a couple of people literally can't stand seeing each other, etc. How did people deal with that on boards? You know, you just have people …. oil and water. How do you deal with some of those issues?

Speaker 2 (02:31):

Yeah, I've been on 10 boards, myself invested about 20 companies, and I do agree that they come in all different shapes and sizes. Um, I think, um, first of all, constructing the board, thinking about the personality, the backgrounds, the intellectual capital, the composition of the board is important. That's step number one. And those that pay attention to that, tend to do better. The second is the functioning of the board and how it's utilized, how it's empowered, what people's roles are, of course committees, um, the, the frequency, the approach, interaction, expectations. And then I guess, the third would be really the execution, the impact of, of the board. So, if there are, um, inefficiencies and his personality issues, then, of course, which will occur, the question is really where does that come from? At what point could that challenge be improved or remediated?

Speaker 1 (03:33):

And what about today's boards showing the public company side? There is tremendous push to make sure there's diversity and inclusion, um, people of color, making sure that you're all male, not all white male women, people of color and other things. How would you seeing that at the private board level, where people are moving more to try and make sure that they're more inclusive and there's more diversity

Speaker 2 (04:03):

Of course, and, and that is the topic of, of the day -  other than COVID and the economy is really, how do we become better stewards of our companies? Not just not as public companies, but private companies. We are definitely including and passionate about balance, cultural, social, uh, gender balance that for our clients - we're giving advice on both the B to C and B to B side to give inspiration. We give knowledge to get access to people so they can, um, be more effective boards in representing the diversity of the clients, but also their culture and their employees. You know, DEI is, the topic of the day, but - it will be important forever. And it has always been important, but now it's essential because people are paying attention to it. And they're seeing also the importance of, of making those decisions, uh, both ethically, culturally and economically. So, I don't think it's a new topic, but it's really become essential to the proper functioning of any board of directors.

Speaker 1 (05:18):

Fantastic. And take a moment and talk to us about Circle Peak Capital, where over the last 20 years you really found niches that you enjoy. Are there areas you specialize in and talk about that with us for a moment?

Speaker 2 (05:32):

Sure.  I began Circle Peak Capital when I was 30. I was itching to leave the comfort of a more traditional investment firm at that point, Caxton-Iseman Capital - now CI Capital – a $2 billion firm ….  there's lots of money to make, there's learning to have, there, and deals to do, but at some point we all get an itch. We want to be off on our own and try something new. So, I began a very simple approach to direct investing, using a hybrid of a search fund model and a merchant banking model. I was determined to build a brand, to build an ongoing organization that would be able to, to execute serial transactions…..we still run it today 20 years later, and we've been able to execute and lead 14 direct investments with about a billion dollars of total capital. And the pace of that those investments, um, goes in and out over time when the markets are functioning well, we tend to do more deals; when the markets are disrupting or in recessions or in more distress mode; we tend to take a pause. So it's been a great ride. We continue to look at deals very actively, about 500 a year, and, happy to make, one or two a year in total.

Speaker 1 (06:58):

Is there an investing point you look at, or that you prefer?

Speaker 2 (07:04):

Uh, we have invested in both growth, equity and buyouts. I think the sweet spot for us, or we can be involved in a bit more of a mature company, but also be around some cashflow would be EBITDA over three to 5 million up to 50. Um, in the past or average equity check has been around 20 million each and we've funded about, 80 or 90 million ourselves and syndicated another 900 million of capital. So on the buyout side, I would say people would tend to call that small cap or lower mid cap.

Speaker 1 (07:40):

Yeah. It's an amazing track record. And talk for a moment about your coming into 2021. It's been an insane 2020. When you look at 2021, what are you most excited about? What's on your priority list? What are you excited about going to this next year?

Speaker 2 (07:58):

Well, from an investor standpoint, it’s exciting to put money to work, um, in a recession at the trough, knowing that you have a better economic cycle ahead - this recession is quite complex and unusual and extended and may or may not be a V-shape or even an L-shape recovery, but there will be a recovery. So those that have the courage and liquidity to invest, particularly consumer cyclical, uh, or elastic companies will tend to do quite well in the next year to five years, in terms of sectors, particularly like, impact and ESG savvy companies. I like women owned companies and I like multi-channel consumer companies, that are not relying upon one particular sector. I am particularly passionate and excited about, about certain areas of wellness that can include B corps, as well and many consumer categories. Um, there's lots of, lots of opportunity for those types of businesses, particularly those that are able to reach, exceed over five or 10 million of sales or more.

Speaker 1:

I want to thank you for joining us today on the Becker's private equity podcast. What a pleasure to listen to you about what you're doing and what you're doing with Circle Peak and what you're doing as well with Wisdom Board - what an amazing set of offerings and opportunities. Thank you so much for joining us today.

Speaker 2

Thank you, Scott. Nice to talk to you.