Episode 133: Michelle Noon of Clearhaven Partners on Partnership-Driven Software Investing in the AI Era

Episode Transcript   

 

Shiv Narayanan (00:10.25)

All right, Michelle, welcome to the show. How's it going?

Michelle Noon (00:12.992)

Hi Shiv, going great, thanks for having me.

Shiv Narayanan (00:15.08)

Yeah, excited to have you on. So why don't we start with your background and then Clearhaven as well and we'll take it from there.

Michelle Noon (00:21.518)

Sure. So I'm Michelle Noon, the managing partner and founder of Clearhaven Partners. We are a Boston-based, lower middle market, software-focused investment firm, private equity firm. We are coming on our seven-year birthday this summer, so relatively new firm, currently investing out of two active funds, a little over a billion dollars in equity capital. And I founded the firm on the back of almost 20 years as a software buyout investor.

really for two reasons. One was a complete focus and dedication on lower middle market enterprise software. And the second equally important reason was how we do business. And what I mean by that is really bringing back or bringing into play elements of true partnership. All of us have a very similar look and feel on our website, some of the similar terminology. We all use the word partnership a little too flippantly.

relative to how I thought it could be re-embodied. And what I mean by that is our firm is rooted in a shared culture and set of values on how we do business against the what, which is the investment strategy and what we target. So when I started the firm, it was really for those two primary reasons. And today we are a team of about 25 people.

based here in Boston, our entire investment teams here in Boston, our operating teams a little more geographically distributed. And we have completed 15 investments over the past handful of years, eight current platforms active in the portfolio and some add-on acquisitions on top of that.

Shiv Narayanan (01:59.9)

And talk about this partnership elements. What is that the reimagining of that look like? Because a lot of, like you said, like a lot of firms talk about that. So what's unique to your approach?

Michelle Noon (02:09.186)

Yeah, so I wish it weren't the case, but the truth is that there's some basic values that have been left behind at times in how our business, our industry works. And so what I mean by that is kind of going back to some root values, some core values on authenticity, on doing what you say you're going to do, on transparency and really bringing to the table

sort of a true perspective on intent and motivations and desired outcomes. And what we have found is not only is that kind of clean living approach a better way to live and work every day, but that is exuded in our conversations with management teams and for the management teams for whom that matters. And it's not true that it matters for everybody, but for a lot of folks it does. We are a more attractive partner as a result.

And I know that kind of goes back to almost the kindergarten level of values, but it is something that I think is important as a leader, as an investor, and we are also very serious about the responsibility that we undertake as managers of other people's capital and how we operate, how we act with that, with our LP community within our team, and then certainly with our management teams that we back or could potentially back is something that is.

very embedded in who we are as a firm. So I wish that were not a refreshing take in a way on how we do business. But what we have learned and found in conversations with management teams is that they say, wow, Clearhaven, you guys are different. And I like that because I built a firm to be different. But by the same token, I want to know what they mean by that. And they say it comes down to two core things. Number one,

Michelle Noon (04:00.002)

we come to a first conversation incredibly versed in their business, their market, their competitive dynamics, the trajectory where we have perspective on where that business could go, again, under the right circumstances. And so we're deep in not only our vertical in software or our industry, but then within that we're incredibly thematic. We spend a lot of time thematically pursuing businesses, sub-themes, industry verticals that hit on

what we would consider to be long-term demand factors for business software. And so we come to that conversation with perspective and it's a more enriched conversation in the first instance as a result. So that stands out. We're deep in our experience in a relevant way to their business. And then the second thing they tell me is that you guys are real people. And I love that because that is exactly what we're trying to be. Real people, we know it's hard to build businesses. It's harder now than it was five or 10 years ago.

And so if we can accept that reality and then just go deal with the hard problems together, where we bring something to the table, management brings something to the table, that's a winning formula. So those are the two things that really make Clearhaven who we are.

