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The show featuring luminaries from across the world of private equity.
Brought to you by Affinity Presents. Public conversations in private capital.
Carried Interest Ep. 4 - Founding Haveli & AI's Real Cost | Brian Sheth, Haveli Investments
English (US)
00:00:00.080 — 00:00:31.600 · Brian Sheth
I've now invested in almost 400 software companies between platforms and add ons, and the most consistent thing I've seen is that investments that do well have very effective management teams. And so I think the best thing that I've ever done in my career is get the right management teams in place. There are things that I think effective board members and organisations can do to enhance the natural capabilities of good managers, but it's really difficult to get a good result if you don't have good management.
00:00:36.920 — 00:01:22.920 · Sam Andersen
Welcome to Carried Interest. I'm Sam Andersen, and today I'm joined by someone whose career has helped define what technology focused private equity looks like at the highest level. Brian Sheth spent two decades building and leading one of the most consequential enterprise software investment platforms ever assembled, before stepping away to do something. people at that stage of their careers simply don't start over from scratch with a blank sheet of paper. What he built next Haveli Investments raised one of the largest debut private equity funds on record, built around a conviction that the next chapter of enterprise software would be defined by AI and has been operating at the forefront of one of the most turbulent and opportunity rich moments in technology investing of a generation. Brian, thank you for being here.
00:01:22.960 — 00:01:24.640 · Brian Sheth
It's great to be here. Thank you so much.
00:01:24.680 — 00:01:44.680 · Sam Andersen
So before we dive in and talk about Haveli and everything that's going on now, I'd love to take the conversation to start in the early days, what were the lessons that you learned in those first years of private equity investing that you still use today? What are the maybe the the pieces of advice, the lessons, the frameworks that you use that hold true?
00:01:44.720 — 00:03:30.270 · Brian Sheth
Yeah, I was super lucky. I had a lot of great people that I learned from when I was young, starting in my career in investment banking. So my first boss coming out of college was this legendary investment banker named Frank Quattrone. and I got to see firsthand because we were a really small shop. He had left his sort of legendary perch at Morgan Stanley and started a new business at Deutsche Bank.
And they they hired me out of undergrad, and it was really fun. There was only a handful of us. And so I got to see this incredible networker sort of work, his magic and the way that Frank could, you know, take relatively complex things and simplify them and lay out a story was so impressive to me. And even at a young age, I knew I was I was watching someone who was very gifted from that standpoint.
So he, he, he made a huge impression on me. And then I went on to work at Goldman Sachs, and I worked for another legendary guy named Gene Sykes. And Gene is maybe the greatest M&A practitioner of the last 50 years. And certainly, you know, extremely well known at Goldman Sachs and in those circles. And what what always blew me away was, was Gene's attention to detail and his ability to listen and then relay back something that was incredibly germane, even though he clearly had a plan for what he wanted to do.
Um, you know, he captured the attention of people in a really remarkable way. And even though he had a profound and has a profound intellect, he spoke in very approachable terms. And I think that's part of the reason why he was such a great communicator. So those were probably, you know, as I sort of entered my career in private equity, those were two great role models that I had.
And there are so many similarities between the world of M&A and the world of private equity. So I was very lucky to sort of start my career having worked for those two gentlemen.
00:03:30.510 — 00:03:38.390 · Sam Andersen
Those are things that brought some success. Was there maybe an early failure or something that didn't go well that shaped how you think today?
00:03:38.430 — 00:04:38.710 · Brian Sheth
You know that in the in the first couple years at my first firm. Um, well, actually, I started my investment career at Bain Capital, uh, which was terrific. And there were a lot of smart people there, but I didn't stay very long because we started a company called Vista Equity Partners afterwards and at Vista.
Um, our first couple deals were non control deals and one of which was an investment in a very promising software company. But, um, there were several venture capitalists seated around the table. And we were minority investors. And I learned firsthand sort of the challenges of coming to agreement when you had, you know, vintages and perspectives that were not in alignment.
And that was a very hard lesson because that that investment didn't do well. But it was a very important one. And I was lucky in hindsight that I learned it at such a young age because I took that with me, you know, alignment not only between investors, but alignment with management, having everyone sort of with the same vision of what success looked like.
And that's really, really important.
00:04:38.750 — 00:04:45.230 · Sam Andersen
Yeah, I'm in my day job. I am a VC partner and sit on a number of boards, and I've seen this exact.
00:04:45.270 — 00:04:46.030 · Brian Sheth
It can be difficult.
00:04:46.070 — 00:04:58.140 · Sam Andersen
To play out. In fact, we often tell founders that are evaluating our fund or evaluating a deal to call the founders whose deals didn't work, because you'll learn most about the VCs when the deal is not going so well.
00:04:58.180 — 00:05:12.940 · Brian Sheth
It's funny you tend to learn the most when things don't go well. Your reputation is made based on the things that go great. But for people who don't have a lot of experience in this industry, it gives folks the wrong impression of where you learn the stuff that actually matters down the road.
00:05:12.980 — 00:05:36.980 · Sam Andersen
Yeah. You know, private equity is a business that I think is often seen as very transactional. But you mentioned Frank earlier being a phenomenal networker. Investment banking also very transactional as an industry. How do you think about relationships in this business? That is a transactional business in a way that is not a transactional relationship, building over a long term or making a relationship that matters?
00:05:37.020 — 00:07:16.220 · Brian Sheth
You know, private equity, finance in general, it's such a massive, massive ecosystem. Um, for us. I've always been so lucky in that I've been in these sort of people businesses, you know, the software business, the video game business. These are very people oriented businesses where individual talent and individual personalities have a huge impact on, you know, the culture of these different companies.
And so I think at least in the business that I came from, which is technology, private equity relationships were really important. I know there are other parts, and I have partners of other types of finance firms that are more sort of strict finance or leveraged finance or some of the things that, you know, get caricatured and maybe for good reason.
But at least in the technology industry, especially when you're dealing with entrepreneurs and where even though the world has become large, it's still a relatively small one. Relationships are everything. It's the relationships that you maintain over time that sort of, you know, help through those bad times that we were talking about earlier.
And and when you make missteps and when you misfire on an investment because you maintain those relationships and it's not just transactional. Oftentimes people will give you a second chance or give you the benefit of the doubt? And oftentimes, especially in private equity, you appreciate this in venture capital.
You're talking about multi-year decisions. And so even the right call in early days because the work is so difficult, it can it can sometimes feel a little difficult. And you can maybe feeling like you're crawling through glass, through glass, so to speak. And those relationships, those aforementioned relationships really kind of help pull you through and give you some credibility and and some cover.
00:07:16.220 — 00:07:31.460 · Sam Andersen
Can you maybe give an example of a specific relationship that maybe opened a door for you, or opened a door for the firm, or a project that you were working on, that no amount of diligence or no amount of other effort maybe could have opened if the relationship didn't exist.
