Welcome back to the Alt Goes Mainstream podcast.

Today’s episode is about mining for investment success in enterprise software by going “an inch wide and a mile deep” with someone who is one of the industry’s most prolific private equity technology investors.

We sat down with Nic Humphries in Hg’s London office. Nic is the Senior Partner and Executive Chairman of Hg and Head of the firm’s Saturn fund.

Hg, one of the top 10 largest PE firms globally based on the PEI300 ranking, has built an impressive investment engine focused on mission-critical enterprise software. The firm has built a portfolio that is a “transatlantic ecosystem of software and services businesses” — representing over $180B in collective enterprise value across its 55 portfolio companies.

Nic is responsible for Hg’s strategy, management, and governance. On the investing side, Nic focuses on larger software investments that provide daily-use mission critical applications for accountants, tax / compliance professionals, and designers / engineers / scientists. He has brought his electrical engineering background to bear to go a “mile deep” into a category where Hg has become an unquestioned market leader.

Nic balances being both a detail-oriented specialist with a vision for both the enterprise software industry and Hg as a firm. We had a fascinating discussion about enterprise software investing, how to create European software giants, applying AI to make companies more efficient, and much more.

We covered:

* The origin story of Hg.

* How Hg grew into one of the industry’s leading software focused private equity firms.

* How an engineering mindset has helped Nic become a leading investor.

* Why Hg focuses on mission-critical enterprise software and why it’s a compelling investment thesis.

* Why enterprise software investing can be considered a low volatility investment strategy and how Hg has delivered consistent returns to investors.

* How to effectively manage exits and DPI.

* Why Europe, why now?

* How AI could impact technology and services businesses.

Thanks Nic for coming on the show to share your wisdom and expertise about enterprise software and private markets.

Clip #1: Unprecedented portfolio consistency.

Clip #2: The structural shift in private markets.

Clip #3: The AI platform shift and cost revolution.

A word from AGM podcast sponsor, Juniper Square

When was the last time things were easy for GPs?

Fundraising remains challenging, providing liquidity to investors is even harder—and broadly speaking, most GPs are underwater operationally.

It’s not about to get easier, either. Especially for managers vying for capital from the wealth channel. Sure, there’s increased demand from HNW and UNHW investors to gain private markets exposure…but managing their expectations for the investing experience is a whole different ballgame.

Reams of paper and a new KYC process every single time they subscribe to a fund? Brutal.

But what if committing capital to private equity, venture, and real estate funds was digital and seamless for investors — and scalable to manage for GPs?

Meet Juniper Square, the fund operations partner to over 2,000 private markets GPs worldwide.

Juniper Square gives GPs the connected software, data, and fund administration services needed for modern private markets. No matter how ambitious your next raise is, how many investors you manage, and how complex your investment vehicles are, Juniper Square empowers GPs to raise capital faster, reduce operational risk, and deliver a world-class investor experience.

And with JunieAI, Juniper Square's enterprise-grade AI built for private markets, GPs can truly and finally unlock the power of AI to work smarter, move faster, and focus on relationships and returns.

Scale your business, not your operational burdens and costs. Visit junipersquare.com/agm today to learn more.

Show Notes

00:00 Introduction to our Sponsor, Juniper Square

01:37 Welcome to the Alt Goes Mainstream Podcast

04:07 Nic Humphries' Background

04:54 Bringing an Engineering Mindset to Investing

05:24 Long-Term Business Thinking

06:11 Enterprise Software Investment Strategy

06:58 Growth Factors in SMB Market

09:21 Impact of AI on Enterprise Software

09:51 Platform Shifts in Technology

11:30 Adapting to AI in Business

12:36 Mission Critical Software and Market Dynamics

15:28 Embedding Products and Services

18:03 Organic Growth vs. Acquisitions

21:32 Geographical Expansion Strategies

22:28 Challenges of Expanding in Europe

24:00 Underwriting for Long-Term Success

24:18 Management Teams and Expansion

26:59 Jurisdictional Differences in Payroll Software

27:44 Investing in Market Leaders

29:35 Enterprise Software Market Size

30:53 Software's Ubiquity in Business

33:33 Hg's Investment Strategy

39:31 Consistency in Returns

41:38 Understanding Recurring Revenues

42:28 The Importance of Discipline in Investing

43:21 Learning from Past Mistakes

45:11 Maintaining Team Excitement and Focus

47:18 The Role of Realization Committees

48:43 Continuous Improvement Culture

49:45 The Importance of Early Cash Returns

51:04 Exit Strategies and Realization Committees

52:40 Re-underwriting Investments

54:50 AI's Impact on Software Development

56:28 The Rule of 40 and AI's Potential

56:54 Investing in AI: Startups vs. Established Businesses

58:20 Hg's Growth Strategy

01:02:11 Specializing in B2B Back Office Software

01:04:07 Segmenting Investment Funds by Scale

01:05:59 Expanding into the Wealth Channel

01:07:52 Lessons from Hg Capital Trust

01:08:47 Communicating with a Broader Audience

01:09:25 The Importance of Brand in Wealth Management

01:10:17 Connecting Private Markets to Everyday Life

01:14:02 Hg's Ownership Structure and Growth

01:15:23 Reinvesting Profits for Long-term Growth

01:17:19 Future Growth Opportunities for Hg

01:19:40 The Role of AI in Future Investments

Editing and post-production work for this episode was provided by The Podcast Consultant.

Disclaimer

The views and opinions expressed in this episode are those of the speaker and do not necessarily reflect the official policy or position of any affiliated organization.

Any references to past performance, including IRR or MOIC figures, are presented on a gross basis and do not reflect the deduction of fees, expenses, or carried interest. These figures are illustrative and not necessarily indicative of future results.

Statements regarding industry rankings, success rates, or performance consistency are based on internal analysis and may not be independently verified. No representation is made that any investment will or is likely to achieve results comparable to those discussed.

This content is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities or investment products.

Join over 12,300 Substack subscribers & followers who are thought leaders and executives from top private markets firms and wealth management like Blackstone, Apollo, Ares, KKR, EQT, Carlyle, Blue Owl, CVC, TPG, Brookfield Oaktree, Vista, Goldman Sachs, J.P. Morgan, BlackRock, Fidelity, iCapital, Franklin Templeton, Nuveen, Hg, Permira, General Atlantic, Stonepeak, Hightower, Focus Financial, Cerity Partners, and more.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit altgoesmainstream.substack.com