Shiv Narayanan (05:09.531)

Yeah, I guess a lot of firms are, or they say they do some of these things. And so why do think it is that that's not the case or what separates you? Because my sense is that part of the issue is that it's a structural problem because investors have LPs, they have targets to hit. they kind of like the way they operate is governed by these financial dynamics. And so I'm curious, like, obviously, you have similar dynamics, you have investors and you have to return capital and

and return capital LPs. So how do you kind of get around there? How do you still stay true to some of these values?

Michelle Noon (05:44.45)

Yeah, well, I would start with the foundation of our firm was built on this and it is not something that is maintained on autopilot. It is something that we actively maintain and how we hire or people leave our team, which doesn't happen often, fortunately, but you know, there have been cases where we've had to exit someone from the team because there was inconsistency of values. So.

It's a garden that you constantly prune. It's built into the bedrock, the original foundation of the firm, and it's got to be constantly maintained. And we do that by kind of the norms of expectation of how we operate on our team. And there's a lot of sort of peer editing of that that goes on, but also then how we operate in the context of a management team interaction or an LP interaction. However, you're right that there are structural headwinds to maintaining

that set of approaches or that set of values. And there are some structural things that we have done to combat that. So number one, we actually construct our portfolio in a much more concentrated way than a typical.

we have about a half a dozen deals in each fund on average. And that allows us, now that's concentration, that's intentional concentration, but that allows us to put more capital, more resource, more time and attention to each of those companies or not spread super thin. But importantly, we also have an inherently strong, much stronger economic alignment of interest with our management teams where that's an N of one on which they will make

their economic outcome. And so for us, it's crucially important that all of our companies succeed. That's important to our fund. But we have that stronger structural alignment of interest with our management teams for whom their equity outcome in their individual company matters. That's very different than a private equity firm who will have 12, 15, 20, or a venture firm who will have 50 companies plus in a fund. So there are some structural ways to solve for that. The other

Michelle Noon (07:53.976)

part of it, which is how you set up relationships in the first instance, whether that's a management team or an LP relationship, goes back to that authenticity value. We're just going to authentically represent what we're here to do and why, and recognize that it's not all going to go perfectly, right? And we're also going to own up to that when things don't go exactly to plan. But being very upfront about who we are, how we operate, how we think about the world. One of our other...

firm values that is codified and has been there since day one is no FOMO. That allows us to have a bit of contrarian approach. And that has been really crucial, frankly, in software over the last seven years. So when we speak about who we are, what we're doing, we try to really authentically represent that. And our LPs who have joined us on this journey recognize what that relationship should look like getting into that.

There are some structural advantages to those things. There's also some structural advantages to our relative small size. When you are asset gathering at an increasingly large rate of speed, it's really hard to maintain all of these things. The value system built into the employee base, the promises made across multiple strategies, multiple funds. I'm not saying it's impossible, it's just harder. So we have some advantages structurally in terms of where we are.

Michelle Noon (09:14.03)

in our scale and some of these things that we've intentionally set up.

Shiv Narayanan (09:17.461)

Yeah, I really like the structural argument or thought on it a lot. Can you expand on that? Because I guess what you're saying is if another firm had a similar fund, they would spread it across more investments, but that logically requires more debt. And so you're putting in maybe more capital or spreading your attention on a fewer set of companies. But I'm curious, what does that mean for your metrics as a firm when you think about return on invested capital or distributions or

your IRR benchmarks are you trying to kind of hit? Like how do you kind of trade those off against the structure or how you're investing?

Michelle Noon (09:55.116)

Yeah, we don't compromise our target returns and really my comments weren't, you know, they don't necessarily imply different leverage levels. However, for other reasons, we do employ lower leverage and I can describe that. But it's not for these reasons. That has really nothing to do with that capital structure. What I mean by the alignment of interests with a fewer number of companies is that we will put in the time, the attention, the resourcing.

