A female founder takes on PE's patriarchs

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The Weekend Pitch

October 18, 2020

Presented by Launch With GS

More than 1,600 private equity firms have been active in the US so far this year, according to PitchBook data. A mere 7% were either founded or co-founded by women. Just like a recent plunge in quarterly venture funding raised by female founders, it's a sign of the challenges many women face in establishing a foothold in the still-patriarchal world of the private markets.

Suzanne Yoon knows those challenges all too well. The managing partner at Kinzie Capital Partners, a Chicago-based investor active in the lower middle market, Yoon is one of the several dozen women in the US leading her own firm. And in the process, she's working to prove the importance of diversity and inclusion in building a successful business—"not for the sake of being diverse and inclusive," she says, "but for the sake of commerce."

Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. I recently caught up with Yoon—over Zoom, of course—to discuss her career, her firm, and her ideas about the power of diversity. That's one of 11 things you need to know from the past week:

"I think it's not a bad thing to be underestimated," said Suzanne Yoon, co-founder and managing partner at Kinzie Capital Partners. (Courtesy of Kinzie)

1. Dealmaking diversity

While she was coming up the ranks in stops at Versa Capital Management, CIT Group and other firms, Yoon had a case of déjà vu. On multiple occasions, she would enter a room for a meeting. And she would be ignored.

"I might have even been the most senior person in the room, and they would talk immediately to my male colleague who was maybe junior to me," she said. "People either assumed I was the secretary or the junior investment professional."

But as she's done repeatedly in her ascent through the industry, Yoon tried to turn an obstacle into an opportunity. The way she figures it, if others wanted to underestimate her, it would be all the more impressive when she proved them wrong.

"You can only go up from there," she said with a laugh. "So I really try to think about, even in scenarios like that, what's the opportunity to change someone's mind? To make them think twice, right? Sometimes, that scenario has given me the upper hand."

After nearly two decades in the industry, Yoon decided in 2017 to branch out and form Kinzie alongside co-founder David Namkung—a move she described as "the scariest thing I've ever done." Yoon saw an opportunity for an investment thesis centered on bringing operational expertise to lower-middle-market companies, particularly those undergoing generational shifts. Another motivation was the chance to build a team where diversity is a core value.

A perfect test case for her ideas emerged last November, when Kinzie made its first acquisition: Colony Display, a manufacturer of custom fixtures and displays. When Kinzie bought Colony, Yoon said that 70% of the company's employees were Latinx, and 52% were female. But there were no women or people of color in its executive management team. To help shrink that gap, Kinzie promptly brought on new recruiters and Spanish-speaking HR managers and set out to reshape the company's leadership.

"We have now two women, one of color, in the executive management team, and then we also have a Latino executive as well," Yoon said. "And we're already seeing stellar performance out of the company: They doubled EBITDA within the last 12 months. The numbers don't lie."

The way Yoon sees things, it's simply common sense. Neither companies nor investors are doing themselves any favors with leadership teams where everyone looks and thinks the same. She sees creativity and new ideas as a natural result of bringing together smart people from different backgrounds.

"When you have groupthink, it's very hard to think outside the box of investing," she said. "The United States and the world [are] diverse. The consumer is diverse. And everything at the end of the day is driven by the consumer and the labor market. So if you have a diverse labor force and you have a diverse consumer base, then you need to have diverse investors."

Yoon also knows the stakes are high—too high to base investment decisions on anything besides what she thinks will produce the best results. As Kinzie has expanded its portfolio (the firm made its second acquisition in September, snapping up Chelsea Lighting), the cutthroat world of private equity will put her ideas to the ultimate test: What will LPs think?

"Whether you're a man, a woman, you're Caucasian, you're a minority, it doesn't matter. It's really hard," Yoon said. "It's incredibly competitive, and if you want to be in the game, you've got to show up every day, 100%. I think about that all the time. If you don't treat your investors' dollars like they're your last dollars every time, someone else will."

For Yoon, the days of being ignored in the board room may be over. But she said she's cognizant that women are still overlooked in much of the industry. For those making up 50% of the population, 7% of all private equity firms is an awfully low rate.

"Now that I've been in this role, and the questions that I get, and the young women that approach me and are inspired—it certainly has elevated the feeling of responsibility that I have to women and minorities in the industry to do well," Yoon said. "I've never wanted to lose to a boy, my whole life. I think I felt that with my cousins when I was five.

"So no, I don't want to lose. But I think more so now, it's so important. There are very few women and minorities [in private equity], so the success of Kinzie I think is hopefully going to inspire people to go out on their own and take some risk."

