Invest Like the Best with Patrick O'Shaughnessy: Episode 429 Summary

Episode Title: Jay Hoag - Keys to Successful Growth Investing
Release Date: June 17, 2025
Host: Colossus | Investing & Business Podcasts
Guest: Jay Hoke, Co-Founder of Technology Crossover Ventures (TCV)

Introduction

In Episode 429 of "Invest Like the Best," host Patrick O'Shaughnessy engages in an insightful conversation with Jay Hoke, the co-founder of Technology Crossover Ventures (TCV). With over three decades of experience, Jay delves into the nuances of growth investing, the evolving landscape of public and private markets, and the enduring success of TCV.

Market Conditions: Then vs. Now

Distinctive Changes in Today's Market

Jay Hoke reflects on how the current market environment starkly contrasts with previous decades. He emphasizes the newfound importance of macro factors such as regulation and global trade impacts on technology investing—topics that were scarcely on the radar 30 years ago.

Jay Hoke [06:39]: "Regulation of tech, how do tariffs impact global trade? All those issues which really were never part of the lexicon or focus for technology is pretty new."

Shifting Focus from SaaS and AI to Consumer Internet

Hoke identifies a unique investment opportunity in the consumer internet sector, which has garnered less attention compared to the dominant interests in SaaS and AI. He suggests that this oversight presents a goldmine for contrarian investors.

Jay Hoke [07:21]: "We continue to see interesting private opportunities that I think most of the world's not focused on."

Opportunities in Growth Investing

New Frontiers in Consumer Internet

Despite the dominance of established consumer internet giants, Hoke argues that there remains significant white space for new consumer-based franchises. The expansive reach of over 5 billion smartphone users creates vast opportunities for innovative consumer applications.

Jay Hoke [07:54]: "The big enormous Internet franchises that have emerged are playing on the opportunity set of 5 billion plus smartphone users... actually create enormous opportunities for new consumer based franchises."

Balancing Technology Development with Commercialization

Hoke underscores the critical difference between investing in emerging technologies and their successful commercialization. He notes that many groundbreaking technologies, such as autonomous vehicles, have faced delays in reaching commercial viability.

Jay Hoke [09:23]: "It's the applicability of technology, not just the availability of it and defensibility. What is a monetization model?"

Public vs. Private Markets

Evolving Dynamics in Private Equity

Hoke discusses the current trend of private companies remaining private longer, fueled by abundant private capital. However, he questions whether this shift is permanent, arguing that most successful companies ultimately benefit from going public due to the discipline and liquidity a public market provides.

Jay Hoke [12:01]: "I believe the vast majority of the best companies will benefit by being public over the long run."

TCV's Strategic Flexibility

As a crossover investor, TCV maintains flexibility between public and private investments. Hoke highlights that while TCV primarily focuses on growth-stage private companies, it remains opportunistic in deploying capital publicly when compelling opportunities arise.

Jay Hoke [15:31]: "We may take one times our money out, but the best companies over time... are generating returns from very rapid growth."

The Investment Process at TCV

Automated and Data-Driven Sourcing

TCV has evolved its sourcing strategy from traditional cold calling to leveraging AI and data intelligence. By tracking and analyzing data from over 11 million technology companies, TCV efficiently narrows down potential investments.

Jay Hoke [27:06]: "We have a data intelligence group... it's an automated tool... allocating our time and prioritizing certain companies over others."

Rigorous Investment Committee

TCV employs a stringent investment committee process where a unanimous decision is required for each investment. This ensures that only the most promising opportunities receive backing.

Jay Hoke [31:14]: "We have a three person final investment committee that has to be unanimous on investment."

Concentrated Portfolio with High Conviction

Unlike early-stage venture funds, TCV maintains a concentrated portfolio of 6 to 10 investments per year, focusing on high-conviction opportunities that demonstrate strong growth potential.

Jay Hoke [31:38]: "We're being hopefully economically selfish by retaining our stake and then we will selectively and opportunistically deploy capital publicly."

