Episode 1: Daniel Pianko of Achieve Partners on
How to Stand Out in the War for Capital with Talent Development 

Episode Transcript

Shiv: All right, Daniel, welcome to the show. How are you doing?

Daniel: Excellent, thanks for having me Shiv. 

Shiv: Excited to have you on. Obviously, with the work that you guys are doing at Achieve Partners, that is a different kind of interview. So why don't we jump right in? I think that the right place to start for the audience just to learn more about Achieve and what you guys are up to is to talk about your investment thesis and your overall philosophy in terms of the types of companies you invest in and what your approach is to the overall fund.

Daniel: Yeah, so we have a really simple belief, which is that in protected markets, you can create really high alpha by using the information that you have by being a sector expert. And so our area of expertise is education, and really not just education, but the future of how we learn and earn in the future. And so what we do is we look to invest in companies where we can create a lot of organic growth quickly, because of our expertise in this concept of the future of how we learn and earn. And so in a nutshell, we're a buyout firm, which I know is a little different than a lot of the folks you have and their firms. So we buy companies and then we sort of partner with amazing management teams to grow them more quickly by leveraging our expertise in this kind of very narrow niche of learning.

Shiv: Got it. And tell me a little bit about the size of the companies that you guys are investing in. What is the, on the lower side, the ARR or the revenue that you're looking at, and on the high end, how big do those companies get?

Daniel: Generally, we're looking for companies between, depending on the strategy and what we're looking to do, between really five or ten million dollars of revenue as a minimum. Sometimes we get there through acquisition and then up to, with some of the non-software businesses, up to 80, 90, 100 million dollars of revenue. So that's roughly the range that we invest in.

Shiv: And then on the organic side, when you're talking about organic growth, obviously you're not talking about just like content and things - like you're talking about growing the company without acquisition. So, on that side, what are the approaches that you're taking to grow those investments out? Obviously, I've seen a lot about your impact fund and last mile training. Is that what you're referring to or are there strategies beyond that?

Daniel: Yeah, so we have really two strategies. 

One is what you referred to as last-mile training. And what we do there is we look to invest in companies where the CEO says, my biggest problem is I can't find enough people who are trained in this specific topic. Effectively, think about areas where if you open the New York Times or just think about it, we just have a supply-demand mismatch for talent. So we don't have enough nurses, we don't have enough cybersecurity professionals. But there are also really great niches like Workday or Salesforce administration where you have - we think about it every time there's a big SaaS company that goes public, a potential ecosystem of talent needs to be developed. And so we like to invest in companies that are services businesses, companies that service those areas. And then what we do is we turn the biggest problem that they face - how do we find enough people - into a value driver. And the way we do that is we actually build apprenticeship programs into the companies. So if you're a Salesforce implementation firm, we're gonna partner with you and try to bring to the table building what we call last mile training, which is where we think of it as a full stack approach to talent development. So we'll recruit amazing talent. We will train them, we'll guarantee them a job. We'll hire them just like, you know, you would have been hired, you know, 20 years ago if you were gonna go work for a big company. We pay them while they're in training. We train them for anywhere from two to three months, bootcamp style usually. And then we put them to work.

And you think about it, this is the way people used to get jobs, right? It used to be that you're on a college campus or a recent graduate, or if you're working in trades, and you would get a job somewhere. And when I graduated from college, I went to work for Goldman Sachs. I had a great luxury of doing that. And they basically put us in a - I was a history major - they put us in a classroom for two or three months. At the end of it, I was an investment banker and building models for large companies. It's a little different when you're talking about specific tech skills, but it's the same concept. 