00:07:31.500 — 00:08:51.250 · Brian Sheth
Yeah, sure. We we invested in a company called Cohesity, uh, in 2024 at Haveli and Cohesity is a real time backup and recovery, a very incredible sort of modern architecture system that has experienced a lot of tailwinds because of AI. And so it's been. It's early days, but it's been a very successful investment for the firm. I wouldn't have been in that situation to invest in the company if it hadn't been for a good friend of mine who at the time ran JP morgan's technology group, and he actually called me out of the blue, um, reintroduced me.
I had met the CEO of Cohesity before, but sort of reintroduced me to him in the context of, uh, Sanjay, the CEO of Cohesity, wanted to buy one of his competitors, and Madhu Namburi, the investment banker who has now moved on as a partner at General Catalyst, introduced me as someone who understood how to do outsized acquisitions and the complexity around buying something that was bigger than the acquiring entity.
And, um, you know, it was literally one of those calls from a dude called me one day, said, do you remember Sanjay? And I said, of course. And he said, well, I think you guys should meet because he has something interesting to talk to you about. And that was in early 23. And then I ended up spending a lot of time with Sanjay and we.
The deal ultimately culminated in 24.
00:08:51.290 — 00:09:10.370 · Sam Andersen
I mean, that's a long deal cycle, I guess, by a lot of standards. Do you? How do you think about those relationships prior to needing them? How do you think about prioritizing your time as you are choosing between both what is urgent and maybe what could be valuable, but with no foreseen timeline?
00:09:10.410 — 00:11:17.960 · Brian Sheth
You know that whole I if you have children, you know, one of the first things you try to explain to them and the difference between urgent and important. Yeah. There's always something urgent in finance. You know, you have the urgency of, you know, requests from your investors. You have the urgency of sort of deals that are for sale and the the pressure sometimes the simulated or or false pressure that comes from, you know, a process.
And it's important not to conflate those things with what's important. You asked a pressing question around relationships. And in my experience now, I've been doing this almost 30 years. The relationships are the most important thing, and it gets a little bit more obvious as you get older. And if you're lucky enough and you have a mentor like Frank Quattrone, you sort of learn quickly and you realize that, you know, people make, you know, the relationship stuff as urgent, you know, because it is important as sort of the the deals and the things that sort of historically or normally take precedence.
So, uh, you know, I've always been one to sort of invest in those relationships who I mentioned, I've known for 20 years, and there's a lot of situations like that, not just bankers, but other investors. My good friend Hythem El-Nazer, who runs TA Associates, he and I have done, I think, half a dozen deals together now.
And we did another one with one of our portfolio companies a couple of years ago. And when you have a relationship that dates back over decades and you have so much experience working with someone, even if they're not working with you, You get this great feeling that they're not working against you. And the trust that comes from knowing one another and and the credibility that comes from seeing somebody work and operate.
You take somebody like Hythem, who obviously has so much credibility as an investor, and his reputation precedes him. But I know at first hand and I know what a good person he is. And so again, when you invest in these businesses and things that mostly go great, but sometimes they don't or, you know, something comes up as they always do with management or something like that.
You know, it's the the duration of those relationships that really contributes to the collective success you hope to have.
00:11:18.000 — 00:11:37.960 · Sam Andersen
So you've talked about some of these people, whether it's a co investor, an LPI portfolio founder, CEO, when you're looking at an individual and you're trying to make some type of assessment or judgment call about whether or not you want to work with them, maybe a prospective employee. What are you looking for?
Like what do you want to see in somebody?
00:11:38.040 — 00:13:07.280 · Brian Sheth
It's emblematic of my personality. And so sometimes it's hurt me as well. But I often look for the same things and people with whom I want to work as I do for friends. And so I love transparent people. You know, I love people who are, you know, honest to a fault. I love people who sort of, you know, open with something that's sort of personal.
And I just personally tend to gravitate towards people like that. And so all of the aforementioned people sort of fit into that category. And, you know, sometimes it can set you up to be taken advantage of. And that happened a few times early in my career where I think people, sort of older people who had a little more experience and were a little more manipulative, sort of saw that in me and were able to take advantage of me.
But I wouldn't change the way I am because I I've found that over the course of my career, any time I am in any way not true to myself and ends up not working out because it's very difficult for most people to carry a false pretense or to try to be something they're not. Um, you know, we all wish we were, as you know, cool as Brad Pitt and as suave as Humphrey Bogart.
But, you know, the reality is, most of us are just who we are. And as long as you stay true to that, most good people are going to like you for trying to come across as authentic and sincere. So, you know, I would recommend young people who are looking at this, you know, try to be the best version of yourself that you are.
Don't try to be anything you're not. It's great to admire people who have qualities that you don't have, but don't try to emulate those qualities because it's going to come off as artificial.
00:13:07.320 — 00:13:16.360 · Sam Andersen
Yeah. Do you think there is a skill or a quality that people should want, but it's just impossible or very hard to develop?
00:13:16.400 — 00:15:07.510 · Brian Sheth
It's it's funny that you asked that. I'm when when I started in private equity in 1999, it was a much smaller industry. And actually the banks used to call it financial entrepreneurship, the Financial Entrepreneurs Group. You know, now it's grown a thousandfold. And it's, you know, one of the largest parts of the finance ecosystem.
And it has it attracted a whole sort of, you know, much broader set of people. And so I'm surprised by how many people, especially young people, are attracted to private equity who don't seem to really like people or, you know, aren't particularly, like, excited to go out and meet entrepreneurs or go out of their way to to spend time with folks.
If there isn't, like an immediate transaction, because that's really what the whole industry was built on. If you the legends of our industry, I always go back. I'm so impressed with Henry Kravis and George Roberts. There are two of the most fun, interesting people in the world to be around, and both their personalities are very different, but in their own ways, they're extraordinarily engaging.
And, you know, I think it's it's it's strange to me if anyone wants to be an investor, especially in private equity, where you sort of get involved in these businesses, you're not making bets and and chipping in. You're going in deep and you're spending a ton of time. It always strikes me as odd when you get people who are a little bit introverted or maybe don't like to get outside their shell, but they really want to be in the industry, you know?
Rarely does that work. I have seen it work with a couple folks. You know, they tend to be more like distressed investors. But certainly if you're going to be working with entrepreneurs, if you're going to be working, you know, as you are in most fields and private equity where there are multiple stakeholders, you have to be comfortable being out there with people, getting to know people, getting them comfortable with you and getting comfortable with who they are.
00:15:07.550 — 00:15:09.990 · Sam Andersen
Ultimately, it's a people business.
00:15:10.030 — 00:15:17.590 · Brian Sheth
I think it should be, and that's why I'm surprised that people who aren't don't have those personalities are attracted to the business.