And on average, we will have a larger equity check as a percent of our total committed capital than a typical private equity firm because it's a more concentrated portfolio construction. But that allows us to spend appropriate time and attention, whether that's our investment team or operating team, working with our management teams, rebuilding and expanding and rebuilding those teams as they need to do over their life cycle inflection points.

smaller portfolio gives us the latitude to do that. Whereas if we had 15 or 20 companies in each fund, we would just by definition of time have less to give. that's how I think about the structural side of it. But to your point on leverage, we actually do employ lower leverage on average. And it's not because of a concentrated strategy per se. It is because we are operationally driven.

Shiv Narayanan (11:08.297)

Yes.

Michelle Noon (11:20.416)

in how we build businesses. We think fundamentally you still need to build intrinsic business value inside out. That means strategy alignment, talent, go to market levers, optimization for efficiency, innovation, some M&A at times. And those things require a lot of work. They require a lot of levers to win. And therefore we cannot have our back to a wall on a debt.

service level or a financial covenant when we need the latitude to operate. So we will tend to under lever relative to what is available in market, our companies at entry. And as they build their processes and their scalability and their cash flows, we can certainly then employ newly available leverage for M&A or other investment. But we do start with lower than what is typical in market.

Shiv Narayanan (12:14.075)

Yeah, I think those are some great takeaways. Talk about the operational side then. So obviously you're giving these companies more attention. What does that look like? How are you getting involved and how deeply entrenched are you with the management teams?

Michelle Noon (12:27.074)

Yes. Well, this is sort of a part of what comes with partnering with Clearhaven. And again, we try to be very upfront about this because it's not the same as just a capital provider writing a check. We are very involved. We are closely aligned with our portfolio companies on a week-to-week basis. We've stopped short of running our companies because if we find ourselves veering too far in that respect, it usually means we need to build on the management team first.

However, what does that look like? It always starts with strategy. We have an investment strategy as we've done diligence on an investment, we get to the closing of the deal and now we need to really align that with the company and the company's strategy for the next three to five year horizon. And so I call that sort of, let's snap the chalk, snap the chalk moment. Let's take a look together at what this company's strategy should be, where it should play.

what market it's serving, what are our ambitions from a scope perspective, from a time perspective, and from a numerical perspective. And that's a super important exercise for us to align with management. Now, if we didn't feel we had enough alignment, we wouldn't get to the closing in the first place. But this really gets it down on paper. This really goes deep in a multi-day exercise on what exactly that means. And when the board and the management team are aligned,

A lot of time and attention of that management team can then be spent on operating the business. So we always start there. The other benefit of doing this initial exercise is that management can take that and cascade it through the organization so that everyone in that company knows what the true north is for the next stage. And in fairness, we have to revisit these strategies every couple of years because things change and maybe even faster these days. We need to ensure that we're still on the right course to get to the right outcome.

but we now have a framework for that and we have a methodology for that. So that's step one. Step two in these run concurrent at times is ensuring we have the right team on the field for the next stage. As I mentioned earlier, we don't run our companies. We are purely an investor supporting group, but we need to ensure that we've got the right team on the field to run the company day to day. And we are investing in businesses that are 20 to 50 million in revenue at entry typically.

Michelle Noon (14:51.468)

those companies have absolutely gotten to a first level of success, but it is going to take some things that are different to get to the next level. And that starts with ensuring we have the right leaders in the right seats for that stage that is coming up. And we spend a lot of time on talent, talent influences culture. So this is an area that is of paramount importance. We could have the absolute best investment strategy, do flawless due diligence, buy the company at the right price.

If we don't have the right team leading that company day to day, we will not achieve our aspirations. So this is crucial. Thirdly, work on basics around process and how do you take a business that is typically built on the back of a great market opportunity and a strong product that meets that need with a lot of founder passion or early management team passion and enthusiasm? How do you take those ingredients?

Shiv Narayanan (15:26.151)

Yeah, sorry, go ahead.