I think underlying a lot of this is if you think about it, when you grew up or when a lot of folks who listen to this podcast back in the 90s, early 2000s, big companies had these large training. And you would, all you needed was to be a smart kid and they'd hire you and they'd train you and be a sales professional or do something else. And that's really with the last two recessions, that's really gone away. And the result of that is we have about 11 million unfilled jobs in the United States. I mean, it's an amazing statistic, right? 11 million unfilled jobs. Almost all of the majority of those jobs require tech-enabled skills or some kind of very specific skills. And so in effect, there's a lot of talent out there. There's probably about 40, 50 million unemployed, underemployed, unhappily employed people. And we take those folks who are making maybe $30,000 as a barista at Starbucks and give them an opportunity to go from there to making 100, 200 grand a year over a period of a couple of years. So that creates a lot of value for our portfolio companies, for the people we're employing through these last mile training apprenticeship programs. And then, you know, also most importantly to their own customers because if you think about it, usually if you have a business services company, you're a very strict, non-solicit, non-compete, can't touch our people, we take the opposite approach.

Right? We're creating people. Please hire our people. That's great because this person now has a great job and then we can bring someone else as an apprentice and grow them. And so when we talk about organic growth, we're really talking about is this is the type of program where we're really bringing a lot of expertise to the table and we're driving significant growth for our portfolio company by bringing in this strategy.

Shiv: Yeah, that's a really commendable mission. We talk about that as we're building our own consultancy out and you kind of have bottlenecks as you go through stages of growth. And one of the most common bottlenecks is when you have enough sales, but you don't have enough talent to catch up to the volume of sales that you're dealing with, especially in a services industry. So you kind of get stuck in this hiring cycle where you go to go find the people to service more business until then you can sell more and then you can't get the bandwidth to actually to deliver high quality work. So I think that mission is commendable. What I'm trying to understand a little bit better is, is that pipeline building or the apprenticeship programs, is that work that's done by Achieve or are you going into the companies that you're buying out and setting up almost like an internal apprenticeship program within them?

Daniel: Yeah, so our goal is for each of our companies to operate independently. So the first 6, 9, 12 months of investing in a company, we tend to be very active trying to help build the capacity of the company to actually deliver this last mile training. So yeah, it's partnering with amazing entrepreneurs who care deeply about this, right? Like if you cared about this and what you did and you said, ‘hey, I realize this is important. And I'm at the stage in my life where I really wanna build this into my company.’ Those are the people we love to partner with. And then we partner with them, we invest in their company, take a majority stake, is kind of the strategy. And then we work with them to build this talent development system. 

Shiv: Does that approach sometimes distract the portfolio companies? Because there's also this trade-off, right? You can build a core business and actually build out the internal processes or just hire someone that's already kind of good enough, maybe even overpay for that talent and then focus on actually driving sales and pipeline versus like almost having this, almost like a separate business now where you have to now nurture and train talent. And I get that that's part of your investment thesis, but I'm trying to connect the dots on how does that approach help you ultimately create more value within that business?

Daniel: That is the inherent tension. And I even hear it in your voice as a business owner, right? If I invest in this, I can't do this, right? And so what we really look for is areas where there's a huge amount of synergy, where there is a natural apprenticeship pipeline that we can build. And so, yes, that is a core thing we look at in diligence. We're talking about work, right? And in general, where it's most successful is where it becomes a key value driver, right? And this is what's important. So let me give you a simple example. It's really hard to - who do you sell to, Shiv? Who's your buyer?

Shiv: Our buyers are private equity firms and we work with them either on due diligence engagements or post-close. We'll help them identify opportunities on the marketing side for their portfolio companies.

Daniel: So it's hard to probably get a meeting with a prospective client, right? It's hard to get a meeting with a partner at a private equity firm, right?

Shiv: Yeah, most of our business comes through people that follow our content or read our book or through referrals. Yeah.

Daniel: Right. And so it's really hard to get those meetings, especially with something… Well, what our portfolio companies can do is we can come in and say, look, you know, hospital or private equity firm or whatever, you have trouble recruiting yourself, right? Just take electronic medical records. Take this, there are estimates of, you know, 3, 4, or 500,000 unfilled Salesforce implementation. You can get a meeting with the CTO if you say, hey, I know you're implementing Salesforce. At the end of our project, you get to keep the talent.

