Episode 44: Alex Western of Terminus Capital Partners on Finding Clarity With the Vision Prism

Episode Transcript

 Shiv: Alright Alex, welcome to the show. How's it going?

Alex: Really well. How about you?

Shiv: Good, good, excited to have you on. So why don't we start with your background and the firm and we'll take it from there.

Alex: Sure. So again, Alex Western, Terminus Capital Partners or TCP is a B2B software or enterprise software focused private equity firm. So all we do is partner with businesses that are 10 to 20, 25 million in ARR. And they're either previously venture backed or they're founder led and they haven't previously had institutional capital. But the whole idea is to be real business building partners alongside those management teams to take a on average, let's call it a 10 million ARR company to a 25, 30, $40 million ARR company, both by organic growth and inorganic growth in order to build market leaders and specific niches that really matter to the overall economy and the company's customers. So we're business builders. And my personal background is just pretty plain vanilla, management consulting at McKinsey, private equity at a firm called Audax Group, hedge fund investing at a firm called GMT Capital. And I founded TCP in 2017 as an independent sponsor. And we formally spun out independently and we've been investing on our own since 2020.

Shiv: Awesome. And a lot of firms and sponsors exist that are looking for these 10 to 25 million ish companies, want to three X it, and eventually exit it. What makes what you're doing at Terminus different?

Alex: Well, I think one thing is how we source. And I hate that word because what it really pertains to is how we think about the landscape and industries or specific companies where we can have an outsize impact and really focusing on those and then getting our name out there in the right way. And there's no better. You know, we don't do a lot of marketing, so there's no better way than sort of reputation and finding the right companies to partner with. So the way we source and build relationships is one big differentiator. 

Another big differentiator. We call it expert restructuring, but there are a few legs to that stool. Number one, a team of operators. And I don't mean consultants. I mean, true experienced software operators. And I don't also mean people who are retired and no longer do the work. I mean, people who really roll up their sleeves and help. Having the operations team that we have and being operationally oriented business builders like me or anyone, even on the deal team, even those who aren't on the operations team. That's one leg to that stool. Another leg to that stool is processes, playbooks, documented best practices. You'll hear a lot about VISTA standard operating procedures, for example. We have done an incredible amount of work to research and benchmark and back solve to how some of the best companies around do it and really distill that down to secret sauce. What that doesn't mean is that we tell companies how to do anything. That's not what it means. What it does mean is we have a Chinese menu of sorts for people to pick from, depending on what challenge they're facing or what they want to tackle or how they want to go about things, when someone says, hey, this is a problem I want to solve, X or Y or Z, as opposed to saying, great, like, we'll be your thought partner in that. We are their thought partner in that, but we also come with a view and real processes that can actually sort of make a difference. And then we customize it to whatever is actually going on. So that expert restructuring is probably the second big differentiator. 

The third, the third is buy and build. We are like outsourced corporate development for the companies that we partner with. We average three add-ons per platform. The whole idea in building a market leader in a specific niche is not just growing the top line organically, sale by sale by sale, but also thinking about exactly what company do you want to build? Like what is, what is the grand best possible vision for this company, this industry? And building that usually also means buying some adjacent market companies or companies that have something new you can add to your product suite or a company that adds transformative scale and putting those together in a, you know, I, I hesitate to use the word synergistic way, but in a, in a value added way, those three things are the differentiators that we keep coming back to how we source, how we help companies operate and how we buy and build.

Shiv: And there's this concept that I've seen you talk about in the past called this vision prism. And why don't you touch on that and explain how that factors into all three of those areas.

Alex: Yeah, okay, cool. So the vision prism. We… One of the first things we do when we are doing our diligence, deciding whether to partner with a company, starting to work with a management team, is we really focus on what some people call organizational clarity. There's no better guru for this, by the way, than Patrick Lencioni. I'm a voracious reader. We love his books, Four Obsessions of an Extraordinary Executive, Five Dysfunctions of the Team, Five Temptations of the CEO. We actually recommend them to a lot of our portfolio companies, but organizational clarity, getting vision right, values right, having that drive strategy, just getting on the same page in terms of chapter one issues. So one of the cornerstone components of establishing and driving organizational clarity is what you just cited, the vision prism. Like what's the point of organizational clarity? It's, hey, a lot of companies are actually kind of just going through the motions haphazardly. Like if you were to ask different people who work at a company, what are you really doing or what are you working towards or what's the vision or what? It's shocking how often the answers you get aren't the same, that they aren't even really similar or that a management team thinks or a leadership team thinks they're pretty clear about why do I exist? What problem do I solve? What's my mission? Where am I going? But that hasn't propagated down. That hasn't translated. And so there actually isn't nearly as much alignment as people think. This sounds kind of obvious. This is not secret sauce, I mean, it is secret sauce actually doing it, but getting that vision right and getting the right stakeholders aligned behind it, we find that's one of the most important things we can do. 

