Suzanne Yoon, Kinzie Capital | Charting the Course of Value Creation in Private Equity

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I am very excited to have Suzanne Yoon here with us today from Kinsey Capital. Suzanne, thanks for joining us.

What's kind of the life story?

And I have, you know, I was a young child and really saw him do that, and actually my first job. I remember coming, you know, walking home from kindergarten, going across the street to the deli. And he would pay me in twix bars to stack cigarettes in the deli, you know, by the deli. Which is a really odd thing to have a five-year-old do today, but that's what. That's how my, I think, my view into entrepreneurship and small business, you know, management started. Unfortunately, when I was young, my father passed away in armed robbery, and so that led my, you know, my mother. At the time, I was 10 and I had two younger siblings, and she was pregnant with my youngest.

So overnight, I actually kind of took over as almost the second parent, and you know, so we. I currently today live in Chicago with my husband and my three boys. I did start my career in New York. But, you know, if I think back to what really had, like, drove. Kind of my interest in business, you know, and making money, because that's what we do in private equity. Part of it was probably the influence of my father, and then secondly, just necessity, wanting really to have financial security, being able to take care of my family.

And so I began my career actually in Chicago with AB Enamro Bank, and then quickly moved to New York. And I was kind of back between New York and Chicago for about 14 years. And I would tell you, my first, as I started in banking, I did rotations through various groups, went through credit training and then landed in our special assets group. And at the time, this is the mid-90s, mid to late 90s, when we could actually have banks, could actually have off-balance sheet private equity portfolios. And so that was really my first entree into, you know, seeing what the buy side really looked like.

It's particularly private equity, like, you know, owning private positions, and, you know, fast forward. Years later, I went from working all up and down the capital structure and credit to really, you know, focusing on equity. The last 15 years of my career, and so in 2017, it kind of led me to the East Coast.

At the time, I had moved my family back to Chicago and I had a very lucrative and stable career at a, you know, another private equity firm. I had made a name for myself in industry, but I always felt like something was kind of missing. And I think the three things that really drove me to start Kinsey were one. I saw a real interesting market opportunity in the lower middle market to bring real operating and technology solutions to the lower middle market. Secondly, I did really want to be back in Chicago with my family.

I have my children grow up here, my husband's also from Chicago. The free babysitting was a real plus with my family being around. And then third, and probably most importantly, like, I really wanted, you know, an opportunity to create kind of my own destiny and create a culture and firm. That, you know, I was going to be proud of that, you know, that would serve the marketplace.

And I was really a specialist at painting things safety, yellow, and so I think if I look under my nails today, there's probably like yellow paint in there.

No need to do it. It was just like, you know, 110 degree Texas heat and I just got to make more room.

And so I love, you know, you did the same thing, Suzanne, like, what was that moment? That said, I'm going to start a firm and explain. Kind of the, you know, the the feeling at the time that led you to say, you know, jump off the proverbial cliff, the building, something.

I had a real interesting opportunity, even in my late twenties, to start up, you know, a new product group. It was essentially a what today we would, you know, it was called the corporate restructuring, and, you know, corporate restructuring group. But really, what? That was was the first time that Av. Enamro and Lasalle Bank, when I was there, institutionalized the idea of structured equity and, you know, restructuring financings on the front end. And it was a time when people really were just trying to figure that out, and I thought that was so exciting.

So I I think having kind of been drawn to these different types of ideas, even within large organizations, I always knew. I think ultimately, I wanted to start, like, start and build things. And and that's what obviously drew me to private equity, but then also really drew me to the idea of starting Kinsey. I I think it took me years to take that leap and but I eventually decided to start Kinsey because I wanted to return to Chicago. I really do believe in the value that we as Kinsey, you know, could bring to the market.

I found great partner and my partner David Namkung, and then also his firm that he started Clarity Partners, which was a which is currently a 160 plus person technology consulting firm. And it was going to support my investment thesis around really being able to leverage technology and strong, strong operations to accelerate growth in these lower middle market companies. And and and lastly, I had the support and confidence, first and foremost, from my husband and my family, and I think we had a lot of soul searching around. We're about to really walk away from a lot of income and maybe we won't have any for an extended period of time.