Shiv: Mmm. Right.

Daniel: So you could approach that as, oh my God, this training thing, it's detracting time, 

Shiv: Sure.

Daniel: Right? But for your biggest potential customers, those new relationships, how do you get that meeting with the CTO of a company implementing Salesforce or university, whatever. You get to do that by going to them and saying, ‘hey, we create this talent, we encourage you to hire it.’ And by the way, that talent across our first portfolio, roughly half of that talent is female. And over two thirds comes from underrepresented communities. So not only am I filling your talent gap, I'm also filling your diversity need, right? And so it becomes very powerful. And even if that person only hires one or two people from our programs, we estimate that for every dollar of last mile training revenue we generate, we actually generate an incremental dollar of revenue from just getting that incremental view.

Shiv: Right.

Daniel: And so we really, if someone views it as either or, it's gonna fail.

Shiv: It's a challenge.

Daniel: It's creating that flywheel of success around talent training.

Shiv: There's another benefit to it. And we talk about this a lot. Like we're a management consulting firm and we're doing these large-scale consulting engagements with PE firms and our deal sizes are large. And so, we need talented people to be able to service those engagements. I can't have, let's say a junior marketer having a board meeting with five private equity investors. It has to be a C-level person, but we run into this problem where there's a supply and demand problem where there's not enough marketers out there that have acquired those skill sets to be in that room. So in a way we have an internal school. When we hire people, I am taking them through an internal training program and coaching them. And we have had people leave for jobs with clients eventually as part of being on this journey. And so I totally get that as part of the value prop. And one of the benefits that can come from, just as I'm talking to you is that when you're able to staff up with more junior employees and you're training them, your gross margin goes up. And so that's another type of benefit.

Daniel: Don't tell anybody!

Shiv: Yeah, so why don't we talk about a little bit about that because the gross margin is a key piece especially within services firms because your effective hourly rate that you charge to the client minus what it's costing you is where the growth really is.

Daniel: Yeah, the most profitable people at most of these services firms are junior people, right? I mean, if you can sell enough work and they're good enough. And so, yeah, we do see gross margins improve. That catches up to you over time, right? That's not a forever thing, right? People are very aware of that, especially these days. Like, you can just look on any number of websites and see what a comparably skilled person will get. 

But generally, you know, we do see significant margin expansion by using trainees. And again, it's not forever, right? So it can have a nice impact on your margin by building in this training program. So it does become - but now you're starting to understand why a lot of people start to view this as a competitive edge, right? If you have trainees that you can staff on maybe lower level problems, you can build maybe a services business that you wouldn't have been able to build with experienced talent to handle low-level issues. I mean, I don't know, in your business, maybe it's Twitter, tweet posts, or LinkedIn posts, or whatever. You don't need 30 years of experience to be able to do that, or even five years of experience. Anybody can write a tweet. Now, you may need someone to review it and make sure it's good, but you can put some folks answering questions, ‘hey, give me 20 tweets’ as an example, then type it into ChatGPT, and five minutes later, you got 20 tweets. And that can drive the ability to leverage those junior people if you have the right types of services to offer can drive the ability to add additional services that didn't make sense with experienced people and to in general kind of drive up your gross margin.

Shiv: Right. Are you selecting the companies that you're investing in - you mentioned this earlier, you're vetting them as part of the due diligence process - but are you selecting companies based on their ability to have this type of inherent advantage by building this last small training? Like, for example, we work with one of your portfolio companies called Riipen and Riipen is very much in the apprenticeship and internship space for college students. And there's a huge market for that for small businesses that we've seen. So that one jumps out to me as an example, but are there, within the other companies that you've invested in, is there a pattern where you're like, this can work here, but it doesn't likely work in other sectors and markets because the business model is very different.

Daniel: Yeah, 100 percent. And one of the most important reasons why something drops out of our funnel is if we perceive the alignment not to be there. 