So what's the vision prism? The idea of a prism that it's one thing, but there are different facets to it, right? know, different reflections or different, different facets or different sides of the prism. The concept is we should know exactly what our vision is. Why does this company exist? What is, what does it do in layman's terms? What are its strategic levers? Where's the market now? Where is it going? What's our place in it? How do we get to leadership? We need to have crystal clear answers to those questions. But that isn't enough because it needs to work, like it needs to fit like a jigsaw puzzle piece with all the stakeholders who are around the table for our company. So, you know, one example is the rest of the value chain. If our vision or if what we're doing or if our strategy doesn't simultaneously add value for clients and for our value chain or suppliers, like if it isn't win, win, win, that's going to be a structural impediment to a company being successful. So one facet of the vision prism is how do we explain our vision to clients in a really empathetic way that isn't about us. It's actually about the clients. How do we explain our vision in a way that really resonates with suppliers? So it's not just like, Hey, this is what we're trying to do. they're like, well, great. But like, why do I care? What's in that for me? Like, why would I help you? See what I'm saying? And that's what that the stakeholders, the value chain, the clients and suppliers are one side of it. 

But there's also, there's also the, the employee contractor, the in the company side of it. There's also the board or the ownership or the shareholder side of it. And all those things need to fit together. Cause a mistake that a lot of companies make is not getting that clarity in the first place. Even if they get the clarity, sometimes not making sure that it works for everybody around the table. So you'll hear some people who are backed by private equity complain about, well, I certainly see how increasing revenues and decreasing costs and driving EBITDA and cash flow, I see how that's positive for the investors, but why in the world is that positive for me as an employee being asked to do more with less and I'm just stressed out, right? If the vision doesn't work for everyone, the company's not gonna be as successful as it can be.

Shiv: Completely agree. We're actually huge fans of Patrick Lencioni here as well. we built out the strategic framework and any company that I've built has done that exercise where it's like, why do we exist? Who do we serve? How do we solve their problems? And what are our core values? And what's next as a priority item in order to get there? And when we come into companies, we find that a lot of them don't have that shared understanding. So it's really difficult to move towards a common objective.

Alex: It sounds like you've read The Advantage too. That's one of the books I forgot to mention.

Shiv: Yeah, that's a great book. Essential reading for founders. Yeah. But I guess connected to that though, you have this idea that like you have to get to a shared purpose or shared vision, but then you also have to connect that to investor objectives. And you just touched on that at the end and what the financial goals are. And so how do you marry those two ideas together?

Alex: How do we marry the vision prism with the financial goals?

Shiv: Yeah, or like, let's say you have an investment thesis behind a company or you add on or tuck in an acquisition and then get everybody that's involved beyond just the investors and the executive team, but like the suppliers, like you mentioned, partners, employees, how do you get them all aligned against that while staying true to the initial reason that the business exists and who they're trying to serve.