Right, I think, Sean, you know what that's like? And we're going to also have to invest our life savings back into it. And you know, that is virtually impossible without having the right support system. And so I feel like I had all these, all these things happening that kind of pointed me to. You have to jump off the cliff, Suzanne. You don't know what is going to be down there, but like, just jump off.

And, you know, especially given the stress of being an entrepreneur, the stress of private equity, I mean, just everything that comes at you in a given day. And I do remember having a moment where I had to really dig really deep and knowing I wasn't going to stay where I was. What was my next step? And I remembered I was sitting on my couch having a moment and really thinking hard about the three paths that I could take, and none of them totally felt right. And even though starting a firm and going out on my own was the scariest.

In my gut and in my, you know, it's like I could feel it in my body, my head, my heart. Like, I knew, if I didn't do it, I would probably regret it the rest of my life.

And I didn't even really know it, and it just kind of like, eventually it got me there. And I don't think I've ever told the story, at least outwardly. When I was, I was, I was on this like 50 50 or 51 49. Do I do this thing? And I was at a Houlihan Loki event at a J.P. Morgan conference in San Francisco.

And they they brought in these like soothsayers from Las Vegas called the Bumbies, and they give you these utterly honest perceptions on people. And I'm sitting there in this line, and most people are like getting passive aggressive, like acknowledges, like you look like you're really good at paddle, tennis or like, kind of like cheap shots.

Yeah, and I show up and they both kind of they have, like, you know, these headphones on and dark sunglasses. They both look at each other and kind of pause for a little bit. And and one of them starts typing, the other one starts typing, they're kind of typing together and they type it off.

And they go, you look like you're like, a, you know, kind of this safe company, man. But you've got this startup idea and you're not sure you should do it. But I can see it glimmering from the edges of you and you need to just go ahead and do it. And I know I hadn't told anyone about this. I was like, Well, what kind of like dark magic is this?

I'm I'm a member of a group called the Private Equity Women's Investor Network, and it is the most senior women in private equity. It was started actually officially, initially by LPS, so very, very senior, you know? Women who are decision makers at limited partners, large pension funds, funder funds, some of the most powerful in the world in terms of allocators that realize that. All the we had, there were women, but they were all on islands by themselves and didn't know each other. So I was fortunate enough to be included in this group a little earlier in my career, even before I made a partner or managing director, and really learned from them.

And they, I think many of them, were great mentors and and friends and advocates of mine. I did go and people knew that I had kind of this desire. Potentially to start a firm, or do my own thing, or or build a private equity firm within a larger asset manager. And ultimately, it was this group of women that almost, like, sat me down and said.

There's no, there are no women running firms, and if you don't do it, who's going to do it? And you should do it? And I think that that gave me kind of that last boost of confidence that I needed.

And that support that I needed outside of even my family to go do it, and you know, it's, it's, it's sometimes like voices from the outside. And in some ways. I felt like I had no choice but to do it. If I wanted to get to the top, because women just didn't get to the top, you know, 10 years ago?

And they're like, we didn't want to jump off, and Monique goes. It's really easy, you just jump off the top of this cliff and you go really, really fast. If something gets in your way, turn. And he's like, What?

So he jumps off and tumbles down all the way down, but then and then he figures things out in 30 movie seconds later. He's a professional skier and so. But to me, that's what it was like starting a business like, you're just jumping off this cliff, you see other people. It makes it look really easy, but the reality is you're going to tumble the keys. You just get back up and you could fall, but you fall small.

And then when something gets in your way, turn so. So. We share that every year at our company. You know, when we do it, we do an all hands strategic kind of session. And and it's like, this is what every day we're. We're jumping off cliffs, you know, it's okay to fall, but just get up quickly. Turn.

I think culturally they are customer centric, they care about their customers and their vendors. And I think third for us, which is a little more cultural in the terms of, you know. Because we want to see companies that will continue to grow, so we want to see a management team. Or, you know, some culture of a desire to improve, desire to improve, desire to grow. And and why are we coming in?

