Introduction

Patrick: [00:01:24] My guest this week is another in a recent series of people that makes me want to work harder, learn more and do more for others. His name is Savneet Singh and he has already accomplished a remarkable amount in the worlds of business and investing. He's preferred to keep a bit of a low profile but I'm hoping for everyone's sake to change that a little bit. See the show notes for where you can read him and follow him. Savneet has invested in unique things like Spanish real estate, famous startups like Uber, cryptocurrencies before they were cool and even websites. He founded and built a FinTech company.

Now, he is both a partner at the wide-ranging investment firm CoVenture with my previous guests, Ali Hamed and the co-founder of Tera Holdings, which is trying to become the Berkshire Hathaway of software companies. To say this conversation is wide-ranging is an understatement. What's neat is that my favorite parts aren't even on investing, but are instead on principles for living. Savneet is one of the best people I've met on this journey. I've had several other conversations with him with shockingly low overlap with the one you were about to hear, a testament to his active and curious mind. I hope you enjoy learning from him as much as I have.

Investing in Spanish Real Estate

Okay. Savneet, we are going to like my conversation with your partner, Ali, range all over the place. We're going to talk about a lot of interesting investing ideas, investing philosophy, your personal story. I thought a fun place to start would be Spanish real estate. How you started thinking about that and what you did in that area.

Savneet: [00:02:46] Sure. I should preface that I am not a real estate expert by any means. I'd say a year and a half ago, two years ago, I and a couple of friends, we bought a condo in Barcelona. Our thesis was that rates were really low still in Europe. Barcelona was one of the few cities that was still very close to the 2009 bottom where every other city had rebounded. It was really that simple. We traveled around on a vacation, went across Europe and realized two things. The first was the Airbnb trend was incredibly unappreciated. What we meant by that was the ecosystem around it had just not developed and people were underestimating just how large it would be. We said, "Hey. Let's figure out what city has mispriced Airbnb the greatest and what city is its legal." We ended up in Barcelona. There was this really interesting legislation that happened where the government passed tourists license in Barcelona. Where if a property had a tourist license, you could legally put it up for short-term rentals. What we discovered was a property with a tourist license only sold for 10% more than a property without one. Yet the yield was two to 3X the price. We said, "Hey. This is just a personal investment. Let's go buy a property." Overnight, when the tenants left, we put it all on Airbnb and the yield's amazing. Fast forward a year, I had left the job I was working at. I said, "You know, this is working out really well. Let's go build a business around it." We raised a bit of money and became the distressed buyer of condos in Barcelona. I think if you talk to any of the brokers in the area, we are the fastest to move. We lock in interest rates at less than 2.5% for 20-year fixed. We are buying at replacement costs. It's been amazing to see a cashflow profile of business from a broker and the next day be able to flip it to two and a half times that by putting on a short-term rental site.

Patrick: [00:04:29] Somewhere on our correspondence, you mentioned this idea that Airbnb might be the most impactful or interesting new company of this kind of wave of companies over the last 10 years. Maybe expand a little bit more on that and tie it back to the idea that you think it was underappreciated when you first started.

Savneet: [00:04:44] Yeah. I think we've had a lot of transformative companies come out. Uber as an example. What I found interesting about Airbnb is if you think about the power of brand, I can take Uber, I can take Lyft, I can take Juno, but most people don't know what's beyond Airbnb. What's powerful to me about that is Airbnb is already the biggest hotel company in the world. If you ask most people over the age of 35 if they've ever been in an Airbnb, the answer is probably no. When you have this next generation that grew up in a shared economy and they become the ones with wealth, they become the ones traveling for work. They'd be the ones traveling with their family. We're just at the tip of the iceberg of the volume of people coming on to that market. I originally started looking where the software plays here. What are the financing plays here and ended up that there was a really great real estate play underneath it.

Savneet's Early Life and Investing

Patrick: [00:05:25] I don't normally do this but because there's such rich detail in the backstory here, I'd love to spend a little time on your very early life. Especially given your and your brother's very entrepreneurial streak. Talk a little bit about your very first forays into business and thinking about investing.

Savneet: [00:05:41] I grew up in upstate New York and not from a business family. My mom's family was social workers and very much in social justice. My dad was a doctor. We had a lot of freedom as children. When we were young kids, we had a Koi pond our dad had built when we were kids as a father-son project. One summer, the fish had babies. My brother and I, I don't know how we got the idea. We took a bunch of pictures of the fish and put it up on Craigslist and started selling fish on the internet. A year after that, eBay started to really grow. We said, "Hey. We have all these baseball cards we bought. Maybe we can sell them online." We sold them online. We said, "Wow. That was little bit of money. What if we made our own packs of cards?" We started going to sports card stores, dealing with people that were far older than us. We were probably 14 or 15 years old. We buy these cards, take these packs and sell them on eBay. Slowly but surely, the business grew. The business grew. I joke but when my brother was 15 years old, he had a BMW shipped to our house and without telling our parents and he couldn't drive yet. It was an amazing experience to see that boom of the internet and capitalize in some small little way.

Patrick: [00:06:42] Talk about the transition from that into the earliest formation of your big investing influences. You've had some really interesting, almost like a tasting menu of different styles of investing and influences. What was the beginning of that chronology?

Savneet: [00:06:54] I was a sophomore in college and I discovered I like business. I didn't know what it was beyond that. My father sent me the Roger Lowenstein book on Warren Buffett with a note saying, "This guy reminds me of you and he really likes cherry Coke and burgers like you do." I read the book and I devoured it. I think part of being naive was, I literally sent an email to Seth Klarman and Dan Loeb and every hedge fund manager that was a value investor to get their view on how to learn to be a value investor. I spent most of college trying to understand the principles behind value investing. That led me to invest in banking because as I talked to a number of those managers, they said, "Go spend two years on the sell-side. Learn how to model. Learn to see the different parts of Wall Street before you make that jump." I went from there into investment banking and really early on, just a traditional two years banking and then I worked at a big hedge fund.

