Private Equity Spotlight: Reinventing Operational Excellence with Cory Eaves

So we're in for a real treat today. I've been really excited about this episode for a while. We get to talk with Corey Eaves today. Corey, thanks for joining us.

How did you get into private equity? What's the story of you?

And I was at a company, a small software company that General Atlantic invested in. And during the time there, the company did well. I sort of progressed through my career and became the chief technology officer of that business. At that point, GA sold the business to another company, another investor, and they, over a short period, recruited me to the second one. It was a little bit of rinse and repeat.

I went to the second one. I was the chief product officer, is probably what you would call it today. I ran all the engineering and product management, all that stuff in the business. That business happened to be mostly in the Netherlands. So that was kind of an interesting experience.

And then, when GA sold that, they recruited me to the third one, and it was rinse and repeat. And when they had sold the second one, it was one of the largest returns at that point in the firm's history. And so when you do that, you get on the Christmas card list. They call you back when you do that. And I was at the third one.

This one happened to be in London. It was going well. I had been at this point working for GA companies for about a decade. And the partner from General Atlantic was a friend and mentor of mine. at this point.

He came over, sat down to dinner. The first thing he said to me was, I'm going to retire. Would you like my job? And that's how I joined GA. So I joined General Atlantic.

I was one of the very first operating people that the firm hired. The firm was an amazing place, good brand name, known for doing technology work, but small. And it was early days at GA. And, as I said, I was one of the first operating people there. And I helped build and lead the operating team at GA over 15 years.

as the firm grew. I was just incredibly fortunate to be there. The firm went from probably something like 5 billion of assets to over 100 billion in assets during my time at GA. If you counted all the various direct and indirect employees, we were probably pushing 1,000 people at the firm or something. So it was just a period of tremendous growth.

I kind of broadly described leading the ops team there, sort of three chapters, if you will, as the firm grew and scaled. I can say more about that later. And then, after doing all that, I pushed down on the elevator one last time a few months ago and joined a new firm. And so I was fortunate enough to be part of a firm called Bay Pine. now.

Bay Pine is a new private equity firm. We're a kind of startup private equity firm, which is a little bit like eating your own cooking, going to a startup. I've been here a second. It's been a super fun first few months at my new place.

You couldn't have planned that, I think, if you had wanted to at that point, maybe a little different now. But yeah, very true.

And it was exactly what you described. It was sort of riding that wave of the tech industry, sort of becoming a much more mature industry. So I often have people asking me about venture at GA, and that was not quite what the firm did. It was the later stage stuff. It's interesting in some ways, going back to the.

So yeah, it definitely feels like a startup. One of our founders at Bay Pine is David Rue. David founded and ran Silverlake for many years. And the way Dave describes it is like. the idea with Silverlake was to buy technology businesses and improve and grow technology businesses.

The idea with Bay Pine is to do the opposite, which is to buy non-technology businesses and use technology to improve and grow those businesses. That's kind of it in a nutshell. And Dave's theory here is that as the technology industry has matured, technology now is pervasive. It affects every industry. And one way to invest in it would have been to buy tech companies.

But now another, newer way to invest in it is to bring that technology to these other sectors. And so that's really what we're up.

And what we're seeing is like a huge, massive spike in tech. And it's not for tech companies, because, like software, is becoming pervasive in every business. And for you to have that so native and bringing that to fold for companies that aren't involved in it, maybe historically, that's got to be just a huge advantage, having the backgrounds that you all do. And we'll get into that in just a bit, like some of the ways that you approach these things. One of the things before we get to that, Corey, is, I'd love to get your perspective on kind of what you look for in a company.

And I don't know about you, but for me, when I was in PE, you're looking at literally hundreds of deals or companies a year. It's hard to read a hundred page SIM cover to cover, you know, that pace. Otherwise, the zero time I had would go negative zero. So I developed kind of like a yardstick, like here's, kind of the elements of value that I would look for over time. And it got better with kind of each year in terms of not only is this company good, and probably, more importantly, in today's world, can it be good?

And so, for our listeners thinking that this is something that someone like Corey is thinking about, good, you probably should think about it too. So, Corey, when you're thinking about looking at a company, what's your kind of personal yardstick? Like this is kind of what I'm looking for in a business in terms of whether it.

