The Dr. Doug Edge: Real Talk with Real Leaders
Across law, business, and finance, Dr. Doug Hirschhorn — advisor to the elite — goes beyond the surface to decode the strategies behind success. No scripts. No fluff. Just what works.
The Dr. Doug Edge: Real Talk with Real Leaders
From Funds to Independent Sponsors: Why Culture and Vulnerability Are the New Edge in Private Equity
If you think capital is the edge, you’re already behind. This week, I sit down with Adam Stulberger, co-founder of Coventry Bay Group and a 25-year private equity veteran, to unpack the real drivers of outperformance: management quality, cultural clarity, and the courage to be transparent when it counts. We trace the shift from the classic funded model to the independent sponsor approach, explain why limited partners crave deal-by-deal control, and explore how new retail capital will push prices higher and returns lower unless leaders find a different gear.
What stands out is how human the best deals really are. Adam shares why he’d bet on an A+ management team in a C industry over the reverse, and he breaks down the signals that separate durable leaders from charismatic risk: who answers which questions, whether a CEO shares the stage, and how teams treat partners and vendors when no one’s watching. We talk about building psychological safety, why vulnerability from the top gets you the truth faster, and how to create a setting where a CFO can say, “We need someone better than me for the next phase,” without fear or drama.
Culture gets the spotlight it deserves. We examine why “we’re like a family” is often a red flag, how to reset norms after a merger, and what it really takes to change behavior over time. Adam is candid about ego traps in PE, the danger of talking more than listening, and the pattern recognition that comes from decades across cycles and sectors. For founders choosing a partner and for emerging investors finding their voice, the message is simple: trust compounds, control doesn’t.
Welcome to the Dr. Doug Edge Real Talk with real leaders. I'm Dr. Doug Hershorn, advisor to the elite. Looking back at my career, I realize I've met and worked with a lot of interesting and talented people. So I wanted to start a podcast where I could have a candid conversation with one of those people while giving everyone a chance to listen in. All of my guests share three things. Number one, they are either a personal friend or someone I've worked with in the past. Number two, they've achieved exceptional levels of success. Number three, and most important, I like them on a personal level. Today I'm sitting down with Adam Stolberger, co-founder of Coventry Bay Group, and a 25-year veteran of private equity. We get real about what's changing in the PE world. From the traditional fund model to the rise of independent sponsors, and what actually separates great investors and leaders from the rest. Adam breaks down how trust, transparency, and vulnerability create real partnerships, not just deals. We talk about why culture drives outcomes, how the best management teams think, and why being the smartest person in the room isn't the same as being the most effective. This one's not just about private equity. It's about leadership, self-awareness, and building relationships that last. Hey Adam, thank you for joining me today. I really appreciate it. Hey Doug, it's my pleasure. We've known each other. I'm thinking back how long we've known each other. It's been oh my gosh, eight years, nine years. Something like that. About a decade. About a decade. And uh just for the context here, so you're in the private equity world, and I'm gonna have you explain in more detail what that means. But for context of people listening, um on you were you were the first guy in Pi and PE that I had met that really understood and appreciated what I was trying to do. I was coming out of the hedge fund world and trying to go into doing human cap assessment in PE. And and you really just kind of gave me an open door into the world and helped me make mistakes and of course corrected me. And and uh it was invaluable. I call it my internship. It was my private equity internship that I spent about a year or two. And obviously, you know that uh I've I've grown to like you personally over the years, and so it's been wonderful to see your success and your journey and uh happy to have you here. So, for everyone listening, just if you don't mind just describing what private equity is so they can understand more fully.
SPEAKER_01:Happy to. Um, and by the way, I'd love to take credit for your success in private equity, but your success in private equity, I I just was the first one you got to pitch your wares to, and it was immediately obvious to me that it was very valuable to not only my portfolio companies, but to myself. So thank you. Thank you. That's why you are where you are. For those who aren't familiar with private equity, it's simply investing in the equity of private companies rather than the equity of public companies. It's a very broad term, it can apply to lots of different models, but at its core, it's it's simply what ties all these models together is it's investing in private companies. Okay. Model that I think most people will be familiar with is what's called the funded model. That's by far the most common model. It involves firms going out and raising large funds that are invested across multiple deals, anywhere from 10 to 15 deals. I spent the first 25 years of my private equity career in that model. An increasingly popular model, a relatively newer model, is called the independent sponsor model. And that model is where capital is raised on a deal-by-deal basis. So it's a much more bespoke model where you do a better job of matching investors to the deals. Coventry Bay, which is the firm that I founded together with my partner David this year, we're an independent sponsor. And we believe for a number of reasons, it's a better model for private equity, particularly in the middle market.
SPEAKER_00:Got it. So when you say investing in in private companies, so public companies, meaning companies that have that are listed on the stock exchange, right?
SPEAKER_01:That's right.
SPEAKER_00:Uh, private companies, what's an example of a private company, just for people's context? I think, I think they're, they don't people don't realize that they're surrounded by private companies. They just don't realize that they are.
