Private Equity Spotlight: Building Success with Tim Schulte of Council Capital

Blue Wave connects proactive business builders, including hundreds of the world's leading private equity firms and thousands of leading companies, to the very best. Blue Wave credentialed professional service providers, independent consultants, and interim executives for critical, variable, on-point, and on-time business needs. Enjoy.

I'm very excited to be here with my friend Tim Schulte from Council Capital, not only an amazing private equity investor, operating executive, but also of the Nashville variety, which is one of my favorite varieties of all time, given that I also live in Nashville. So, Tim, great to have you here with us.

What brought you to this PE industry that you live and work in today? Sure.

out of school, kind of learned the basic toolkit of PowerPoint, Excel, and such. Then joined an early stage startup, think half dozen people sitting around a table figuring out what they were doing, bar in the office, ping pong table, very stereotypical startup. Went to business school and coming out of business school, landed in private equity. And what I had learned from the consulting startup experience was I really enjoy the act of building businesses. Less expertise and even less passion as to what that specific business does, but the act of working together with your peers to build something of value to customers.

I know that sounds generic, but I found very fun. I think in consulting, you have a lot of the benefit of a diversity of industries, a diversity of companies, of people, of projects. You learn a lot, but the incentives are really around selling more work, not necessarily building businesses and creating value. No disrespect to consultants. And found in private equity, you're able to still get that same diversity of intellectual stimulation and personal relationships, but you're able to do it in an environment where you have aligned incentives around improving products, improving businesses, improving customer experiences.

And the relationships that you build aren't 12-week projects, but they're multi-year partnerships. And so the type of work I began doing was similar to consulting, but the construct in which I did it, I found wildly more fulfilling. And so that's what led me into private equity and into a value creation role within the industry, not a traditional investor role.

You've got this really interesting background that you've done consulting. In some ways, you've done kind of the venture capital side of business building. And then the private equity side. What were some of the difference in the approaches as you think about when you were in a startup? and maybe the approach that you take, with maybe the steeper trajectory that maybe is sometimes less certain versus the way that you all do things in private equity?

How do you compare and contrast? And it's not that one's necessarily better or worse. I'm sure they're just a little different.

And so for me, both experiences have been fun and valuable, but they are a bit more different than I think people often believe, because the two industries get lumped together so often.

One of the questions I'd love to ask people is we know you better if we knew this about you. Tim, what's one of the things that we would know you better if we knew this about you?

I selfishly get a lot out of that experience. We just opened our second campus and the school itself, I'll say, is scaling. And so it's also been fun to contribute a lot of what I learned in the private equity world scaling businesses to my personal life and community organizations, helping them scale their operations and excellence as well. The one thing I'll add, completely unrelated, Sean, you and I joked about this offline before we started recording. Another one of your podcast guests, I think it was a month or two ago, Eric Jensen, now at Nordic Capital, talked about his nickname, which was Thor.

I shared with you that I have a pretty well-known nickname too, which is sweet tea. So my father-in-law, then the boy from the North, dating the young woman from Tennessee, my father-in-law gave me the nickname of sweet tea, which has expanded to friends, professional colleagues at multiple employers. I have two nephews, an eight-year-old and a five-year-old. I think the eight-year-old has never once called me Tim, and I'm pretty certain the five-year-old doesn't know my name is Tim because they exclusively know me as sweet tea. In the personal and professional setting, you'd know me better if you knew my real name was sweet tea.

And really through the lens also, if you're a business builder right now, if Tim's thinking about these things, so should they.

We at Council, one of the things that makes us different is what we call our CEO Council. So this is a group of three dozen successful public and private sector leaders from former acting head of CMS and a few state Medicaid directors, CFO at Cigna, CEO at Brookdale Senior Living, many more who help us understand markets. That's probably thing number one that is most important to us. Thing number two is the team, and there's an element of both competency and attitude. Both of those, I think, are equally important.

