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Capital Decanted
Season 3 | Episode 2: Growing Up: How Growth Equity Is Defining Its Place in Private Markets
01:06:31
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- [00:00]
A
Suzanne it feels like growth equity has gone through a few cycles of evolution and growth and now we're in this period where it's becoming an increasingly popular strategy in the private equity ecosystem, yet there's so much confusion around its definition. So maybe it's time for a full rebrand.
- [00:16]
B
I think growth equity does need a rebrand after 2021 because it's been a unusually changeable period for the growth equity market, which didn't just start to emerge in 2019. 2020. Growth equity's been around for a very long time. We've been doing it for 45 years. But the growth equity market got confused with a number of other things during that ZIRP period at the end of the 2010s. The things that it got confused with first was late stage venture capital, where you could excuse a bigger check or bigger valuation by calling it growth equity is one thing it was confused with and the other was pre IPO momentum investing with a very short duration and often quite a passive approach to investing. But the long term things that growth equity are are different than that.
- [01:09]
C
Welcome to Capital Decanted. In this show we say goodbye to tired market takes and superficial sound bites because here, instead of skimming the surface, we dive into the heart of capital allocation. So striking the perfect balance and exposing the subtleties that reveal the topic's true essence. Prepare to have your perspectives challenged as we open up the issues that resonate with the hearts and minds of those shaping capital allocation. We've enlisted the wisdom of visionary leaders in the industry and just like a meticulously crafted wine will allow their insights to breathe, unfurling their hidden depths and transforming our understanding. This is season three, Episode two. Welcome to Growth Equity Investing. I'm John Bowman.
- [01:56]
A
And I'm Aaron Filbeck.
- [01:58]
C
We are your hosts. Well, for the third year in a row, our title sponsor is once again our friends over at Alternatives by Franklin Templeton. They've been a constant that we're so thankful for in supporting our efforts to bring compelling educational content to life here@kaya.ft has over 40 years of alt investing, over 260 billion of asset center management and their specialist investment managers of expertise across six different asset classes. Real estate, private equity, private credit, hedge strategies, venture capital and digital assets. And of course, all of them operate with the client first mentality that has always defined Franklin Templeton to help prioritize investment outcomes. So thanks as always. Alternatives by Franklin Templeton. All right, Aaron. All right, decanters. I want you to imagine a scenario where you're running a company and you're absolutely killing it. Customer traction is strong, revenues flowing, you're just printing margins. Product is hot, perhaps already even a category killer. But while your P and L is healthy and your balance sheet offers plenty of working capital to ensure a going concern, if not more, you're stuck at a certain altitude from a size perspective. And you've got an existing product and a healthy but limited reach. So how do you break out of that? Where do you find the capital for this next stage of growth? To open new offices, maybe to launch new products or even to enter new markets? You're probably too big and mature for venture capital and you're not ready to sell the whole business to a strategic partner. And you're probably way too entrepreneurial for a controlling interest from a PE buyout shop. And further, maybe you feel strongly that you don't want to saddle the business with the weighty burden of debt capital. So you operate in this whole scenario in a different mold, with a different set of needs and demands. So consider your dilemma fully activated here. Well, that's when growth equity enters the conversation. Growth equity is high octane fuel for an already thriving organization. It occupies this sweet spot, as we'll talk about, that retains autonomy and control for the founder and yet offers access to money, expertise and counsel to activate step function scaling. At least that's the goal. And it benefits investors with much more downside protection than vc, but more return upside down and perhaps less stigma than buyout. So today our adventure will explore the rise of this hybrid mashup, the middle child equivalent, the asset class that gets the fewest headlines that is largely misunderstood, often mislabeled, but arguably is now the hottest segment in the PE universe stratum. So we've got a lot of COVID on this journey. Aaron we're going to start with the history, as we traditionally do here on capital decanted. And we're going to do that a little bit differently than normal, as you'll see. I'm going to go into a few narratives that embody how this asset class has evolved and you could say elbowed its way into legitimacy and then eventually stardom. We'll also spend some important time differentiating growth from the other forms of private equity. BC buyout and it's very unique attributes, plus how the distinct playbook typically creates value. On the investment side, we're going to size the market. We'll check the fundraising barometer, we'll discuss risk return profile and of course the importance of manager selection. And finally, we'll riff a bit on considerations for portfolio fit. So this is a heavy, a busy but an exciting blueprint for us today and of course helping us along the way. You'll be hearing from two growth equity experts and authorities. Suzanne Gorin will join us from General Atlantic, one of the true avengers of today's growth equity firms and they manage over $100 billion today. Suzanne is the head of capital solutions for Growth Equity. Fittingly. And a quick programming note, you might remember that we had Suzanne's colleague Martine Escobarri, GA's co president on last season for our episode on AI so be sure to check that out. We'll also have the pleasure of Steve McCourt's wisdom. Steve is the co CEO of Makita Investment Group, of course, the independent advisory and consulting firm. So that is our plan. Aaron, before we jump into history, I'd be curious, what did you think of before this research when you heard the phrase growth equity?
- [06:06]
A
So this is such a tough exercise, John, as a lot of these different topics are. And when you look on the Internet or you try to do any kind of research on defining what growth equity is, every single organization defines this very differently. So many of the early stuff that I found was really focused on late stage venture and tried to compare it to the venture capital space. I won't steal some of the thoughts that we heard from Steve, but coming at it from a different perspective, maybe closer to buyout, is where growth equity really sits today. So I would say that the definition is one of the most challenging things and I'm hoping that throughout today's episode we'll be able to put a little bit more clarity and differentiation because I still think the industry gets this. I don't know if it's wrong. It's just very confusing.
- [06:51]
C
Yeah, I mean I would co sign that completely. I think that's the problem with this space and why we felt a necessity even though we've spent some time a couple different times on private equity generally on this show historically is that in typical investment jargon fashion, we often talk around and through each other with phraseology that means different things or at least brings different certain anecdotes or emphases to mind that we don't intend. So as is often the case here at Capital Decantan, we need to do some definitional excavation. You might say, with growth Equity. Are we talking about stage or age of the company? Well, partly. Are we talking about the size of the company, whether it's revenue or EBITDA or maybe size of the check? Maybe. Are we talking about percentage of control from the gp? Well, perhaps a little bit. Are we talking about the GP playbook? The proportion of operational improvement versus just financial engineering? Well, I think the answer is all of those things a bit. And that's the problem. As growth equity has evolved, variations of GPs and their LP clients and even the media all construct their own Frankenstein of growth equity using different appendages of lifestyle, check size, company maturity, governance model, operational intervention. So we're going to try to parse through those elements later in the episode to make sure we give you and us a proper rubric to think about the risk reward profile and portfolio fit for this rising asset class. Because I think you're absolutely right and I wanted to open with this. The definitional problem is what I think lingers and provides a real storm cloud over even having a debate about the asset class. But we can't start there. As I just said, we're going to get there. We need to rewind about six decades first to our history segment. So to help us understand the history of growth equity investing, I mentioned a moment ago, we'll be taking a tour of three vignettes, three narratives of the early movers in growth equity. I think this will be an interesting, unique way to grasp the development here through some avatars, you might say, if you will. So so today's story and our first vignette begins in 1968 in Boston with Peter Brook. At the time he was a 39 year old head of Tucker Anthony's Corporate Finance and venture capital group. Peter had cut his teeth previously in venture capital across both equity and debt at Bessemer and at First Boston. And by the way, Aaron, did you ever come in contact with Tucker Anthony?