SPEAKER_01:That's what I was gonna say. It's it's almost every company you run into is a private company. I think the vast majority of companies that you know of are private. The public ones get a lot of press and you see them in the stock market. But everything from the person who repairs your air conditioning to a local store to their very, very large private companies out there. But just about every company you run into, if you're not familiar with them as a public company, they're a private company. And they run the gamut from very small to extremely large.
SPEAKER_00:Okay. So they so they could be anywhere from a small mom and pop business that might be a couple million in revenue or even smaller. And they could be like Bloomberg, which is a private company, which is multi-billions of of of size. That's right. Got it. All right, thank you. That's that's good context. And how long have you been doing this? Uh, about 25 years. 25 years. Uh, where do you think it's heading in the next five years? I know you've already described like the evolution of a fund versus uh a sponsor uh relationship, but where do you think in the next five years it's going?
SPEAKER_01:Yeah, there are uh there are a handful of trends that that we're somewhere in the middle of right now. And that the the big ones I've seen are the bifurcation of the industry between the large, very large megacap multi-strategy firms, and those are the ones that you know anyone who's familiar with private equity will have heard of the Apollos and Carlisles of the world. Um, and they're just getting larger, they're increasing the number of strategies they have. Um, and then the so that's on one end. On the other end, are the smaller and the niche specialty firms. Uh, and what that means is if you're not one of those two, it's becoming increasingly difficult to raise a fund. So the folks that are in the middle that don't have a special edge, they're having an increasingly tough time raising a fund. So that's one trend. Another is that the limited partners, those are the folks who give private equity firms their money to invest, they increasingly want finer and finer controls of where their money is invested. And this has been a trend that's existed for probably 25 or 30 years at this point. Um, limited partners just want to be able to choose, if they could, the specific deals they're invested in. And that started with them saying, not only are we going to invest in a private equity firm, but we want to invest more capital alongside the private equity firm, which is called a co-investment. So they increase their exposure to any one particular investment in a fund. And more and more common these days is deal by deal, where they want to invest deal by deal. That's the independent sponsor model. And that gives them full control because they know exactly what they're investing in.
SPEAKER_00:But the money's still locked up for a certain number of years, is that correct?
SPEAKER_01:The money is still locked up for a certain number of years, but it's locked up for for fewer years because in a fund, your your money is locked up for 10 to 12 years. In a deal-by-deal scenario, your money can be locked up for that long, but the average length of time for a private equity investment is really closer to five to seven years. Got it. So your capital is locked up for a shorter period of time. Understand. The last trend, which is really important, is that the the opening up of private equity to retail investors, which is you're just seeing right now. Um, it's a very new but very powerful trend. It's gonna significantly increase the size of the private equity industry. Most of that will be picked up by the very large mega cap fund.
SPEAKER_00:Right. So the problem, the problem with that at that last evolution is that means there's going to be more capital going in. So what you're saying is basically so your, you know, your account at Raymond James or Schwab or whatever it is, you'll now have the ability and opportunity to invest in these deals on a smaller scale, as opposed to, you know, having to have pass some some certain level of rigor that currently is in place to invest. I think it's called a qualified investor, but uh on the smaller end. But what I've heard is that actually will now open the door floodgates of a lot more capital going into the markets, which then means that there's either going to be a lot more money to go onto fewer deals. It'll be is that is that what's gonna happen?
SPEAKER_01:Yeah, I think what's gonna end up happening is again, most of that capital will flow to the very largest names in in the space, the ones that the most capital, um, multi-strategy. The addition of capital is gonna absolutely drive drive up prices and drive down turns in in the industry. Um because these firms are are going to have to find ways to put that capital to work. They're very good at it. But when there's more capital, that should result in lower returns. Got it.
SPEAKER_00:All right, that's interesting. Um all right, so pivoting now more towards the the leadership side and and management and the stuff that you are an expert in because you deal with it and have dealt with it for 25 years now. I remember I'll I'll give it I'll give a shout out to Frank Sika, who we both know. And um, it really was an aha moment for me with Frank, uh, who's a legend in the PE space, um, and he's been around for for for many years. Uh and uh I remember I the first management meeting I sat through, I love telling this story. Uh on one side of the table is the company, and I they they might have been they did something like like cleaning oil tanks out of like Oklahoma, whatever it was. On our side of the table was, you know, the the PE guys are all in suits and ties and buttoned up and looking great. And uh and and I remember I didn't know what I was listening to. It was a four-hour meeting, and I'm just taking notes on all the questions that are being asked. And I have like a list of a hundred things that are being asked and the answers, and I again I'm like, I don't know what I'm listening for, but I'll just sit here and do something for four hours. Meeting ends, and uh the the company leaves and I look at at the deal team, you all, and I say, What's your biggest risk? Right, okay, because I'm coming from the hedge fund space, you know, it's all about managing risk. I'm like, what's your biggest risk? And Frank Sika says to me point blank, our biggest risk is that is that we buy uh a good company with with a mediocre management team. And he said, You can have a mediocre company with a great management team and it'll work out. But if you have uh a great company with a mediocre management team, they'll destroy the company. And and that was like, wow. And then I said, Well, that's great. How how do you evaluate the teams? And and then he goes, We just did. And I started to laugh. I'm like, no, you didn't. You asked one question how the culture was, the guy said it was good, and then he moved on to everything else about the business. And that was to me was the aha moment. I was like, there's a way to do this that on a more on a more what do you how true is that in your experience? That that statement.