00:15:17.630 — 00:15:42.670 · Sam Andersen
Well, our sponsor Affinity is all about these relationships, so I think they'll really like that segment. The last 18 months, we have seen a fundamental shift in the way that people are thinking about software. In fact, there's a narrative. Software is dead. The SaaS apocalypse, I think, has been floated around.
What is your take on that? Things continue to change. Things continue to evolve. But from where we stand today, how do you think about software?
00:15:42.710 — 00:17:38.340 · Brian Sheth
Yeah. It's really it's so interesting. It's such an exciting time. I think it's an exciting time for a lot of entrepreneurs. It's an exciting time for a lot of investors, and there's a lot to be excited about in terms of, you know, what generative AI can do in a lot of different contexts. Software is constantly evolving.
You know, I started becoming a dedicated software investor in the year 2000, when the global software industry packaged software industry was less than $100 billion. This year, Gartner expects it to be 1.5 trillion. So it's grown a lot in 25 plus years, and it's still growing. By the way, you know, it's expected to grow almost 15% this year.
And and contrary to what some prognosticators believe, AI is a tailwind for the overall industry. But people are confused, I think, especially people who aren't deep in software and technology because they hear things like, well, now you don't need software developers anymore because the software codes itself.
Well, it's not entirely true. Yeah. Um, you know, you can use a lot of these interesting tools, the most famous of which is Claude Code to help you with software development. But coding is only one part of software development. And actually, if you look large at the industry, there's more software developers today than there were a year ago.
And this is something we spent a lot of time with our portfolio companies on. And, you know, fortunately or unfortunately right now, the AI DLC, in other words, the the artificial intelligence development lifecycle is probably slightly more costly than the software development lifecycle was, just because you're now factoring in tokens and all this stuff.
And what we are appreciating is we can generate a whole lot more. Yeah. Um, what we're going to determine over the next couple of years is what are the metrics by which we're evaluating whether all this productivity has actually made us better? Is it better software or is it just more?
00:17:38.380 — 00:17:40.300 · Sam Andersen
Yeah, more is not better necessarily.
00:17:40.340 — 00:21:28.970 · Brian Sheth
Oftentimes it's not. And that's why you you know, you have this term AI slop, which anyone who's dealt with any sort of generative AI projects over the last three and a half years is familiar with this term. And the metrics around sort of measuring productivity are going to be really, really important.
I do think, you know, generative AI, which is the version of AI that we have today, will continue to be with us for a while. Um, I don't think we're going to get AGI from generative AI, uh, nor do most, you know, theoreticians and computer scientists that I respect. But I do think we're going to end up with really interesting productivity tools.
The biggest challenge is around cost. You know, today as an industry, it doesn't make any sense. But for the venture capital firms and sovereign wealth funds that sort of, you know, support all these, um, sort of behemoths in the industry. And some of the most interesting innovation is actually coming from the open source community.
And you see this in places like China and India, where we do a lot of business. Uh, I think it's going to do what always happens, which is the software industry will continue to evolve. Um, I mentioned sort of that software development lifecycle changing to an AI development lifecycle. And you have scrum teams going from 10 to 4, but then you have many more teams and they're working on different projects, and there will be whole areas of software that don't exist today that are going to grow up and exist in the future.
There are going to be companies like Cohesity that were growing fast prior to sort of these AI tailwinds, and now they're growing much faster. And then you're going to have other parts of the software industry that are candidly going to go away. And I think that's where the fear comes from. And this whole idea of SaaS apocalypse, do we need as many workflow tools.
If agents are going to replace the activities that people used to do in some certain areas. You know, what is what does worker productivity software mean in the context of an agent that's always on and can actually enhance the relationship between the two people that are working on it? So I do think, you know, anywhere from a quarter to a half of the software that's being developed today is going to have to be changed significantly.
Um, I think all software, what we refer to as UI, UX, the, the user interface or experience is going to change people. I saw this happen firsthand with the dawn of the iPhone, where, you know, prior to that, people every day, people didn't have a lot of experience with software. And if they did, it was that their jobs and their job software was sort of like green screens and Excel spreadsheets.
And then all of a sudden we got these phones that had this very interesting software that was really easy to understand and manipulate. And people started asking, why can't our business software work like our apps on our phones. And I think you're going to have that same sort of aha, you know, moment. It's happening now with people where they're saying, you know, why does my ERP system, why can't I just query it the same way I can with like ChatGPT.
And that's happening and software companies are doing that. AI is sort of total AI spend is about half $1 trillion this year, projected to be so about a third of software. And my expectation is the two will probably, you know, tie out somewhere around the $2 billion range, you know, sometime in the future, whether it's in three years or five years, I don't know.
But it doesn't mean that software will be any less important. I just think there's things that generative AI can do that software can't, but it also can't do it without the software. And yeah, without getting too technical, you know, talking about harnesses and, you know, the the most exciting applications in AI are applications, Claude Code, Cowork.
These are software applications built on top of what we refer to as large language models. And my guess is that sort of, you know, a glimpse of what the future of software is going to look like.
00:21:29.010 — 00:21:36.890 · Sam Andersen
Are there categories that you think are more resilient or less resilient that you say, hey, team, let's focus here, and not so much there.
00:21:36.930 — 00:25:17.720 · Brian Sheth
100%. We were so lucky it Haveli We sort of launched post AI with our software fund and all of our software investment, and we had some extraordinary people sort of helping guide us and help us think through that. And amazing woman named Lila Tretikov, who at the time was running AI for Microsoft. She's moved on and is now a partner at a huge venture capital firm. My close friend, Doctor Daniel Nadler, who's one of the great and longest standing AI entrepreneurs.
He has a company called OpenEvidence. But before that, he had a company called Kensho, and I was an investor in Kensho, and I'm a personal investor in OpenEvidence. And they they helped us really understand the art of the possible in 2022, before AI was really sort of broadly acknowledged and talked about.
But as we think about it, you know, there's there's several different types of softwares, you know, and, you know, I would say broadly speaking, we're very interested in infrastructure software. You know, software has been around for a long time, 50 plus years. The biggest companies in the world have the biggest investments, legacy investments in software.
And a lot of that candidly needs to be caught up in modernized before you can take advantage of applications like generative AI. And so one of the big areas of growth for us, I've now mentioned it three times, but Cohesity is emblematic of that where people need to invest in, in more modern digital infrastructure so that they can have cleaner, secure data from which they can now glean insights using things like generative AI.
And so that's a huge area, sort of the interstitial layers of of software that help, you know, manage the infrastructure that people have, not just workflow, but actually how different software systems work, how networking systems work, how communication systems work. That will continue to be a very interesting place to invest.