Alex: I guess we kind of do it like that old saying about how somebody eats an elephant one bite at a time. Maybe what I'll do is maybe we'll step through kind of a real life example without giving away any confidential information. So a company called Katabat, which we invested in August of 2020. So Katabat provides credit collection software to big banks. That's a great company with a great leadership team. They had been backed by, many venture capital firms who had written small checks. The only issue was this. The original founder, left the company and that may or may not have been a little messy and Katabat is a great company and a great industry, but it's not a great fit for what I'll call, you know, steroid injected growth, grow at all costs, you know, 50 gazillion dollar TAM, even bigger than the size of GDP. You know, not every company is a perfect fit for venture. So great product, great space, great company, good people doing good work who, you fast forward the clock, you know, dozen years and people felt like they were stuck in second gear a little bit. And everyone had kind of created their own rationale for like, why am I here? What are we doing? How are we kind of putting one foot in front of the other? And so there wasn't that lack that there wasn't that organizational clarity. There wasn't that, that vision prism, if you will. So Ray Peloso, that CEO, legit, a friend of mine, to this day, we obviously met through the process. He and I spent a lot of time thinking about like, what is the vision for Katabat? And what we came, and what, what we came up with it's about getting the right message to the right borrower at the right time in the right way. And on the one hand, it's a little pithy and that's good because it needs to be memorable for us. It needs to be memorable for customers. It's good for marketing. It's helpful for the employees to sort of have that jingle. But like that took on real meaning for us. So one example is like if you borrow from a bank and the bank is just trying send you updates, hey, bill's coming due, or maybe a bill is passed due by five days. I guess there's two ways to approach things. There's a bank saying, hey, I'm just trying to service a loan. The other way to approach things is credit collections, and that kind of has a menacing, it kind of has a menacing connotation, let's say. So an example is we realized, you know what? Katabat is all about nurturing customer experience for those borrowers. And by nurturing customer experience for those borrowers, they're better payers. And if they're better payers, the banks can actually charge lower costs of capital and the banks can, less often have to result to charge-offs or sort of more aggressive legalistic follow-ups. You know, I forgot to pay a co-payment for a doctor and I moved away from that location long since I get this nastygram in the mail. This is an attempt to collect a debt. All right. It's $25 like relax. So what we did, what we did with Katabat started with that vision thought about how do we actually help clients reach the most amount of borrowers. But then how do we help them reach them in the right way? So the borrowers are actually happy and they're repeat customers for the banks. Well, that in turn makes the banks happy. And from an employee perspective, it's, wait a minute, let's get really focused on our product roadmap because we actually had too many initiatives and different customers want different things because we were straying from our vision and people felt disorganized. Let's get back to basics. Now that we know exactly why this company exists, what's the gap between exactly what this product does and what we want it to do? Great, let's build the product roadmap around that. Then the vision prism is applying to R&D. Then how does the vision prism, that was your original question, how does it apply back to the investors of the board?

Without giving away confidential information, I'll put it this way. We invest in Katabat and there is a, let's call it 300 to 600 ish million dollar market. And there are a lot of players and there's no clear winner because there are lots of ways to skin the cat, but there's an opportunity to create a clear winner. And if there's an opportunity to create a clear winner, the leading company in a space can deliver fabulous returns for its investors. Right. So that's the opportunity that we saw. And we saw it was only going to work if it really worked, not if we were like extracting value or anyone's extracting value, but rather if we really created value and the market rewarded that. And that is what happened. That company grew tremendously in its top line and the enterprise value of the company almost quadrupled in a year. And that company ended up becoming the technological backbone for a company that doesn't just do credit collection in a narrow sense. It does broader revenue cycle management accounts, receivable management. So then that company becomes part of the engine of a company which serves an even broader ecosystem where you know what? Companies managing receivables well and just general companies that the capital market's working better, that's a good thing for everybody. So you find those win-win opportunities and you actually try to deliver on them. And you certainly get rewarded for that in your fair share, but the benefit is you're rewarded in a way that's really beneficial for your reputation and for how you work with people. So then you get referrals. And then if you do it again, it actually becomes kind of a positive feedback loop.

Shiv: Yeah, what's interesting as you spoke about that example is that there's the vision for a company and the mission and why it exists. And somewhere along the way it's lost across all functions, but the more that permeates through those functions, the more successful a company can become. I'm just as I'm hearing you speak, I'm thinking about just getting your product marketing, right? Knowing what exactly it is that you want to say and how you position yourself in a marketplace. Knowing who's the ideal customer? Who are you going after? Where are you more likely to win? Who are you likely to serve? What are the exact offerings that you're bringing to those customers? And then potentially saying no to other opportunities because it maybe deviates from your mission. And then also it affects how you think about your product roadmap, which features you prioritize, what the sales team is focused on. So it's not just about the vision, but it kind of brings, like you said earlier, organizational clarity to everybody in terms of what everyone's focused on. 