SPEAKER_01:So Frank Frank is a legend. I've I was very lucky to spend almost 20 years working with him, and he has a number of sayings that I have found over my 25-year career, I keep repeating, and that's one of them, which is I'd rather have an A plus management team in a C industry than a C management team in an A plus industry. And it's been proven over and over again across the industry and in my experience. Management is by far the most important factor in the success of any company, but particularly a private equity investment, where it's really a partnership between the private equity investor and the management team. And that's why we spend so much time with management teams before deciding to make an investment. Um, we like to spend six months with a management team, really getting to know them and understanding who they are, not only as professionals, but as people, because we've seen over and over again that's going to be, again, by far the most important driver of success in an investment.
SPEAKER_00:Yeah, that was one thing I that made a, you know, I got lucky right out of the gates. I I I met someone, meaning you, who actually understood the value of that. And I I thought it was the norm. I thought, oh, so you so you do spend, you know, talk to the person every day or several times a week and fly out to where they are and get to know them, not just how how the numbers, but also the business. Uh, and and that is not the norm. My experience over the past 10 years and working with PE funds, it's much more of the, oh, that's one of our 20 portfolio companies, set it and forget it. If there's a problem, wake me up. You were always much more hands-on and deeper dive into those relationships on many levels, which I which I identified with, because that's always been my business is roll your sleeves up and be a part of their DNA ecosystem, not invasive, not telling them how to do their job, but understanding more than just someone that's investing in the business. What does great management look like to you? Like, what do you actually what qualities separate truly exceptional leaders from the average ones?
SPEAKER_01:So, first, there's no one model of a great management team. Successful entrepreneurial teams come in in all shapes, but there are a few characteristics that that we've found over the course of our careers that lead to successful teams, but also to teams that make a good fit for us. Because really important in a private equity investment is making sure that the management team and the private equity investor are good matches for each other. There are plenty of management teams, plenty of private equity firms. There's a good fit. There'll always be a management team will find a private equity firm that's a good fit, but not every private equity firm is a good fit with every management team. So it's really important to find that. The things we focus on are, you know, first making sure the management team is full of team players, people who like each other, respect each other, and listen to each other, and place a high value on the success of the company and the team. You know, um, I think about the concept of servant leadership, and that that comes to mind as being really important amongst uh entrepreneurial teams, you know, really valuing the the good of the entity as well as valuing the the you know yourself. And the sample that I've seen a few times is where an executive raises their hand during the process of getting to know us and says something along the lines of I'm the CFO now, but I shouldn't be the CFO of this company as it grows. I'm really the controller, I'm standing in for the CFO. Right. And I want to continue to be the CFO, but you should find a real uh you should find a real CFO for the business. That kind of uh self-awareness, first of all, is is very impressive, but also it's someone who clearly values the success of the company.
unknown:Right.
SPEAKER_01:Even if he's taking a step down in title. Yeah. Um, it's also one of my partners is increasingly fond of asking if someone has their listening ears on. Um so we we pay attention to whether folks are actually listening to each other. If the team or any member of the team thinks they have all the answers uh and they don't respect each other or anyone on the outside, uh their opinion, that's often a very bad sign.
SPEAKER_00:You know, you said something uh about servant leadership in the podcast, an interview I did a bit ago with a guy named Matt Jones, who is the CEO of Sigma Defense. They did defense contracting work, but he brought that up also you know, about servant leadership. And the conversation then evolved to vulnerability, like vulnerable leadership. And I and when you when when I when I come across and what you described, there is a CFO that says, Look, I like being the CFO, but I'm not the best person for this job. They have self-awareness, but they're also allowing themselves to be vulnerable. They're disclosing that to you, you know, technically their boss, right, in the situation where where they're saying, you know, you you should replace me because it's better for better for the company. It sets everyone up for success here. It's better for the investment. And that willingness to be vulnerable, you know, uh, I think is a huge I think, I think the more I hear about it, that's the word that I think about, as opposed to just saying servant leadership. I think vulnerability is the key component where you're intellectually honest about what you're capable of, not capable of, and then and then feeling comfortable enough to disclose that, knowing that it might be your your demise, knowing that it might cause you to lose your current position, but it's it's better for the greater good of the and that that only I completely agree.
SPEAKER_01:That only happens if you set the environment, if you set the table to allow that. And and right I have found is the way you do that is by being open and vulnerable yourself. Yeah, you don't come in saying you have all the answers, right? You come in and you ask questions and you point out where you think you can help, but also areas where you want to that that's exactly that's even that's exactly it. You get that back.