Patrick: [00:07:40] What do you take from those two years? That's a pretty standard path. I know a lot of people that have gone through it. It's an arduous two years. Oftentimes, people are completely burnt out at the end of it. How did that impact you? Did you enjoy it? What do you look back on and remember from that period?

Savneet: [00:07:54] I loved it. Everyone complains about it because it's a lot of work. It's not a lot of I think, intellectually satisfying work but I loved it for a few reasons. I think the first was I had grown up in a small town. I had never really been exposed to how this part of the country lives and it blew my mind. I remember I was 22 years old. I was on a flight to Japan. I was like, "This is wild. I don't think anyone in my family's ever been to Japan." I think that exposure was great. The second thing that was super useful was you get exposure to all parts of Wall Street. You're on the sell-side. You see the IPO process of meeting the buy-side. You see the private equity side where you're selling deals to them. You see the capital market side. It's a great exposure at a young age. I think the last and probably maybe the most important is you're around really high horsepower people. Far more than you were in college. Far more than you were anywhere else. It was awesome to be challenged by people who ... I say this with no arrogance. It was the first time in my life I met people who could think faster than I could. That is a really humbling and fun experience.

Patrick: [00:08:49] We come in now to a tough part of the story I think for you and just for the whole world. 2008, the financial crisis to the extent you're comfortable talking about. It was a tough time personally. I would love to hear that next stage.

Savneet: [00:09:02] Yeah.

Patrick: [00:09:02] What happened and how it impacted how you think about life.

Savneet: [00:09:05] Yeah. It was tough for a number of reasons. Obviously, it was an interesting time to learn to be an investor. I think within my first 12 months at a hedge fund, Lehman collapsed. You had AIG. At the same time, I lost my mother. I had randomly gotten very sick. All those experiences at once make you think about what you really want to do with your life. I remember I said to my brother, who's had obviously a lot of influence in my life. He said to me, "Okay. Imagine the job of your boss at your fund. Imagine the job of being an entrepreneur," which I was debating doing. He said, "Do you want your boss' life?" I was like, "Yes. I really want it." He said, "Well, tell me why." I was like, "Well, he's got this amazing house. He's got this great life." He said, "Okay. Think about the day job, what he does." I'm like, "Well, it's great. He gets to interview company managements. The sell-side is always trying to give him stuff. It's just really fun jobs." He said, "Okay. Now, would you take that job if you're paid $35,000 a year?" I was like, "Nope. I do not want that at all." It was a very amazing experience for me. I said, "Okay. You know what? I've been through all this trauma. I want to try to go build something because while I love value investing, I had this entrepreneurial bug to create." It was a tough time. It was also probably the most formative time in my life of wanting to create something.

Patrick: [00:10:09] Talk about the entrepreneurial journey. Talk about GBI a little bit, What that business was, how you got the seed for the idea. I know a lot of what you've learned there has then formed more roots for what's coming next. A couple of minutes on GBI would be fascinating.

Savneet: [00:10:21] I and some partners who were actually far older than I started brainstorming this idea of originally creating a platform for people to buy hard assets. The idea was after the crisis, there'd be a movement into one esoteric assets but two, assets with less counterparty risk. A simple example was when you buy your house, you buy it directly. You're not buying through someone that owns shares of a trust at a place you don't know that owns your house. Why are you doing that with your financial assets? Is there a way to create that? We had this macro thesis that precious metals would be a place to be. When we looked around the world, we were surprised that gold is the oldest asset investment currency in the world yet is not electronically traded anywhere. It's this little backwater desk of most Wall Street firms. We said, "Let's go figure out how to tackle this market." We went and built what's I think now one of the largest platforms in the world to buy trade and store precious metals. That journey I think was scary in that I always say that it was two parts of the journey. The first journey was building the company, which was convincing dealer desk, buy a trading desk, buy a sales desk to come join our platform, our exchange. The second half of the journey was literally convincing all these banks come into a platform that was started by a 26-year-old. It was amazingly lucky. The timing was great. The investors were great. It was just the beginning of this FinTech. I don't know if you want to call it revolution but evolution. We were at the right time, right place and recruited a great team.

Patrick: [00:11:39] Let's talk about FinTech for a couple of minutes. You were in at the ground floor in terms of watching a lot of these businesses be built because you were building a business at the same time in the same space. I know you've been an investor at some point, angel investor or otherwise in the space. Talk about just a general take on FinTech companies, FinTech investing and the trend. Any observations you have there.

Savneet: [00:11:59] My best way of talking about FinTech today is like an example of the conversation you have with an entrepreneur. Someone will come in and say, "Hey. I have this great idea that's going to disrupt life insurance." You're like, "Wow. That's amazing." They go through the pitch. They're like, "It's a great user interface. It's a great user experience." The final answer is always like, "In life insurances, companies haven't changed in a hundred years." This is going to be disrupted. That's always an exciting thing to say that something hasn't been disrupted in a hundred years. When I hear that, I'm like, "That just means it's a really good business." There's a reason why something hasn't been disrupted. It's not like there haven't been people that have been a smart businessman before you. If something's lasted for a hundred years, that's the definition of an amazing business. Breaking that down, I think that's been the problem with FinTech. People have a poor user experience and assume that it's easy to disrupt. You've had the first wave of FinTech be primarily customer acquisition, acquisition businesses. Get a loan online. Get a insurance product online but they haven't really created new products. I can get a loan online. I can buy insurance on my phone, but it's still the same loan that I would've gotten from a bank and still relatively close to the same insurance product I would have gotten from a traditional insurance company. I think we're just at the cusp of the second wave, which will be actually new products. That's where I think it actually gets really interesting. When can you loan to markets that couldn't get capital before? When could you insure a risk that didn't exist before? That you couldn't cover before because there wasn't data to cover that. That's where I actually think you're going to have real businesses created. That's why I honestly think the first wave of companies while you've had some big brand names, they haven't actually had economic success. I think they've had VC success but having got to that level where they're really sustainable business models.