- [09:08]
A
I have not, no.
- [09:09]
C
Okay. When I first came up in the business, it was a boutique investment and research bank. I mentioned on this show previously that part of my first assignment as an analyst in the mid-90s was tech and telecom coverage and Tucker Anthony was, I thought, the absolute best in my view at the time. Two gentlemen, Stephen Dings, Keith Berkhauser. These are two friends and both Kaya members, I should say, covered me. So shout out if you're listening to Stephen and Keith. Thankful for you both. You taught me a ton very early in my career. So Back to Peter Brook, 68. Tucker Anthony helped fund Peter to create TA Associates as an affiliate of Tucker Anthony. Now, for the most loyal of decanters out there, you might remember that we often cite the coaching tree or diaspora effect of Drexel Burnham Lambert and Mike Milken on the credit side for originating and birthing countless private capital firms and professionals. Well, TA Associates is kind of the equivalent of that. It's another top of the family tree type of firm that you can trace many, many histories back to those early days in Boston. So Peter's first hire would be newly minted MBA Kevin Landry, who would go on to run the firm after Peter departed to start a couple other private equity firms in 1990. Now, the first two decades, to be fair, of TA Associates would largely still consist of early stage venture investments. Its first investment, interestingly would come in 1972 for Eastern Mountain Sports, the outdoor retailer. But by the late 70s, about a decade in, TA would migrate almost exclusively to its bread and butter that it's even known for today, software and biotech, with early investments in Biogen, Computer Associates, Immunogen, Digital Research, McCormick and Dodge, just to name a few. By the way, I should also mention here that the hire that really put TA on the map in software was a woman named Jackie Morby. Now if you don't recognize that name, Jackie joined in 1978 at 40 years old with no finance experience, but has become one of the true legends of private technology investing, of growth investing perhaps. Obviously Jackie was also one of the very first, if not the first woman ever at a private equity firm. So she is a true pioneer. And one of Jackie's only interviews, at least that I could tell she's a fairly private person, is on the podcast show the Joys of Compounding. So strong commend for all of you to listen to that it is a wonderful lesson on grit and innovation as well as the history of TA Associates by the way. So again recommend that it is inspirational. So that same year that Jackie joined 1978, TA would formally separate from Tucker Anthony. This is again a decade after Peter Brook founded. It would become a partnership owned by its leadership, by its MDs. They would grow substantially from there. In 1980, in fact, they would be the largest independent VC firm in the rankings. But as the 80s progressed, largely under Landry's leadership, they began moving investments into more mature later stage high growth companies with actual revenue growth and profitability track record. They've begun seeing their core competency as partnering with businesses to help them scale and grow versus venture capital, which of course is aimed to provide capital for them to get started with this urgency to exit and to make a nice multiple on invested cash. So in fact by the mid-80s even the VC label was gone off of TA Associates website and its marketing collateral. And they would begin referring to themselves as simply private equity in 1980. A couple years later, another enterprising investor, Chuck Feeney, the founder of the Duty Free Shopping Guide. If you ever done any transatlantic travel, you will know this well. Chuck would establish a new investment firm that he called General Atlantic. And that is in fact our second vignette. So while GA wasn't the first growth equity firm, that was ta as we just explained, it's arguably the most well known. Now as we said, one of our guests, Suzanne, will be talking to us a little bit later. And that's because its founding vision from Chuck rested in values and philosophy that came to define growth equity versus maybe some others that we'll see that seem to migrate there for market opportunity purposes. What do I mean by that? So let me just quote right from GA's website here, quote. As Chuck's business gained momentum, that's his duty free business, so did his interest in investing in new ideas, people and philanthropic endeavors. In the spring of 1980, as we said, the founding team at General Atlantic would help entrepreneurs build great companies as a means of magnifying Chuck's ability to contribute to the societal causes that propel global progress. The success would fuel the impact of Atlantic Philanthropies, Chuck's foundation that made big bets for a better world. Chuck gave the founding team the latitude to think outside of the box, follow their instincts and and take an untraditional approach to what was an unprecedented investment mandate. The team saw an opportunity to build a new kind of firm focused on patient capital and partnership with purpose, laying the foundations for what the world would know later as growth equity strategy. End quote. So as you could pick up there, Chuck was all about partnering over the long term to supercharge great companies to make a lasting and multi generational impact. His experience as he started in globalizing Duty Free Shopping from its start, which was a liquor business in Hong Kong to cater to returning US military servicemen in Asia in the 50s to the largest travel retailer in the world was the same model he embedded in the DNA of General Atlantic. And the way they thought about portfolio companies serving partners that shared their sense of purpose with capital and advice to create durable long term business models that could navigate international expansion, leadership, team development, operational scale. So our last vignette of the three of those original forerunners is Summit Partners. Summit Partners was founded a few years later, 1984 by rose stamps and Steven Woodson, who previously worked together at Guess where. Yes, TA Associates. The early angle for Summit. The reason I chose this one to round out our three was to specialize in backing bootstrap companies. So bootstrapping typically refers to businesses that had grown up without any outside funding. And Summit helped these companies professionalize, upgrade their systems, prepare for the next stage of growth. And what made Summit unique and ultimately left a lasting imprint on how growth equity would mature was their respect for founders. They didn't push for control, they didn't demand board seats. They offered support, not interference. And today that mantra still flashes across their culture and at Summit and the approach of growth equity generally. So Summit describes themselves today on their site as the following quote. As a minority or majority shareholder, whether we work together to accelerate organic growth or support the