SPEAKER_00:Yeah, we we talk about that a lot as a leadership advisory firm about creating what we call a psychologically safe environment for clients. And and to do that, you have to allow yourself to be vulnerable, you have to allow yourself to to be transparent. And the way you get there is by putting the time in with the client, by by physically going to the site to spend time with them, you know, if you get the opportunity to meet the their significant other, their families to get to know them as a human being and not just an investment. And that I have found goes a long way.
SPEAKER_01:Uh back to Frank Zika. Another thing he's famous for saying is I can handle good news, I can handle bad news. What I can't handle is no news. Right. That that's a way of saying, Look, you can you certainly tell me the good things, but you can also tell me the bad things that are going on. Yeah, it's okay. Like I don't expect perfection. Yeah. People get in trouble, is where they hide the bad news. Yeah.
SPEAKER_00:Because that just festers into problems that become very hard to you know, Adam, there were times when you know I'm telling you, I'm telling you this for the first time in the many years that I've known you. Um, because it's appropriate now to say it and bring it up. Not wasn't appropriate back then, but there were many times I would sit through board meetings of some of your portfolio companies or even companies that you were looking to buy, and I would start to get to know the team behind when behind closed doors, and they would ask me about you and they would ask me questions, you know. You know, I would hear them say literally in their pre-meetings that we don't want to say that to the PE fund because I'm like, time out, guys. It's like you definitely want to say that uh to this one. And and because and I would have to explain, it's like these people are different, like this guy's different. He's he's gonna be concerned if you're not transparent. He'll know something's wrong, he'll know there's something you're not telling him, he's not an idiot. And and if and if you tell him where the black and blue marks are, then you're then you're thinking of him as collaboration, then he's helping you solve these problems as opposed to blaming you for the problems. That's that's that's unique, man. There's so many times when when private companies and and management teams are afraid to be transparent, fully transparent with the sponsor, because they think the sponsor only wants to hear about unicorns and rainbows, even though we know that's not the reality of where it is. Uh how do you how do you go how do you go about that process of of evaluating the uh the management teams?
SPEAKER_01:Well, first, first of all, the way I go about evaluating management teams is much different now than it was before we started working together. So my current way of evaluating management teams has been liberally plagiarized from from you in your playbook. Um so you'll hear things that are familiar. First of a flattered, okay. Oh, now I'm interested. Look, it it works. Um, first of all, we put on our listening ears, right? We we we have to listen to what's being said um to body language. We have to pay attention to body language of these teams, we have to see how they interact together. And the only way to do any of that is spend time with them. And you just alluded to it. Um I'm a big believer that the only way you can evaluate human capital is by sitting down with these people, uh, preferably in person, certainly in person, at least a few times. Um things you miss when you're doing it virtually. You can get a lot done virtually, but you can't get everything done virtually. But you have to sit down around a conference table, around a meal, and and get to know them and see how they act with each other. Um it's a lot of observations, listening and watching to see how they answer questions, who answers what questions. Right. CEO answers every single question and doesn't defer to the domain experts within his own management or her own management team. That's often going to be a problem. We look for CEOs who answer the questions they should be answering, but also bring in other members of the management team to answer the questions that they should be answering. We look at how they look and react to each other. You can tell a lot about just the looks in their eyes when someone else is is speaking. Yeah, it's amazing how much you can learn about a team just by observing those kind of things. And then we pay attention to how they have historically treated their partners and their vendors. Um if if they're treating them poorly, ignoring them, in lawsuits with them, I'm pretty sure I'm gonna be on the other side of that pretty soon. Instead, if they treat them with respect and dignity and they listen and treat them professionally, um then that's a really good sign.
SPEAKER_00:Yeah, I think I think that last part is is really compelling because it's overlooked. The word vendor versus partner, it could be the same, the same end user. So in our in our situation, where you know, we we provide services to private equity funds or to law firms or to you know hedge funds, banks, whatever it is. How they treat us in the early days, how responsive they are to emails. Are they, you know, when they say they'll get back to you by this date, are they getting back to you? Are they treating you like a vendor or in a partnership? They might say the words. And that's one thing I have learned. Forget about the words, right? Look at the behaviors. Yeah. And the only way you get to really see that is by experiencing it firsthand. You can ask someone, but very rarely you're gonna get, unless it's a friend of yours, you're very rarely gonna get the the truth about how someone is on the other side because no one wants to be that person in the industry because it's a small business. So you got to put the time in and you got to see them a couple reps, one interview, everyone's on their best behavior, right? You see them a couple of times in a more relaxed environment, allow yourself to be vulnerable, see how they respond. Are they always on guard? That that stuff is is, I think, magical. And the fact that you've you've put that into your process, I think says a lot about the quality and caliber of you as a partner with with the right company that will appreciate and value that. And then you get, you know, then you get real real growth and real opportunity, which is a win-win for both sides.