That's always an exciting thing to say that something hasn't been disrupted in a hundred years. When I hear that, I'm like, "That just means it's a really good business." There's a reason why something hasn't been disrupted. It's not like there haven't been people that have been a smart businessman before you. If something's lasted for a hundred years, that's the definition of an amazing business.

Patrick: [00:13:27] Do you think any of those companies, I'll pick on one like a Wealthfront or a Betterment where effectively yes. It is a very nice user interface and a bunch of technology on top of arguably commodity products. Like an efficient frontier passive market portfolio. Do you think that some of those companies might successfully transition into this second type? Have some sort of first-mover edge just in the fact that they've got a big team. They're well capitalized by venture capitalists. They know the players so they have more of an edge in say like pricing some new insurance that we couldn't before. How do you think about the FinTech incumbents? It's funny saying that because they're all still private businesses.

Savneet: [00:14:04] I think it's absolutely possible. I think one of the great challenges of starting a FinTech business is that it's a very long sales cycle. I imagine if you're sitting in the seat of the founder-owner of Wealthfront, Betterment, one of these great companies, part of you is also like, "Gosh. It's really great that we're this size now but it was really, really hard." You almost start adopting the legacy mindset of that industry that you're trying to disrupt. I think the challenge is, are you able to continue to break that legacy mindset to create? Listen, when you're a robo-advisor with 100 million in assets, you're not really anything yet. When you have billions of dollars and you're registered and every marketing communication has to be approved by council and then by an outside counsel, you start looking more and more like the traditional incumbents. I believe the robo-advisor market will work. I feel unfortunate for the founders of those companies because I think they become missionaries. I'm sure they'll do well but not nearly as well as they dreamed of when they started the company and given how much capital has to go into it. I wouldn't bet they're the ones that disrupt the product creation.

Patrick: [00:14:57] Let's go back to some of these ideas of what actually might be a new product. Maybe we'll take insurance as the example. Could you give an example of something where this has potentially something that we can now get into business with that we just couldn't before and what the barriers were prior?

Savneet: [00:15:11] I'll give you an example I thought about. I used to think about a long time ago, which was today, if you went to get life insurance and you had any form of cancer, you're not getting life insurance. If you have diabetes, your rates are incredibly high, but it's a blind pool that you're in a box that you can't get coverage for anymore. I think what's silly about that is there are many forms of cancer that you still live a very "normal life." There are many times with diabetes where if you take care of it appropriately, you can actually live a traditional life span.

I think an area where you'll see some of this happen are in areas where you have data now to reprice that risk to a way where it actually is beneficial to the consumer. Instead of saying, "Hey. You've got this disease. I'm sorry. You can get life insurance but this will cost you $200,000 a year for a million-dollar policy." Now you can say, "Hey, we can price you at a relatively fair price provided you act in this type of behavior pattern, which allows us to price it that way." That's an area I think you'll see some, I don't know if disruption is right word, but product development. I think another area will be obviously the property and casualty world broadly. Cars will be different. I think being able to ensure my skis when I go skiing as opposed to always having to pay for insurance for that, you're just starting to see some of the stuff that's going to adapt to what I think will be the new world of insurance and the world of traditional insurance products.

Patrick: [00:16:20] What is your take from experience and just from thinking about it? About venture capital style investing? I know you've done some angel investing. Maybe you could tell a couple of the really interesting stories there. As I've said many times on the podcast, I always have trouble disentangling skill lock, timing, relationships, replicability of different venture strategies. Given that you've done a lot and existed in that world, I would love your take on that style of investing.

Savneet: [00:16:44] I have existed in that world in the sense of being just like anyone else who started at a FinTech company. You ended up being a bit of an angel investor. I always joke the first deal I ever got into was Uber. It was complete luck.

Patrick: [00:16:55] How early was that? What year was that?

Savneet: [00:16:56] 2010 or '11. I think the single lesson I've learned from venture, which makes it so hard as an asset class is it's not systematic. When I break down the successes I've had as an angel investor, there's no pattern. It was like, "Hey, I got to know Travis completely randomly." I got into that so fine because my friend was there and he was a college roommate of mine. I got into some of these deals and there was no pattern. I couldn't create the pattern for it. I think that's why traditional allocators struggle with the asset class in general. I think what's worked in the past is either saying there's a brand. Whether it's a persona or a brand or a firm. I think that works for some. I think it's challenged more in a world of AngelList in the blockchain where anybody can be a VC now.

Patrick: [00:17:40] This would be a First Round Capital or something.

Savneet: [00:17:42] First Round Capital, Sequoia, Kleiner or that persona around it, like a figure in an industry. If I was to bet, I bet you what happens to the next wave of venture capital will be a lot more domain-specific venture capital. I have a customer acquisition skillset. I'm just investing in companies that are trying to pick off Proctor and Gamble brands. I want the next Dollar Shave Club. I want the next Chewy because that's actually a value add. I know I have that skill set. I could provide that to you. I'm just the InsureTech guy because I can make connectivity for you here and there. I think you're going to have a lot more specialization as opposed to I'm going to invest in venture because I'm a really special guy and everyone comes to me. I think that model becomes more and more a challenge over time.

Patrick: [00:18:17] Are you still active in that world? Making angel investments, things of that nature?

Savneet: [00:18:20] I'm not. It's purely because I just couldn't find the pattern. I always say I will do it in the event that it was someone in my network who I just think is 10 levels smarter than I am, then of course, you always throw that check. It's not something I actively look at.

Starting Coventure and Some Life Lessons

Patrick: [00:18:34] Talk about the transition out of GBI. We can start to bridge to one of the favorite episodes of the show just based on the feedback I've gotten, which is with your partner, Ali Hamed-

Savneet: [00:18:43] Sure.

Patrick: [00:18:44] ... CoVenture. What's the next stage of the journey?