creation of an acquisition driven platform, we seek to structure investments in a manner we believe best supports the goals of each portfolio company. Above all, our focus is on growth of the companies we back and the executives who, who lead them. End quote. So I'm not suggesting these three vignettes exhaust the history and activity in those early days, but I think they help us begin to shape a mental model for investing. And while buyout firms were focused on control and leverage, and VC firms were chasing moonshots, the occasional home run, growth equity firms were intent and are intent on investing in what's already working. And to help make them even better, it's not so much about reinventing the wheel, but trying to make that wheel spin a bit faster. So as you might imagine, this approach appealed to a specific kind of founder, someone who had built a successful business, wanted to take it to the next level, but didn't want to lose control or dilute their vision along the way. And it also appealed to a specific kind of investor, someone who wanted strong returns, but wasn't comfortable with the binary outcomes of venture, or maybe the debt heavy financial engineering risks of buyout. And so the seeds of a new asset class had begun to sprout. This was not a mashup of other forms of private equity, but a brand new philosophy requiring new tools, new talent, and new sourcing mechanisms. These businesses that they targeted tended to have cleaner capitalization tables, stronger unit economics, stronger capital efficiency. And that capital light nature did tend to migrate suitors to businesses like software, health services and tech enabled capabilities. And Aaron will talk more about that in a few minutes. But despite this early start and spark, the LPs didn't suddenly start carving out growth equity allocations. And this modern independent label remained largely elusive even into the 2000s. And despite what I've said about its unique features, growth equity was still seen as a bit of a hybrid. And hybrids, as we all know, aren't easy to categorize in strategic asset allocation shops and governance models. It was still relatively under the radar. Most institutional investors still, as a result, exclusively allocated capital to traditional buyout funds or venture capital in their PE book. And then of course, as we often tell the story, 2008 came, and we've reflected on this so many times because it was a generational inflection point and catalyst to every sub narrative in capital markets. And suddenly risk tolerance collapsed. Venture capital felt too speculative. Buyouts with their heavy reliance on debt felt too risky and maybe a bit reputationally uncomfortable. Investors wanted another option, a new form of risk premia that combined the best of both real companies, real revenue and real growth potential, but without the volatility, or at least without the level of volatility or leverage. So growth equity fit that bill perfectly. So post GFC firms like Insight Partners, tcv, Excel began raising larger funds for later stage companies. These were often their own portfolio companies they had seeded earlier and they were doubling down on their winners, as they would say. And even traditional buyout giants like kkr, tpg, Carlyle moved downstream. They moved the other way to dedicated growth platforms, sometimes calling them late stage Venture as Aaron mentioned earlier. So both buyout and VC were migrating towards each other and colliding in this new middle child called growth equity. And hence the definitional mess that we still need to unpack a little bit. By the mid teens, growth equity was no longer a niche, it was a core allocation. Institutional investors began carving out specific buckets now for growth equity in their portfolios. Consultants like our guest Makita today started recommending it in their strategic asset allocation as a way to balance risk and return. And the data backed it up. As Aaron will expand upon shortly, Growth equity funds were delivering strong performance with lower loss rates than VC and less volatility the than buyouts.
- [19:31]
A
So John, that's really helpful to hear those three vignettes and I think it'd be additive to hear what Steve had to say as someone who was on the ground as a lot of this was happening. So let's listen to his perspective on how growth equity evolved into its own space and private equity. I think what he says is a good parallel to some of your vignettes. And as you'll hear, I was surprised to hear the direction of travel between buyout and venture.
- [19:54]
D
Growth equity as a component of the private equity landscape goes back many, many years, but it has evolved over time. Initially, Growth equity was Distinguished from traditional buyouts by the fact that growth equity investments generally involve taking minority positions where the capital was used for growth and expansion, as opposed to a buyout strategy where the capital is used to buy out a existing investor or founder of the business and the buyout manager owns and controls the company. So growth equity was minority positions, lack of full control. And because the capital in those situations tends to be used for expansionary growth purposes, it tended to focus on industries that were faster growing. As time has evolved over the last couple of decades, the growth equity sector has evolved as well. From our vantage point, the sector today is not exclusively, but it's more focused on technology, software, what we today see as the fastest growing components of the economy, where the fastest growing businesses are. And it's also evolved to be not in every case, but in more cases, a bit of a stopping ground between companies that are privately owned and ultimately IPO in the public markets. And the public markets themselves in the IPO market are becoming more technology focused too. So the industry has evolved in that way. It still has a lot of the characteristics it started with 20 plus years ago, but it's probably in the aggregate today has moved a little closer to resembling late stage venture and a little less resembling traditional buyout strategies. But it clearly resides and always has resided between those two extremes.
- [21:45]
C
Well, I think Steve provides really interesting framing there as well. Aaron, I know we talked a little bit in the opening question about the fact that GPs compare growth to late stage venture, but Steve is actually saying maybe it migrated or came out of the buyout space, which could also work given some of the overlapping characteristics. All of this, of course, just harkens back to our definitional challenge of where it sits and how it compares to the other two. So Aaron, I think that gives a quick summary of the first five decades, but I think it'd be helpful for maybe you to jump in here and give us a snapshot of where we are today. How do you size this? Because I'm ending this cliffhanger story with these vignettes and we're kind of in the mid teens as far as chronology at this point. So obviously there's a big chapter still to come post.