Alex: 100%. And I like how you touched it. I like how you brought that to marketing. I'll give you the plug and I'm sure your listeners know it that you’re the author of Post-Acquisition Marketing. One of the biggest things our perspective or existing portfolio companies or partner companies tell us they want help with, the number one requested thing is go to market. The number one requested thing is marketing because the best kind of value add is organic growth because unlike inorganic growth, you don't have to pay for it. And controlling costs, like, okay, that's all well and good, but that ain't nearly as much fun as the champagne bottles popping because things are growing, right? The growth is the holy grail. And when you get the vision prism right, it propagates through the go-to-market. Cause you're clear on what you do and that makes marketing a lot easier. And that makes telling the right story to the right customer easier. That helps you think about, cause you're already in the mindset with that vision prism of like, got to think empathetically. It can't just be the one vision in the mind of a board chair or a CEO. It needs to be how does the vision really resonate for suppliers, customers, employees, other board members helps a marketer, for example, think with that in mind, how does my marketing resonate, not for me. You hear people talk a lot about don't sell the features, sell the ROI. How do I put myself more empathetically in the customer's shoes and connect that vision to then that can come alive. Like there's some real sizzle behind what you're doing. so yeah, the applications are, are, are broad.

Shiv: It totally and I can share a personal example here is just this business. Initially, when I first started it, I thought all kinds of software and technology companies would be our customers. And very quickly, I learned that private equity has a unique set of needs that we were uniquely positioned to serve. And so now if you go on our website, it's all about creating enterprise value, working with portfolio companies, due diligence, like the book is called Post-Acquisition Marketing, and the second one is called Exit Ready. It's all about, this podcast is called The Private Equity Value Creation podcast. There's so many books I could have written about marketing, but the ones I wrote are specifically tied to our mission. It's very much about helping the end user, right? And so sometimes we miss out on other opportunities, but we are so uniquely positioned here that we, that's how we build the PE relationships that we have. And that allows us to have like a pretty differentiated position. And people think of us first before other, let's say marketing agencies and providers out there and that's allowed us to grow over the years.

Alex: We are, I like how you said that. You're very, I don't know if you would describe it this way, I would say, forgive me for putting words in your mouth, you're very systems driven. We pride ourselves on being very systems driven. We buy enterprise software. We partner with enterprise software companies. Engineering is literally all about the process, DevOps, like don't let me go down a rabbit hole on that. What you're saying though, connecting the vision prism to enterprise value, how you think about, listen, it starts with a foundation of TAM and segmentation and product marketing and sales enablement and go to market. All that is fed by perfect clarity of who you are, what you do, your position in the market, what we would call that organizational clarity and that vision prism. But how you are expert at thinking about how that foundation, which is underpinned by organizational clarity, then feeds, what do we do in terms of demand generation and our content and our website? What do we do in terms of our team and our budget and how we take the leads we're getting and convert them? And then what does all that mean ultimately for revenue maximization? And obviously revenue maximization is like a direct correlation to enterprise value. It's one thing to kind of, you know, it's hard enough to get the vision right, but then the real work begins, if you will, is connecting those dots, threading that needle, all the way to enterprise value, but to our broader point, trying to do it in a win-win way.

Shiv: When you meet companies, do you find that they inherently understand this or how often is it like, is it one out of five, one out of 10, one out of three that really understand this and not just on the marketing side, but when it comes to the product roadmap or what they're focused in on the sales side, like do you see companies truly having this in place or do you have to build it in most cases?