Savneet: [00:18:47] Ali and I got to know each other many years ago and just as friends. He was a sophomore in college. I was speaking at a class that I knew the professor. He came to me and said, "Hey, I've got six startup ideas that I'm launching right now." I came back and said, "Hey, just do one of them." As GBI was growing, I started thinking about, "Hey, what happens next in my life?" I have this large illiquid asset that has value. Let's just say tomorrow, I want to go do something else. There's no income stream from that. I started obsessing on this idea of finding income streams.

Dispatch real estate was a derivative of that. One of the areas that I started investing in was finding really niche originators. The idea here was similar to what we just talked about in FinTech, that all the VC money had gone into companies like LendingClub. Find these great businesses that were figuring out how do I make student loans easier? How do I make consumer loans easier? How do I make personal loans easier? They weren't actually lending in brand new markets. What's really interesting is if you find a new segment that has not had credit before, you as the debt capital can lock in amazing terms for yourself. Traditional capital won't come in because there's not five years of history. Because it's new. Because if you're a hedge fund with a billion dollars, like a $5 million check, it's just not really worth your time. No matter how high the yield is, you can't relate that analyst learning how to underwrite a produce loan. It's not useful elsewhere.

I had gone to Ali and said, "Hey, I think this is an amazing place in the world for you to spend time. I'll throw some money into it." It was a really fun journey. After I left GBI, I started thinking a little bit about what I wanted to do. As I mentioned, the area of the world that I was interested in was this idea of being a value investor but being an operator. One of the journeys of mine was figuring out what does the next Berkshire Hathaway look like? I and some friends, five or six years ago went to the Berkshire Hathaway meeting. We all left there in awe. I think obviously where all of the wealth and all that stuff. We really expressed like, "Gosh. Warren Buffett is really, really content. He's way happier than our investors or the people we look up to or our bosses." How do you recreate that? We can dig into an hour later but it led to this exploration of trying to build a holding company of really powerful assets.

Patrick: [00:20:47] Let's hold off on Tera because that's the place where I'd like to spend a big chunk of time, really diving through the thesis. I actually want to back up. I meant to ask early on about tennis early on.

Savneet: [00:20:57] Okay.

Patrick: [00:20:59] Maybe you could describe your career, however brief or long in tennis and what you took from that.

Savneet: [00:21:05] I love to play sports as a kid. I discovered tennis a little bit later. I guess 10 or 11 years old, which is a little bit late for sports. I got really good really fast. My brother and I used to fly around to these tournaments and these camps. It was amazing. We got to play with Andy Roddick before he was Andy Roddick. When we were I think 14 or 15, my dad sat me down. He said, "Listen. If you want to be anything in life, you really have to give it your all. If you want to be a tennis player, you should drop out of high school and go move to a tennis academy and go do this full-time." I also said today, I think we both whisked out and said, "No, dad. We want to go back to school and we don't want to do this." The thing that impacted me the most from that was the sheer fact of my dad giving me the option to do that. Obviously shows that he believes in me, but it also created this mentality that you can do anything you want. It's so powerful now that I think about how much that impact had on me. My dad is one of those guys who did all sorts of experiments on us, but the tennis journey was beautiful because it taught us the ability of hard work, commitment to something. You were 13, 14 years old and you're waking up at five in the morning, going running with your dad. You still have to go to school then you had to go play tennis after. I think that rigor of hard work and then obviously the empowerment, your dad telling you to drop out of school to go chase something was really helpful as we got older.

Patrick: [00:22:13] Are there other things that your parents did in particular that you feel had a very high impact on the way you think about the world or the way you act or your character?

Savneet: [00:22:20] I had dramatically different parents. One of the great things my dad did at a really young age was he involved us in big decisions. I used to joke when we would go to the airport to go fly somewhere, he would go to me and my brother and say, "You pick what time we leave." We were still too young to really figure that out. I know my mom hated it because we'd be late. We don't have time. He would give that responsibility to us. His prizes for us. We'd be driving to visit our grandparents two and a half hours away. He would make us memorize every single exit on the way there. All 40 or 50 of them, the names of the streets of every exit. It was always challenging us to be part of the conversation when we were far too young. I think that always gave us a little bit of a chip on our shoulder. We always felt very comfortable in awkward situations because of that. My mom what I think actually is most influential on us is this sense of social responsibility and fighting for injustice. I think both my brother and my sister, all of us are hardworking, successful in our careers. None of us are really motivated by money. I think none of us have big Instagram or social profiles. None of us look for that notoriety but it's very much driven by trying to create justice for other people. It was a really interesting dynamic of two very different parents.

Patrick: [00:23:23] Can you say more about justice? It sounds like a really interesting thread. How would you describe or classify that?

Savneet: [00:23:30] I'm a Sikh-American. I look very different. You can't see me but I have a beard and a turban. They do a double-take if they saw me on the street. I think coming from such a visibly minority community, you are more aware of the trials and tribulations of people who look different, who don't belong or whatever the proper word is. I think that experience combined with a family that was very much fighting for the rights of other people, grounded you in this idea that you were really lucky. I often say like, "I've learned two real lessons in life." One of those lessons is the power of circumstance. I feel so lucky that I was born in America. That was nothing to do with me. My dad decided to fly over here and take a risk. I had zero part of that but it's been the most impactful thing in my life. From a young age, when I got my first paycheck, every job I had, my dad would make me give it away. When we had time in the summer, we were forced to go volunteer. When we were young, my dad would take us to third world countries and say, "Let us be exposed to people that I think most people don't get exposure to at a young age." We've always felt this shift to help other people. I don't know why. On a personal basis, this always mattered but when I'm bored, I go on GoFundMe. I find campaigns of people doing real interesting things and I fund them. I think it starts from being a community that was very much part of our DNA. To when you get older just realizing how lucky you are.

Patrick: [00:24:39] What was the most memorable trip that you took?