Success Factors and Longevity of TCV

Building an Enduring Investment Franchise

Celebrating its 30th anniversary, TCV attributes its longevity to resilience, a relentless focus on growth, and a commitment to investing in the best companies. Hoke emphasizes the importance of internal talent and maintaining a culture of excellence.

Jay Hoke [22:56]: "It's a lot of resilience... our bet on technology paid off. Our focus on growth paid off... being a long term patient investor in the best companies."

Avoiding Common Investment Traps

Hoke warns against the common pitfall of overestimating near-term potentials while underestimating long-term outcomes. He cites historical examples like Apple and Microsoft to illustrate how enduring companies often weather periods of skepticism.

Jay Hoke [10:28]: "Every area and every great company goes through a desert of disillusionment in investors minds... you have to keep that in mind."

Challenges of Long-Term Investing

Navigating Market Volatility and Public Scrutiny

Holding significant stakes in companies like Netflix and Spotify, TCV has experienced periods of intense market scrutiny and valuation fluctuations. Hoke recounts the challenging phases of financing Netflix in 2001, highlighting the emotional and strategic complexities of long-term investments.

Jay Hoke [35:17]: "Company filed to go public in 2000, market melted down... we did a restructuring financing in 2001 to get them through to profitability."

Managing Expectations and Second-Guessing

Public market corrections often lead to second-guessing investment decisions. Hoke acknowledges the difficulty of maintaining conviction during downturns but reaffirms his belief in the long-term value of top-tier technology companies.

Jay Hoke [37:49]: "If you could predict when the market's going to sell off, that'd be a productive discussion to have... it's hard to know if somebody's a great investor except for the Passage of time."

Advice for Aspiring Investors

Focus on Passion and Excellence

Hoke advises young investors to pursue growth investing out of genuine passion rather than the allure of financial rewards. He emphasizes the importance of building a team of exceptional individuals and maintaining a contrarian approach by avoiding herd mentality.

Jay Hoke [43:10]: "If you love it, don't do it because you think it's going to be financially rewarding. Success has to precede that."

Embrace Long-Term Commitment

The keys to sustained success include patience, resilience, and a steadfast commitment to investing in high-quality companies. Hoke encourages investors to remain disciplined and focused on creating long-term value.

Jay Hoke [43:38]: "Find a segment that is relatively unexploited and therefore maybe has to be a little more contrarian, which also then means the fundraising is going to be harder. But don't follow the herd."

Personal Insights and Leadership Philosophy

Influence of John Wooden’s Principles

Drawing inspiration from basketball coach John Wooden, Hoke emphasizes defining personal success and striving for continuous self-improvement. He shares a personal anecdote about saving Netflix CEO Reed Hastings' life, illustrating the importance of preparedness and quick thinking.

Jay Hoke [45:13]: "John Wooden's pyramid of success... a peace of mind which is a direct result of the self satisfaction of knowing you've done the best to become the best you're capable of becoming."

Leadership and Succession Planning

With TCV celebrating three decades, Hoke discusses the firm's succession planning, highlighting the appointment of John Doran as a key successor to ensure the firm's continued leadership and success.

Jay Hoke [40:16]: "Succession success in Planet is John Doran... He's running the day to day."

Conclusion

The conversation between Patrick O'Shaughnessy and Jay Hoke offers a profound exploration of growth investing, the evolving dynamics of public and private markets, and the strategic imperatives that have sustained TCV's success over 30 years. Hoke's insights provide invaluable guidance for investors navigating the complexities of today's technology-driven investment landscape.

Notable Quotes:

• Jay Hoke [07:54]: "The big enormous Internet franchises... create enormous opportunities for new consumer based franchises."
• Jay Hoke [09:23]: "It's the applicability of technology, not just the availability of it and defensibility."
• Jay Hoke [10:28]: "Every great company goes through a desert of disillusionment in investors minds."
• Jay Hoke [43:10]: "If you love it, don't do it because you think it's going to be financially rewarding."
• Jay Hoke [45:13]: "John Wooden's pyramid of success... a peace of mind which is a direct result of the self satisfaction."

This comprehensive summary encapsulates the key discussions, insights, and conclusions from Episode 429 of "Invest Like the Best," providing valuable takeaways for both seasoned investors and those new to the field.