Michelle Noon (15:47.18)

and convert it to a repeatable, scalable business. So we work through go-to-market levers, whether that's sales, marketing, customer success. We spend time thinking about how do you not only invest in those areas, but invest with the right type of return on that investment. So optimizing the business, looking at the P&L, thinking about the metrics, looking at other unit economics. We invest heavily in innovation. You can't have a great product today and not continue to innovate on that. So that's a major part of our playbook.

And then finally, as I mentioned, we do look at M&A, but that is the tail, not the dog in our strategy. We start with those first five levers first. We make sure that we've got a healthy, organic orientation in the business, and then we will look selectively at M&A to enhance the product portfolio, geography, or otherwise accelerate getting to our outcome.

Shiv Narayanan (16:38.685)

Yeah, I think all of those are phenomenal ways to add enterprise value. One of the things that we've noticed is that, say, four years ago, you could just focus on the acquisition side to grow the enterprise value of these companies. But I think your approach is more aligned with what companies need now and how to make investments actually work because organic growth is really how these companies need to be transformed. I guess my question on that would be that with how heavily you're being involved,

the management teams really need to buy into that because there are a lot of CEOs that just say, give me the capital and leave me alone. So how are you vetting for that? And are you setting that expectation upfront? And are the CEOs that you're partnering with, do they welcome that?

Michelle Noon (17:19.502)

Absolutely, it's an absolutely correct observation that it's not for everyone. So when I mentioned earlier how we interact, even in a first meeting with a management team, that management team who are decision makers, whether they own 100% of their business or do not, they are decision makers in that process. They're getting a flavor for how we operate, the questions we ask, where we push, where we make suggestions, where we're learning and how we're learning.

This relates very much to how we try to authentically represent who we are, which gives people the right set of data points to consider whether we are, in fact, the right partner. We're considering whether this is the right investment. We want those management teams to consider whether we are the right partner. And that's bilateral decision-making process. So by the time we get to closing, that's pretty upfront. That's out front and center. And the trickier parts are where we see weakness in a leader, for example.

Michelle Noon (18:16.438)

If we see weakness in a leader and we don't think that leader is going to make the jump to the next stage, we are not going to hide the ball on that. We are going to talk about that openly. That might mean we don't get to a close on the deal because they don't like that answer. And that's okay because what would be much worse would be closing that investment and then having that management team feel like they got the rug pulled out or we're doing something that was unexpected. That, in an important phase of building trust that would...

actually diminish that opportunity to build trust. we do try to be very upfront about that. then, and so to answer the question directly, therefore, our CEOs tend to embrace this interactive model. They tend to embrace the one plus one equaling more than two approach, recognizing that we have our place. We're not running the business. We don't see everything they see day to day, but we're close enough so that as there are strategic decisions to be made, we connect quickly.

Michelle Noon (19:12.546)

where there are pitfalls that the company runs into, we can support with resource and network and know-how. And that allows us to have a great relationship, including through those trickier times.

Shiv Narayanan (19:24.297)

Yeah, I think that's great. think that having the right type of partner and vetting the investments on the front end and making sure that they're open to that, I think more firms need to do that because then you can deploy this type of a playbook. Can you talk a little bit about what resources you have built inside your firm versus what you're using external partners for? Because a lot of companies or firms are trying to figure this out, right? There's a balance between having operating partners or full operating teams and then

having this like toolbox of partners that you're bringing into portfolio companies.

Michelle Noon (19:58.174)

Absolutely. So we have always believed very heavily in the support of the operating partner model. And my co-founder is an operator. So that was something that was, again, built into the firm from the beginning, supporting our belief that businesses are built operationally. We have 10 operators on our team today and we have 13 investors on our team. So it's a heavy investment in our operating team.

But we also have what I would call a complete continuity model. The investment team does not hand off our investments to our operators. Rather, the operating team joins our investment team throughout the entire life of an investment. And our investment team is very operationally minded ourselves. So we have the benefit of going deeper in a particular domain or a particular problem set with the expertise of our operators, whether that's going deep in enterprise sales.

or AI engineering or marketing or former CEOs who are great advisors to our CEOs. We have all of those and more on our operating team today. And that bench is bigger and deeper than you would typically expect for a firm of our size or a portfolio of our size. That's intentional. And the way we extend that as needed would be, I'd say specialists for other types of episodic projects.