Savneet: [00:24:42] It's funny. I'm culturally Indian but born and raised [American]. I had never really gone to India. When I was a kid, I've never really gone until I was 12 or 13 years old. I remember I was in eighth grade. Our parents took us there for a month. When you're at that age, you can actually understand what's happening. I remember just being shocked by the poverty. I remember our mom just walking us around the neighborhood. It was just so sad and amazing that people can live like this. It was just complete happenstance. When we came back home, the first English assignment we had to say is why we're proud to be an American. I was an incredibly quiet kid in eighth grade. I don't think I ever said a word. I remember we got this assignment. We were talking about it. A few people just are like, "I'm not a proud American. America sucks." I stood up. Again, an incredibly shy, quiet kid. I just went off for 0 minutes of how lucky we were. I would say without question that was the most impactful thing in my life.

Patrick: [00:25:30] You mentioned that there are two key lessons that you've learned. I think I would classify it as randomness or circumstance. Luck as the first. What's the second one?

Savneet: [00:25:37] Being in the arena. That Teddy Roosevelt quote of you have to take action. I think one of the great lessons I've learned is that those that don't raise their hand, those that don't ask the girl. Those that don't actually take that plunge, that never works out. The quote, I think I'm going to butcher it, but I'd rather be the guy on the ground with blood, sweat, and tears than the shy and timid souls on the outside of the ring. I always took that to mean, yes. You have to raise your hand. You have to jump into it but it's actually the life experience of putting your all into something that's valuable. You may go quit your job at Goldman Sachs and do a startup and fail. That journey and experience of actually trying to pave your own path is so valuable from a life perspective. Your financial outcomes may never be the same as they once were, but that journey is so, so valuable.

You may go quit your job at Goldman Sachs and do a startup and fail. That journey and experience of actually trying to pave your own path is so valuable from a life perspective. Your financial outcomes may never be the same as they once were, but that journey is so, so valuable.

Value Investing

Patrick: [00:26:18] Let's go back to the five or six years ago. You're at Berkshire with a group of friends. You had this formative background reading about Buffet and Lowenstein's book. Value investing appeals to you. First, describe what in particular about value investing so struck a chord. Then I'd like to talk about your evolution of thinking around this idea that people that are famous for it, the idea itself, the kinds of companies that leads you to and all of that will serve as foundation for talking about Tara.

Savneet: [00:26:46] When I went to Berkshire and my study of it, I've never been able to define why it resonates. It just did. It was one of those things where I love the hunt to find a company that someone didn't know. That was undervalued for whatever that reason may be. I love the dynamic of trying to understand if something was undervalued or not. It was just natural to me. I sometimes joke that if you live in an immigrant family, you're taught to be a value investor at a very young age. Maybe it was that. I don't know. It was naturally there for me. As I studied more and more, the more I just became obsessed with it. I would spend hours and hours with a group of friends just dissecting John Malone, dissecting Danaher. Dissecting 3G and trying to figure out were there patterns that we could pull from these to educate our own lives.

Patrick: [00:27:22] We were talking about this at lunch but it'd be great to say it again on record. To talk about your observation of culture as a component of the undercurrent that's important at some of these compounders. Everyone wants to find compounding companies and invest in them early. It's very easy to look back and say, "Yeah. Here are the compounding companies. Look how great John Malone is." Very difficult to have found that ahead of time. It's a fairly small sample. In studying those companies, what commonalities did you find? Maybe what are all the commonalities with a special focus on culture? Because I think that's one that's talked about less.

Savneet: [00:27:55] I think when we looked at dozen-plus companies, it's very hard to find patterns. I think some of them weren't good industries. Some of them were great operators. The three things I think we saw uniformly through all of them was the first was they all had very long-term visions. They were not focused on the next quarter, the next year, the next two years or three years. That actually underlines everything that they've done.

Patrick: [00:28:14] Can I pause there for a second? I always struggle with obviously long-term, thinking long-term seems smart. That's the right thing to do. I wonder if you could clarify even more what that might mean. Because in my experience, let's say setting really ambitious long-term goals may not be the best policy. Because then you're blinded to stuff that's happening along the way. It's almost self-limiting. The odds of you getting your goal go up. I'm curious how you would define the proper long-term mindset.

Savneet: [00:28:45] I think it differs by different persons. The way I look at it is as follows. As your compensation for your team and your employee is geared around what's happening tomorrow or the future. As a result, is your culture then wrapped around how do you create value in the long run? So that every person in that team is mentally wired to think what creates value five years from now, not tomorrow. The way you see things manifest is like recruiting. One of the interesting things we discovered in many of these companies was they all had really robust recruiting functions. It wasn't about filling the spot with the guy with a quick resume. It was, we're going to wait to find the right person. I'll give you an amazing example. My brother works on one of these high-flying tech companies. It's a super fast-growing company. They really needed someone for a hyper fast-growing market. The company literally waited six months for that hire because they needed to find the right person. I always say that's now so imbued in the culture of that business that they know we'll never sacrifice hiring. I think you look for signals like this that say, "Hey. We're trying to invest for five years from now or 10 years from now, not now.

Patrick: [00:29:40] Come back to some of the examples of culture.

Savneet: [00:29:42] Yeah.

Patrick: [00:29:43] We were talking about 3G. Maybe we could start there.

Savneet: [00:29:44] The three things we observed were a long-term vision, very strongly focused on being tax-efficient and culture. The culture is probably there. Maybe there's a fourth one or it's part of culture is this idea of adding operational value. Culture I think like you said is by far the least talked about but I think the most powerful. The simplest way I define a company with a great culture is, will that company sustain after the leader that created that business leaves? Can it sustain for generations? Danaher's on his third CEO. Nothing has changed.