- [22:32]
A
Covid yeah, absolutely. Five decades and 20 minutes. Well done. John. One of the things that I think is interesting just listening to you talk about growth equity is the similarities and parallels to what we've seen in private credit and how private credit was kind of this little sub part of private equity strategy or a hedge fund strategy. And then all of a sudden blossomed into its own subcomponent in its own industry and asset class in its own right. And we've seen a very similar type of experience here in the growth equity space as well. So maybe just to give you a sense of size and who the players are in growth equity, Growth equity is right around 1.7 trillion in assets under management. So again, maybe some parallels to private credit sitting right around that size in terms of AUM, and it represents about 10% of the total private equity fund industry as of 2025. So venture capital and buyouts continue to be the overwhelming proportion of AUM in these strategies. But I think what's interesting is that the growth of this strategy really accelerated post Covid. And when you look at these AUM charts that show the gradual growth throughout the 2010s, all the way into the early 2020s, all of a sudden there's this huge jump that happens right around 2020 and 2021. So when I was interviewing Suzanne for the episode, she actually made a comment that, like John just walked through. There's been a ton of different iterations of this strategy and of this asset class. And 2021 is the new inception of what we call growth equity today. And a lot of this is because of what happened post Covid with the shift in monetary policy and interest rates and reversing a lot of the trends that existed throughout the 2010s. Part of this is because growth equity has little to no debt. And it seemed to be taking advantage of that reversal in monetary policy, where in the 2000 and tens, you really weren't able to differentiate what you saw in growth equity versus light stage venture or other parts of the venture capital ecosystem. Buyouts were relatively free. It's a free cost of money. You're not paying a lot to borrow. And so all three of these strategies didn't have a lot of differentiation amongst them. However, when you get into 2021 and interest rates are going up and there's a lot of reversals around inflation, all of a sudden the differentiation becomes much more clear. Buyouts are much more expensive in order to conduct those transactions. Venture capital also has its own cost of capital associated with it. So growth equity really stands alone relative to the other sub strategies. Now, as for the other major players in the growth equity space, I ran a screen on Prequen that looks at the top 20 fundraisers over the past 20 years, and John mentioned a couple of those names. So I'll spare you the entire list, but the top five included Insight Partners, TPG GA Summit Partners, and Warburg Pincus. Now, what's interesting, and I'll talk about this later, is that when you go further down the list and further down the line, you actually start to see some other familiar names like Blackstone and Blue Owl and Goldman and even Andreessen. So these are names that have not historically been associated with growth equity. But as John just mentioned, there's been this convergence between each of these different strategies. And you've got buyout managers coming into the growth space and you also have venture capitalists that are taking advantage of this as well. Growth is also accelerated in terms of fundraising over the past 12 months. So we're sitting here close to the end of 2025, and it was around this time last year that Pitchbook published an article titled Growth equity deals surpass LBOs defying a historical Trend. And the thesis was relatively simple. When interest rates go up, buyouts have a high hurdle to hit due to higher borrowing costs. But I also think this has to do with another important fundamental driver, and that's when a market is full of valuations that are stretched and other investors are looking for different sources of innovation, it's really attractive to look for what's working in companies that are continuing to grow their top line growth already, as Suzanne said in some of the conversations we had, many of these companies are growing between 20 and 50% year over year. So it's a really easy way to hitch a ride alongside rapid growers that have somewhat of a proven track record. The other phenomenon that's coming to the market is the expansion into the wealth management space. So some of this growth beyond some of the market environments are who is actually investing in growth equities. So many of the names lower on that fundraising list, the Blackstones, KKR Blue, Alice, Goldman Sachs and so on, are all part of this wealth management expansion and trying to build product for the individual investor. So we may begin to see some significant market segmentation which could have some implications for fundraising in growth equity in the coming years.
- [27:16]
C
Aaron, let me stop you there just for a minute because I thought Steve's comments here were also fascinating. So I want to jump back to him, particularly when we asked him about where he saw growth equity markets next leg of growth, his answer was all about wealth. It's clearly the focus. So let's listen in here.
- [27:34]
D
I would say maybe like the market as a whole, the biggest and most dynamic opportunity for growth equity is in bringing the broader private markets to the individual investor marketplace. And we're at the stage now where it's just the beginning of product development and financial intermediaries adopting different vehicles to provide exposure to the private markets. And in this phase, there's, at least from our perspective, there isn't. There hasn't been a lot of differentiation between styles of strategies within private markets, venture growth equity buyouts, the stuff that in the institutional world we take for granted because we've been parsing this out and overthinking diversification within private markets for 30 years or more. But in the individual investor marketplace, that's just happening. And so as financial intermediaries become more conversant in private markets and create for their clients portfolios that are diversified across the private markets, there's an opportunity for growth equity there to distinguish itself from venture and traditional buyouts and capture a piece of the fundraising pie, much like growth equity has in the institutional space over the last several decades.
- [28:47]
A
So you may begin to see a market where venture capital is very institutionally focused, whereas growth equity is much more focused on wealth. So, John, I think one of the things that might be interesting to talk about at this point is we've talked about the past five decades, we've talked about the past five to 10 years. A lot of evolution that's happened there. As I mentioned, a couple of environments, especially post Covid, that have changed the dynamic. But how do we actually define this? Again, this is the big challenge and maybe the crux of the episode. So in your research, I'd be curious how we actually define growth equity.
- [29:21]
C
Yeah, I think you had some really helpful or provocative buzzwords that are a nice segue to the aforementioned definitional work we need to do. You talked about convergence, you talked about migration up and down the stream. You talked about standing out, you talked about cost to capital differences. So I do. We are right to draw some clear comparisons. What actually distinguishes growth equity from the other forms of private equity? We've danced around this quite a bit already. So it is time for this definitional excavation exercise I mentioned in the intro. So get your vocabulary shovels and your figurative pivot tables out. We need to make some comparisons here. So we typically talk about three stratifications of private equity. We've done that already today in this episode, buyout growth, which is today's topic, and venture capital. And while each of those certainly shares some characteristics, most notably that they're unlisted, locked up capital. These are private companies. They are distinct in several ways. And I want to spend some time specifically inventorying the unique characteristics of growth versus the other two main categories. So as I teased in my opener, we're going to tackle the taxonomy exercise across five attributes very quickly. First, ownership and control. Second stage, third, use of leverage. Fourth, value creation and fifth, risk profile. So just taking those in turn, ownership and control. So in venture capital, typically this is a small minority stake, 10 to 20%. But that often is accompanied by disproportional influence from a governance perspective. That's of course because the VC has most of the power as the founders wholly dependent on their capital to take it from concept, which is typically all it is at that point, to commercial reality. VCs usually take board seats and include protective provisions to safeguard their investment. Now, there are some exceptions to this philosophy in places like founders Andreessen, but typically VCs tend to be much bigger and more influential voices in governance than anywhere along this continuum. Buyouts are full control. So the PE firm acquires a majority or even 100% of the company. Founders sometimes stay on, but the firm calls the shots, meaning the GP calls the shots and usually completely restructures and recapitalizes the company, polishing it up for sale. And it can often even become contentious or antagonistic to existing leadership and employees as the primary goal is just selling the company for a profit. So contrast all that with growth equity. Now, like VC, these are still minority stakes, sometimes a little bit higher, 20 to 49%. But the founders still stay in charge. The investor is a partner and a counselor, not an authoritarian voice.
- [31:58]
A
So John, before you go on to number two, I'm reminded of some of Steve's thoughts on this and especially how governance and value add intersect in a unique way within growth equity. Let's listen to him here.
- [32:12]
D
I think again it'll vary and certainly growth equity managers will emphasize their value added as an owner above and beyond the capital that they're deploying. But I'd say in general you're right. It's hard to argue that the influence of growth equity general partner exerts on a business would be greater than a buyout strategy that is majority owner of the business and has most of the board seats, or a venture company that's provided all of the financing for a business. So there's a lot of overlap between that, but I think generally your thesis is correct.
