Minerva Valuations

@Minerva_Valn

Valuations / Litigations / Advisory Firm

Joined March 2018

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Minerva_Valn retweeted

illiquid

@lefttailguy

44 minutes ago

“Our first cohort of companies has doubled their EBITDA in less than two years through topline and productivity growth, all while increasing headcount. (We’re proud to say that we’ve never conducted a layoff.)" If at any meaningful scale / organic (not through bolt ons), that's really quite impressive. Sounds like they have 40 businesses in their portfolio and ~30k FTEs. Stripping out Amex GBT, that's about 8k FTEs at 39 businesses, which implies ~209 FTEs per business (if all standalone). The rise of AI transformation firms in general is evidence that PE is going through an evolution akin to what public equity markets went through over the past 25 years. I wouldn't doubt if the grand vision for all these guys is to automate value creation in private markets (unstructured, noisy, slow economic feedback loops) the same way quants automated alpha generation in public markets. In the last 15/20 years, capital in the public markets has largely flowed to passive (indexes, etfs, etc.) or systematic/quant (all of Rentech, Two Sigma, D.E Shaw and much of Citadel, Millennium, etc) strategies and away from long-only or (single manager) L/S fundamental stock pickers. From 2016–2025, domestic-equity index mutual funds and ETFs received $2.9 trillion in flows including reinvested dividends, while actively managed domestic-equity mutual funds experienced $3.4 trillion of outflows. That also meant that engineering/product/sales types (on the passive side) and PhD math, physicists, stats people etc. (on the active, systematic side) displaced MBAs/consultants/bankers as the kinds of people best able/positioned to manage public equity portfolios and capture the value from doing so. I'd imagine Long Lake's view is that the best way to manage private equity portfolios and capture value from doing so over the next 25 years won't be via financial engineering (initial 80s/90s LBO days: KKR, Apollo, etc.) or operational "value creation" (Thoma Bravo, Vista, Bain Cap, etc.) They likely think it'll be about "technological leverage", which is capability downstream of the kinds of people that can think about the firm as a gradient descent machine: one that continuously optimizes and compounds the process of turning inputs (humans + compute) into economically valuable outputs. People that are capable of turning PE (sourcing, underwriting/DD, value creation, operating) into fully technology-native, systematized processes AND are commercial enough to command meta-access to the most valuable Context Production Factories (see: https://t.co/P6cOOgm8kU) are very different from the kinds of people who work in PE today. I think the big PE guys will still be around, but will look a lot like the passive public strategy guys (BlackRock, Vanguard, etc.) in terms of value capture. We already see this with a shift towards pure a asset gathering orientation by many of these guys. Investing with them will be like owning an index in somewhat sleepy, but stable private companies/infrastructure (along with LP allocations in these new active managers). And working there will feel more like working at bank or insurance company than an active investment management firm. Similar to how the long only stock pickers couldn't really evolve into systematic/quant funds and either largely got subsumed by passive strategies or went out of business, big PE will likely not have the DNA to evolve into what Long Lake and others are trying to do. To do that, you probably need to be built around this new kind of talent / approach from the beginning. Blackstone's analyst program probably would have missed @sdand (and he probably wouldn't have joined!) I was pretty surprised to see that David Shaw joined Morgan Stanley and stayed for 2 years. But the equivalent of Nunzio Tartaglia's Prop Trading group doesn't exist at Blackstone today. I think the firm that wins will figure out how to properly attract, incentivize, instrument, and massively lever this flavor of talent to their most productive use. Ken Griffin did this in the public markets, will Alex Taubman do it in privates?

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