Alex: I would say that we build it in most cases. I would say in conjunction with the leadership teams, the management teams, they build it in most cases. But yeah, it's not there. But again, we've been talking, this is like a therapy session. We're talking a lot about empathy in this episode. I like it. Let me put my empathy hat back on one more time. One of your question is, yeah, we don't see it a lot. That's not because like, silly company or silly management team, know, this, this private equity person thinks they have something figured out and every hammer is a nail that that's not it at all. I think that it is unbelievably easy for the urgent to crowd out the important. I fight that battle in my business every darn day. And when you talk to lower middle market software company at kind of that 10 to 20 million in ARR mark, that is the hardest place to be, honestly. Just getting started out, ooh, that's fun, the ideation phase. I built Terminus myself, believe me, I remember the early days. Ooh, that's fun. When you're really big and the flywheel's really going, know, not taking anything away from that, it is a little bit easier when the snowballs got momentum rolling down the hill. That chasm between getting to be a real company, I mean, breaking through the five to 10 ARR, the 10 to 20, it's just so darn hard that most of the time management teams just have to firefight. You just feel like you're, that phrase drinking from a fire hose, you feel like there are multiple fire hoses absolutely leveled at you. So they're like, I think most companies think, would it be great to nail my vision and craft my strategy in pretty PowerPoint slide and think about how I can then put the right priorities behind it and think about carefully aligning everyone in my company and carefully like having a great relationship with all members of my board and even make sure it's win-win for my customers and suppliers. They're like, that sounds nice, but that sounds too good to be true. And that's, that's you talking to someone who doesn't know what it's like in the trenches every day. So it's not there cause they just ain't time to put it there. And so we like to be that extra set of arms, legs, that extra brain, that, that roll up your sleeves partner alongside a company, not ownership, which is most private equity firms sitting on top of a company. And sometimes they have a very clear sense of vision and all this stuff. They just like, I need some arms and legs to help craft it in the right way. And then we're gonna divide and conquer a little bit. I'm gonna be rolling it out this way, but honestly, you can get more deeply operationally involved with your operations team, take a line role for a time and help us align and you do it together. But yeah, often it's not there and often it's not there because there's just too much going on trying to tend to the store. You know what I mean? Trying to keep the lights on.

Shiv: Yeah, I completely resonate with everything that you said. It's one of the hardest things is to build a company in that phase because you're managing cash flow, you're wearing multiple hats, you're thinking about where the next deal is coming from. You may not have your executive team fully flushed out or even if they are, you have to be an active coach and actively involved in a lot of domains. So you're just managing a lot of stuff and taking a moment or even like a month or a to do an offsite to figure out some of the stuff is not at all a priority for founders when they're kind of running and trying to do all these things at the same time. So totally agree with that.

Alex: I hate to confess this, we want to do an annual offsite. We're so busy at TCP, we had to cancel our annual all hands offsite this past September and we kicked it to Q1 of next year. I value humility and I gotta be humble enough to admit what I can't even take my own advice, right? I hear you.

Shiv: Right. Yeah, it's one of those things. It's like we talk about this a lot internally. It's just like it's in the important, not urgent quadrant. And so it is important. You have to do it. But along the way, if there's a deal that needs to be closed next week or something else is going on that requires your attention, then you don't have time for it. And so you kind of have to figure out when is the right moment on our side. We've probably done it. I think we did it once in the second year of our business just to get everybody aligned. And then since then we didn't touch it until last year. And we did like a full internal process around it when things were less busy. But then we haven't done that work since then. It's just like, it just sits there, but we have some sort of an idea of where we're headed towards together. And then there's week to week stuff and month to month stuff. And I imagine it's the same case for a lot of founders who are at that stage where they don't have an institutional investor or they don't have the capital to be able to take that time to be able to do more of it.

Alex: That's when private equity can help. If private equity can think, because there's a little bit of been there, done that, there's a little bit of doing all that research and benchmarking. If private equity can take that universe, all things a company can do and be the, let me be careful with my language here, that SHI- filter can be that filter in order to take all that and say, all right, you know what? These are the key issues. Understanding the universe of what's possible and you know what? You can implement CI-CD and that would be great, but is implementing CI-CD and releasing more frequently, is that actually something that's worthwhile and drives enterprise value for your company? Or is that gonna be a lot of process and training stress that you don't wanna go through? Going through that entire universe, understanding it, having a deep enough partnership and understanding of the company to understand where its real opportunities or where its real pain points are and then connecting those dots. You know what? Only so many hours in the day, let's not get overwhelmed. We come up with a value creation plan together that is simple and it fits on one slide and we revisit it every quarter and we often change it every quarter but it's gotta stay simple and it's gotta stay clear and we can bring the right tools or people to bear on that really short list. But if you focus on that really short list, you put more wood behind fewer arrows, you can get a lot done. We wanna make sure we don't spread ourselves too thin or spread the companies we partner with too thin, because as we just talked about for the last five, 10 minutes or whatever it is, they've got enough on their plate, you know?