- [32:47]
C
So second stage of investment. And this is where this mid market thing gets in the way or phrase gets confusing in vc. Of course, by its very nature, investing in early stage startups is the name of the game. It's often pre revenue, sometimes even pre product. This is about Betting on potential, an idea, a market, a founder in particular. Buyouts are mature businesses with stable cash flows. These companies are often optimized for operational efficiency, not rapid growth. In many cases they are post growth and firms GPs are just trying to maximize the free cash flow harvest in order again to get the multiple and the valuation up for sale. Now, in contrast, growth equity, these target companies are already profitable in most cases, or they're very close to it. They've already found product market fit, they've got a scalable model and they're ready to expand. But they just need more capital and expertise to tackle that next phase. So it's sometimes, as I mentioned, used interchangeably with the word mid market to my scrambled word problem I mentioned earlier. But it isn't just about the size of the check or the size of the revenue or the size of ebitda. Sometimes that can be conflated. So that is stage third leverage vc hardly ever debt. Exclusively equity buyouts is the other extreme. Very heavy use of debt. Of course. Now, to be fair, as we unpacked at length in our season two finale on private equity, the use of leverage and financial wizardry has massively evolved from the heydays of the 80s and is not nearly, to be fair, the main lever any longer. Nonetheless, the classic LBO model involves borrowing heavily to acquire the company and then using cash flows, hopefully to pay down that debt. Now, growth equity, like vc is minimal or no debt. The focus is, however, on organic growth, product and geographic expansion, not financial engineering. And they are certainly past the startup phase. As we said a moment ago, fourth value creation. What is the playbook? So we're going to talk much more about this in a moment, but in vc, you're helping to build the foundation, you're helping to design the product to ensure that there's market fit. You're helping to make early hires, gain initial customer traction. In buyouts, this is about optimization. Cutting costs, laying off workers, improving margins, restructuring operations. You're squeezing every last bit of excess out of the system. And in growth equity, the focus is on scaling. As we just mentioned, new markets, new products, better systems, stronger teams. So finally, our fifth risk profile in vc, very high risk. Most startups fail mathematically, but the winners can be massive, which is where the math ends up working. In a fund structure, the rule of thumb of a successful fund out of 10 is usually that 7, 8 are going to fail completely. You're going to have a couple singles, maybe a double in there, and then hope for one home run. Honestly, one out of Ten is a home run in fact, we'll get to in a moment. 1 meta 1 Uber can make not just a fun vintage, but a career literally for a partner. And then buyouts. Lower business risks certainly, but higher financial and reputational risk due to all that leverage we've talked about. So bankruptcies are rare in a pure sense, but a lot of collateral damage can occur through these big ugly recapitalizations, layoffs, asset stripping, selling off parts, loan defaults, loan restructuring, et cetera. Growth equity, to contrast, is somewhere in the middle. Moderate risk. As we said, the company and the product is proven so it has cash flow, it's a going concern. But obviously anytime you start to scale, it does introduce execution risk. So to summarize, growth equity in comparison to VC or buyout, the governance posture is minority control and it's a spirit of partnership. The stage is acceleration stage. So think late teenage, early adult part of the cycle. The financing usually involves minimal debt, if no debt at all. The your unique role is enabling scale and the risk profile is moderate somewhere in the middle. Those versed in the growth stage take what's already working and they make it work faster, smarter, bigger. It's about accelerating an already successful business. One of the partners at GA had this handy way of describing what they're looking for in a growth equity investment. They called it the three M's. The market is in a large and growing market that provides strong tailwinds, which is all that matters in VC. But second in this 3M structure, the model, the company has a strong business model that once at scale, can provide durable margins defensibility for the company. And third, management. Does it have a visionary management team that will drive and execute against ambitious growth opportunities? So that's the definitional work.
- [37:26]
A
So John, a lot of your definitions align really well with Suzanne's defining characteristics too. While you have a lot of good compare and contrast going, she puts a bit more of a specific portfolio company twist. What makes growth equity growth equity? Let's listen to her walk through these as well.
- [37:44]
B
I think of growth equity as five things. If you look at the qualities that you look for in an investment in growth equity and hopefully these five things illuminate why it is different from venture capital and from buyouts. The first is that the company is high growth, so you're talking about companies that are growing 25, 30, 35% per year, often organically. The second is that it's near profitability or at profitability and we can talk more about that. But when you look back at the Growth rates. One of the things that I found when I moved over to growth equity from buyouts was that you have to look at next 12 months, not last 12 months, to really see what the company's going to do. And that was a big adjustment for me coming over. The third is that you're looking at a strategy that has little leverage or no leverage in many cases. And I think that's an underappreciated quality about growth equity. The fourth is around the sectors that growth equity invests in. I think because there is this often grouping of growth equity with venture capital, it's assumed that this is a very tech only strategy. And the way I think about growth equity is it's tech enabled, but it's not all tech. Tech enabled can reach a lot of different sectors of the economy. And the third is how you think about hits. And then when we talk about risk and return, this will really come up. But growth equity is a strategy where there should still be hits. If you're doing the strategy right, not every company is a hit, and we know that from venture capital. That's no different in growth equity. But you should have the opportunity to invest in a company that is capturing a secular trend in a way that's very unusual and can return an outsized return on that one investment. So those are the five qualities. Growth rate, profitability or near profitability, low leverage, multi sector, and still having the opportunity for hits.
