Jim Strang (HgCapital Trust) - Building an Experience Curve in Business Software

Far From The Finishing Post

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