Hollie Haynes is the Founder and Managing Partner of Luminate Capital Partners. In this Q&A with Launch With GS, she talks about venturing out on her own, what she looks for in an investment, and why entrepreneurs are actually risk-averse.
How did you get started in private equity?
When I first met Silver Lake, I remember going into my boss’s office and telling him that I’d gotten an offer to go work at this firm doing tech buyouts. He said: “If it’s such a good idea, why isn’t every private equity fund doing it?”
That was the moment I decided to take the job – I thought it was the most ridiculous criticism I had ever heard. Sometimes, one big, meaningful idea is all you need to get started.
How has the industry changed over the years?
The first five years at Silver Lake we spent going around the Valley explaining what private equity was – so that gives you some idea about how different things are now. The fact that there are big, established firms today is part of the reason I was able to branch out on my own. There is enough going on at different entry points – sector, price, geography, you name it – that the ecosystem can support a lot of different activity.
Some of your deals at Silver Lake were among the firm’s most successful. How did you know the time was right to go off on your own?
I owe part of my decision to Therese Tucker, the founder and CEO of BlackLine, which was one of my deals at Silver Lake. To see Therese take an idea, start a business in her kitchen and grow it into a public company – that had an impact on me and still does. Also, a lot of the funds starting up at the time were run by analyst buddies of mine who I started my career with at age 23. I figured, if they can do it, I can probably do it, too.
I was extremely fortunate to be in a position where I could take a risk, no question, but you get to a point in your life where you start to look again at your priorities. I’m 47 years old; I wanted to cut out some of the noise, some of the hassle that came with my job. And honestly, I didn’t feel I was giving up too much. When you’re a deal partner at a private equity shop, you’re already running your own little business.
What have you learned about entrepreneurs, having been on both sides of the table?
People say entrepreneurs are risk-takers, but I really believe the opposite. The entrepreneurial mindset is about boiling a problem down into a small enough set of components where you feel you’re really not taking any risk – you have confidence you can do it.
What was the hardest thing you had to do to start Luminate?
The biggest shocker to me was that people just didn’t believe me when I said it was going to happen, that I was going to raise capital, do deals, have a fund. Like I said, this is something I’ve done before: hire people, find deals, make people money - it was the same work I’d been doing at Silver Lake. But the entire world was skeptical, and it did take me a little while to wrap my head around that. I ended up having to eliminate the items that allowed people to be skeptical, such as office space, for example – people would point to that and say, you’re not a real firm, you don’t have an office. So I got us an office.
What are you focused on at Luminate?
We have a narrow focus by design. We do enterprise software, growth buyouts. We ask: Is this software that someone at a big company simply cannot live without? That’s what BlackLine was – it’s a formula I know works, and the reason it works is that a lot of these subscription-based companies have great products, they have laser-focus on their customers, but they’re small and growing slowly. It can take 10-20 years to get to $8-12 million in recurring revenues. We can step in, get teams capital now, and take them more quickly to the next level.
And, we’re dealing with entrepreneurs who want fast execution, to know who they’re dealing with, and they want whomever they work with to have knowledge of the end market. That’s us.
What separates your firm from competitors?
We win on execution and making things easy; we’re faster than anyone else, and it’s not hard to work with us. We’re clear on our target and we don’t deviate, so when we see something we like, we’re there. As I see it, there is plenty of room for us to beat out other firms on the quality of the experience. I’ve flown to a founder’s house the day a bid was due. I showed up, I said, “Here I am. You said today was the deadline, I have your check in my hand.” That’s some advice: If you fly somewhere and you’re ready to get a deal done, the odds are in your favor.
How do you know when to sell?
That’s a tough thing about running a fund – no one believes a deal is successful until the exit. And that is something that’s meaningfully different between Silver Lake and Luminate. When you’re big and established and you have a twenty-year track record, you might be able to wait for more growth. Exits help credentialize you as an investor, they establish your reputation, they prove – right there, in numbers – that you can do this. The fact that raising our first fund took close to five times as long as our second is a product of that, no question.
What was fundraising like?
I’ll go out there and say it: No one gave me money because I was a woman in private equity. The only things that worked for me were, one, I did a deal before we raised money, we made almost 9-times our money, and I was able to point to that and say, “Here is how I will do this for you.”
The people who invested in my first fund were either people who knew me or were one degree removed. That whisper network – yeah, she’s good – was crucial. It’s scary to lock up your money with someone. And it took me two-and-a-half years from when I quit my job to when I closed my first fund.
How do you think about building your team?
I have colleagues focused on the deals, and those who are focused on the operational aspect for our portfolio companies. They have different skillsets and interests – and it’s important to let everyone live where they’re comfortable and fired up. I also love building up young people and promoting and mentoring them. As the team continues to grow, it’s important to do it gradually. In the end, all we’re doing is making decisions, and having more people around the table doesn’t always help you do that.
How is finance doing when it comes to promoting women?
You have to show women they can be successful. Not just hired – successful. You have to promote people. The biggest impediments to younger and mid-level women being successful, and this is just my opinion, are giving people benefit of the doubt and mentorship. You put them on the good deal or you don’t; someone screws up and you make it a problem or you figure it out. There are a lot of decision points where people can be helped out, coached a bit, or disregarded.
In the ’90s, for whatever reason, that’s what was happening. I think there’s been a tipping point in the last five years, but we still need to see some results.
What do you see when you look at the state of the market right now?
I’m the oldest person at Luminate by a fair margin. I’ve seen a bear market, and I lived through the financial crisis. A slowdown could happen pretty much any day now. And yes, our own business is competitive; there are a lot of enterprise software companies out there. People ask me if I’m worried that some CEO might just say, you know, we can’t have any more vendors. But there’s still so much critical work being done on paper at big Fortune 2000 companies.
Don’t wait for your invitation
Three words to describe Luminate’s culture
Open, analytical, friendly
Three words to describe private equity’s culture
Competitive, analytical, structured
The Broadsheet Podcasts; The Daily, The Ezra Klein Show
One thing not everyone knows about you
All-American runner in high school
One big number
Met with more than 500 LPs to close Luminate 1