And it's usually because they want to. They know that they need to make changes, but they don't know how. And they need help doing it, and they need help, you know, finding the right partner. And so I think those are probably the key area initially that we we look for. Obviously, there's so many other things like, do they have good financial controls? or can they have good financial controls? If we get there, obviously profitability, history of growth. But I think in order to get to the type of returns that we are chasing. It does require a mindset, very much a growth mindset. Which means you are open to changes and growing, no matter how difficult they might be.

For me, life's a journey, it's not a destination. It's like little bits. It's the desire to improve, right? but not necessarily improve.

But the but I'd love to maybe double tap on some of those. And so if we think about, you know, business owners who are listening to this and they think, okay, Suzanne's looking for a differentiated product or service? What does that mean in your mind? What does this? What does differentiation mean?

And what we loved about the business when we were just founder led, when we, you know, founder, the founder was selling the business. They had a really differentiated service model relative to the industry and they were able to build that because it was so nimble. And then how could we really leverage off of it to continue to grow, which we have? And so, or, you know, we own a sporting goods very specialized in golf distribution business and they we. We are the largest green grass sales team in the country, meaning we actually have one-on-one customer service for our green grass. Which is the clubs themselves. And act essentially as the catalog, the office or business catalog for the golf club. So that they can buy everything they need to run the golf course from us.

And no one else is doing that at the scale of of this particular business. So it allows us to do additional acquisitions and get into different product lines. And they did an amazing job building that business, and it was again a founder led business that sold to us. So, you know, and I, as I think about that, you know that that's one.

And the second reason why they grow is because they did a great job for their customers and there's no way to continue to grow on that. If you don't have a customer centric or customer first culture, so we, we, we certainly look for that. And then I think the third is they know that they have something special.

They don't know how to scale it.

And then good things happen with more fuel and help. So I think, I think it's a very excellent way to to, to succinctly describe, like, what's going to make a great company and make it even better?

And it's not that you can't do really well in the large cap private equity. But you're in more of the tanker ship business, where you're like, you're changing things more kind of evolutionary, you're taking, you know, more gradual turns in in, but you know?

And so it is difficult to scale and grow a business to the multiples that we want. On a return if you are going to do more of the same.

And so just I think the fear of making technology investments. Even going back to 2012, you know, early 2010s, and then into, you know, the last 15 years, is still kind of a fear. Because it can be very expensive if it's not executed right, you, you can lose your shirt. And so I really looked at that as an opportunity for a firm. That could, you know, looking at the larger firms out there like Bain and KKR, and who have large operating teams. Because they have billions and billions and billions of dollars under management and can afford to have those people in house. And how could I bring that type of resourcing to the lower middle market? So I was very fortunate to be able to partner with my co-founder and head of technology OPs at Kinsey, David Namkang.

He was the founder of a 160 person technology consulting and management consulting firm that does enterprise level work, and we were able to create a strategic partnership with them. We're actually co-office, so I have access to his entire team, really, anytime I need them or like.

We need them, our portfolio companies need them. And that's not just at, you know, when we think about ERP and EPM implementation, but everything from digital web, custom application development, data analytics, security and IT infrastructure. And then outside of that, his network, you know, his technology network. To be able to bring in the right people for the right sizing. And then also having blue wave, you know, to help us resource that. So, for me, the value creation, what, you know, private equity of the past, where everybody looked like geniuses, where they were buying, right, 20 years ago, we were buying. We just talked about this.

They were buying at three to four times, and interest rates came down over time and the companies were kind of slowly growing. You look like geniuses because you're able to get to your multiples fast, because you're buying low now today multiples are higher. You know, the debt loads are heavier. Like, what are you really going to do to get to that alpha?

The only way, in my view, it's like, you've got to get back to fundamentals, which is really value creation and operations.

Little did I know buying low, selling high. You know, now the world is just so much more competitive and efficient. The industry is an industry, and, you know, bringing this tech mindset to traditional economy companies has got to just drive tremendous, you know, value inherently to companies. That if they're forward thinking on, it can probably, you know, start picking up the pace and lapping their competitors who aren't adopted.

So, you know, and one of the things that I'd love to get your perspective on is, you know, today, as you're engaging with your portfolio companies. And you know, thinking about some of the commonalities that can make these companies bigger, safer, stronger, more valuable over time. Like, what are some of the things that you're kind of messaging and working with them on? Kind of these, you know, in some ways, probably we, you know, the board meetings happen every week, you know, kind of a thing.

