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Private Equity

From F-16s to the Lower Middle Market — 7 Lessons These Investors Learned in the Military

In celebration and acknowledgement of America’s birthday, we talked to three decorated U.S. service-members turned lower middle market investors and Axial members. We asked them mostly about how their time in the military informs the way they think about leadership, decision-making, risk assessment, and investing.

We are honored to count these American veterans as members of Axial and are eager to witness and support their endeavors in the private sector.  Below are their biographies and 7 bits of hard-earned wisdom they shared. Happy 4th of July to all!

Taylor Grant is the founder of independent private equity sponsor Fox Three Partners. Taylor served for 11 years as a Navy Fighter Pilot. He is a graduate of Top Gun’s Adversary Course, and flew F-14 Tomcats, F-5 Tigers, F-16 Fighting Falcons and F/A-18 Hornets in both peacetime and combat operations. 

Logan Leslie is the founder of long-term holding company Northern Rock, Inc. He joined the Army on his 17th birthday and led soldiers in combat as a Ranger qualified Sergeant at the age of 19. He has over 15 years of military service, with 26 months of experience in Iraq and Afghanistan. Logan continues to serve as a First Sergeant in the National Guard. He holds an A.B. in Economics from Harvard College, an M.B.A. from Harvard Business School, and a J.D. from Harvard Law School.

Kevin Williams is the founder and managing partner of Arteryx Capital Partners. He spent 12 years serving as an officer in the Navy SEAL Teams where he led SEAL and Coalition Forces in support of the Global War on Terror.  His last two years of service were spent in command of Basic SEAL Training where he led 120 SEAL instructors in the screening and selection of over 1,000 SEAL candidates annually. 

1. Empathy is crucial for success

“Most people who have led teams in a military environment become a quick study on what incentivizes people. Being able to understand where someone’s head is relative to their heart, what kind of alignment is there — that’s really meaningful, particularly in the lower middle market. A lot of these companies are family-run operations that have been around for a while, and there’s a lot of emotional gravity there. The founder wants to make sure their company will be in good hands, that their concerns will be addressed.

I don’t always agree with the person on the other side of the table; I can’t always offer them the money or terms they’re looking for. But more often than not I’m able to dig down into what drives them and say, ‘I understand. I may not agree with you, but I understand.’ That’s empathy, and it’s crucial for a successful deal.” 

-Kevin Williams

2. Technical expertise isn’t everything

“In the military, you’re put into a brand new job every 12 months. As a result you get really good at figuring out which people to talk to and how to get the information you need from them to succeed. 

There are lots of examples of people in the military and business world who are not technical experts and nevertheless are successfully running whole divisions or entire companies. But in the lower middle market, it seems many people focus on being a product or service expert. 

From my perspective, while you do need people on your team with expertise, equally important is knowing how to evaluate the situation, ask the right questions, and implement the right processes. It can be a paradigm shift for some people, but we’ve been able to add a lot of value to our portfolio companies in a variety of industries without being technical experts in the field.” 

-Taylor Grant

3. Say what you mean

“Direct communication is the expectation in the military. You’re polite, but you’re direct. In the civilian world, people sometimes aren’t used to this. Even if you say something very nicely, people sometimes will get defensive, or they’ll throw a criticism back in your face. I’ve found that it’s often necessary to sugarcoat things more than I’d like. 

Within Fox Three and our portfolio companies, even though the other members of my team aren’t veterans, I’ve tried really hard to develop a strong culture of constructive, straightforward feedback. We don’t use being ‘direct’ as an excuse to be a jerk. But we trust one another enough to be honest with one another. It’s helpful — it provides feedback loops and helps us continue to do better as a team.” 

-Taylor Grant 

4. Be accountable

“Accountability is a huge thing in the military. When I was on active duty, I witnessed various different methods of creating strategy and then making an executable plan. Plans change, of course, but the fact that they can change isn’t a reason not to make a plan in the first place. Every time I went on a flight, it never went the way I thought it would — some factor always changed. But for every mission, everyone understood what we were trying to accomplish and who was responsible for what — and we trusted each other to get it done.

In the same way, the most successful larger private equity firms have a very well thought-out, documented, repeatable, and systematic process — they create a strategy, produce a written action plan, and actually follow up to make sure people get it done. We’re trying to bring that discipline to the lower middle market, where that doesn’t happen as frequently. Based on this idea, we created a system called JETS (“Joint Execution of Tactics and Strategy”) Business Operating System, a playbook and methodology for corporate leadership teams to help run their businesses more efficiently and effectively. While it’s primarily based on sound business principles, it leverages all the good things about the military — the ideas around leadership, clear direction, and always being accountable, among others — and leaves out the less-desirable qualities that are sometimes associated with the military, like the bureaucracy of the system as a whole.” 

-Taylor Grant

5. Connect the dots between menial work and the larger mission

“The best military leader will be both a servant and a mentor. He or she has a teacher’s heart, and can motivate people by connecting the dots between the task at hand and the greater mission. 

This is the type of person we want to hire to lead our companies too. Let’s say you have a construction company working on building roads. A lot of the workers in that job are low-wage and may not be highly invested in their role. To get the most out of them, to have them be satisfied with their job and want to grow with the company, you need to lead by example. You need to show them you care. You need to communicate to them the importance of what they’re doing to the larger goal, no matter how insignificant their job may seem.” 

-Logan Leslie

6. Take risks on veterans

“Northern Rock is a long-term holding company looking for investments in the lower middle market, mainly in the infrastructure maintenance space. But we also have another mission, which is to hire exceptional military veterans both into executive and tradesman roles, either at our firm or our future portfolio companies. 

I like to serve the community and have a social mission, but I’m not hiring vets primarily for that reason. It’s an advantage for me. The market undervalues veteran leadership, which makes them an ideal asset class to invest in. There are many veterans out there who have extensive leadership experience in the military and are qualified to hold top-level corporate positions, but on paper their qualifications don’t pass muster. I’m more than comfortable taking that risk.” 

-Logan Leslie

7. Asking the right questions is key to evaluating risk

“In the military, you’re constantly placed in situations where you have to decide between kind-of-bad and worse. You have to ask yourself: ‘What’s the risk to the force? To my team? To the mission? Do we still have a chance of accomplishing what we’ve set out to accomplish?’ The margin for error in some cases is near zero. You have to make high-stakes decisions on a daily basis, and part of that is knowing the right questions to ask. When you’re in enough of those situations, decision-making starts to become second nature. 

You can use this experience when it comes to sourcing deals too. Does it make sense to pursue this investment? Are our interests aligned? How is the company leadership currently running the business? Why are they selling? For example, are they pretty much M.I.A. and just harvesting the golden egg everyday? That might be a great opportunity — you can move the needle just by putting active leadership in place. You can start to understand how good an opportunity it is and how to structure the deal most effectively based on the driving factors you’ve uncovered.” 

-Kevin Williams 

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