So those are a little bit of table stakes. For me, it's a couple of things to maybe go to the next level. One is, I know this sounds very straightforward, but it's just the leadership of the business. I think in almost every industry or all the investments I've worked on in my career, there's just no question in my mind that the caliber of the leadership of the business is what really makes or breaks these things. I say that even having spent most of my career as the tech guy, you'd say I'd start with tech, but it's not where I start.

I mean, I think it really does come down to leadership. And so one of the things we always look at, I always look at is, you know, what is the team like and who's there? And if you have a thesis about the business or the product and the management's not quite right, then are there ways that you can augment management or make changes that get you where you want to be? That's a big one. A second one is what I think of a little bit.

It's just like the clarity of their strategy. Is this a business that's got eight different irons in the fire and you can't quite tell what they're focused on? Or is it a business where they've got a really clear mission? They've got a really clear set of ideas of what it takes to win. That idea of just focus and clarity and strategy is a super important one.

And then maybe the last one I'd throw out is what I think of for a lot of the businesses I work on is sort of a product orientation. A lot of companies I find, you know, they sort of start out life where they're doing projects or customer things, totally normal, like they're doing whatever it will take to win. But they're basically doing things one off, from one customer to the next, customer to the next. And there's this sort of maturation where companies sort of figure out how to productize that, how to build something that's repeatable. And that's usually the unlock to a big scale boost in the company, right?

So for me, it's a little bit trying to work out where are they on that journey? Are they still scrappy and doing everything they can win to every single customer? Or are they a little more mature in how they're thinking about going to market? So

But as soon as you start becoming quite a real company, is what I say here. It's everyone are coming. We're coming to real companies. You got to find that focus, that precision, that intensity of purpose, and do it with really good people. And particularly in the areas that you spent time previously, I'm sure you'd see a lot of that where they maybe started off as this fast-growing startup.

But if they don't narrow the aperture of their lens a little bit and be more purposeful, they probably risk stalling out as they're ascending.

And they had a handful of very large customers. And each customer that they won was a huge contract to win. But it also resulted in months or years of effort for every single customer. And that's just not a model that scales very well. So I think that transition is one of the exact things we were helping them work through.

And what you shared, they're just.

But I was also pretty impressed that here was an entrepreneur who had the foresight to make the tough changes in his management team that he needed to make. And I think that's always something I try and think about, how they do that. I also think, again, in growing or small organizations, a lot of times you see an organization structure that's really built around a lot of the people and personalities in the business. And that's another one of those maturation things where you can kind of watch companies get more intentional, more thoughtful about division of labor and the people that they bring in. And then maybe, again, a last one I'll throw out, I'll kind of put my tech hat on for a little bit, is where does the tech leadership sit in the organization?

Is the CEO the kind of guy or girl that thinks about the product and is driving it? Does that reside with, maybe, a CTO, a chief technology officer in the business? It's not a great sign if you look around and the technology team is reporting in a level down, or there's one person who has 10 different functions, including IT or something like that. From a tech and product perspective, that's a big signal in the business too. And so I think for all the business builders,

It's a great observation and lesson, and I think it's just lost on a lot of folks. So I appreciate you bringing that forward. As we kind of turn the chapter here, I'm curious to get your perspective on the business of Bay Pine, going to what you're doing there. as the private equity industry continues to evolve and become more and more like a business and more and more like an industry. Like you are becoming, like I said, a real business.

So watch out. And so I'd love to hear how you all are approaching this concept of value creation and the resources that you're bringing to support the lift and the journey of.

It's kind of an overused phrase, but the idea is that we want to find well-run, middle-of-the-road businesses and then really intentionally apply technology, data, AI to change the revenue or cost trajectory of the business. That's what we're kind of setting out to do. I always find myself saying in private equity, that sounds like a super common approach. It's not. Most private equity firms don't want to take that.

on. Most private equity firms, they see a business that needs an ERP upgrade, they kind of run in the other direction. from that. I do think it is a little bit of a unique strategy. Even the firms that attempt it tend not to underwrite it.

They sort of treat it as a upside case and not something that they're kind of leaning into from a valuation perspective. So that for us is all a little bit of a starting point of what we're setting out to do. The other thing I would say is at Bay Pine, it's also a little bit of a filter. So in our case, we want to find companies and leaders and CEOs who actively want that transformation. So maybe said the other way around, if you want an investor that is kind of interested in a more conservative approach or you're not interested in doing something like that, then we're probably not the right partners for you to go do that.