And so, you know, we talk a lot about the J curve in private equity. But getting the management teams and the employees to understand that there, that there's going to be a J curve and that that's uncomfortable. It's a very scary place to be for people, you know, management teams. But it's very difficult to get to that hockey stick growth right without making the investments on the front end. So for those of you who know what the Griner model is, you'll understand the Griner curve is not a smooth curve. You know? It's really like a step growth, and every step is very uncomfortable. It's really squiggly, you know, if you look at the Griner curve model.

And so I think it's just leaning in, trying to get our management teams to lean into the discomfort, knowing that that's going to be there in order to grow. And I think the second piece along with that is really giving them and helping them and collaborating with them on making sure that they have the right operating system in place to execute that growth. And be able to push accountability down to all the employees of an organization.

And that's part of the reason why private equity outperforms every other asset class, not only over time, but through cycles, because they have this appreciation for cash flow. It's very old school, like you got to make money.

And so also, you know, teaching and being a partner in teaching and collaborating on how to manage a balance sheet is also a big part of lower middle market portfolio management.

So there's just tremendous ways to unleash value. And the other thing that you said I really love is this whole grinder curve thing, which I had to google because I didn't know what it was until now. So I was like, Oh, that's how I describe, you know, what we do in our business to the team here. But I didn't know there was a term for it. And because I only know how to speak metaphorically, like using the word like, and as it's in every conversation I have, it's this. I was like, you know, we're, we're, we're taking off.

We're building our plane as it's taking off. And then you you level out, you feel the wings wobbling, and then you got to do something different to get to the next altitude, and then you feel the wings wobbling. And and now, apparently, there's a term for it.

What might be one of the pieces of advice that you'd share with yourself that you wish you knew that?

They just go down, you know, after they get to the first trouble, so I think it's a great lesson. I'd be curious, maybe, as we're, we're, you know, coming to full circle here, maybe with this in mind and wisdom in mind, that you've talked about, are there any kind of business or personal books that you like and you share with with your team? That would be good to talk about?

It's almost becoming a little bit of a Bible to me, so I actually carry it with me, I reference it constantly, and it's it's. It's a great leadership book, but also a great guide on how to really create an operating system in a company. And and and to create accountability, you know, with every person in the organization. And and my feedback from others who have read this book or use the system. Across many entrepreneurs, and, you know, executives, has been that it has really helped them create true growth and accountable growth in their companies.

That was one of his Bibles. He's like, you've got to read traction and I did, and it's so it. It just great lays out this wonderful methodology for bringing order and discipline to a company in a way that almost anyone can. If they have a little bit of discipline, you know themselves and how they think, yeah.

I'd be, I'd be curious, you know, have you have you found ways? You know? Are you using it within your portfolio companies? are you using it within your firm? are you using it kind of in different areas? How, how and where are you going?

And now going to a place where I have to do more, you know, get away from direction and more delegation. I really, I started to. I've started to implement it at Kinsey amongst my team, but also I've realized that it's a. It's a huge plus. At our portfolio companies, we actually have a portfolio company that where the CEO actually also carries it in his backpack. I did not introduce him to it, and, you know, has notes. It's almost like he's, he lives with it.

So it's, I do think it does work, and it's a great guide for really any leader. Or, if you know someone doesn't have an operating system in a in a company, it's a great place to start.

And so I really applaud you for doing that.

I'm really good as do as I say, not as I do.

So I think I think it's it's really good to see that you are doing as you say and doing as you do, and and and kind of living the message. So that is, I think, something that I'll I'll absolutely take away. And had I gone back to my 22 year old self, that would have been good to know. So, Suzanne, thank you so much. this has been a really fun and really insightful conversation.

And I appreciate you sharing these pearls of wisdom with us here today.

Special thanks to Suzanne for joining. If you'd like to learn more about Suzanne and Kinsey Capital, please see the episode notes for links. Please continue to look for us anywhere you find your favorite podcasts, including Apple, Google and Spotify. We truly appreciate your support. If you like what you hear, please follow, rate, review, and share.

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