So I'll give you a very simple example that's kind of really complicated. Healthcare, right? We need a lot more nurses in this country. But if you look at sort of healthcare, the number of job openings in healthcare would dwarf almost anything else. But then you have to say, okay, well, within healthcare, well, you need a certain number of not just - there are different levels of nurses, right? There are at least four or five major differences in nurses, right? They need a lot of technical support. So if you think about - go to the hospital, just how many certified personnel you walk into, right? Someone who's going to take your blood pressure, someone who's going to do your CAT scan, someone who's going to, you know, it's not just one thing.

And so I'll take healthcare as an example, because I think it's reasonably - you know, people kind of get it immediately. Training nurses is really hard. So one of the first places we went with healthcare - and we invested in a company that does staffing for school districts - is registered behavioural therapists. These are people who work with kids primarily with autism or other kind of special needs, social development kind of needs. And this is someone who once trained can, - and so, relatively, it's not a five year, it's a relatively low level of training - but once someone has that training, then they can actually come in and help out in school and actually work with a kid who's got learning issues. And that process takes someone from earning - call it minimum wage - to earning enough to have a family. And so that's really transformative. Now within nursing, we could have done a lot of things with nursing. We identified a very specific niche to do that. And one of the things we're doing now is we're allowing those people, after they get that sort of low level of certification, to actually enrol in company-paid nursing programs. So then they can become a more formal nurse that of course would lead to an even higher pay rate. So, it is really, really important to not just say, hey, I'm interested in the sector, I'm gonna create talent in the sector.

Shiv: Right.

Daniel: You gotta be really, really intentional about where you're creating talent, what specific certifications you're doing. And that's, we spent a lot of time -

Shiv: Yeah, because there's a couple of thoughts I have on that, because on the one hand, you have to be selective. But I'm wondering, does that limit your market of the types of companies that you can potentially invest in? Are there like in terms of people that fit your profile? Like does the TAM technically shrink when you're looking for deal flow?

Daniel: Yes, but I mean, your biggest - if you think about what we're doing, or you think about areas of the economy where there aren't enough people who are trained to do them, and like your mind explodes when you think about that. So we think of ourselves really as like a business services investor, where we can add specific talent, we can add specific advantage and organic growth very quickly through this avenue. It's not always this full apprenticeship program, sometimes it's more generic human capital development. But yeah, so we don't really view it as a small market, we view it as a very large market. But it does help narrow where you spend your time. I mean, the hardest thing as an investor, and I think for most people who have, you know, who kind of look around at the world, as CEO level, your C-suite level or investor level people, the most important thing is where you spend your time.

And so what this lens allows us to do is sort of say, ‘hey, you know, if you're a generic, you know, IT consulting firm, we're not interested, but if you have a specific niche, we're really interested’. Plenty of ways to make money in generic IT consulting, but we're looking for a company that does, you know as a workday partner or a Pega or, you know -

Shiv: Sure.

Daniel: Think about these kind of big, big markets. And so that allows us to - you know, we see a huge amount of deal flow and a huge amount of opportunity, because we're looking at visiting an HVAC company next week.

Shiv: Right.

Daniel: There are lots of areas where this applies.

Shiv: Where this type of approach can help. So that makes sense. In terms of, on the flip side, so you have the deal flow and actually sourcing of the deals and let's say there's enough of these companies out there, like how are you pitching LPs on this approach? Because you kind of have to get their buy-in on this investment philosophy, right? So what has worked there and what has resonated? Because you're kind of competing for those capital dollars with other private equity for folks that have a different investment thesis or philosophy.