Shiv: Yeah, as I'm hearing you talk, know, question on this as well is even on our side, we have so many different initiatives that we want to work on. So we currently are investing into a software that we're building ourselves. We have, we launched a new book, obviously. We have a course potentially that we're launching for marketers and PE firms and their portfolio companies. There's a bunch of initiatives. There's like five or 10 of them. And I had our COO pull up a list of all the strategic initiatives that we have. And it's like eight or 10 of them. And immediately I was like, we need to cut three to five of these because we don't have enough time to work through these effectively to get to the level that we want to. And I think to like B2B companies, and there are often initiatives that seem good on paper, but then as you start to execute it, you slowly realize that you're drifting from your core purpose or your core mission or your core set of customers or things that made you successful. Like an example that immediately comes to mind is going up market. Every company wants to go up market or down market or to a different adjacent vertical or things their software can be repurposed in some way. And so how often or how do you balance that? Because there's like your core, we talked about books, there's a great book called Profit from the Core and there's your core business and then there are the adjacencies that you can kind of extend into. But there's always this risk of spreading yourself too thin. And so how do you balance those two things, especially from this perspective of what your core vision might be?

Alex: For us, we use an ROI framework in order to forcerank things based on how much time is it gonna take and how much is it gonna cost, whether it's hard dollars, people, which relates to that first, by the way, or opportunity cost. But that together becomes the cost and the duration. What's the enterprise, know, what's the, we force ourselves to quantify the value we think can be attained, even if it's something that's qualitative. Like it might be it. We had an initiative called staff for stars at one of our company that was all about, cause the company was growing really quickly hiring absolute tip top, quality talent. Gosh, how do you really quantify that? Like, how do you like. Yes, let's do it. And that means let's spend this much on executive recruiters and let's spend this much on some applicant tracking software. And like, what exactly is the value going to be? And you know what we forced ourselves to, we found some research on the difference in perceived quality of management teams and valuation multiples. And so just, you know, you don't want to have false precision on something, but we force ourselves to quantify it. So literally a cost benefit analysis, and then you forcerank according to the third variable, which is like sort of confidence interval or, you know, how attainable do you think it is? So, bad example, but if there is, if there were just literally excess costs, like, here's it. We had a company that wasn't about squeezing the belt or anything, going into COVID literally unused offices in different countries. That wasn't like a shutdown office. That was like a no one works there. I think even though the value from that was very low, it was actually prioritized number one because it was like 50 basis points per year of margin. And like it's quick and easy and the confidence on that was so high and EBITDA is EBITDA and it frees up opportunity to invest in other stuff, actually put that to the top of the list. So we force-frame by looking at each of those three things, cost, benefit, confidence interval. That's how we think about it. 

Shiv: What do you, are your thoughts? Because you earlier mentioned you buy and build and where capital can kind of bridge that gap between taking on that risk, say organically versus like finding a way to invest in an adjacency without necessarily needing to build it from scratch and where capital can support an initiative like that.

Alex: Yeah, so on average, on average, let me actually do some math here off the, okay, probably a little bit less than 75. On average, our total equity hold size in a company is about 75% when we first get involved. So what I mean by that is, hey, execute the buyout or execute the recapitalization and let's say that ultimately you're to have invested $4 in the company, you've invested $3 in the company. There's going be an extra dollar of follow-on investment. It might be because you actually want to invest in an organic initiative and higher up, but you know what? The bar on that has to be really high because you can't waste money and it's easy to talk yourself into something that's pie in the sky. But it could be an organic initiative or it could be an inorganic initiative, buying the right company and adjacent market, the right that complements what you've already got in order to build a more compelling hole where that hole is greater than the sum of the parts. So we're usually looking to invest incrementally, not just all at once. And I like that because I mentioned that I had a hedge fund background. When I worked at the hedge fund GMT capital for, for years, we had a concept there called cumulative conviction. In public stocks, you can take a small position and then get really close to the company. And if the company is performing and you like what you're seeing, then you can add to that position over time, size up. I often found sizing up or sizing down the right positions was more important for my returns than just making the right investment decision in the first place. Like buy the company, don't buy the company. That's hard to apply to private markets because like it's private equity, it's illiquid. You either buy the company or you don't. It's binary, right? But for us, this buy and build strategy where we're trying to get a company from 10 to 35, 40, that usually means follow-on opportunities for investment. And the closer you're working with the management team, the more proof points you see, the more opportunity you see, you can size that up. So that's how we think about it. 

