Royce Yudkoff

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.