SPEAKER_01:Yeah, that's right. That it's uh again, it's all about finding the right partnership between the private equity investor and the management team. And that's the way you do it. You spend a lot of time together, and you you'll you'll either on both sides you'll have positive feelings about each other, or you'll have some concerns, and then you'll have to let me tell you something that I do that I do now.
SPEAKER_00:I didn't do it, I didn't do it back then when you and I worked closer together, but I do it now. Uh, let's say a mid uh private equity fund hires me to help them find a new CFO, which is a common upgrade situation, right? After post-acquisition or whatever it is. Uh first thing I will do is I will actually fly out to the company, meet with the management team, and spend as much time as I need to spend with them so that they understand that I'm part of the DNA here. I'm not telling, I'm just I need to understand them so that when they when we hire a CFO, it's the right chemistry fit with the organization. Right. Now I'm equipped with I've spent I've now spent more time on the ground with that company than the sponsor has and the private equity fund has, right? I've sat through all the meetings, I've met the family, blah, blah, blah. Uh when the search firm then brings me the candidates, right? Rather than burning time having to figure out travel schedules where the candidate comes in town, does a song and dance, smiles, and the CEO smiles. I actually fly out to the candidate wherever they are. I'll fly out to them and I will sit down with them, and for an hour and a half, I will tell them in exquisite detail what it's like to work with that company, good and bad, because a disaster is that person quits the job to take a job that's not as advertised, and then they leave that. Now they've messed up the investment, they've messed up their career. Like, and and I I've had sponsors and and uh HR department say, Don't don't tell them what it's like here, you'll scare them away. I was like, they're gonna find out anyway. It's like if I scare them away, that's a good thing because we've just saved a lot of money and a lot of brain damage here, right? Up to a T, every single CFO or CEO that I've done that with has told me that they they appreciated it. They've never had anyone do that for them. And and I've had some walk away say it's not for me. I was like, great, no problem. Like, you know, good, it's not for you. That's the point of that conversation. I'm not making shit up here. It's like this is what's gonna happen. And and you're gonna look at me. My success is when you when you start there and you look at me and say, Doug, it was as advertised. Thank you very much. You're welcome. Like, that's great. Like, if there's something that I didn't tell you, it's because I didn't know. I just didn't know about it either. That transparency, though, that vulnerability is not used at all, really, because and and this is what I wanted to ask you you're competing to invest in businesses, right? So your money is no different than another PE fund's money, right? So when you're when you're trying when a company looks at you and say, you know, come on, you know, I like you, Adam, you're a nice guy, blah, blah. Why should I go with you versus that one? What's your answer?
SPEAKER_01:The the answer to that question, and it's a question you get almost every time, is that we do have a different approach. My my partner David and I do have a different approach, and and that approach is more listening than speaking. We are here to help you solve problems, not because we have the answers to all of those problems or even any of those problems, but we have an extensive network of people we can bring who can be helpful in helping you think about and solve those problems. We also have each 25 years plus of experience investing in companies like this, so we've seen just about everything. So we've seen enough to be able to spot patterns. I often talk about how my main job is pattern recognition. So we can see patterns that an entrepreneur who's only in their business, only in their industry, might not be able to see. And when they have a problem which feels very acute to them, I can say, look, I know that it feels acute to you. I've actually dealt with this problem across five different portfolio companies. Here's how we handle it in the case where it didn't work. Here's how we handled it and it did work, here are the resources we can bring to help you. We're true partners, thought partners, and helping you to run and grow your business. Um, and the best way to evaluate us when you're thinking about partnering with us rather than someone else is talk to our management teams and ask them how we are as partners. And I always tell them, ask for any kind of um diligence they're doing on potential partners, ask two questions. Ask, how are they in the good times? And surprise, surprise, we're all great in the good times. But also ask them, how are we in the challenging times? Because that's when you really know who your partner is. That's you know who you have across the table from you. Is it someone who is pointing fingers and yelling and blaming, or is it someone who says, Okay, we have this problem, let's figure out together how we can address it and get through it.