I think when we looked at dozen-plus companies, it's very hard to find patterns. I think some of them weren't good industries. Some of them were great operators. The three things I think we saw uniformly through all of them...The three things we observed were a long-term vision, very strongly focused on being tax-efficient and culture

I think there's a great argument to be made that John Malone has created this culture of people who are very focused on X, Y, and Z. In the 3G example, everyone has their view on 3G. Whether it's good or bad but what I think I've learned the most is that they've created a culture that is sustainable. I imagine if you're the employee at 3G and you just saved a dollar on whatever it is, you feel really good about yourself. Because the culture rewards that and it encourages that. It encourages that aggressive form of thinking. That is something that lasts well beyond the founders of that business staying there. The more you can define that culture, the more that you can write that counter culture and build it. They're going to emote actually becomes over time because that becomes a defining process of that business. Other examples are companies that really reward R&D and technology. Because that was the DNA of that business that lasts well beyond the founder. Because they recruited a team that believes in that. They've built processes that reward that and they encourage that. When you have an organization like 3G where the founders fly economy, when you're flying and you're uncomfortable flying from New York to San Francisco on an economy flight, you feel pretty proud. Because you're like, "Hey, the boss is happy that I did that." When you are finding extra dollar in the budget, you're saying, "I'm not going to spend that. I'm going to send it back to home office because that's what they really value. It's hard to express but it's so powerful for these companies lasting for generations.

Patrick: [00:31:21] Your initial admiration of Buffet in particular in this case and his style, has anything changed about your opinion? I guess one way of asking the question would be, would you invest in Berkshire stock today relative to say the S&P 500?

Savneet: [00:31:34] Yes, but I'm not sure how much of that is emotional versus logic. Here's what I'd say. After we did this journey and this is again, something we're just doing as friends on the weekends. Thinking about what makes great compounding businesses. We then went back to Berkshire and said, "Let's find the pattern of how we invest." Let's dig through the companies he's bought that there's public filings. Let's look at every ratio. Let's look at every single signal we can find that gives us a logic to why he finds his ... Maybe there's something hiding there that you can copy. The short answer is, it's really hard to do that. There's truly some genius there that it's hard to figure out what it is.

The thing that I think that was more eye-opening for us is the few things that we could pull out of that, we actually felt a little bit challenged in today's world. I'll give you an example. One of the great questions Warren Buffett's asked in meetings is find me a business other than a brand that can keep its margins for 30 years. It's really, really hard. Because at some point, everything becomes commoditized. That brand becomes the difference between a 10% margin or 30% margin business. I've always thought that was just an amazing lesson for me to learn. Then if I think about today, a brand means a lot less today than it meant yesterday. The brand of my father is probably not the brand of me. I think as you look at the disruption of commerce in general, if I had a pet, I'd scrap the Chewy. I'm not buying the brand that my family used to buy. When I'm buying clothes, I'm looking at Instagram. That idea that the brand becomes a mode, I think is a little bit challenged. I'm not saying it's over but it's definitely a little bit challenged. I think the other lens, which I found challenging or I think it could be challenging for some to repeat this idea of Berkshire Hathaway tomorrow is finding these businesses with high fixed costs that have reinvestment mode. Railroads are a great example. The utility business that he has. We're living in an area where there's asset-light businesses. Building a skillset around that I think it could be challenging. In no way would I ever say don't invest in Berkshire Hathaway. I own it. I love it. I've learned so much but I just think that Berkshire tomorrow will be very different than the one of yesteryear.

The Strategy Behind Tera Holdings

Patrick: [00:33:22] I couldn't have asked for a better transition into what I hope will take us some time to explore in a lot of detail, which is the idea behind Tera Holdings. I think this was the culmination of all this thinking. Basically, all the foundation we've laid thus far has now led to this very particular mission and journey where I think you spend a majority of your investing thinking and time. Talk about the strategy behind Tera. How it came together and then we'll get into all of the leavers and the things that you think about.

Savneet: [00:33:49] After we do this analysis of, okay. Can you copy Buffet and redo it? I think we left it being like, "No." We started thinking about what if you could just find the right pool to fish in so that you could pick the horse and not the jockey? I was running a technology business that's on software. My friends were all software investors. We started saying, "Well, what if you created the Berkshire Hathaway of software?" As we started looking through it, we started saying, "Well, let's first look at the biggest software companies in the world." We looked at a company like SAP, which is I think the oldest publicly traded software company in the world, one of the largest. What's fascinating about that business is every customer of SAP complains about SAP. There's no one that says, "Oh my God. This is the greatest product ever." Nobody. Yet if I was to ask anyone on the street, "What do you think the renewal rate of SAP is?" You'd be shocked to find out its like 98%. If you remove bankruptcies and mergers, it's 99%. What that's implicitly saying is the average customer stays for 50 years. As a result, the market almost never less that business trade blows six times recurring revenue. We were like, "Wow. If Warren Buffet was 30 years old, this is all he'd be investing in." Because he has a business that has clearly has a moat, because if your customer lasts for 50 years, it's almost definitely a moat. You can raise price every year and no one's going anywhere. You have the ability to reinvest for growth. That sounds like an amazing place to be.

We spent the time with public market and said, "Okay. Wow. That's an amazing fact. Software's great, but it's already priced in." Then we looked at private equity and said, "Hey. Has private equity figured this out?" Short answer is, six of the top 10 performing private equity funds have a very high focus on software. I said, "Okay. Private equities figured this out. Is there anything for us to do here?"

When I left my job and my partners later left their jobs, the first thing we did was an exploratory tool, a listening tool. We went around and we just started calling software company after software company, private equity guy, after private equity guy. We said, "Listen. We're not private equity. We want to be the Berkshire Hathaway software. What does that mean for you? We want to buy your business and we never want to sell it. We want to reinvest in it. We want to create a transition so that your baby always stays. That that heritage, culture and legacy of business never changes. Is that an opportunity?" What we discovered very quickly was it was a much bigger opportunity than we'd ever imagined. While I think every company in the world has been called on by software, there are plenty of opportunities for businesses that don't desire to be sold through private equity and are excited at the opportunity to work with something different.