And it's growing very, very fast. Um, public companies that, you know, you see, that are growing faster than ever. You know, something like Atlassian, which people had written off, you know, just months ago. And now they had their fastest growing quarter that they've had in over two years. You're going to see software begets other software, and that requires tools to help you do it today.
We're designing as part of the AI DLC lifecycle, where we're designing agents to work directly with those tools, and that's going to create more opportunity for the GitHubs and GitLabs and JFrogs and Atlassian into the world. And so, you know, anything related to infrastructure data. And then of course cybersecurity is massive.
You know, the challenge with, you know, becoming more of a digital world and having these powerful predictive technologies, which is what generative AI is, is it allows you to touch more, you know, in a fraction of a second. And unfortunately, hacking and malware and things like that. Those are, you know, based on, you know, a numbers game, probabilistic.
You want to get to as many folks as possible because a tiny fraction of them will make a mistake and give a hacker something. And so, unfortunately, generative AI is a very powerful tool as a probabilistic technology for them. So you need to counteract that. So you'll see a rise in things like threat Intel and vulnerability management.
Um, XDR, you know, all the things that will help remediate the challenges that you have. And you're going to have more and more what we refer to as zero day events. You know, Mythos ended up being, I don't want to say much ado about Nothing, but maybe slightly more hype than than it turned out to be. But without question, in the future, these LLMs will be able to scan code and identify vulnerabilities and holes in code in a very effective way.
That creates what we refer to as a zero day event. And you're going to need vulnerability management tools to help remediate that. So all of that's going to continue to grow. And you're seeing companies that are ten, 15 years old that are having quarters in this last quarter of the quarter before that are the fastest growth that they've had in two, three, five years.
00:25:17.720 — 00:25:28.960 · Sam Andersen
So the technologist, Ben Thompson has been talking about this very cyber security issue that you bring up. And he's been relating it to the fable of the boy Who Cried Wolf. And what he says is eventually the wolf does come.
00:25:29.000 — 00:25:29.360 · Brian Sheth
Yes.
00:25:29.360 — 00:25:40.560 · Sam Andersen
The story goes that, you know, it's much ado about nothing until eventually the the wolf does come. Do you feel like we are prepared, or is there some impending wolf that is coming?
00:25:40.600 — 00:26:46.710 · Brian Sheth
No, but but because we are prepared, and because most enterprises have so much cybersecurity that there will be a constant stream like there are today, of malicious agents inside these organizations. But we we partition and structure our organizations using technology in a way where they can do the least amount of damage.
Yesterday, I was on the phone with the former CTO of Blackstone, Josh Schertzer, and he he's now at a at an investment firm. But we were talking about the best way to sell cybersecurity is to explain situations where people didn't have enough and he would constantly do that. He told me when he was at Blackstone and they were great about listening to him, which is why even though there are mega firm, you've never really read about, you know, Blackstone having a massive issue or outage or data leakage, something that that makes them very impressive.
And having been an investor in cybersecurity for a very long time, I laughed and I said, yes. You know, every cybersecurity CEO knows how to relate to CSOs with really terrible stories about what happened when they didn't have enough protection.
00:26:46.710 — 00:27:06.230 · Sam Andersen
When it comes to AI, obviously it's changing the way that software is being created. It's changing the way that we think about our relationship with technology. How is it changing what you expect from a portfolio company? So when you're evaluating a deal or looking at an existing portfolio company, what is the performance expectation difference that AI has, has created?
00:27:06.270 — 00:29:00.110 · Brian Sheth
You know, there's been a lot of talk about that because the I would say the hopeful expectation when I speak to some of my peers in private equity about their software companies, is that what was the rule of 40? May now be the rule of 60? In other words, can we use AI to make these companies even more efficient, not just in software development, but in other aspects of the operational profile of a business?
I would say we're early days and, you know, token costs are a very real thing and everyone is dealing with it. I, you know, I just went through this AI DLC with two of our companies today, both of which are very, you know, almost AI native businesses. They both are these businesses we were talking about that have massive tailwinds from what's going on.
And they have very smart people. Both of their development organizations are based in Bangalore, India. You know, we were going through the token costs and whatever efficiency gains from a cost perspective we might have gotten from, you know, redundancies has more than made up for by the amount of money that we're spending in both those companies, because they're in Bangalore and it's part of the culture of Bangalore, are really experimenting with open source systems to really reduce tokens.
The other, there's a lot of things that you can do. The other thing that, you know, not a lot of people talk about is, you know, building your own semantic knowledge graph. And that's something that all of our software companies do. You know, if you use what I call a generalist, you know, coding agent, you end up burning a lot more tokens.
If you have an existing software company that's particularly good at building code in a certain way and building products that do a certain thing, and if you build your own knowledge graph, you can then use that ontology to reduce the tokenization. So I think we're we're all starting to figure this stuff out.
So maybe down the road that rule of 40 will go to rule of 60. Yeah. But I think it's early days and I think we're all spending a lot right now to figure out where the investment return is going to be down the road.
00:29:00.150 — 00:29:22.740 · Sam Andersen
It's been interesting in VC, in the seed and the series AI stages. We're expecting, frankly, a lot higher growth than we would have five years ago. We're expecting companies now to be tripling, quadrupling later into their development than they would have otherwise. Is that growth trajectory holding into private equity?
Are you expecting to see these companies continue the top line expansion the same way we are?
00:29:22.740 — 00:31:16.460 · Brian Sheth
I think you're seeing this in some businesses. We mentioned Atlassian that, you know, it grew 30% the last quarter, which is hard to do for a $6 billion company. Um, some of our companies are seeing it because the demand has increased for the type of infrastructure software that they sell. So our company, Couchbase is a database provider, and they do something called a JSON NoSQL database that is particularly relevant for AI search.
And so their existing customers, because it's a consumption model, have increased the growth rate of the business. But for sort of our traditional software companies that aren't selling directly a product that participates in something like that, they're experimenting with agents that they've built on top of their software.
You know, there's an appetite for that in a lot of big enterprises like the banks have created AI purchasing departments separate from software. But candidly, I think for every piece of AI software that we sell, there's some sort of declination and pricing or something like that. So you end up selling sort of a suite.
It's almost like an ELA, you know, you offer up a bunch of stuff. You're overall because in private equity, you're dealing mostly with companies that have been around for a while. And so they're selling new existing customers. And it's that dance. It's why I laugh when people say, oh, seat based pricing is going away.
These software companies are going to drop in. Value said. You've clearly never sold software in your life. Um, the negotiation with a big existing enterprise customer is not a linear one based on math and C it's it's a negotiation based on how important the software is to them and how important they are to you as a customer.
And you get some uplift when you offer them more stuff, but you never get list price because they know they don't have to pay it. And so that's sort of the dance. So yes, we've seen some growth, but nothing like what you're seeing from AI native, you know, startups.