SPEAKER_00:All right. I'm gonna, because I know you and I've worked with you, and I've seen both sides of I'm gonna add something to that. Because to be candid, and I'll push back a little bit here, a lot of the stuff you said is what every single sponsor is gonna say. We're we're thought partners, we're gonna help you. We've seen this a lot before. Like, no one says this is our first time doing this kind of deal, go with us. No one says, you know, we're jerks, go with us. No one says that, right? Everyone always says, you know, the the right words. What I really think, and this is maybe something because I know you're a very humble guy and not a self-promoter. What what should what does differentiate? I'm telling you what does differentiate you and what but what you need to figure out how to communicate or get communicated, and maybe it's by having them ask other sponsors you've other companies you worked with, uh is you're trustworthy. You're you you're you don't you don't you don't spin shit on them. You you know, you you're you're not you're you're really it's more than partnership. It's it's like what I saw, what was unique about how this is not a love fest, but I'm just being transparent with you about your your differentiator now that I have a comparative sample. You were someone that they could go to and know that it they weren't gonna be judged. You know what it is, Adam? It's kind of like you have a kid, right? You say to your kid, look, I know you're gonna drink, I know you're gonna do stupid shit, right? I'm not gonna tell you, you know, and try to convince you it's bad for you. You're gonna do, we all have teenage kids, you're gonna do the dumb stuff. Don't do anything really dumb, right, please. But but we'd rather, we'd rather you sit and call me up saying, Mom, dad, I had too much to drink. I can't, I can't drive home. I don't care if it's two in the morning. I'd rather have that conversation. You and and kids that have the good relationship with their parents will will will trust them with that information, they're not going to get in trouble, right? As opposed to they're afraid to tell. You created that environment with every single portfolio company that I can think of that you dealt with. They were comfortable once they got to know you, and it was just you, it wasn't necessarily other people on your team or. Other people on the platform, it was you. And they were like, That's a guy I could tell anything, and I know he's gonna help me figure it out. Like, there's no hidden agenda. And the closest that I can describe what you what you just said there, and maybe this is the best way you can get it, is by encouraging them, not just suggesting, but encouraging them to talk to other CEOs or deal teams that you've worked with so that they can hear it, right? Or or even I'm happy, like in I'm happy to share that experience. But that that to me is more compelling. That's a differentiator of what I've seen about how you operate and think with.
SPEAKER_01:Thank you. And and it is it's very intentional in the approach I take, um, which is whether you whether you call it supportive or CEO whisperer, over the course of my career, I've developed very good relationships with the leaders of of my portfolio companies, because we can have open and honest conversations in both directions. And again, it has to be in both directions, it can't be a one-way street. Right. You know, the private equity industry as a whole has a reputation for having some sharp elbows, and that's that's a deserved reputation. Yeah, it doesn't have to be that way. It's you know, if you choose not to surround yourself with people with sharp elbows, and if you choose not to behave in that manner, you don't have to. And that's that's the approach that we've taken, which is much more open and supportive and collaborative. And everyone uses those words. You're absolutely right, everyone uses those words. But our approach, proven by the fact that we've backed the same entrepreneurs over and over again during our career, entrepreneurs that easily chosen to go to other firms and have them back them, uh, I think is a testament to our approach.
SPEAKER_00:I'd agree with that. The repeat customers is huge. Like I was about to say, that you've had you that's huge, is that they're gonna go, they they lived with you for five years, had an exit, and they're and they're re-upping with you again. Like to me, that's the they'll turn down bigger money for the opportunity to work with the right, the right relationship. That that to me is compelling.
SPEAKER_01:Yeah, one of one of the most rewarding things in in my career has been backing entrepreneurs, one, one specifically, uh Richard, who who you got to know, I think. Sure. He was super successful, very talented entrepreneur uh in the wireless tower space. And every large mega cap uh firm was knocking on his door, telling him they want to back him with much more capital than than I had available to me. And Richard over and over again said, you know, thank you, but no, thank you. I really like working with the team I'm with.
SPEAKER_00:Yeah, I I that that resonates on so many levels. You get to a point in your life where you'd rather work with people you like than just chase the extra 10, 15, 20% or whatever it is and just money. Um, that's great. I want to pivot now to lessons and growth, some, some, you know, some of the some of the road bumps you've hit along the way. What are some mistakes or hard lessons that you've learned along the way? What they teach you?
SPEAKER_01:I think the the biggest lesson that I've learned along the way, and I actually keep learning it, is is the importance of culture and and the the trouble you can get in by underestimating the the power of culture and overestimating the uh the ease or ability to change culture. Culture is is one of, if not the most important determinant in the success or failure of the company. It's often set at the top by the management team. And but just as important, inertia exerts an incredibly powerful force on culture. And a bad culture will tear a business and a management team apart faster than almost anything else. Right. Good culture, uh a management team with good culture can work their way through all of the problems that businesses face, even the worst of problems. But in a bad culture, as soon as they hit a problem, the finger pointing starts and the team starts to tear itself apart. That doesn't mean you can't change culture. I think you have to be very careful in choosing a business that has a culture that you think is going to work. If if you go in naively thinking, oh, I'll just change the culture, that's likely to fail unless you have everyone on board that the culture has to change, that there's enough shared belief about doing that and the hard work and time it takes to do that. Yeah. Um, but you really have to have a plan and you need enough time to execute it because it doesn't happen quickly.