Patrick: [00:36:00] Talk about some of the key features. Checklist, if you will. You mentioned you're out of venture because you can't find the thread or the pattern. It's not systematic. Describe the systematic check points that you look for at the beginning of this journey now. I don't know how long this has been going, but we were talking earlier that you've at least visited dozens and dozens of software companies all over the place. You've got a big enough sample now that I think you've started to refine really what it is you're looking for. Maybe go through some of those check points and I might have some follow-up questions on this.

Savneet: [00:36:29] We can talk about sourcing too, which is an interesting dynamic in this world. The key thing we look for in a business: "is the product solution or tool mission-critical?". Is it something that you can't live without? The second is, is the retention rate very high? If you can figure that part out, you've pretty much figured out the business. Any business with a high rate of recurring revenue and the retention rate being very high is a really, really good business. I give this as an example. I think of businesses as apartment buildings.

The key thing we look for in a business: "is the product solution or tool mission critical.?" Is it something that you can't live without? The second is, is the retention rate very high? If you can figure that part out, you've pretty much figured out the business. Any business with a high rate of recurring revenue and the retention rate being very high is a really, really good business.

If you have Building A, which is filled with doctors and lawyers and you have Building B, which is filled with tourists, summer vacation counselors, startups. What building would you pay more for? You're always going to pay more for Building A because there's great visibility in that revenue. I think sticky software is that. We look for businesses where the recurring revenue is very high. The retention is very high. The price point is high. NPS scores are very high. The customers are happy with the product. We look for businesses that are integrated into many different points of a solution. It's not just I use it for one thing. It's that one thing that integrates into 20 other parts of your business. If you can get all that right, you have a business that can last, customers can stay on for 50 years.

Patrick: [00:37:31] Let's talk about the counter-arguments to this. All these great positive features. Somewhere, I saw a chart from you that basically shows the performance of some of those private equity vehicles that focused on software. An index if you will, of software companies in the public markets. They're these beautiful charts that had you been in them in the beginning of the chart would look phenomenal. You would have had great results. As someone that's worked for back tests a lot, whenever I see something like that, I'm always getting a little uneasy. Just think, "Well, okay. That's great. It's worked really well in the past." What structurally is it about this? Maybe in the public markets you think it's been priced in and the future won't be the same. With a company that's got really good profitability, 99% retention rates, it just makes me think. That's something that's right for competition. For someone to come in and try to take share from that. How do you think about-

Savneet: [00:38:21] Yeah. Let me add a little more color-

Patrick: [00:38:21] ... The defensibility.

Savneet: [00:38:21] ... Yeah. Let me add a little more color to that. Another key attribute we look at is, is the underlying asset that it's serving going to be around for a long time? We look for companies that service utilities, service governments, service healthcare. Service industries that lasts for a long time. A great example is dental practice software. Dentists have a 1% failure rate. The lowest failure rate of any small business in America. If you're the software serving the dentist, you're probably going to be around a long time because that dentist is around for a long time. If you're a marketing technology solution, the chance of you having a low turn rate is almost impossible because the technology changes so fast. The end asset you're servicing is changing so fast. Your product's probably not worth as much. The other thing that I was remiss not to mention was, we look for businesses with small TAMs. We're not looking for the $10 billion market that SAP, Oracle or Workday is trying to go after. We're going for the $400 million TAM where it's not really worth the time the big guy to come in there.

The other element I think that's important to understand the risk of disruption is, if you do a really great job with your customer, the desire for being disrupted is ... You don't want to deal with that. Think of the guy that runs the dental practice. He installs the software when he starts his practice. It now does his billing, his scheduling, his accounts payable, his practice management. Everything is in the software. If someone comes to them and says, "Hey. I'm going to give you a 25% discount if you take my product." There's almost a 0% chance that dentist is going to go for that. Why? Imagine the disruption of saying, "What if I miss Pinnock's payroll? What if my billing gets screwed up for the week that you're changing the software? What if my schedule gets messed up and all my patients get canceled on?" For a very incremental benefit of price, it doesn't actually make sense to switch because the switching costs are so, so, so high. We try to find these pockets of the world where you don't actually have to worry too much about the external competition. Instead, you can spend that time creating a better product for that customer.

Patrick: [00:39:59] You have this great chart that showed the average lifespan of a company in the SP 500, which I've seen before. It's this chart that cascades down. The average expectancy now is a little more than 10 years. It used to be 60. It's changed a lot over the years. What I had never seen before, which was really neat was to break that down by sector. You've mentioned some of the sectors, utilities, materials, energy, telecom, et cetera. I'm curious if you then break that down any more by the cyclicality of those underlying things. Let's take energy for example. Obviously, energy is hyper cyclical so are materials. You have these crazy high highs, these crazy low lows. I totally agree as a person that runs a business that uses software for a lot of the solutions, more and more of a built in-house. Some of it that's still third-party software under the subscription license or subscription model rather. Yeah, you don't want to switch. It's a total pain to switch when times are good. When times go bad, it's actually something you're willing to put in the work to do. To tear out a system and install a new one. How do you think about cyclicality of the underlying customer base?

Savneet: [00:41:00] It's huge. I think when you're doing that analysis, as an example, if you're an energy company and oil prices are down 40%, are you going to take away your accounts payable software? Probably not because what are you going to do? You try to find those pockets. Another great example that we've spent a massive amount of time is in compliance. There could be another great sell off on Wall Street. JP Morgan is not cutting compliance spend. If they are, they're not cutting it on the product that they depend on to run their AML and KYC checks. You try to find these businesses that yes, there's cyclicality in the end industries. You may not grow that as fast that next year. Signing the next incremental customer that's moving from paper and pen to your software. That recurring base is so sticky that you're plenty good on your outcome.

