Superhumans: The Type of Operators we are Looking for

Dear Investors, Advisors, Family and Friends,

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Superhumans: The Type of Operators we are Looking for In the intricate landscape of private businesses, finding the right CEO is paramount to ensuring the smooth execution of our Operational Thesis: Part 1, Part 2, Part 3. We are looking to partner with individuals with the rare ability to preserve and nurture a business legacy—someone who possesses strategic foresight, operational expertise, and an unwavering commitment to sustainable growth. Today, we delve deeper into what we at GenCap believe are the critical qualities of our top-tier potential operators—our Ideal Operator Profile (IOP)..

The Ideal Operator: A balancing act between an Executioner and Visionary 1. Ethical Integrity: The Non-Negotiable and Absolute Dealbreaker We seek an operator with strong ethical principles who not only upholds the highest standards in their own actions but also sets the tone for the entire organization. This integrity is vital in fostering a culture of transparency and accountability, where trust is cultivated among employees, partners, and stakeholders. Our CEO will have the freedom to operate within certain boundaries without being micromanaged, making it crucial to manage with the highest level of integrity for the longevity and success of the company.

Culture is set from the top, and any wrongdoings will set a poor example for our employees, potentially leading to an overall decline in ethical standards. We have seen too many public examples like Enron, FTX, Theranos, and Wirecard, where ethical lapses eroded shareholder value and led to negative publicity that reverberated throughout the entire world, severely damaging the company’s reputation. Such a scenario could jeopardize not only the business’s standing but also our opportunity to successfully exit from the business.

2. Industry Experience: Operators In Their Element Our IOP must possess industry experience that is both relevant and aligned with the asset they will be leading. While it may not always be a perfect match, the operator must have a deep understanding of the industry. Digging deeper, this includes:

Broad industry network: The ideal operator should have the relationships and influence to make things happen, including the key players and which suppliers that hold leverage in the market—whether it's picking up the phone to secure extended credit terms, obtaining preferential treatment for limited inventory, or negotiating that extra discount.

Deep industry expertise: This depth of understanding significantly shortens the ramp-up time and minimizes mistakes and pivots, allowing the operator to be effective from Day One. Such expertise is particularly crucial during major commercial negotiations, where a deep grasp of business nuances can make or break a deal. If the operator is perceived as lacking insight into the industry’s intricacies, it could not only be inefficient but also potentially damaging to the company’s position.

P&L Management: While we don’t require our operator to structure a financial product, they must possess exceptional financial acumen. The operator needs to quickly and thoroughly understand the key levers that influence revenue, costs and cash flow—critical for preserving and enhancing the business’s profitability. It’s also not just about understanding the numbers; it’s about executing strategic decisions based on business and financial insights. This includes making tough calls, such as shutting down an unprofitable division, even if it impacts jobs. However, such decisions must be handled with respect and sensitivity, reflecting the operator's ability to lead with both wisdom and compassion.

A clear example of our point here emerged just this week. Zachary and our two potential Operators (in separate meetings) engaged with potential sellers - one in the corporate secretariat space and the other in private education. The feedback was very positive, with the sellers noting that GenCap stands out by bringing in highly relevant and experienced Operators. A distinct advantage over other competing generalist firms.

3. Leadership: Recognizing People as a Core Strategic Asset

Battle-hardened operators would be quick to acknowledge that a big chunk of operational challenges lies in the ability of leaders to motivate and inspire his/her employees to row in unison, in one direction. Especially so when a new CEO takes over the business. All eyes will be on him/her. Their every move scrutinized as trust is built from ground zero.

In our opinion, there are a multiple leadership personas that the Operator needs to portray:

Servant Leadership: One that stands out not by commanding authority but by fostering a culture of empowerment and growth. This persona matches the Phase One of our Operating Thesis - the Transition, where we expect to be observing, building relationships and preserving the good. We expect the Operator to be hands-on as well. This goes beyond merely setting an example; it’s about earning trust and respect through action. This approach builds credibility, as the team sees that the leader is willing to engage at every level.