SPEAKER_00:No, it takes a long time. And you know, the uh the the catalyst that I look for when we're brought into do change management and culture integration, it's it's when you have MA situations because now you have to create a new culture, right? So it's you know, you have culture from company A, culture from company B, and now it's create the new culture 2.0. That's where you get an automatic fresh restart with everyone and have the conversations to figure out what the new culture should be like. Speaking about culture though, Adam, what's interesting is um by the way, I agree with you. That's you know, it's kind of like a surgeon saying they got to do surgery. So I'm talking from a human capital perspective that obviously we think culture is important. We think we find a lot of PE sponsors say culture is important, but at the end of the day, you know, they don't really know how to evaluate, they don't know what to do about it. They think they, if it goes sideways, they, you know, the PE guy can make a phone call and fix it. I mean, well, anyway. So, you know, those are all short-sighted things that I think sometimes PE funds uh when they try to solve those problems. But when companies, a red flag for me is when a company or CEO says we operate like a family, I'm like, oh, that's a disaster. That's a disaster because because no one likes to tell family member bad news. Like no one enjoys that. No one likes to manage family members. And and I understand what they're trying to say. They're trying to say we get along, right? When families get along, but I think that's the wrong word that that they use. And I think it should be more about we function like a team, like uh that's a healthy dynamic, that's right, not a family. A family's got like problematic stuff involved there. That means you got legacy people that shouldn't be there anymore, you know. So that that to me is always a red flag. And and I had to dig deeper to find out. Tell me more about the family. That's great. Tell me more. What does that mean? You know, how how do you guys think about that uh from a culture?
SPEAKER_01:Interestingly, we uh because of where we invest, which is smaller entrepreneurial owned and run businesses, we actually invest in family-owned businesses quite a bit. And ironically, most family-owned businesses act more like a team than most unrelated businesses. So we're we there are plenty of family-owned businesses where it's father and son or husband and wife and their kids, and they act like a team. They they treat each other, you know, as business people, not as family members. Correct. Much more so than than many many non-family business.
SPEAKER_00:Right. The I always I I love when I deal with with owner-founder entrepreneurial businesses, and my my favorite ones are when they've got, you know, the CEOs, like the real deal and you know, other professionals, and then they've got that cousin or that brother-in-law that's like slotted into some job that they're not qualified to have. And, you know, it's like, how do how do we make sure that person, you know, is is respected, kept with dignity, but no longer the SVP of sales? How do we how do we make that? I always love those because it's like doing surgery. It's this very delicate, you know, uh element uh with getting getting them to have the hard conversation that they know should have, but they don't want to have it because they don't want to cause a problem at the Thanksgiving dinner table.
SPEAKER_01:And there are plenty of times that having an outside bringing in an outside investor helps to facilitate those conversations.
SPEAKER_00:Yeah.
SPEAKER_01:Conversations they can't have when it's just family owned, but uh conversations that they can have when there's another investor involved.
SPEAKER_00:Yeah. And if and if you have, if you've put the time in, like we talked earlier today, into building the trust and relationship and et cetera, then they know it's coming from a genuine place of improvement. They know that you know it's it's this is what's best for everyone involved, and we'll do it in a dignified way and a professional way, but it but change is gonna happen and it has to happen. And you know, blame it on the evil, you know, PE guy coming in doing it, or the consultant, whatever it is. But you know, that that those are those are my most fun situations to deal with when it's like the owner, founder, entrepreneur, kind of they're they're way over their skis, but they you can tell they've got the stuff, right? Now you just got to build the right team around them and clean it up a little bit. Um what are some mistakes you see uh private equity funds make over and over again?
SPEAKER_01:You know, it's very it's very easy in this line of work to fall into the trap of believing you're the smartest person in the room. Um it's even easier to fall into the trap of of believing that just because you're smart in one area, you're smart in every area. That often leads to talking much more than you're listening. Uh, and even when you're listening, you're really just listening for the opening in the conversation so you can give your opinion, uh, your point of view. So you're not hearing what's being said. The result of all of that is you're stifling real conversation. You're gonna miss or ignore, not hear like real red flags, real problems that you could address if you were listening. Um and that happens between the private equity firm and the and the management companies. It also happens within firms, where you're ignoring the point of view of your partners, you're ignoring their advice when it could actually be helpful. And firms that do a good job managing that and making sure that everyone has a voice, much more successful than the firms that don't. And when you don't, you end up with a bunch of siloed, siloed groups within a firm, and you lose all the benefits of being surrounded by all these really smart, talented, experienced people.
SPEAKER_00:Yeah, then you get politics and knives out, and that that uh ends up being a very destructive experience. Um heroes, inspirations. Who are your biggest heroes, biggest inspirations?
SPEAKER_01:It's gonna sound a little corny, but it it's a hundred percent true. I am incredibly inspired by the entrepreneurs we get to partner with. Right. My partner David and I are both frustrated entrepreneurs. We never had the guts to take that path. So we're constantly in awe of those who did take that path, and we're really fortunate. We feel fortunate that we get to partner with them to help them build their businesses. And some of the greatest pleasures I've had during this career is to help entrepreneurs achieve their goals in terms of building their business, doubling, tripling, quadrupling the size of their business, um, putting some money in their pocket and achieving their goals. So that that's when I wake up, that's what I'm inspired, inspired by.