But with those two things as a ground rule, we're going to then use a little bit of a known approach. I hesitate to say playbook, but the idea is we're going to have a combination of people at Bay Pine that are folks who are senior industry, people who know digital. So, for example, on my team here at Bay Pine, we've got the ex-chief digital officer from McDonald's who brings amazing sort of consumer-oriented experience. We've got the ex-digital officer for one of the P&G divisions who brings a kind of a manufacturing experience. So we're trying to get some folks who are industry level, relatively senior folks.

And then we'll also have some people who are specialists in some of the functional areas. So I'm actually actively recruiting for a head of data science that we're going to bring to the team. And we'll fill in some more conventional positions to, like a head of talent and head of finance, and so on. So it's that combination. And then from there, it's a little bit back to the focus idea, trying to map out, not a hundred, but let's find the two or three things we can engage with the company on that will really help them on a digital front and focus on those.

And that's what the intent is at Bay Pine.

I love that approach because you're taking.

All your partners at the firm know it's part of how we make our return. It just brings a little bit of a clarity of thinking when the dollars are tied to the outcome. I'm sure that part of it too, is particularly for.

It's really great to hear the way that.

on this. What we've seen is, and I can maybe just cite an example or two, but what we've seen is our companies have built small prototypes. I'm thinking of one in our education business, for example, that helps them select students upfront who are most likely to be successful going through the journey of getting to a degree. at the end. It's pretty focused.

It's using all the latest machine learning and data models to make this prediction, but then it essentially scores students when they start. Then we use that in several ways through the journey. The early pilots of that have had really dramatic high teams type increases in completion rates. We've rolled that out in a couple of small pilots. The agenda for this year is to roll that out across the whole platform, across hundreds of thousands of students at the business.

I think that is a good example of what we're trying to do. I would also say, in the same vein, even a couple of our businesses that are not yet doing this, I think we already see opportunities where they can. We're going to be helping them try and do that. Maybe just one other quick thought on this. I would also say this does not have to be splitting the atom.

I think in some cases, some of this data stuff, machine learning stuff, is now actually available off the shelf. You find it embedded in your tools. You find it as a service. You can download it Azure. You don't have to really create something from scratch in many cases to do this.

If a company can find something like pricing or a store location or some pretty straightforward use cases for this, then it's pretty easy to see a path from pilot to roll out by focusing on some of those things that are maybe a little less advanced science kind of stuff.

It's amazing. It's your strategy and yourself, just internet. Then you're like, well, I don't know if it's a strategy. It's more of a tactic. Then people started chilling out and they're like, oh, it's really good for moving goods and services and information real efficiently.

Then last year, it felt like that, just like AI, our robot overlords are going to rule everything. Then it was like, no, it's really good at synthesizing information more quickly and doing what humans can do, maybe a little bit faster, just like the internet was, just like the iPhone did. What I think you're sharing is one on the more of the actual things. After a year of buzz, this stuff is getting embedded into tech stacks that people already use very quickly. If you're willing to flip the switch on that.

From a technology perspective, I think the big cloud platforms like Azure and AWS and Google are going to be where this stuff mostly lives. I don't think the average company is not going to have to invent a lot of technology to go do this. Most companies are already running applications on those platforms. I think it is slowly moving from concept to reality. It's interesting as we looked at the.

. Think about this. It's a case study idea. here. You have many hundreds of private equity firms.

There are thousands of portfolio companies that come in for organic needs. First quarter 2024, technology needs up 40% versus first quarter last year. Maybe the calls last year, where I need to talk about neural networks and really what it is. No, we need maybe a strategy that started last year, but we're going to implement tools that are embedded in other technologies and thoughtfully and proactively embrace what's already becoming available. Whereas I think the vast majority of the world are going to be late to even embrace what they have and that systems are already buying.

Your point is a really good one. You don't need to create your own neural network, but you do need to be willing and open to either use the systems that are embedded in the ones that you are using or switch to the ones that are going to do it much better. What I also really love what you're saying is you're also being really thoughtful about the tools that are commercialized and that you can commercialize. The original vision of BlueWave was going to be much more of a self-serve SaaS platform. What we realized was the dimensions that we were solving for in these connections that we make were too multidimensional and Alexa wasn't smart enough.

then. Every year, I would call this team of data scientists that were in our network, can a mere mortal company that's not Google or Meta or Apple make this stuff? They're like, unless you want to spend $50 million. I'm like, nope, don't want to do that. We did it.

