Royce Yudkoff
speaker
143 appearances
1 recordings
1 series
first heard May 2025
last heard May 2025
Royce Yudkoff’s voice in public audio — every appearance, attributed to the second.
Trend
recordings per month · last 12 monthsNo recordings in the last 12 months.Older appearances are listed below; set an alert to hear about the next one.
Appearances
Unlike private equity, it's hard to find a great many instances, particularly in the unfunded market, where investors lose their capital. Just doesn't happen very often. I would say in the funded market, the other thing that I find interesting, and I'm not sure about this, this might not be true, but I have the impression.
is that it's become much more of a venture capital play than a private equity play in the sense that I think about the way VC portfolios work. You guys are smarter and know more about this than I do. But I think the way VC portfolios work is you have 10 firms in a fund and you want one of them to win and maybe another one to break even.
And if you end up losing all your capital in the other eight, it's not the way you wanted it, but you're still going to have pretty good results. And private equity is very different from that.
Of those 10 firms in the portfolio, there may be one that has some loss of capital, usually not 100%, but some loss of capital, four or five that might break even, a couple that do okay, and maybe a couple that do very well, but not astronomically well. Is that fair, Royce? Yeah, I think that's fair, Rick.
Unfunded search is very much like private equity, maybe even on the safer side than private equity. Funded search really starting to feel like VC investing to me. And interestingly, Patrick, one of the things that's changed a lot since we talked 10 years ago is much of the funded search is occurring through institutional investors. but rather small private equity funds that specialize in search.
And they're increasingly dominating funded search. And that's a huge change. So they're looking at a portfolio level, much like a venture capital fund looks at it as a portfolio level. So it's very different.
If you're an investor who's thinking about investing in one or two of these, either invest at the portfolio level in one of these funded search portfolios or an unfunded searcher who you know and love, somebody you know well, but not buying a portfolio of these is potentially a scary investment.
And this is an odd thing. This market is so illiquid. It's really hard to find buyers. good companies to buy with recurring, what Royce and I think about as value investor plays, recurring revenues, enduringly profitable companies. There's so much harder to find and transfer than you would imagine that I think that's the bottleneck.
I think there are searchers, there's kind of a market equilibrium going on here. There are searchers, there are investors, sellers, there's a whole bunch of information costs everywhere because it's a very fragmented market. And I think that keeps it down. What's interesting, fascinating to me as an economist and as an investor is that at least on the low end, multiples have not been driven up.
If you want to buy a firm with $750,000 of EBITDA, that's a pretty good recurring revenue business without a lot of customer concentration. You can still do that for Forex. Probably can't buy a $2 million, a million and a half dollar EBITDA business. Maybe you could have done that 10 years ago. Can't buy that at Forex anymore.
But you can certainly buy the sub-million high-quality business at Forex.
Rick, are there others you'd want to put on this list? Well, I think you need to buy a business that you can manage. I like to say if you're allergic to fur, don't buy a pet shop. And I mean that to be emblematic of a whole bunch of things. So many businesses I could not run. I could probably run a landscaping business, but I don't think I could run a biotech.
So I think you have to have a business that you can use your talents or develop talents to run. You don't have to know the business. You don't have to be an expert in whatever the business does, but you have to be the kind of person who could learn that.
Right. Who ends up buying the blue collar businesses from our students? It's usually the people who are captains and lieutenants in the army and the Marine Corps. They're used to managing blue collar workforces.
They say, well, we're running the company, but they have a different sense of what a company means. Anyway, so I would add that. You have to be able to run it. The other thing that's increasingly interesting, I don't know if this is a millennial thing or not, because I certainly cared about this when I was looking for a job, is people care deeply about where they want to live.
I think Royce and I are not convinced, me maybe less than Royce, that you can run businesses purely remotely. I think just being there, walking through the shop floor, talking to people at the water cooler, I think all that belly-to-belly management, if you will, is just really essential, especially if you're inexperienced and young and learning the business at the same time.
The idea that you can buy a business in Mississippi and run it from your ski lodge in Colorado just seems incredible to me. Although I wish it were true, I don't believe it's true. And so often our students are worried about where the business is. So they're worried about the quality of the business. They're also worried about where the business is.
And then does the business meet their criteria as in what they could personally manage? So it's complicated. It's fascinating. We have this project where our students look at companies that have been for sale in recent past or are currently for sale as part of their project in our second year courses. And that's ongoing now. We recently had this day, Roy, tell them about that.
Right. And you'd think that it would be like one great company and everybody would say, oh, that's the company I want to buy. No, that's not what happens. Beauty is in the eye of the beholder. Yeah.
I mean, first of all, you need to have capital to begin with, the academic problem. But I think it's a pretty open market. And the reason I think that is our school, our institution, Harvard sensibly has very strict rules about relationships between faculty and students, particularly while they're students.
Showing 21–40 of 143 · page 2 of 8
← Previous
Next →