Part of what we can do is help entrepreneurs to build out their management teams and bring in new capabilities. There needs to be a cultural fit and attitude and always be learning and always wanting to get better. We are on the same team type of mindset. So team is extremely important to us. We just hired a chief talent officer earlier this year who's focused on helping our portfolio companies build out their talent capabilities.

I think a lot of other PE firms who have hired such a role have done it more as bringing exec recruiting in-house. That's not what we've done. We are helping our companies get better at the act of recruiting and building their recruitment engines. So market, team, and then company sounds silly to say, but is maybe the least important of the three. There's obvious things around growth and retention and things like that, product and quality that are really important that we look at.

In order to have a productive partnership, though, both sides need to bring something to the table. So we're not looking for perfect businesses. We're looking for good businesses in good markets with a good team that we can supplement and build around to help them grow. And where there are weaknesses or opportunities for improvement, that's where we, as a value add investor, can really contribute the most. So a little long-winded, but that's how we think about it.

But then, if you have a really good market and a really good team, this whole idea that magic happens. And as I even reflect on my past career and the first 20 years of my career, I was in private equity. And as I came up in the industry, early on, it was about learning and chopping wood and trying to figure out the business of business. But then, as I grew, it became more of my job was to be a recruiter and a psychologist. And just because people matter.

And when we look at our data today, working with hundreds of PE firms and thousands of their port goes, the number one reason our phone rings is we need to get the right people in place, working with top business builders like you, because it matters. As much as the robots seem to be taken over, we seem to get more and more calls for the people.

It's a people business. And there's a whole variety of reasons for that. And so maybe with that in mind, we talk about like, creating value. I'd be curious, how does council capital approach value creation? What resources are you bringing to the companies that you partnered with to help them become safer, stronger, bigger, better?

One, I mentioned our CEO council earlier, so that a group of active investors and advisors of the firm helping us understand markets, make introductions, sit on boards, things of that nature. We also have quite a few folks employed by council capital as part of what we call our value creation team. So the couple of different roles there simply are generalists and our specialists. So the generalist chief of staff model, think post MBA, former consultant types who can drop in and help with strategy, operations, things of that nature, at a, at a, in a way that we are able to bring great talent to these companies and reallocate them in a cost effective manner. Generalists can solve a lot, and I'd argue a lot more than most people think.

that said, subject matter expertise is still important as well. I mentioned our chief talent officer earlier, but also things like finance or M&A. that subject matter expertise is important. And we bring that to bear to our portfolio companies as well. So partnerships, collaboration across companies, a million examples of all of those things.

But the last one I'll highlight is we want to make sure that we have an impactful model, but we do it in a scalable way. And I think a lot of private equity firms talk about playbooks. We like the concept of toolkits much better. I think a playbook implies we've done this. We know what to do.

We will tell you here's the play and what to do. Go run the play. Our approach is more toolkits. You're the builder. Our job is to provide you with the right tools so you can be successful in your role.

And so the development of templates, resources, partnerships, to bring that partnership to scale in a more scalable manner.

And what I heard from you is like, no, we're going to do something in between, and maybe some common approaches, but custom implementations to solve unique challenges and opportunities.

And so there are some funds, if you only invest in B2B software and all of your companies are using Salesforce and Marketo and NetSuite and the same set of systems, looking at the same set of metrics with the same set of processes, you can take a more systematic, heavy handed approach. given the diversity of the companies in which we invest. That just doesn't work. And also I think that's less fun for everyone. And so I think the model has to be less heavy handed, but higher touch.

And we try to strike that balance.

That's the order of nature in business, in life, in humanity. We want to kind of build structure. And I view the private equity world kind of the same. on a more kind of lattice level is, you're having an interplay of not just within the organizations, but between the private equity firms, the deal teams, the operating teams, and then the port co-leadership teams, and then down through those organizations. So, Tim, I'd be curious how you all manage this kind of symphony of motion within your firm and your portfolio companies.