You brought up profit from the core. That is something that we talk about all the time. It's a bad analogy because we're software, but I guess Nike is a classic analogy of you literally start with shoes, running shoes. So then what's the most logical, how do you profit? How do you grow from that core? Well, make shoes for other sports. I got it. It's kind of the same thing. You're applying your core competency of shoe making to different sports. Well, now that you're in different sports, you can make apparel for different sports. So you fast forward and Nike is a gigantic sports lifestyle company that, I mean, they supply sporting goods, make golf clubs for a period of time. They really run the gamut, but that wasn't haphazard. If you trace that back, that was actually carefully thought through logical product extensions because they were growing from their core. That's what we try to do with each of our companies. 

I already mentioned Katabat earlier in this podcast. Again, Katabat, credit collect, borrow communication or credit collections software for big banks, but like, you know, consumer lens, SoFi, Sallie Mae, US Bank. Okay, they serve big banks. But I also mentioned that one of the things that might have been holding the company back was people were like, how big is that market really? How big of an opportunity are you really going after? Does that get the company excited, the employees excited, future investors excited? So how do we go after a bigger market opportunity? The answer for that, we acquired a company called Simplicity Collect. Simplicity Collect was a SaaS offering for third party agencies. Because if you think about serving credit, you can do it first party, like the bank. I made the loan and I'm talking to the borrower like, hey, you know, here's the mailing or here's the text reminder or here's the email or here's the web landing page for you to login and do your own service. That's first party. There's also third party, which is, if something goes awry, you got to hand it off and if something, then actually collecting is the third. Let's open up the whole market. Acquire Simplicity Collect which is the same value proposition, the same kind of product, the same reason to exist, but in the third party part of that market, now you've opened up the whole market. And by the way, if you've got first party customers who say, listen, I love your enterprise software, but it is pretty big and pretty hard to work with. I'm a smaller lender. I'm more of a startup consumer lender funded by VC XYZ. Do you have a SaaS offering? Yes, we do. It's called Simplicity. For some of the large agencies,

Simplicity might be small or SaaS or not robust enough for them, even though Simplicity is incredible, it just targets a different customer segment. We can tell those third party agencies, well, we have Katabat. So lo and behold, cross-sell. Once you had that, once you led that credit, that overall credit collections industry, not just third party, but also not just first party, but also third party, then it's, well, what's next? Well, those same principles can be applied to overall revenue cycle management or AR receivables management, not just how a bank or a collections institution thinks about liaising with its customers. So Katabat was a company that very carefully and thoughtfully grew from its core. And there's a lot of tactics involved in that, but honestly, a lot of it came back to getting those chapter one issues right. That vision prism, I could bore you to tears with some of the specific playbooks around how we specifically implemented HubSpot, because the company didn't have a CRM yet, or how we separated lead generation from deal closing, because the company had two sales reps who had to do their own prospecting and demand generation and pipeline nurturing and then close it. And it was, hey, let's let you focus on what you do best and let's have say, I can talk about some of the specific tactics. A lot of that really did come back to getting that right alignment on those chapter one issues. It made all that downstream stuff a lot easier.

Shiv: Yeah, I think that's a great place to close out the episode. I think just this point that if you get that vision right and then you let it kind of find its way through all the different priorities and places where you're investing across the organization, across M&A, across where you're deploying your capital, good things happen and eventually there's more enterprise value for everybody. With that said, Alex, thanks for coming on and sharing your wisdom. Is there a place if people want to learn more about you or Terminus, what's the best way they can find

Alex: Yeah, check out our website, terminuscp.com. We are growing investment by investment by investment. So we're doing it the old fashioned way. There may be a day in the near future where we start to do, know, sort of join the Instagram generation, start doing a lot more on social. A lot of people are doing that that's super smart. We're a unique blend of new school, because all we do is software and AI and the cutting edge, but also old school, kind of building this company brick by brick with the right kind of partnerships. So the website's probably the best place at this point. 

Shiv: Awesome, so we'll be sure to link that in the show notes. And with that said, Alex, thanks for coming on and sharing your wisdom. I thoroughly enjoyed the conversation. I think a lot of founders, CEOs, and investors can take a lot away from it in terms of how they think about value creation planning and just starting with that ground zero or foundational question of why do we exist, who do we serve, and then slowly building out from there. So thanks for coming on and sharing that.

Alex: Shiv, thank you, I really appreciate it.