Moreover, direct involvement provides the operator with a unique, ground-level perspective on how the business functions. It allows them to experience firsthand the challenges and bottlenecks that might not be immediately apparent from a distance. By understanding the workflow in its entirety, the operator is better equipped to identify and address the real issues, leading to more informed decision-making and more effective solutions. This not only enhances operational efficiency but also strengthens the connection between leadership and the workforce, fostering a culture of mutual respect and shared purpose.

Emotional Quotient (EQ): High-functioning operators possess the ability to read the room, sense emotions and know when and how to respond appropriately. This skill is particularly crucial in the early stages, when trust is still being built and employees may be hesitant to share openly. Accurately interpreting non-verbal cues, understanding the tone of conversations, and observing team dynamics are essential skills that help operators get a true sense of the situation on the ground, beyond what is explicitly communicated.

Visionary: This is someone who, over time, inspires and energizes the team. But it's not just about having a vision for the business's growth; the operator must also be able to articulate that vision effectively. The Operator needs to rally the team around a shared goal, making sure everyone understands the path forward and feels motivated to contribute. Taking this idea a step further, the Operator should then foster an environment where innovative ideas are welcomed and valued, ensuring that the entire team feels a sense of ownership in the company’s future. This environment will then bring his/her vision to fruition. Some tactical ideas would include incentivizing best executed ideas, or simply openly recognising the contribution(s) of employees.

4. Superhuman Qualities: Our Values Wish List Beyond capabilities and experience, we hope our superhuman Operator would be imbued with these values. These values would be seen as a foundation to the success of our assets. .

Resilience: There’s nothing quite like a battle-hardened operator—someone who has taken hard knocks and emerged stronger each time. Our founding operator, Eric, for instance, has experienced multiple periods of austerity, with his startups teetering on the brink of collapse. During those times, he and his management team took significant salary cuts and even injected personal funds to keep the company alive.
Beyond the financial sacrifices, it’s the mental resilience that truly sets such leaders apart. Maintaining a strong, unified front in the darkest times is no easy task. To be clear, at GenCap, we don’t expect our operators to silently endure hardships. Instead, we seek operators who possess the mental strength to confront challenges head-on, to be able to speak with the others at GenCap, to problem-solve with creativity and resourcefulness, and to rebound quickly. These are the operators who become pillars of strength for the SMEs they lead.
Ambition & Hunger: Our CEOs need to be driven by a hunger for financial success. The GenCap Management team, including the CEO, will collectively invest 5% of the business’s equity. Additionally, the CEO will have sacrificed years of potentially lucrative salaries in pursuit of a life-changing outcome at the point of exit. Every decision the CEO makes will be laser-focused on building a financially robust business, relentlessly pushing their limits everyday, and positioning us for maximum leverage when it’s time to exit.

Risk-Tolerance: In the final part of our Operating Thesis, we discussed Growth, Internationalization, and Diversification. As the business expands into these new areas, there will inevitably be elements of risk. While we’re not looking for our operators to be gamblers, they must have the resilience and composure to navigate the business through uncertainty. Demonstrating confidence and decisiveness in the face of risk is crucial.

In conclusion, the search for a "Superhuman" operator goes beyond finding someone with the right skills and experience. We aim to identify a leader who embodies the qualities necessary to flawlessly localize and execute our Operating Thesis. This ideal operator is a unique blend of an executioner and visionary, deeply rooted in industry expertise, yet adaptable enough to lead the company through growth, internationalization, and diversification. Finally, they must be aligned with the mission and vision of GenCap - to preserve and scale the lifelong legacies of Southeast Asian businesses, ensuring their growth and sustainability from genesis to generational success.

Do you know of anyone who might fit the mold? We’d love the opportunity to meet these exceptional individuals and, in turn, inspire them to join us on the GenCap journey—one that we believe will be as rewarding for them as it is transformative for the businesses they will lead.
Our Key Asks: Thank you for looking out for us If you have made it this far, thank you for reading. We would very much like to stay engaged with every one of you as much as we can. Please reach out to us if you:

Have any questions on our operator criteria or even a related topic in mind that you would like to hear our views on in the future, Know of any great operator that is looking for an adventure, Know of any potential debt providers or investors keen in private companies.

Upcoming update next week: GenCap Progress Update (2nd Sep 2024)

Have a stellar week and see you soon!

Best Regards, Eric and Zachary