Daniel: Yeah, look, I think the most important thing when you're - I think, let me say how I think about the world, and I think about the world as you really want to invest with experts who have a specific way to drive value. In the current market environment, you could get an unlimited number of teasers. The classic funnel for a private equity firm is 1,000 teasers, 100 NDAs, 10 management meetings, and a deal. And look, that clearly works. There are wonderful investors who do have that focus. And what we talk about is, ‘hey, that's not our approach.’ Our approach is to get to know industries really deeply, work closely with founders who are passionate about the issues we're passionate about, and build a relationship that allows us to create kind of this increased organic growth, which is really, we think, one of the best ways to drive incremental value. 

And so, that is how we think about the world, and we think about driving value. We don't use a lot of leverage. Our goal is really to invest in great companies where the opportunity to apply our unique skill set drives a lot of incremental value. And some folks find that interesting and want to invest behind that and others think it's either too niche or too this or whatever. But that's how we talk about ourselves. Or that's how I think about investing.

Shiv: It's also about finding LPs who kind of see the mission behind that, right? And the different...

Daniel: We're explicitly an impact investment firm. I mean - and by the way, we think that, and just listen to how I'm talking about this, the impact is driving the alpha.

We're not one of those people that says, hey, we're just doing impact because we think it's important. And look, that is great. And I'm glad more and more people are adopting PRI principles and investing, ESG principles and the rest. We're different. We're an impact. But we're an impact fund in such a way where the impact, getting people jobs, building pathways to employment, it's driving the creation of that.

Once you make that transition, I love being an impact fund. I love where I can say - by solving one of society's great problems, this chasm between education and employment, by solving this problem, by creating pathways and on-ramps for people with or without degrees into great first jobs, I think we should be paid billions of dollars by folks for solving those pathway issues.

Shiv: Yeah, because at the end of the day, if your approach is creating more jobs in the market, the companies can employ those individuals and grow with them. And those people can also grow in their careers and work for their clients. Like inevitably you are growing alpha. It is going to happen over time, but you need LPs who think along that time horizon or look at investments in that way. And that's your job is to find the right LPs that map to that type of a philosophy.

Daniel: Yeah, I mean, look, if you think about impact investing in general, it's one of the largest, fastest-growing parts of the market, right? So we are increasingly, I think people in general, LPs driven by two things. One is just, ‘hey, we want to - if we're an asset holder, we want to invest in things that align with their values’, and there are a lot of people with values that align with job creation, right? But I also think that a growing number of people are realizing, ‘hey, by doing this thing, I'm going to make more money.’ And those are the people we want to talk to. We want to talk to people who believe that by creating this impact, we're going to make you more money. Because at the end of the day - there was just this article today, and I talk about this a lot - there is a war for capital out there. How you use your capital, if you're an individual, what products you buy, if you're an LP, what funds you invest in, it is, you're making an impact. You're making an impact either to invest in traditional businesses that are likely harmful to the world economy or to the world in general, or you're making a conscious decision to invest in funds and companies and products that are contributing to better things in society. And that is something that people inherently want. to do, I believe. And I think what we do and what our impact managers do is really critical.

Shiv: Yeah, I think you said something interesting there, which is that there is a war for capital, like the global dry powder, I think it's like 2.5 trillion or something like that. And so you have all this capital chasing after limited assets. And I would think that when you're in a deal cycle and competing with other private equity firms and they hear this unique message from you versus just a standard private equity firm that's trying to just drive value in the traditional ways, your message likely resonates with a big section of the market and you likely win deals because of that.

Daniel: 100%. I mean, and look, it's the same, you know, we have other strategies. One of our strategies is to invest in education technology companies, right? And there it's a slightly different pitch, which is to the founder, which is, ‘hey, we'll help you grow from being a regional player to being a national player’. We know, because we're so deep in this market, we can help you grow because we know the large schools and universities. We can introduce, you know, we know all thought leaders in and around education. And in both cases, you know, the people with whom our pitch resonates say, I want to work with these people who are going to help add value, turn my biggest problem into a positive. They're going to turn my bottleneck into a value proposition. They're not gonna use a lot of leverage. And by the way, we're different than a lot of traditional private equity firms, right? Just the way, if you listen to us talk about what we're passionate about, how we spend our time, we're spending our time writing about these issues, talking to people about these issues. We're engaged in these issues because we care about them, just like our founders. And our founders who we resonate with the best are just as passionate - I like to say that, I love meeting someone who's sort of mid to late stage in their career, you know, 30s, 40s, 50s, you know, someone, and they have woken up one morning and said, it's really important that we solve this problem.