Then, in 2022, I called them again and they go, yeah, it's ready. I'm like, what do you mean? it's ready? They're like, yeah, mere mortals like you can do it. Really?

We started developing our own recommendation engines. They work really well if you have the gumption to do it, and it doesn't take a Google or an Apple or a Meta budget. It's not cheap, but it's having profound impacts on the speed, the efficacy, the precision, the comprehensiveness of thoughtfulness of all of the ecosystem that we manage here. What you're describing with your education business, it's exactly that right. It's like you're using it to make the students more successful throughout the process and seeing a tangible lift in a relatively short period of time.

I think that's right. I think just as a.

Yeah. Because they've all changed. I'm like, what should be the expectation.

Oh my God. Since I have zero coding skills,

You have no clue how hard this is.

So, admittedly, that's a flaw, that I have, a weakness. And I'm jealous that you actually know how hard it could be. Maybe, as we round out our conversation here, Corey, I'd love to bring you back into the Wayback Machine, because we've talked a lot about the future and the current now and where the world is going. And one of the things that I constantly benefit from, from the really good fortune of being able to have conversations with people like you, is, I always learn things I wish I knew. I was like, how did I know that?

And I was like, other people have to have those same kind of thoughts. And so I'm curious, Corey, if you were to go back to 22-year-old Corey or thereabouts and give your then self a piece of advice, what would be one of those things that you'd share? Yeah, I thought about this when I saw.

So that was probably all positive. I think the advice I would probably give myself is to do two things. One is maybe plan a little more, back to the serendipity point you made about getting into private equity. I'm always a little jealous of people who can kind of chart this multi-year course and navigate some 20-year career in some thoughtful way. That didn't happen for me.

And I sort of look back and wonder if I could have been a little more intentional. I probably stayed at a couple of jobs early in my career a little longer than I should have if I had been a little more thoughtful. My other piece of advice to myself would be sail more. My personal passion is sailing. I love to do it.

And I think, if you look back, there's a lot of weekends and travel and stuff where I was putting the extra hours at work. In the long run, I probably would have been better off if I had been sailing with my kids or something instead of traveling around the world.

Just look left and right, maybe a little bit, and don't just go charging. I love that. And sailing is a skill that I'm also tremendously jealous of, because I lived in the coastal areas of Connecticut for years. We joined a club that was a sailing club. And it was mostly because it had a pool for the kids and tennis courts for them.

When we joined, I was like, I'm going to learn to sail. And I grew up in Texas, so there really wasn't an option. And to this day, I really regret that I didn't, because it seems like it's just tremendously peaceful, but also it has this element of sport and tactic and strategy. And you can decide which one you want to do, depending on your mood.

And these are the world's most boring boats. Every kid learns to sail on these boats. And if these things don't snuff out the passion for sailing, nothing will. They're absolutely terrible boats. But everything you learn on that boat, how to steer, how to trim the sail, how to read the wind, all of that applies all the way up to a 200-foot yacht.

It's absolutely the same theory, the same learning, the same skills, and so on. And I think there's something kind of neat about learning some skill as a five-year-old that you can take all the way through your life. It's one of the things I love about sailing.

And I understand they're kind of like little race boats, kind of a thing. So he tried to get his daughter, my wife, into sailing. And her sailing career was apparently pretty short. And I think she'll forgive me for telling this story. But on one of her first ventures out in those little bathtubs, she had a firm disagreement with the young person who was deemed to be the captain.

And she immediately threw him overboard.

Apparently, that was the end of her sailing career. So she wasn't able to teach me to sail. So, Corey, this has been a tremendously insightful conversation. I've got a little stencil pad where I take all these notes during these conversations. I really do appreciate you taking the time to share your lens into the world.

That's a really unique one. And particularly in an industry of private equity that's so rapidly changing. So thank you for spending the time here with us and teaching me all these sorts of things that I wish I knew beforehand. Thank you for having me. It's been a pleasure.

That's all we have for today. Special thanks to Corey for joining. If you'd like to learn more about Corey, Eves and Bay Pine, please see the episode notes for links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcast. We truly appreciate your support.

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