00:31:16.460 — 00:31:27.860 · Sam Andersen
So if you look forward five years from now, what do you think will have changed about the way that we think about AI, about the way that we think about AI and its relationship to software or its relationship to technology?
00:31:27.860 — 00:33:13.009 · Brian Sheth
I think that we will be we will all be absorbing, at least at the enterprise level, something closer akin to the true cost of AI. So you won't have the subsidization from venture capital and sovereign wealth funds and other investors. And so therefore, we will have figured out where AI really works well and where we get a return on it, and where people are probably a better option.
Or existing systems, uh, deterministic systems might be the better answer for it. So I think that's probably the biggest delta from sort of where we are today, where everyone's experimenting with it versus where we'll be in five years, where everyone understands the real cost of it, and therefore we've evaluated where the best benefits are.
Because of that, I think we'll have whole new categories of technology, and that's super exciting. And I think anything, anything that's predictive in nature, whether it's predictive analytics, you know, any sort of analyses, any sort of simulations, all that stuff is going to be a massive area of growth, and you're going to see it in industries that have historically not been able to take advantage of it.
So, you know, predictive simulation based technology and health care, for example, and certain areas of trading and capital markets and very capital intensive industries like mining and geology, I think you're going to see a huge impact from generative AI. I'm a little bit skeptical in in some of the sort of back office in other areas, just based on, you know, what I've seen about the complexity and sort of the hallucination rates and your ability to sort of harness, um, code to some of these ERP systems and get similar results from people.
Irrespective of of token costs. But I'm optimistic that maybe we'll figure some of that stuff out. But it certainly
00:33:14.010 — 00:33:59.690 · Brian Sheth
heretofore required a lot of professional services and customization for something that, you know, relatively low paid human being could do. And I think we forget sometimes people talk a lot about how quote unquote smart AI is, which, of course, is a contradiction in terms, because it's artificial intelligence is a misnomer.
But, you know, most jobs in corporate America can be done with an eighth grade education. So it's not so much about the intelligence, it's about sort of the situational awareness and what's going on in different steps. And hopefully I can do a lot of that sort of stuff. It hasn't proven to be able to do so in the first three and a half years that it's been broadly available.
But, um, you know, we'll find out.
00:33:59.730 — 00:34:31.570 · Sam Andersen
Changing gears slightly and looking at the other side of the private equity equation, the LP side, they have been constrained on liquidity. We hear about the liquidity crisis. Companies are saying private much longer, partially thanks to growing private equity that can keep growing them beyond what otherwise would be possible.
Yet here we sit today on the day of the SpaceX IPO. I think it's going to start trading tomorrow. What are you seeing from LPs? What are you hearing about their expectations for this next period of time?
00:34:31.610 — 00:37:19.680 · Brian Sheth
Well, one of the reasons why we've been able to raise as much money as we have is, you know, we we offer up a strategy that provides liquidity faster. And, you know, I think LPs are incredibly frustrated. You know, you can't we raised $9 billion of equity in a relatively short period of time. You can't do that unless we're taking away from somebody who might have historically gotten, you know, those allocations.
And I think large LPs, you know, ones that have been investing in private equity for a long time are reassessing many of the relationships that they've had because so many existing LPs really failed them through sort of Covid. And then the inflation of the interest rate environment, you know, from 22 through today, and there's just a lot of capital that was improperly allocated over that time period.
The illiquidity is because for the most part, things were bought at prices that were unsustainable. And now they have cap structures that are really problematic. Until LPs put more pressure on LPs to sell at market prices, you're going to continue to have this illiquidity. So where it's really coming up is in re ups and where LPs are going to allocate.
So you're you're and so if you're not connected to LPs and you have this sort of long tail of existing investments, you might not realize how unhappy they are with you until you go ask for more money. Um, but they're very focused on it as they should be. You know, hold periods, um, have gone from sort of four plus years to seven plus years.
It's a very long time. This is an industry where we want to hold things for a while, because you get value from holding for a while. But that's not what these LPs signed up for. And that's not was what was advertised to them. And, you know, there was a period of time when when GP's doubled down and started raising what we refer to as continuation funds, and I think that era is over as well, because I think for the most part LPC that for what it is, which is, you know, the the GPS got, you know, the initial investment wrong and rather than being forced to sell and take whatever loss etc., um, they, they just put something in something new and they expect the LPs to just continue on to delay.
But I think that that can't it can't persist. You know, there's US pension funds, for example, are in one of the worst places as it relates to their vintage of portfolio. They need that liquidity. They're going to have to force it. The secondary market, which has grown tremendously, has helped somewhat, but it can't even begin to address the amount of illiquidity there is.
So I think you're going to see a lot of pressure over the next couple of years from LPs to force GPUs to sell, you know, their legacy portfolios. And I think there's going to be a lot of GPUs that likely will raise either smaller or just won't be able to raise subsequent funds.
00:37:19.720 — 00:37:47.400 · Sam Andersen
You're an LP, I'm sure, on the family office side and in your own personal investing, in addition to being a GP through the Valley, when you are looking as an LP evaluating another GP's prospectus or pitch. What are you looking for in a manager that says, hey, this is a place I want to put money? Particularly when it comes to thinking about maybe somebody whose paper marks are really great versus someone who produces DPI on a routine or regular basis.
00:37:47.440 — 00:38:34.270 · Brian Sheth
Yeah, returning capital is so important. It doesn't have to be returned quickly, you know, because this is private equity and my family office, predominantly because I do a lot of private equity myself, invest in, in venture capital and real estate funds. And so just a track record of demonstrating that they can return it, that their marks just aren't continuous private marks.
I think that's really important. You know, I will stop investing with with certain GP's and fund managers if I feel like they're not as focused on it as they used to be. And that does happen. And I know you've seen it as well where GP's, they've had some success or they've been around their interest wane or they wander and they start, you know, getting into politics or they start getting into sports teams or, you know, and that's a big red flag for me.
00:38:34.310 — 00:38:36.510 · Sam Andersen
They took the carries and they can let it ride.
00:38:36.550 — 00:39:22.070 · Brian Sheth
It's not a part time business. You know and some people were were surprised when I started early because they thought for some reason I was going to retire. And, you know, I love investing, but it is an all in business. You know, if you're not, I told some of my mid-level people at an off site we had last week.
You know, if from 8:00 in the morning to late at night for the five workdays, you're not on the phone or talking or working on something, you probably should be. We're working less than 60 hours a week. Something's wrong, and most of us work a lot more than that. And we do it because we love it. Yeah, and if you don't love it, you probably shouldn't be doing it.
And you can kind of tell, or at least I can. When I evaluate these guys, do they truly love it or are they just kind of going through the motions and raising another fund because they feel like that's what they need to do?
00:39:22.270 — 00:39:25.110 · Sam Andersen
You raise fund 1 in 2020, 2021.