I think folks often focus on defining roles and who has decision rights, and yes, that is really important, but they're overlooking the foundation. So we have a lot of processes in place, with our board meetings and monthly financial reviews and our engagement model and things like that, but mutual respect and good communication is important. Diverse skill sets, not having 100% of people who work at a firm being investment professionals and 100% of people on your board being investment professionals, often not a great mix. And so diversity of people, diversity of responsibilities, mutual respect, good communication, you'll figure everything else out, if you have. that, is kind of the philosophical approach we've taken to it.

And I think that's 100% how you want to build the foundation, whether it's a private equity firm or a portfolio company, or an independent company, or dare I say, even my family.

What's unique or additive to those prior comments is our executive and residence program. So I think, from a process perspective, private equity firms have historically, one, found a business to invest in, and then two, subsequently, make sure they have the right team in place. We have essentially flipped that to say, number one, let's make sure that we partner with the people that we want to be in business, with. Good people, good values, good skill sets, and then let's work with them to find a business to invest in. So our last two investments both came through this executive and residence program.

We're partnered right now with the gentleman, Alan Peninsky, who is a leader in the payer services and value-based care model, connected to us through our CEO council, working with Alan to find what is the right business for him to help lead to success. And so that people-first model comes to life in how we source businesses. That's the first thing I'd highlight. And the second one, I think everyone is talking about AI, and in some cases, it's hype, and people don't always know what's real and what's not. There's a lot going on, though, at council, both within our portfolio, as well as within the firm.

So I could give you a million examples of portfolio pilots and projects, but what we're pretty excited about is an internally developed tool that we've created. Essentially, think of healthcare, private equity, specific version of Google and LinkedIn. So, when we want to go into a new business, it can aggregate tens of thousands of research papers, data from PitchBook, data from Grada, data from other sources, to help us much, much, much, much more efficiently come up with a shortlist of actually relevant companies, not just tangentially relevant companies, help us better understand who, within our network, has connections to and around this company, in a degree that's a few steps ahead of where you can get from a LinkedIn search, helping us understand and framing up market research. to inform our investment thesis and our investment memos. We have hired a developer and have human beings whose job is to build out software product to help us be better private equity investors.

I think that is something quite different and quite exciting that we're doing at council.

what do they have embedded. Beware of confidentiality, by the way. Don't ever forget that. And so the way that you're doing it there, though, and thinking about the business of your private equity firm as a business, is, A, very unique, and then, B, I think, super exciting. And so to have those tools and that ability to invest, it's got to make you guys feel pretty good about doing your own job, so you can spend more on things that are interesting and matter.

Not staying until three in the morning on LinkedIn searches.

So now that I have the opportunity, Tim, to pick your brain here and hopefully make myself a little bit better at your hard earned work, I'd be curious, what are some of your favorite books that you've read, and maybe some of the takeaways?

Both had similar themes around. all of us have a finite amount of health, wealth and time. And all of the decisions that we make are essentially trade offs across those three dimensions. And so we need to be more thoughtful and intentional about what we're giving up and whether it's actually worth it. I bet a lot of people who listen to private equity podcasts prioritize time and energy around probably maximizing wealth one, health two and time three.

But having control over your time is actually the best predictor of happiness in life. And so not necessarily a lot of novel concepts that you didn't know beforehand, but pretty thought provoking around, are you focused on the right things and being intentional about the trade offs that you make? And that applies to both business, the projects you work on, how you spend your time and, more importantly, life outside of it.

I don't know that it's becoming imprinted. One of my friends that was on a recent episode here wrote this book that is called My Teacher, My Son. And I'll show you here. And he was in kind of this go, go, go. ecosystem, and had this really tragic, kind of unimaginable accident that occurred in his family.

And it caused him to kind of pause and reflect and learn, like, we're only on this rock for one lap, maybe many laps around the sun. But this is our one, and he calls it their one shot and something I've been thinking a lot about lately. And so thank you as well for bringing that up, because it's something that I know that I struggle with personally.

It really helps us when you do this. So thank you in advance. In the meantime, if you need to be connected with the world's best in class, private equity grade, professional service providers, independent consultants, interim executives or anything else, please give us a call or visit our website at BlueWave.net. That's B-L-U-W-A-V-E.net and we'll support your success. Onward.