- [39:35]
C
So now that we understand the defining features of growth equity, I want to spend a few minutes on the nuts and bolts. Let's get to the playbook, the blocking and tackling. I made reference to this in the five I just talked through on how they distinctively add value and they provide a scaling platform. And again, there's some crossover with our PE episode last season here, particularly as it relates to operating value. So that could be a nice refresher here too. So I'd encourage perhaps a listen back at that. So what do growth equity firms actually do to help their portfolio companies? Maybe the most obvious area that I hope popped in those earlier three vignettes and some of the quotes that I've mentioned is strategic expansion. Growth equity capital is often used to enter new markets, whether that's expanding from the US to Europe or Asia to the Middle east, or from one vertical into another. It might fund a new product line, a new sales channel, a strategic acquisition, and more generally, a seasoned GP will have access to market research and experience across borders regarding social, demographic, consumer trends, et cetera. And finally, it can also help navigate Complex regulatory and tax implications of multinational operations that would really be intimidating to a fairly early stage company, even if they're doing well in one country. Another area of opportunity besides strategic enhancement would be operational enhancement. So this is less about pure cost cutting and operational efficiency as you would see in buyout. Growth equity firms often help companies upgrade their internal systems and their tech capabilities. Could be an ERP platform, a CRM tool, data analytics, cybersecurity. So this is more sophistication versus efficiency. On the operational side, they could also help recruit senior talent, cfo, cto, cmo, other key executives who can add much deeper expertise and sophistication. Third, go to market acceleration. So this is about biz dev and sales in particular, marketing and sales are critical levers for growth, obviously. And growth equity firms help companies refine their messaging, maybe optimize their digital marketing spend, build scalable sales teams. They might introduce performance metrics or customer segmentation strategies, new pricing models that the portfolio company hasn't thought about yet. So this is especially important for companies moving from founder led sales to a professionalized institutionalized business development organization. And then finally governance and professionalization, you might call it. Catch all that I'll use. So as companies grow, obviously they need stronger governance and in some cases they need to insert the first vestiges at all of governance. Growing out of that cult personality that defines successful startups, growth equity firms help build boards, they establish reporting structures, implement compliance frameworks, and they can even help upskill the executive team with leadership training, mentoring, establishing KPIs, succession planning, et cetera. So Aaron, you've done a ton of work, having listened to me just a moment ago and researched this as well. I'd love to hear from you on the marks of what makes a good growth equity GP considering this, and maybe even a growth equity investment, meaning at the portfolio company level. And then maybe now is also a good time, given the definition and clarity work I tried to do to describe how LPs are thinking about fitting this asset class into a diversified portfolio.
- [42:47]
A
Yeah, absolutely. First of all, I mean the value add in the playbook is really tough to measure. I was listening to you walk through some of those levers that these gps can pull. It's similar in some ways to what we talked about in some of our previous episodes about the value add component. So you might be sitting there listening to John talk about these five different levers and say, well that's great, but is that unique to growth equity or is that just a buyout type of strategy or not? So I've got a couple of questions that I think are worth asking as you evaluate both portfolio companies, or even more importantly, underwrite a GP who is claiming to be growth equity on the portfolio company side. One of the biggest challenges here is that again, many of the target companies are already performing well, so they're not even looking for or may not even be in need of that capital. The capital might provide some expansion, but they're pretty well doing this on their own. So in other words, you're convincing the company to take your investment in exchange for some kind of expansion into a new geography, or as John said, professionalizing the organization. The second challenge here is that growth equity is becoming popular. So back to my earlier point. You now have PE managers on both sides, both on the buyout side and the venture side, who are adopting some of that growth equity language, if you will, but aren't actually truly doing growth equity. So a couple questions maybe to think about. First, is this company or this business truly being bootstrapped and being lightly funded, or is this just another expansion of prior private equity investment, perhaps venture capital backed, that has led to this point? There's a clear difference in the definition of growth equity versus just expansion capital or late stage venture. Second is does it actually have a proven business model with real customers or are we still in that early stage? Again, late stage venture versus growth equity is where the difference really comes into play. Third is, is the business growing in a capital efficient way or will it require substantial funding in order to maintain its growth? And that to me is the difference between buyout versus what you see in growth. If you need a lot of capital, which might lead to a complete control of the organization, then it's a buyout transaction, not necessarily a growth equity transaction. Fourth, if the reinvestment in growth and some of the initiatives were shut off, would the business still be profitable or would it start to struggle? And this is another buyout versus growth type of question. If the reinvestment and the operations are shut off and it's not profitable relatively quickly, well, you're looking probably more at a buyout transaction versus a growth equity opportunity which should be growing quickly and should be doing fine on its own. And then of course is the gp, if you're an lp, is the GP taking a minority stake with limited or no leverage? And that one is relatively self explanatory. So again, depending on the answers to some of these questions, you may or may not have a true growth equity strategy and may have something that reflects more late stage venture or Some kind of alternative flavor buyout.
- [45:45]
C
I think those questions are such great tools to help us think through how to differentiate some of the three and also I think differentiate the playbook elements between other styles of private equity, particularly if you're sitting in the LP seat. And this is where I think bringing Suzanne back in would be really great because she has the perspective of both seats. She's been both an allocator and a gp. So let's listen in here.
- [46:11]
B
I think there are some unique considerations and they explain why some LPs don't include growth equity as a defined allocation within their portfolios. So the first one that we see a lot and that I wrestled with when I was an allocator, is that the metrics are really different in growth equity. So it's a different amount of work and it's often a different template. If you happen to be an allocator who does a lot of diligences every year and tries to template things in a way that you can compare across your managers, the template has to be different. And that creates a lot of friction. And that friction explains why a lot of GPs don't pursue growth equity as primary investors. And it also explains why there's not been a secondary market for growth equity that has developed, because the secondary market largely focuses on buyout, where it's a very transferable set of metrics. So if you think about growth equity, you have to develop a deeper expertise in a broader set of metrics. It's not all just ebitda. You have a variety of companies, some of which are valued on revenue metrics, some of which are on that journey where they're pivoting between a revenue metric and a EBITDA metric, depending on what the exit outcome is. And then you've got to think about things like gross margins, you've got to think about arrows. So you have to have the database to compare that, to contextualize it. It's not like early stage venture where you can just say most of the metrics are N A, N A, N A. So you have to build that muscle. But that muscle is one reason that the space is less competed and really interesting. So I've talked to a lot of allocators who say I just can't fit it into my metrics. But I think that's one of the arguments for diversification relative to your 9th, 10th or 11th buyout allocation. One of the other things that I would challenge LPs to think about, and I haven't yet figured out how to quantify this, maybe someday I will. But we always plugged our portfolio in to look at the underlying diversification. You looked at the underlying diversification by vintage, year of assets or commitments.
- [48:15]
C
That's good stuff there and I think underscores that the fact that growth equity, as we've been hinting throughout this entire episode, is a mix of both art and science as far as value creation. The LBO transaction has a very well known established model, but you just can't replicate that with a growth equity model, at least not yet.
- [48:33]
A
The other factor to consider is the level of involvement these GPs have with these companies. So as John mentioned, venture is always minority investing, but you have a lot of influence, a lot of say, in the governance and a lot of hands on guidance for these founders. Buyouts, of course, come with a lot of structural control because you're taking full control of the company as an equity investor. So you have a lot of ability to influence as well. However, growth equity is slightly different because it can be active or passive. You can provide equity financing and be along for the ride, or you can provide some of those value add opportunities that John walked through as well.
- [49:08]
C
Well, perhaps tying it back to what I said a little bit earlier, that spectrum, that continuum, is really important and perhaps to continue Suzanne's thoughts from just a few moments ago, she emphasizes, as we've tried to as well, that growth equity is much more about supercharging what's already working, which means customizing and creating a bespoke solution for each engagement to fit their needs.
