How Sticking to One's Search Instincts Can Reap Rewards (Searchfunder Interview)

SEARCHFUNDER INTERVIEW OF MIKE ROBERTSON

We talked with Mike Robertson whose AltaLink Capital recently purchased Efficient Forms. Previously, Mike worked for Accel-KKR, where he invested in and advised HR software and services companies including PageUp People, Infinisource, PrismHR, and Cielo. Mike started his career working for investment banks Piper Jaffray and Lehman Brothers.

This 3-part series covers his search process, closing the deal, and his reflections on being a new operator.

As you’ll see in Part I, Mike set up his search process using his past experience as a guide and stuck to his instincts in how he wanted to approach it. At the same, he credits a bit of good fortune in that one of his interns made the right phone call at fortuitously the right time.   

PART I: THE SEARCH PROCESS

Tell us about your search process?  

According to my advisors, I probably ran one of the bigger search operations. I graduated from Stanford and moved to Utah, where I have roots and family and the cost of living is lower. From a business perspective, there is a strong culture at Brigham Young University and the University of Utah for unpaid internships. The University Venture Fund (an experiential student venture fund out of University of Utah) allows undergrads and grad school students, wanting to head into private equity, to have internships -- while receiving college credit.   

I rented a really large dive office space, about 2000 square feet. It was such a dive, but cheap at something like 40 cents per square foot. I pitched our internship as real private equity experience. I mirrored the operation similar to an Accel-KKR. I used best practices I had learned from prior private equity experience. I had overwhelming levels of interest. From my first unpaid internship posting, I received 125 resumes. I interviewed 40 or 50 people and ultimately brought on 15 interns.

I divided the interns into 2 roles: sourcing and deal evaluation roles. 50 to 60% of the interns at any one time were dedicated to sourcing. During the 21 months of my search, I never had fewer than 15 interns; at the peak, I had 22 interns. It was a self-reinforcing structure. The sourcing team would generate new opportunities by phone call, cold email, and going to trade shows and the deal evaluation team would do the financial modeling and market research.

I was unique in allowing the sourcing interns to speak directly with company owners. They received true sourcing experience. I coached these pretty young folks – and they would get really good at it. Each sourcing intern had to come in with 1 new “qualified/interesting” opportunity per week. They would have had to talk to the owner of a company that fit our metrics. It took a big funnel to get that 1 lead. The experience they generated was absolutely second to none. They developed pattern recognition and actual deal evaluation skills. For each new opportunity, we would hope to get an NDA and sufficient financial information to run our financial model. I then created deal teams – 1 execution intern, 1 sourcing intern, myself, and perhaps another intern. We would meet as necessary to evaluate the deals. 

My time was primarily spent on coaching the interns and evaluating the deals. For deal evaluation, I tended to err on the side of getting on planes and visiting business owners. I got some pushback from my investors on my initial travel budget. I was spending between $40 to 50K per year on travel. I was biased toward visiting the opportunity and building the relationship.

Searchers tell us that their credibility is very important to them. How did you build credibility if you were having college students making the initial contact?  

I really focused on getting the right people for the internships. BYU students typically have done 2-year missions. They are reasonably close in age and maturity level to someone doing an MBA at Harvard. In some ways, they were almost better because they have spent two years talking to people from a variety of cultures about sensitive topics, like religion. Also, in Utah, there’s a culture of door- to-door selling. Almost every intern brought onto to the sourcing team had such a background. I did a lot of coaching. We did a ton of practice drills. The interns were having 5 to 10 of these conversations per week; thus, after a month or so, they were pretty good at them.  

My investors thought I was pretty crazy to approach it this way. I don’t think that number of years is a predictor of success in the role. I mean, that’s what the search fund model is all about – taking someone younger with less experience and coaching them up to CEO. The internship was along the same thought.

For that first crop of sourcing interns, I didn’t know how it would go. We learned from our mistakes. I learned how to train them. They felt so empowered, enabled and trusted that they wanted to do a good job. Our team meetings were 90 minutes to 2 hour discussions, legitimately debating companies – financials, markets, customer base, etc. The interns got up the learning curve of thinking like an investor. I tried to build specific knowledge. When the interns talked with the owners, the owners knew their business but did not know a lot about investment structures. Our interns came off as the investment experts. The owners would often turn to our interns to ask them questions about what the interns were seeing in the market. The interns knew the difference between 80% and 95% renewal rate and its impact on market valuation. As long as I picked someone who was driven but also willing to be humble and teachable, they would be really good.

The experience our interns received at AltaLink empowered them to ultimately get the best finance jobs out of their BYU graduating classes. For example, last year we placed 5 interns into Goldman Sachs. When I told one of my business school classmates currently at Goldman, he said, “You must be one of the largest exporters of talent to GS at the analyst level. You’ll have yourself a goldmine of deals in 15 years when these guys are running the world.” The link between their work at AltaLink and the potential of landing jobs at graduation was the social contract that was critical to the success of our internship program.

I take it that an intern found Efficient Forms?

Yes, one of our interns found Efficient Forms through a cold call. I had previously worked in HR Tech and went to an HR Tech conference. The intern added those companies to our list. Will Montgomery, the intern, was a typical sourcing intern and made a cold call into Dave Kenney. Dave was right in the midst of an opportunity where he needed to sell the business, our model was right and the ownership structure was right.