Jim Strang (HgCapital Trust) - Building an Experience Curve in Business Software
In this episode we speak to Jim Strang, Chairman of HGCapital Trust. The Trust has an outstanding track record investing in business-to-business software companies. We discuss the evolution in private markets over Jim’s career, the benefits of specialisation and the reasons behind Hg Capital’s success.Show notes:[01:15] Jim discusses his early career[02:12] HgCapital Trust’s history[03:41] The benefits of specialisation[05:56] The importance of controlling the capital structure[08:02] Characteristics of typical Hg investments[10:07] The growth model[11:29] End market fragmentation[13:29] Being highly selective[16:25] Having the flexibility to own the best businesses over the long run[18:07] Replicating Hg’s success in the US[19:58] Why Hg is an attractive owner for entrepreneurs[22:35] Sustaining Hg’s culture and using greater scale to drive operational improvement.[25:25] Objectively assessing each company’s potential[27:03] Low loss rates and a few major successes[27:57] Why things typically go wrong[30:22] Leverage and the capital structure[33:33] Valuing private companies[38:43] M&A in a higher interest rate environment[40:54] Trust your gut