00:39:25.110 — 00:39:30.390 · Brian Sheth
I raise fund one of our video game fund in 22 and in the software fund in 23.
00:39:30.790 — 00:39:42.070 · Sam Andersen
The market for fund raising does look different today and will look different when you go raise fund. Two. What have you learned or what will you do differently when you go raise fund two than you did with fund one?
00:39:42.110 — 00:41:36.660 · Brian Sheth
Well, the good news is with both fund ones, we had no performance, so they were sort of raised on the back of some historical credibility and luckily I have some extraordinary partners that have great track records, and I've been at this for a long time. Now we have the benefit of a track record. We have DPI, we have exits, which is good.
Um, so, you know, I anticipate it'll be a little bit easier than it was the first time around. And, you know, happily, the style of investing that we do, which is more operationally turn around, you tend to be able to garner, you know, some DPI a little bit faster. You, you know, whether through, you know, leverage recaps or minority sales, when you buy something that was marginally profitable and you make it very profitable and it's still growing, it tends to be a more attractive asset.
So and that just happens to be something that, you know, LPs are really looking for right now, which is really helpful. The other thing that we've done, which is different than when I started my career, we've done a lot of co invest, so we have billions of dollars of co-investment alongside our funds and happily, those deals have gone well.
And so our investors appreciate that. And they sort of want that seat at the table. And and of course, when you're raising a fund one, it's the promise of co-investment. Yeah. So when you have the opportunity to have demonstrated it delivered and then those deals have done well and you've been able to recap them or sell them, it makes the investment for fun to a little bit more straightforward, which but I have to say I appreciate my fund one investors.
I've told them all. You know, I owe them forever because that was sort of, you know, it was it was raised on a promise. And, um, you know, I will work very hard to deliver on that promise for the rest of my career. As I know it was not a small thing for them to, to commit, you know, billions of dollars to a team that, you know, collectively had a lot of experience, but not as a group.
00:41:36.700 — 00:42:01.420 · Sam Andersen
When you started fund one, it somewhat coincides with the creation of ChatGPT, the broad release of these LLM models. How did it change your investing practice. The introduction of AI. And if you were to refound Haveli today with AI's progress, would you do anything different in the way that you evaluate a deal and the way you build a team because of how AI has changed investing?
00:42:01.460 — 00:43:42.900 · Brian Sheth
Well, I, I tell my team all the time, my career is based on being lucky, not smart, and we were very lucky in the timing of our software fund because it was post the launch of ChatGPT. And and so I had mentioned Lila and Daniel, and we had some great other folks who are very technical who have helped us. Um, so from the very beginning, we asked ourselves how software is going to change from AI.
And we talked a little bit earlier about collaboration and workflow. You know, I would say by and large, weak SaaS is going to get much, much weaker. And, you know, the most mission critical systems are going to get more important. So you think about a real system of record and implementing, you know, agents in an organization, you have to anchor them to something in order to sort of reduce hallucinations, get them to do what?
You know, we are used to and have been trained by deterministic software for 50 years to expect out of technology. So those systems will become more important. And then the systems where there's less data, there's less sort of proprietary workflow, there's less of a reliance on what the outcome that comes from that system.
It's probably less likely that that system is going to be required by customers in the future. And so we were just so lucky, truly lucky that we launched, you know, post that. And it was something that especially Lila Tretikov really kind of hammered home because having headed AI for Microsoft, she obviously was privy to a lot of stuff that was happening prior.
She didn't she didn't reveal any confidential information, but she gave us a sense of what was going to come, not just from ChatGPT 3.5, but the tremendous amount of innovation that was coming on on the heels of that.
00:43:42.940 — 00:43:54.370 · Sam Andersen
Does it change your practice as an investor? Like fundamentally, the way you go through your day, the way your team diligence is a company? Are you using AI? And if so.
00:43:54.410 — 00:45:29.250 · Brian Sheth
We are there are some tools that are really interesting. There's some research tools. Um, there's a there's a tool that we use a lot for expert calls. It is funny sometimes because we do get to see the hallucinations and where, where, where some of those conversations go awry. But but generally speaking, they get us a lot more information in a compressed period of time.
You probably use some of the same tools we do that pulls information from data rooms and can populate some of the metrics and frameworks that we use to kind of understand what we're seeing. Um, so all of that has been really interesting. I would say the ability to pull research has been greatly accelerated.
So when you think about doing outside and research on a company, um, you can do a lot more now with generative AI and the search functionality that's available at our fingertips. So we love that. At the same time, there's a lot more to sift through. You know, and you want to make sure that you're you're managing that signal to noise ratio because there's a lot more noise.
Now, um, you have to worry about sort of fake noise, you know, and you have to ascertain whether or not, you know, the system by which you pulled information is accurate. And that's really important because you don't want to base anything on false assumptions. And then, you know, I'd say lastly, in tech obsolescence, if you're a software investor, as you know, as a venture capitalist, you have to be obsessed with it.
You have to constantly be concerned about it. And I would say the pace of innovation right now is about as fast as I've ever seen. And so you have to be even more obsessed with this idea of the risks of tech obsolescence than ever before.
00:45:29.250 — 00:45:40.170 · Sam Andersen
Once you have invested in a company and it's time to start operating, what levers are you pulling? What is the common playbook, so to speak, today to produce value.
00:45:40.210 — 00:47:07.800 · Brian Sheth
You know, probably the biggest change, um, in my career was the sort of operating model and the value creation model of early versus what I had done historically. Historically. My approach was to sort of come up with a plan and then work with the companies afterwards with a team of consultants, many of whom were worked inside of my former firm at Haveli. I sort of woke up, you know, while we were building our our operating plan and our plan, our strategic plan to build a business, and looked around the room and saw my partners, who all had tremendous experience and thought about my own experience.
And I said, well, we know hundreds of operators, you know, instead of sort of, you know, building a team of consultants and all that, why don't we just partner with this tremendously capable group of operators and have them do diligence with us and oftentimes have them just go run the company? So that's really our sort of standard practice today.
And so there's a lot less of like projects and tweaking it heavily. And a lot more of, you know, folks that we've worked with a lot on multiple sort of tours of duty who just drop in, you know, during diligence and then immediately started the company. And it's been very augmentative and sometimes, you know, just completely replaced.
So we we took a company private called Couchbase, for example. And, you know, the the entire entire management team ended up being replaced by people that used to work with us, who helped us during due diligence.
00:47:07.800 — 00:47:21.080 · Sam Andersen
When private equity firms talk about value creation, and they talk about the resources that they bring to bear. Is that real? Is that where value actually is derived when you look back on a successful investment?