So we might work with a pricing firm if we need to revisit pricing or we're pricing a new product. We might lean in on systems consultants if we need to upgrade systems in a company. Those will not have full time on our staff. But what we do have full time in our firm and on our staff are those where there's persistent functional builds that require a lot of change management, a lot of perspective on what it takes to go from smaller to mid-size company.

That's where we've invested heavily as a firm and lean in on a full-time way.

Shiv Narayanan (21:53.957)

Yeah, yeah, I think that's great. What about on the AI side? One of the things that we are working with our private equity partners on is building AI marketing playbooks and even agentic capabilities inside their go to market organizations. And it's been something that we've seen a lot of interest from PE firms on and I'm curious, like, what are you guys doing there with the the portfolio companies? And how are you supporting the companies and trying to figure this out? Because it's all new, right? Everybody's trying to figure out

what the right way to implement these systems is inside every single business.

Michelle Noon (22:25.774)

100% and it's moving very quickly. So what we thought worked well through even three weeks ago needs to continue to evolve. To the point on marketing first, we are seeing our most forward leaning companies having enormous leverage in employing AI well. It does not replace human judgment, of course, that's true in marketing or anywhere else, but enormous leverage from our AI, our most AI forward marketing leaders in the portfolio. More broadly speaking,

We are big believers in incorporating AI across both the products and the value we're delivering in products and in the processes or how we run our businesses. We have the benefit of, I'd call it almost a sweet spot size of portfolio right now. We have eight companies that are active in our portfolio. We have a sufficient N and they're all of similar life cycle stage and size profile. So we have a sufficient N to see.

what works, what can be adopted, what can really be leveraged for a return and results. But we don't have such a large portfolio that we need to worry about pushing new techniques through 80 companies or having some of those companies slip through the cracks. And so as a result, we've been able to bring together a lot of best practice around AI very quickly for our portfolio. And the onus is on the portfolio companies to adapt and adopt. But just to give an example,

and this is applicable across functions, we've largely standardized on Claude at this point. And we've had the ability to create a Clearhaven marketplace of Claude skills that are applicable to our software companies in various functional areas, whether that's customer success or marketing or engineering or finance, et cetera, all down the line. And our portfolio leaders can come into our marketplace within Claude, fork that or pull that skill down.

fork it to their own environment, plug in their data, and it's ready to go. And these, again, are the types of things that each one of our businesses deal with day to day. So that allows us to give those companies a lot of leverage, both in the learning and discovery phase. We don't need everyone experimenting with Codex versus Claude Code versus anything else. We've been able to do that ourselves and create strong recommendations. Now, if a company happens to be a Gemini fan and goes down that path,

Michelle Noon (24:49.644)

that's okay too, as long as they are also on that same type of adoption curve in their own way. And we can monitor that across our companies and provide other support even for those companies who might have gone down a different type of platform.

Shiv Narayanan (25:05.348)

Yeah, I think all of those are fantastic. And I think a lot more PE firms need to be thinking about it in this way, because you can standardize a ton of skills across different portcos. And some of these best practices are currently not being shared across different companies, where one company might be very well-versed and agentic, and another company is very, very far behind. What about on the education side? Are you investing a ton into...

getting portfolio companies educated and staying up to date on the latest technologies. And even for your operating team, I would imagine it's like something that needs to be invested into.