- [49:32]
B
I think value creation is very challenging for limited partners to assess from all of their general partners in this decade. I think there's such a diversity of models now. In the 2000s, you had a pretty defined model. In the 2010s, you three models. And now we have a proliferation of models in every strategy within private markets. And growth is not exempt from that. The two words around value creation that you would hear at our investment committee are influence and alignment. And so the way we think about this is that we're investing behind outstanding companies and we need to identify those founders or management teams that want our help up front. Because what we're doing is putting our help against our best companies to get them to grow faster. This isn't about fixing problems or pulling your laggards up along with your portfolio. This is about supercharging your best companies. And in growth equity, your best companies could already be growing 40, 50, 60% by Rule 40, Rule 50. So these are great companies and what you're looking for is founders or management teams who stay up at night thinking about the things that they're not doing that they could be doing. And they either just don't have the time to do it, or they don't have the capabilities in house to do it. So we're coming in as a very focused partner with partners that have opted in to do this with us. And they opt in before we invest. We're not showing up with an army the day after we write them a check. So they're opting into the two or three things that we know we can do for these companies. And because our companies are younger and often quite fast growing, in many cases it might be the first time they've done some things. It doesn't mean those challenges are simple, but we can bring tools in a replicable way to our companies. Whether it's capital markets, if they've never thought about financing or thought about an ipo, whether it's management assessment, they've often had one team on the field since they started their company. And then on the operational value add, we have a package of tools that we can use with our companies around go to market around pricing. This last year, supply chain was name of the game, if you had a supply chain.
- [51:38]
A
Okay, so we've spent some time defining the space, talking about some of its differences to other private equity strategies, and then how you perform some of those initial due diligence questions. I think the two final missing pieces here are how to look at performance and then how to think about portfolio integration. So I'll cover both of these. As we've discussed, growth equity has an interesting profile that sits somewhere between the profile of venture capital and buyouts. But it's a little bit more complicated than just looking at median returns or quartile spreads, because many of those can be misleading. So according to Cambridge associates data, growth equity net horizon irrs were actually higher than both buyout and venture capital, despite supposedly sitting in between them in terms of stages and risks. So you can already see how this gets a little bit more complicated. You can also look at different risk metrics like loss ratios or drawdowns. And by those measures, growth equity actually looks really similar to buyouts. So you might be telling yourself, oh, nice, all the upside and no downside relative to some of these different strategies. But not so fast. I think it's important to take a step back and think about the dynamics of buyout and venture relative to growth equity. Venture is very much a manager selection game. So these pool median returns mask the tremendous upside of the top gps and the fact that most investors earn disappointing median returns. Buyouts, on the other hand, have grown significantly over the past decade or so, making their performance much more competitive amongst the sub strategy. And you can see this in most of the dispersion data as well. So depending on the data set, it can be very hard to differentiate amongst these strategies. However, what about the investor experience? As we all know, pulled returns can be misleading. So I had to put on my quant hat to try to understand how these strategies differ from one another. Because they have to, or at least they should. And it's not until you start to dig deeper into return distributions, so not dispersions, but distributions of funds that you can see a very different story than some of the more traditional quartile spreads that we've been seeing. Then some of the numbers start to line up with some of the intuition okay class, we're going to dust off the old Kaya textbook for this one and talk about two statistical concepts that are really important for alternatives, skewness and kurtosis. By the way, John, I now have a lot of empathy for you. After doing this exercise, I realize that many of my jokes may feel like looking at skewed data. Why? Well, you just don't know how to interpret it sometimes. I'll let that sit for a second.
- [54:10]
C
Oh my goodness, this has spiraled so poorly.
- [54:13]
A
Okay, in all seriousness, when you look at the return distributions of these private equity sub strategies, they look really, really different. So again, the dispersion numbers mask the experience of an investor. Venture capital, for example, follows a right skew distribution, which means a bunch of low returns with a long positive tail. And it's platykurtic, meaning those tails are fat. And you have extremes on either side of the distribution. Buyouts ironically follow more or less a normal distribution, so it looks a little bit more like what you see in public equity, parts of public fixed income, and so on. And then unlike both, growth equity follows a leptokurtic distribution, meaning that it has really thin tails and a lot clustered around the median and the mean, which looks very different from venture. And this makes sense intuitively when you think about these companies being well established and there's not a lot of extremes. They've already gone through the system and done their thing. They should all be clustered around those different return profiles.
- [55:14]
C
Aaron, what was that P word for VC again? Platykurtic listeners, forgive me, I need another glass of wine on that one.
- [55:23]
A
I can give you a masterclass if you want. Another interesting thing here is that while median returns may line up buyout, growth, and VC in that order, if you're just looking at the mean returns of those distributions, it actually goes the opposite way. Buyout has the highest mean return, followed by growth and followed by metric capital being at the lowest end. So if you're in that analyst seat, it's not enough to just look at median returns and quartiles and instead look at where those returns are clustered and where you actually might be able to invest in those clusters. Again, venture capital is very much an access class in a lot of different ways. So I guess it makes sense to me that return distributions would look very different given the different motivations and the different fundamental drivers of returns, as well as the different economic backdrops, which we'll talk about here in a second. So from a portfolio perspective, there are a few things that I want to highlight as well. First is that growth equity sensitivity to the economic cycle relative to other parts of the private equity ecosystem is different as well. Growth equity tends to be in more of a secular growth phase, meaning that the growth is accelerating so fast that it doesn't actually matter what's happening in the background. Counterintuitively, growth actually may be less sensitive to economic performance than buyouts, and a lot of this might be due to sector composition or representation, as well as the leverage that is found in buyouts. But again, growth is all about growth. They're growing so fast that the sensitivity to the broader market may be more muted. However, growth equity still has some level of sensitivity and tends to be more sensitive than venture capital for a completely different reason. Remember, venture capital is highly idiosyncratic, so while it may be riskier than growth equity in aggregate, it's mostly because the returns are highly dependent on the specific portfolio company's risk. So maybe to make a public market analogy, venture capital is like deep in the money call options on a portfolio of stocks, whereas growth may be resembling more of an actively managed portfolio of stocks. Second, and related is how growth equity compares to your public stock market book. Now remember, growth companies are more established, so you should be careful not to double up your exposure. At worst, pay higher fees. For a fund manager that's giving you beta exposure that you can get much cheaper. We see this argument a lot in buyouts, but I also think this applies to growth as well, perhaps even more so than buyout. Growth equity seems to be an access strategy just like venture capital, because these are earlier stage companies. More often than not, you benefit from the illiquidity and patient capital so these companies are able to execute on their strategy and perhaps these companies are actually not going to go public anyways. You see this in J curve measurements in terms of how long it takes to break even. And those J curves actually don't look all that dissimilar to venture. So you tend to have a lot of longer term themes with higher growth potential that sit in this part of the private equity ecosystem. So while growth equity is not exclusively technology companies, most of them are tech enabled or sit in a technology driven flywheel as Bain called it in one of their private equity reports. So you have things like consumer healthcare, business services and other sectors that you have just like everywhere else, they're just jumping the curve and are enabled by technology. More recently, AI. Finally, I want to talk about the market segmentation and how different growth equity investors tend to operate and build their portfolios because that may influence how you integrate this into your own portfolio. Again, Bain had a really good private equity report a couple of years ago that had a few examples that I think showcased the different motivations and approaches that different types of participants in the growth equity market tend to employ. First are hedge funds and crossover funds. So like venture capital managers, these managers tend to be highly thematic and usually focus on technology. They're also really fast decision makers and passive investors. So again, going back to that passive versus active spectrum. So these investors will often pay up for growth and they'll sacrifice control in order to get onto a particular theme. Second are your traditional growth equity players. So this is what we've been talking about for the duration of the episode. These investors tend to be slower to move, are more valuation conscious, and want to find a way to be more active in the portfolio company. Now, as Suzanne said, they definitely are quicker to make decisions than maybe full blown buyout funds, but they tend to follow a more traditional underwriting approach. And then third are your buyout funds or more traditional GPS that are entering the growth market. So bio managers as a structure have a much harder time moving into growth since they tend to prioritize control and board seats to engineer their way to success. However, some of the larger players are beginning to dip into growth equity. You look at companies like Blackstone and KKR who have built up their buyout capabilities and now they're trying to port some of those skills over into growth equity. So you may have growth equity with a bit more of a buyout esque type of bent. So John, I think that might be a good place to stop because I know you have a few examples of Some high profile transactions that bring this whole story home. So I'll turn this over to you to give some of those different examples.