SPEAKER_00:So I'm gonna I'm gonna pivot a little bit here because of what you just said. You said you you you and your partner, you know, never had the guts to do to be the entrepreneur to be entrepreneurs on your own. So now that what I want to ask you is, do you find that some of these owner-founder entrepreneurs are less receptive to to maybe your advice or guidance because they're looking at you as like, well, what do you know? You're you know, you you never you never you never had to deal with something like this and go out there and and create something that didn't exist in the world, or do you find that they that they take your advice and guidance as more of wisdom and measured where you're aware of what you don't know? How does that parse out? It's all over the map.
SPEAKER_01:The the initial reaction is and and should be, frankly, skepticism about what why should I trust someone from the outside? But the approach we take is we don't have all the answers, but we'll help you think through and we'll bring resources to to help you think through all of these problems. Um and I think over time we've built experience that we we have a roadmap and a playbook that we can lay out in front of them, which they see where we can add value. And they see that we're we're not operators, we're not going to get in the middle of of their business, but we're gonna provide our you know, our guidance and our insights from having done this for for a long time, as well as opening up our Rolodex of people who can be really helpful. But sure, they're they're skeptical at first, as they should be. It's our job to prove to them we can add value.
SPEAKER_00:Yeah, made me think of when you said that, it made me think of in sports psychology, there are two camps of athletes that you deal with. Some athletes are like, Well, you never played, you know, I don't know, you you never played professional tennis. So what do you know about tennis? And you can't, you have nothing to add my value. And then there's some some athletes that are like, Well, I like the fact that you've never played professional tennis because you're not going to try to be my tennis coach. Right. And and I think knowing which athlete you're dealing with is an important distinction, right? And and uh I've always said it was easier for me to work because I'm a baseball guy and played baseball in college. I know enough about baseball to be actually a coach and and help someone mechanically. When I worked with women's gymnastics at West Virginia University, loved it because I couldn't even do a somersault. And so I was only forced to I was forced to focus on the mental side of things. I wasn't there to say, oh, it's the wrong tuck, the wrong way. I didn't know the language of what it was. But some athletes, uh, wrestlers, I yeah, football players, they're like, Well, you don't play football. What do you know about football? Do you know the sports psychologist for the LA Dodgers uh is actually a hockey player? I I was yeah, and I met him randomly. I was like, that's kind of odd. Like I thought a baseball guy would get that job, but no, he's a hockey guy. You know, it's like he just he's a sports guy, and and they they embrace that. Sorry, you were gonna say something.
SPEAKER_01:Yeah, look, as as we evaluate CEOs, they they really fall into two camps, very, very similar to what you laid out. It's it's the the CEOs who think, uh, I got this. No matter what the problem is, I got this. And and frankly, that's one of the most frustrating things I can hear from a CEO is I got this, because that's code for I don't want to talk about this, I don't want to hear what you have to say. Right. Or they're the CEOs who engage in conversation, even if they don't think you have all the answers, they're willing to at least listen and hear and be open-minded about things. And and those those are the CEOs that we really uh try to have be our partners.
SPEAKER_00:Yeah, that's a that's a good, that's a good test, actually. Are they open to to hearing information and collecting new information, or are they going to fall privy to confirmation bias and discount you know the stuff they don't want to hear because they don't want to support their opinion? Uh, last two questions, Adam. Best piece of advice you've ever been given.
SPEAKER_01:The best piece of advice I was ever given um was was by a coach who pushed me to identify and accept areas of my own areas of strength as well as areas of weakness and accept those. And as a result, surround myself with people who are strong in the areas where I am weak. Right. Uh, because that's the way you build a team which is more than the sum of its parts. So as David and I were creating Coventry Bay, first of all, the two of us fit that model very well. Uh, but the team we built around us and the entrepreneurs we partner with, same thing. We're we're looking for folks who can bring strength to our team, and we we don't necessarily shun people away because they have weaknesses. If if our strengths match their weaknesses well, they're perfect team members for us. Right.
SPEAKER_00:Uh, and then looking back, someone starting out in PE, young person, newcomer to the PE space, you know, they've they're ready to go. What's what's a piece of advice you give the next generation of P investors? What would it be?
SPEAKER_01:I I would tell anyone going into PE, uh, and frankly, anyone going into just about any industry, be incredibly curious about everything. Just continue to learn and be curious and be open-minded and and not monomoniacally focused on that one thing you want. As I said, so much of this job is about pattern recognition, what a business looks like, what a great management team looks like, what market cycles look like. And the broader your knowledge base, the more things you know, the more areas where you have some knowledge, the better you're you're gonna be uh at spotting those kind of patterns. Um, this is a job that allows you to learn new things every single day. Um, new industries, new structures, new ways of investing, new ways of engaging with management teams. And if you're not energized by that every day, I'd probably tell you find something that does energize you.
SPEAKER_00:I think that's great advice. Adam, thank you very much. It's been great. Really, really fun talking to you. Uh I always learn something when I talk to you, but it's it's really been great to have this conversation. So thank you very much for joining me today.
SPEAKER_01:Thank you, Doug. This has been great.
SPEAKER_00:All right.