Peter Lacaillade

Because we think that by going in the smaller end of the markets, we're taking on maybe more risk, but you're able to buy into things at lower prices.

You can do more operationally and improve these businesses, and then they can be sold up the food chain to these larger players into these places that have lower cost of capital.

That has continued to evolve.

I think it's not happening overnight.

But I think one thing that is interesting about those big places is that they have become maybe more like investment banks than private equity firms.

What does that mean, bring that point to life?

You go join Blackstone or...

whatever, after your stint of banking, you're really just cranking through models and you're not really on the front lines with entrepreneurs.

It's more about financial engineering than it is business building.

I'm making generalizations, but I think the size of what they do.

Yeah, I think they are targeting lower cost of capital.

They're really focused on, okay, what kind of premium are we going to get over public equities?

Is this suitable?

There's a real emphasis on credit from these shops because it's very scalable and clients are not taxable.

They're less sensitive to that sort of thing.

But I would say that the cool thing at HBS maybe 10 years ago was to go back to your firm that you'd worked at or go back to Blackstone or Carlyle

KKR.

Now, I think a real trend that has been going on for many years, but is really accelerating is actually to not go back to these big shops, but to actually become an independent sponsor, to do a search fund, to go do a roll up in a certain industry.

And maybe that leads you to building out your own private equity firm.

Royce Yudkoff teaches a class at HBS, and there's been some real success stories.