00:47:21.120 — 00:47:23.640 · Brian Sheth
I think there's a lot of, um,
00:47:25.160 — 00:48:53.280 · Brian Sheth
a lot of points of view around, you know, how you create value. I would say I've now invested in almost 400 software companies between platforms and add ons and the most consistent thing I've seen is that investments that do well have very effective management teams. And so I think the best thing that I've ever done in my career is get the right management teams in place.
There are things that I think effective board members and organizations can do to enhance the natural capabilities of good managers, but it's really difficult to get a good result if you don't have good management. I've had many investments where I've gotten a lot wrong, but because we had great management and ended up being like a two and a half ex, I've had very, very few investments where I've gotten a lot wrong or right, where bad management yielded us a great return.
And so I would say I too have heard from a lot of people and and some of whom I used to work with that, that, you know, there's so much that private equity can add. I think there's a perspective and a focus that private equity can be helpful. We're very good at analysis and we take good news really well. But I think for the most part, if your management isn't driving the outcome, it's really hard to convince a buyer on the back end that this is something that they should believe in and invest in, and that's ultimately how you create the value.
00:48:53.320 — 00:48:58.520 · Sam Andersen
You've seen this market through so many cycles. I think you said you became a professional technology investor in the year 2000.
00:48:58.560 — 00:48:59.680 · Brian Sheth
In 99, believe.
00:48:59.720 — 00:49:11.720 · Sam Andersen
99. So you've seen now multiple ups and downs. What advice would you give to someone who's starting and investing career today as part of this cycle? And beyond that, you've learned from those others?
00:49:11.760 — 00:49:49.320 · Brian Sheth
Most important thing is that there are cycles. You know, there's this there's this compulsion when you manage capital to invest it. And and I learned this expression years ago putting money to work. I never heard Warren Buffett say he needed to put money to work. And I continue to think that he's the best of any of us.
And, and so I think that you have to look for what is a great investment. Have conviction around that. And you have to be cognizant of the environment in which you're in. You know, when everyone wants to make investments in the same thing,
00:49:50.600 — 00:53:13.830 · Brian Sheth
which feels a little bit like the environment we're in now, you should probably question how many times that I've worked in the past when everybody piles into, you know, not everything can go all the way to heaven. Um, and generally speaking, in my experience, and maybe I haven't invested in everything, but I've invested in a lot.
The more money that gets pointed in the same direction, the fewer winners you know there are. Because you can be right, for example, in technology and be wrong about companies. Or you can be right in a company and be wrong about valuation. Uh, if you look at the the bubble that sort of started my career, you know, I graduated college in 97 and started my investment career in 99 and up until maybe recently that we considered that the bubble of all bubbles, the post Y2K deflation.
You know, we all thought many of these companies were going to be great. I mean, people talked about Webvan like it was the greatest, you know, last mile delivery company ever created better than Federal Express. And I think it went bankrupt. You know, a year and a half after the bubble burst. Um, you know, there were incredible companies.
Exodus Communications was the hottest company when I was at Goldman Sachs. I think they were our number one client from a fee generation standpoint. Their stock was insane. They went bankrupt. Um, most of the telecom companies that were famous, Global Crossing was another very famous example. I mean, the conviction that people had in 1999, in these companies I had rarely seen in my career until recently in some other newer startups.
And so I think it's just important if you're not old enough to have lived through cycles to do your homework and read and understand the history of investing and how cyclical in nature this stuff is, the capital markets, by definition overheat. You know that they go right until things go terribly wrong.
It's very hard to predict when bubbles burst, because it's psychological, because people recognize they're in a heated environment and they just want to, quote unquote, get out, you know, before it bursts. And nobody rarely do. People see it coming. And the people who get it right rarely get it right a second time, which is why you don't have, you know, multi quadrillion heirs who have predicted every bubble bursting, but they all do.
And in hindsight it always is obvious. And then foresight is very difficult to predict. It's part of what should drive humility in any professional investor, because all of us are accountable for both the hits and the misses. And there are a lot of misses for anybody who's been at this for a long period of time.
So I would say to anyone who hasn't lived through a cycle, you know, brush up on your research, you know, look at, you know, the late 90s, um, look at the mid 2000, you know, look at 2009 through 2011 and you know, look at Q4 2018 and then look at what happened in early 2020. And then of course late 21 to 22. So for somebody my age, there's been a lot.
And uh, and and hopefully as painful as they can be, you learn from these things and it informs your perspective. It probably makes you a little more conservative. I'm for a technology investor, pretty conservative. But, um, you know, you're conservative for a reason because you have the scars to sort of prove why you need to protect yourself and your investors.
00:53:13.830 — 00:53:24.710 · Sam Andersen
Do you think that is the number one mistake that young investors, young, ambitious asset managers make? Is they just over deploy into I'll call them hippie type industries.
00:53:24.710 — 00:54:05.740 · Brian Sheth
Everyone over invest right at the point where you shouldn't be. You know, if you go back, you look, I don't know what how 26 is going to be. But more venture capital, for example, is invested in 26 in the first half of this year than in all of last year. And all of last year was way more than 24 and 23 combined. You tend not to want to invest at a time when everyone is investing.
The history has proven that like 21 was a terrible year to invest in, 21 dwarfed prior years investments. 2018 turned out to not be a great year to invest. 2006 turned out to not be a great year to invest. So in 99 was a terrible year to invest unless you invested in Google. Um, and so that
00:54:07.260 — 00:54:30.220 · Brian Sheth
you get swept up in this idea. And when you're young and you're smart and you look at an old guy like me, you're like, oh, you just don't get it. This time it's different. And then when anytime anyone strings together those two phrases, it's time to get a little bit nervous. By the way, when I was young, I said that many times to old farts who were incredibly successful but just didn't get it.
00:54:30.260 — 00:54:32.460 · Sam Andersen
Yeah, well, it sounds like you learned.
00:54:32.500 — 00:54:37.780 · Brian Sheth
I guess I was wrong then, and there's a bunch of young guys who look at this old fart and are probably wrong now.
00:54:38.340 — 00:54:55.260 · Sam Andersen
Um, Haveli is different than other private equity firms, largely in one way, largely around your emphasis on the environment, on the way that you think about conservation work and your social conscience that surrounds the firm. Where does that come from? Why? Why is that important to you?
00:54:55.300 — 00:56:08.180 · Brian Sheth
Well, you know, I got so lucky. And my my partner, Ian Loring, he and I were both so lucky in that we, we spent the first parts of our careers that at firms that really grew and had tremendous success. So Ian at Bain Capital, myself at Vista and and so, you know, the reason why we formed Haveli is a little bit different than why people usually start companies we we love investing were between the two of us combined the biggest or second biggest LP at this point. So we wanted to be great investors.