- [60:28]
C
Yeah, I think that tutorial on the way to approach the frames and the lenses by which to approach portfolio integration is so helpful. You know, jokes aside on your big academic words for a moment, I think sometimes we get lost in kind of mean returns or IRRs, of course, which have other flaws too, as we know and don't think about the distributions. And that was a really interesting comparison because it does, at least it should explicitly influence how you think about integrating in this in the portfolio based upon your risk budget, based upon your fund's goal, your organization's purpose, et cetera. So I thought that was really, really helpful and really distinguishes the three from each other, maybe more than the headline returns might suggest. Also, your beta point I think is important and I've been on the record and not everybody likes when I frame it this way. But you can on the one hand say, well, this is just expensive beta. But the reality is if growth equity over the last 10 years has enabled this massive theme of staying private longer, which I think it has, because in the old days all you had was VC and then you would launch them off the seesaw into an IPO immediately. So there was no even late stage venture, much less a teenage and early adulthood capability to stay private. And now there's very little urgency than when I was early in my career to ever go public. And particularly as I've said in the new economy businesses we've noted like pure tech software, these capital light businesses like biotech tech enabled services. So you can sit there and say all you want that it's expensive beta, but if that beta doesn't exist in the public markets, well then it's not really beta. So I think that was a really helpful reminder too. So yes, Aaron, I thought I'd close out this episode with a little fun by highlighting some famous historical deals that really epitomize the strategy and serve as good illustrations to bring all of this background and your tutorials and thoughts together. So sometimes to understand these asset classes, especially these coming of age stories, the most effective way is to peek into a few iconic companies that we would all know and discover how growth equity was a critical part of their stories. So none of these growth equity shops discovered these ideas. The initial VC firms should be credited with that. But in this baton handoff, growth equity is what took them to household names and solidified their future. So let's have a little fun here as we finish off 2009, GA invested in Facebook when it was already recognized on college campuses and amongst the younger generation, but still very much in hypergrowth mode. And the capital helped Facebook expand internationally, build out its infrastructure, and Prepare for its IPO a few years later in 2012. In 2013, TPG growth backed Uber during its global expansion phase. And we all might remember this when we would travel once we got spoiled in the States. If you're from the US by Uber and you go overseas and even to developed parts of the world and you're still back in the municipal taxis. So, as I said, Benchmark and Bill Gurley specifically were famously the primary vc, as most of us know. And as such, the company had already proven its model in many cities. But TPG and Growth Equity helped to go global very rapidly. It also helped Dubra navigate a lot of the regulatory challenges in the municipalities and the states and the cities. It also helped it build out its leadership team. Actually, 2015 Airbnb was certainly beginning to disrupt hospitality, but it needed capital to expand again internationally, deal with complex legal environments and growth equity investors such as Tiger Hill House. And again, GA provided not just funding, but strategic guidance on scaling operations, preparing for the public markets. Then in 2016, TPG Growth and Dragoneer invested in Spotify as it was expanding into new markets and refining its product a bit. The capital helped Spotify build out its premium subscription model, negotiate licensing deals, and prepare for its very famous or infamous direct listing in 2018. And finally, lastly, a fun one I picked, given the geopolitical hot potato that TikTok has become today. GA and CO2 backed ByteDance in 2018, just as TikTok was exploding globally. The investment helped the company scale its infrastructure, expand into new regions, navigate geopolitical complexity here in the States, at least for a while, as we know. So just like Chuck Feeney paved the way decades earlier, all of these deals were supercharging efforts. Each one in their own right. Involved a business that had already found product market fit. It had real revenue, it was ready to scale. But Growth Equity provided the capital, the expertise and the strategic support to make that happen. So there you have it. Betting early but on already proven ideas, backing companies that already are working and helping them work even better. Scaling without surrendering from a founder perspective, growing without overextending. From an investor perspective. That's Growth Equity. So it's less high octane than vc, less headliney, you might say, than buyout. It's an agency partner that bridges good to great, regional to global promising to dominant. And so for founders, it's a way to raise what you might call second phase capital while still retaining control. And it's a way to bring in strategic partners who understand the journey and are experts on diagnosing and prescribing the right hyperscaling ramps at the right time. And for investors, it's a way to access high growth opportunities with lower risks than early stage venture and less financial engineering than buyouts. It's a strategy that's built in the end on fundamentals, revenue, customers, margins and momentum. That, friends, is growth equity and we will leave it there. So we really appreciate you hanging with us. These coming of age stories I have found on asset classes and their stories to stardom are particularly popular so I'll be excited to see and hear on your feet feedback. I hope this was helpful. Aaron, thanks for the journey. Thanks for riding along and decanters. We will see you next time.