Michelle Noon (25:40.014)

It's crucial because it's true that you could have a couple of leaders who are spending a lot of time learning and can incorporate it into their function day to day. But if their peers aren't understanding that, or if it's not working upstream or downstream, then it's only going to have limited efficacy. So training is absolutely important. One of the ways we've done that, again, with the benefit of being able to centralize some of this, is one of our operators, TJ, is an AI engineer.

and he has really been going company by company and supporting training of our leaders and of our teams, even below the leadership level. Those who want to lean in more, we can go deeper with them too. And so there's, you know, it's absolutely important to sort of provide that scaffolding and that support to get everyone started and then continue to provide ongoing support as they lean in, they get the first level advantages. Now we need to move and get to the next level. So.

Again, it's something that we think is, it comes from the top first and foremost, it's got to be CEO driven, it has to be an absolute priority for the company, but then cascaded into each of the functions, that's where we are starting to see leaders really shine and really find new ways of work. Last thing I'd say on all of this is we have portfolio companies who were by definition built pre-AI age in the modern sense of AI. And they have

their advantages, they have their incumbency advantages, which relate to moats and defensibility we all as software investors should look for in the companies that we're investing in in the first place. If you couple that incumbency advantage with an AI first mindset, that's a future winner, that is a winner. And so that is the approach that we're taking. The mental model is incumbency advantage plus AI first mindset is a winner.

And in order to get to that AI first mindset, that requires shedding a lot of conception and reality on what made companies successful to this point, what made leaders successful to this point. So we sort of embrace this era with a lot of optimism, but also a lot of humility that we all need to work differently than we have in the past. And we cannot hold on to the things that even made us successful as leaders.

Michelle Noon (28:00.918)

And with that coupling, I think we're seeing a lot of embracing of this across the portfolio. We're excited about the future, even as we recognize it's going to be a bumpy ride for a while.

Shiv Narayanan (28:11.546)

Yeah. How has that changed how you look at companies on like that you're investing into? I'll just point to a couple of stories. I've had calls with some PE investors, especially the last week where we've been engaging and they've said like, Hey, we want to rethink our entire go-to-market organization from scratch. I want us to think about if we were starting on ground zero, how would we build this team up when we have agents filling in certain roles?

and where historically maybe we had a person fulfilling a role and what does that team need to look like? I'm curious how you look at that for an entire business and if that's changing how you're investing in companies or which companies you're selecting because in an AI first world, certain companies are going to be more successful and some of the more historic ones that maybe found success in the past may not be as successful. So how has that changed your investment strategy?

Michelle Noon (29:05.346)

think that is exactly the right question for leaders to be asking. If I were to start from a blank sheet of paper today, how would I do this? How would I create this team, run this function, deliver this outcome differently? Because that is exactly what the AI startup is doing down the street. And again, they don't have that incumbency advantage. They haven't built trust with enterprise customers. They don't have the domain expertise or the deep proprietary data yet.

So we have those things, but how do you think about re-imagining it? So I love hearing that question because I think that's the right way to think about it. Now, it's one thing to have the thought experiment and it's the other thing to work through the change management. And that is a reality as well. And you might say, well, we'd only have, you know, we'd have AI SDRs and we'd have three sales folks that process this and, you know, we would have relationships over here. But is that realistic?

Is that realistic to just wipe the slate clean? And the answer is probably no, in most cases of incumbency. then you ask the question, well, how fast can we move toward that end state and what's the first step? And you break it down, just like you break down any change management process. So we're thinking about that in the context of our companies. And just as you described in that sales example, that's exactly what every leader in every function needs to be doing and thinking about. And then ultimately picking places to move on.

You can't do everything all at once. An organization, whether that's your own company or it's the customers that you're serving, cannot digest all of these opportunities all at once. So you have to pick the high value moving high, you know, ease impact matrix approach where you think about high impact and low, you know, low risk, do those first and then do the ones that have high impact and a little bit more risk or investment required. So.

For us, it's going to be an evolution. think the other related consideration is anything that you do build with AI needs to be maintained. And it's not as if it's a set it and forget it. Just like any other software, it needs to be maintained. And so do you have the capability in the team to then maintain that going forward? It will not auto run. And certainly not if you're delivering solutions in an enterprise environment, which is what our companies are doing.