We need that great return so our families are happy with us. But you know, we also both want to be part of something that was mission driven and people feel great when they give money to charity and all that sort of stuff. But we wanted to build something that could be an engine for giving And so that was sort of the idea behind Haveli. So half of everything that I make is in a trust, and we have this sort of generative engine, you know, we've we've had some good returns so far. So it's been great. And my sort of vision for this for the next 25 years is hopefully my, my continued investment prowess will drive, you know, a lot of capital towards the things I care about, conservation being a huge part of it.
00:56:08.580 — 00:56:16.620 · Sam Andersen
Is there any particular conservation project or any initiative in specific that you're particularly proud or excited for?
00:56:16.660 — 00:57:58.850 · Brian Sheth
You know, we're about to announce when I can kind of preview here where we, are are part of a donor group. We were kind of the Keystone donors to unlock a whole bunch of money, um, both private sector money and then Canadian government money to protect millions of acres. Rewild, what we call rewild, which is sort of like restore and bring back closer to kind of its original form nature in Manitoba, going into Hudson Bay in Canada, where, you know, seals breed and beluga whales breed.
And it's an incredibly important sort of natural resource for the planet. And I'm a big believer in sort of global ecosystems. And and what happens in one area can kind of impact another. Uh, and so we're we're really excited for that. And that's an example of, you know, sort of profits that would have otherwise been my carry are now being redistributed towards this.
And one of the great things about conservation, because I've been doing it for so long, like in investing you have these relationships. So in this case, we're partnering with an amazing private foundation that we've partnered with in the past and done projects in Latin America with they came on board.
Certain First Nations in Canada got on board quickly because they had worked with our organizations in the past, and we had some scientists who did the background research on this in conjunction with the Canadian government. So it feels great. It's a huge it's going to be massively impactful, not just to Canada, but to everyone in North America because of the way these ecosystems work and animals don't necessarily respect our geographic boundaries.
And so they sort of need these pathways to, to, you know, transgress along these, these national lines. So I'm very excited about that.
00:57:58.890 — 00:58:07.090 · Sam Andersen
What about on the personal side as we kind of wrap this section up, what what do you hope your legacy is? Personally, when all is said and done.
00:58:07.130 — 00:59:40.480 · Brian Sheth
Well, when your dad most people would most most dads would say your legacy is your kids. And then, you know, knock wood someday, your grandkids and all that sort of stuff. And I hope my kids will forgive me for all the nights away and all the time that I spent working, um, and sort of judged that time as well spent because of the context of what we did, not just in concrete things like conservation and sort of some of the fun things that we got to do as a family, but also, hopefully they'll appreciate as they get older.
Um, the real satisfaction one gets when you create something that endures and is certainly something that not only the organization, but I think our perspective on bottoms up investing on very, you know, sort of low risk, high return, you know, low loss ratio investing. We're training this sort of next generation of investors, which is really important to us.
Um, when you get to be my age, you start to think about sort of the next generation of people, and we have a bunch of really smart junior people, many of whom might not otherwise have gotten an opportunity to work in private equity. We kind of look for those types of folks and and we've trained them up to be really effective.
And so I think more than anything, that's what I hope the legacy is that my kids don't look back and say, gosh, dad wasted all that time working when he could have done X, Y, and Z. I hope they'll appreciate that. You know, for me personally, as as the man I needed to become, I wanted to work that way. But more importantly, I did it in a way that created something that was tangible and at least intellectually enduring.
00:59:40.480 — 00:59:51.680 · Sam Andersen
What do you hope other people would say in terms of what you stand for, what your values are? When people look from the outside in, what what do you want the the brand of Brian to represent?
00:59:51.720 — 01:01:00.120 · Brian Sheth
You know, I think what I've been it's been so fulfilling to sort of start a new firm after I've been associated with another one for so long and, um, one that just the capital that we were able to raise up front without any investments was a real testament to the relationships that had been made over the years.
You know, I think if anything, people probably say that, you know, Brian does what he says he's going to do. And, you know, growing up in central Massachusetts, it's part of the culture and it's really important. And and being a person of your word. And that that's important to me. And I hope that's the way people view our company.
And the one thing I'm extremely proud of. We have 65 people at Haveli. To a person, they are a person that in a different life, if we didn't work together, I'd want to be their friend. And I think when you talk to people at our portfolio companies now, we've got almost 20 of them. They enjoy their personal interactions with the folks at home.
And, uh, you know, I don't think that it's mutually exclusive to have a really high performing investment firm and a group of people who enjoy one another's company and enjoy coming in to work every day.
01:01:00.200 — 01:01:09.160 · Sam Andersen
Okay, we're going to do a lightning round. So I'm going to ask a series of questions. Question number one, what is one thing private equity has taught you that has nothing to do with money?
01:01:10.920 — 01:01:22.040 · Brian Sheth
Um, think long term. Very important things happen. Years after an initial interaction and people remember initial interactions.
01:01:22.040 — 01:01:28.280 · Sam Andersen
What is one thing that you believed when you started your career? That since you've changed your mind about entirely.
01:01:28.880 — 01:01:31.920 · Brian Sheth
How well you treat people is much more important than how smart you are?
01:01:31.960 — 01:01:36.720 · Sam Andersen
What is one piece of advice that you've received that you treasure and who gave it to you?
01:01:36.760 — 01:01:45.560 · Brian Sheth
How well you treat people is much more important than how smart you are. I actually got that one from Frank Quattrone a very long time ago.
01:01:45.600 — 01:01:52.320 · Sam Andersen
What is a book? Maybe a writer, a thinker that has left a lasting impact on you?
01:01:52.360 — 01:02:24.750 · Brian Sheth
I sort of borderline hero worship Warren Buffett. I just think he's the best investor, certainly, that I know of. Certainly that has existed during my lifetime. I think his ideas around capital allocation are genius. I think the way he looked at companies was innovative. And I think his sort of, you know, uncommon common sense and wisdom, um, you know, is sort of the North Star for anybody who wants to be a long term investor.
01:02:24.790 — 01:02:29.070 · Sam Andersen
What does success personally look like for you over the next ten years?
01:02:29.110 — 01:02:43.510 · Brian Sheth
Well, as my kids are getting older, success to me is having them want to spend time with me when they have options. Otherwise, uh, hopefully they'll choose to live not too far away from me and hopefully they won't look back and say dad wasted a whole bunch of time in the office.
01:02:43.950 — 01:02:47.070 · Sam Andersen
Brian, thank you so much for coming. I've really enjoyed the company.
01:02:47.110 — 01:02:47.830 · Brian Sheth
This is a great day.
01:02:47.870 — 01:02:48.150 · Sam Andersen
Thank you.
01:02:48.190 — 01:02:49.310 · Brian Sheth
Appreciate it. Really appreciate.
01:02:49.310 — 01:02:59.670 · Sam Andersen
It. Thank you so much for watching this episode of Carried Interest. If you enjoyed the conversation, you can find more on our YouTube channel at Affinity Presents. And make sure you connect with Affinity on LinkedIn.