2. Hello, Neumann

Adam Neumann is back, baby, and he's investing in a company that might be named after a character from "Batman"? Bloomberg reported that the WeWork co-founder invested $30 million in Alfred, a butler-esque platform that provides concierge services and manages maintenance requests for apartments. The same day, Neumann's former company made a move that brings an end to an unforgettable chapter in VC history: The We Company has officially changed its name back to WeWork.

3. SoftBank's SPAC

SoftBank, the investor that became most associated with the sordid saga of WeWork, was also in the news this week thanks to its plans to join in on this year's biggest investment fad. Rajeev Misra, the head of SoftBank's Vision Fund, reportedly told the Milken Virtual Conference that SoftBank is planning a special-purpose acquisition company, a vehicle that will surely be closely watched even on the currently crowded SPAC landscape.

4. Tycoon trouble

The New York Times published an account this week that Apollo Global Management co-founder Leon Black wired at least $50 million and perhaps up to $75 million to Jeffrey Epstein, payments that came well after the disgraced financier had pled guilty to soliciting prostitution from a minor. Black said the payments were for providing financial and philanthropic services, and emphasized that Apollo itself had no business ties to Epstein. The Wall Street Journal, meanwhile, reported that Vista Equity Partners founder Robert Smith reached a $140 million settlement with federal prosecutors after a four-year investigation into Smith's taxes.

5. BlackRock, Blackstone

BlackRock made an $118 million investment in Arrival, a UK-based developer of electric vehicles. The firm is also reportedly in talks alongside Brookfield Asset Management on a potential $10 billion-plus investment in oil pipeline assets owned by Saudi Aramco. A similarly named Wall Street titan has also been busy: Blackstone lined up a $1.9 billion SPAC merger this week for portfolio company Finance of America, a consumer lending specialist, and is also considering a $14.6 billion sale of BioMed Realty Trust, according to the Wall Street Journal.

It was a busy week for BlackRock and Laurence Fink.
(Michael Cohen/Getty Images)

6. Mind over matter

Last year, mental health startup Calm got a valuation that put it in the unicorn club. Now, the company is in talks to raise $150 million in new funding at a $2.2 billion valuation, according to a Bloomberg report that emerged this week. As my colleague James Thorne writes, the deal would be the latest in an ongoing boom in venture funding for mental health products and services, with investments in the sector more than quadrupling since 2015.

7. PE's IPOs

After pricing a PE-backed IPO in late September, Polish ecommerce company Allegro saw its stock soar during its first day of trading, taking its market cap to some $19 billion. In the US, Array Technologies, a solar energy specialist, raised more than $1 billion in an IPO backed by Oaktree Capital Management. Two other prominent PE-backed names have listings in the works: McAfee set an initial range for an IPO that could result in a valuation of around $9 billion, and Datto set a range for a possible $4 billion listing.

8. Around the world

Canada, India and Thailand might not be thought of as traditional venture hotspots. But startups from all three countries raised significant new rounds this week. Up north, Canadian financial adviser Wealthsimple became a unicorn in a funding round led by TCV. In India, another finance-focused company, Razorpay, also became a unicorn with a $100 million Series D. That leaves Thailand, where delivery startup Flash Express secured $200 million in new VC.

9. Around the neighborhood

One transit startup, Proterra, raised $200 million to fund its growing network of electric buses and research into electric vehicle technology. Getaround—another business concerned with, well, getting around—pulled in a $140 million Series E round for its rental car-sharing platform.

10. Eyes on exits

Different stages of the exit process were on display from a trio of highly valued companies. VC-backed customer data specialist Segment locked in a $3.2 billion sale to Twilio. Game development company Roblox made an early step in its walk toward Wall Street, filing confidentially for an IPO this week after reaching a $4 billion valuation in February, according to PitchBook data. And DoubleVerify, a customer engagement business owned by Providence Equity Partners, is preparing an IPO for 2021 that could come with a $5 billion valuation, Bloomberg reported.

11. Going vertical

Vertical farming startup Plenty secured $140 million in a round led by SoftBank, with participation from berry grower Driscoll's—a vote of confidence from an established industry giant. Two other startups concerned with altitude were also in the news: Richard Branson's Virgin Orbit is reportedly seeking between $150 million and $200 million in new funding ahead of a December launch demo, and Astroscale, which aims to remove orbital debris and provide other services to satellites, raised $51 million in new capital.

View the full list online

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