Michelle Noon (31:29.218)

thinking about that as an offset to the productivity gains is something important as well.

Shiv Narayanan (31:33.87)

Has it changed how you think about companies like future states and which verticals or industries you're potentially looking at? Because maybe some areas are more prone to be disrupted by AI. I'm just curious, how has that changed your focus in terms of where you're willing to deploy capital?

Michelle Noon (31:54.254)

So there's companies that are more exposed or less exposed to disruption in this technology shift. And if you're thinking about superficial applications sitting over the top of someone else's data, they are exposed. The way we invest in lower middle market software from day one and continues today is thematically. We invest across four major themes. These themes have been present since day one of the firm.

run through them if you'd like, but they are very persistent themes, including in an AI era. So what we're looking for at the end of the day is embedded sticky value that our companies are delivering to their customers and their market. Whether that's in the form of an essential system, the back office plumbing of a business, whether that's in the experience and engagement theme for us, which is really about the use of technology to limit friction, reduce friction.

in the interaction between a business and its customer or constituency. It's a theme around hybrid infrastructure, which is one of our infrastructure themes and a belief that the end state for business tooling systems data is an increasingly complex hybrid state. Neither is everything in server closets nor everything in a public cloud. It's a combination end state and software that can be deployed in multiple environments where that use case is relevant or otherwise that can.

Michelle Noon (33:21.314)

work across and mitigate the complexity of that infrastructure sprawl can be very valuable. And then finally, we have a theme around data and the proliferation of data. And as you can imagine, these themes in an AI era are still incredibly relevant. So at the highest order, we're not changing what we look for in businesses. Now, these are high level themes. So how do we go after it? We go industry by industry or sub-theme by sub-theme.

Michelle Noon (33:47.896)

to build relationships, get to know companies, build market perspective. And through that second order and third order process, we're establishing a perspective as well on AI defensibility and AI acceleration equally. So those are, at the highest level, there is no change. At the granular level, absolutely, we're going to be diligent seeing for all of these things that allow us to feel confident in making a new investment.

Shiv Narayanan (34:13.562)

Has it changed how you've underwritten deals where you look at the change management that needs to happen or maybe the product layer or the agentic layer on top of the application maybe needs to change? And then also there's go-to-market transformation and how you change the organization. So I'm curious how your underwriting of deals has changed in your investment horizon and where you're looking for returns. How you look at that has changed.

Michelle Noon (34:40.078)

Well, certainly the diligence leading to the underwriting of an investment has incorporated these new opportunities and realities. I would say historically, and this is still true, the best answer to the question of how persistent will this company deliver value comes down to the customers they serve. What in fact are they serving of value to their customers?

and talking to those customers and talking about where those customers are thinking about going in their businesses and how they're thinking about the solution that we might be contemplating investing behind. So at the end of the day, if you really strip it all down, we're talking about technology that supports delivery of value in the marketplace. What is that value that's being delivered? Is that something that we see being persistent and enhanced over time with AI or is it at risk?

of going away because of AI or customers valuing it less in a new world. And that true north, if you will, for how we think about the ultimate value of a business, it's about what value it's delivering in its market over a long horizon, that remains consistent and very fundamental as investors.

Shiv Narayanan (35:52.422)

Yeah, that's fantastic. And I think that's a great place to end the episode as we're coming up on time. But Michelle, before we close things off, what's the best way for people to get a hold of you or Clearhaven?

Michelle Noon (36:02.382)

Clearhavenpartners.com. We've got all of our contact info on the website and very much enjoy the conversation, Shiv. Thank you.

Shiv Narayanan (36:09.864)

Yeah, I appreciate you being on and just sharing your approach to value creation. think a lot of companies, PE firms in particular, need to get more operationally involved with their businesses. So I appreciate you coming on and sharing that approach and also your thoughts on AI and agents and how you're looking at companies.

Michelle Noon (36:25.966)

Thanks very much.