And for everyone there, and they want to contribute to their community too. For many of them, maybe they'd make more money selling to somebody else in the short term. But you know, whether you have 30 million, 40 million, 29 million, it's not going to really change your lifestyle, right? What changes your life is to be passionate about what you're doing. And our best founders are really passionate about solid.

Shiv: And they're mission-driven. So that makes a ton of sense. So when you look at your firm and the types of companies you're investing in, how do you define success at the end of the day, If we're talking over a five-year period or seven-year period? As you hold these companies, what does that look like and how are you measuring that beyond just the amount of value that you're creating or how you're returning the fund?

Daniel: Yeah, so first of all, we are, you know, I said we're impact investors, which means we, you know, first of all, care about return. We're going to make - our goal is to be a top quartile returning fund. So let's put that in terms of how we measure it. So we've worked with our - we spent a lot of time on this. And again, always trying to make sure the impact is driving the off-the-rack. So the simplest thing is, oh, we track how many people we place, how many job placements we have. That's really easy. But how do you make it more impactful, but also help drive sort of the other agendas I mentioned, like DEI and other things that are important to society? 

Well, I gave you some statistics. Half of our people are female in these programs. Over two thirds, almost 70% are from underrepresented minority communities, right? Think about what that means. So we track that. We track what percent of our C-suite is diverse. We track what percent of our interns come from - it's not just about race. A lot of people get caught up in - and race is a big issue in society, clearly - but we also tend to look at socioeconomic status. So we have a whole thing, what percent of these folks come from zip codes where the median income is less than $40,000.

When you take someone who comes from a family in a zip code that makes less than $40,000, and you get that person to make $100,000 or $200,000 a year, you've not only changed that person's life, but you've changed their whole family's life. And frequently given, and frequently one or two relatives away, not just that one family, but maybe even a whole network of cousins and aunts and friends and family and created role models and hope and really important things. So it's not just one thing we focus on. We focus on sort of the aggregate numbers, and then we go deeper and we go into things like, you know, where these people are coming from, what they're achieving, what their increase in salary is from going through these programs. On the education technology side, we actually pledge to do third-party academic research on the efficacy of all of our products.

So the big criticism - and I don't know if you have kids or some of your listeners have kids, or if you used EdTech products - but like the big knock on it is, oh, we spent all this money on technology and it doesn't really work in schools, right? So we've pledged to have third-party academic researchers actually look at the efficacy of each of the products we invest in to sho -, not just that Daniel says, ‘hey, this product works’, or, you know, Shiv, this product works for my kid’, but day in, day out on a statistically significant way that these products are actually helping people.

Shiv: That's fantastic. I think that's a really good note to end the podcast on. If there's a listener that's listening that has a company in this space or is aligned with your mission, how do they get in touch with you to potentially work together or have you as an investor?

Daniel: We're really excited to work with companies that fit this bill with passion, mission-driven founders. I'm on LinkedIn. Our website is Achieve Partners. We're very accessible and we write about this, talk a lot about this, think about this a lot. We have a newsletter that goes out every week. So please join. And even if we don't invest in you, please, if you are passionate about these issues, be the change in the world and do it in your company tomorrow. You'll feel so much better about what you're doing and drive a ton of value to your company.

Shiv: That's great, Daniel. And we'll be sure to include the links to your website and your LinkedIn profile and all the other relative links in the show notes just so that the audience has it. With that being said, thanks for being on. This was a fantastic episode.

Daniel: Thank you, Shiv.

Shiv: Thanks, Daniel. Have a good one.