Patrick: [00:41:38] What have you done to strengthen the foundations of your conviction that this is the space you want to play in? Because one of the things we've talked about a bunch over the last couple of months as we've talked is a lot of the benefit of this software holding company structure comes in the later dated years. Thinking long-term that with these super low churn rates, the compounding magic really happens not in years one, two and three but in years five through 30 or something like this. That means that you need to be around still doing this in five to 30 years. You've done a ton, right? It seems like you've experienced every kind of investing entrepreneurship business. What are the core elements that make you think you'll definitely be focused on this for that long to be able to take advantage of that structural feature of low churn software?

Savneet: [00:42:24] Yeah. Maybe I'll back up and actually give you the typical profile of the person's company we're trying to buy because it helps put this in context. We're not going after high-flying 100% growth companies. We're generally not finding venture back companies. I can give you the rationale behind that. We're generally not going after stuff that's sexy. We're going after the company that's been around anywhere from 10 to 30 years. That's built a really, really sticky solution for an industry that it knows incredibly well. The founders are generally somebody who is looking for one of two things. They're looking for a partner to help them grow and build that business. They're looking for a really smooth transition. For the latter, it's oftentimes I want to sell the business because I'm retiring. I want to go live on a beach. I want to sell it to the right hands because I care about the employees. I care about my customers and I really care about my legacy. My name is on the fire department. I wouldn't feel right if someone bought my company, fired half the team and raise prices on the customers that got me in business and then flipped it three years later. It doesn't sit right with them. It's a bit of that Berkshire Hathaway pitch. In that bucket, a lot of our value add comes from, "Listen. We're long-term hands. We're committed to it. More than anything else, we're going to help. We're going to be transparent of how we intend to build and grow the business with you."

On the former, the ones who want to continue to build, which is surprisingly the majority of the ones that we've come across recently, it's very much how do you add value? To your point, the single biggest differentiator we have when we go sit down with a company is we come in with an incredibly detailed operational plan. We're not going there and said, "Hey. Let's buy your company. Here's a big check." We say, "Hey. We'd love to buy your company. Here's our plan to build it. Here's exactly how we intend to do it." Everything from, "Here's how we'd run sales and marketing," to "Here's how we intend to create the culture of return on investment thinking." Oftentimes, what happens in that conversation is it's not so much about, "Okay. What price?" It's like, "Well, talk to me. How do we create that value? Talk to me how you're going to change the culture of the company. Talk to me about how that impacts the remaining equity stake I have in 20 years." You ground the conversation and the idea that you're adding a lot of value and you're not coming in there extracting value. It is really game-changing. I think we've had numerous discussions with people that literally come to us and say, "I have a bit of X, Y, Z private equity firm. Come in 20% and it's yours." It's been very powerful. I think we ground the competition day one in saying, "We tend to hold a thing for a long time. If your interest is to flip it, we're not the right guys. We tend to actually help you build this business. We intend to grow it. If you're okay for all of that, let's go do this together."

Patrick: [00:44:39] I'm sure I'm not the only one that's thinking about a ton of philosophical similarities to all the things that Brent Beshore and I have talked about, which is this very permanent capital type structure. A very specific investing thesis, a process, a systematic way of thinking about sourcing and screening and doing due diligence on opportunities. A lot of it rings very true to that same style. One thing that's very different is the companies that you're going after. The first thing that pops to mind is valuation. Instead of paying four or five times trailing owner earnings, maybe you might be willing to pay more for a company that has the economic characteristics that software businesses have. Talk about your philosophy of price and how you think about valuation as a key input into the success of the company.

Savneet: [00:45:23] Yeah. That's a great point. I think the first time I met Brent, I joked "I love the price you buy stuff but I'll pay more because my business will be around for 50 years." I believe that. I think you pay more for that business. Maybe I'll back up. Software is broadly sold in two different ways. The licensed maintenance is historically the way it's done where you sell a dollar of software and then you charge 20 cents for maintenance every year after that. You stack that maintenance revenue on top of each other and that becomes your sticky, recurring revenue base. The other part of software SAS subscription where you're basically charging an annual fee the same price every year and then hopefully, if you're really good, you can raise that price and build that over time. In both those models, the end state recurring revenue generally has anywhere from 30 to 50% cashflow margins. What's powerful about that is you can look at a type of software. You can understand the market they serve. You can pretty quickly figure out. Okay. When that company is steady state, it's going to have this type of margin. If you're willing to make that jump, you can end up buying these companies.

The average software multiple of some of the companies we compare ourselves to our client's businesses for anywhere from one to three times recurring revenue. Everyone's like, "That's crazy. Three times revenue. I would never pay three times revenue." If you believe the steady state end margins are 50%, you're really buying it at six times steady state cashflow. That seems like a pretty good deal. Particularly in a business where you think you can raise the price every year. What we love about our model is we think we get it. We definitely get it cheaper than some private equity given the story and what we commit. We think we can drive that value by helping them build that process. We oftentimes say, "Our advantage is we're the 3G of sales and marketing. We're not cost cutting but affiliate marketing." By having scale, you can sometimes centralize some of this value over time to create economies of scale across all the businesses.

Patrick: [00:47:03] Reminds me of a question I meant to ask when we were talking about GBI, which is sales and marketing. You've told me some great stories about just systematic thinking again. About how to build a sales culture, how to build a process. Maybe talk about your experience and what you've learned there. It's the aspect of every business, which is absolutely essential but I think is probably the least understood. I certainly have struggled with it, right? Thinking about sales and marketing. What have you learned in those two arenas that you think you'll bring to the floor in the software world?

Savneet: [00:47:32] Yeah. It's probably best done as an example. We've been on 70 flights in the last six or seven months across the country meeting software businesses. Uniformly, everyone says, "I want help in sales and marketing." Remember, we're generally going more to enterprise software. We're not I'm selling to the end consumer. You sit down with these businesses. Literally, the first deal we're doing, it's in an interesting space. The founders complaining to us saying, "Listen. The hard part is, it's like a year before my customer says yes. How do I motivate the sales force? What do I do?" We said, "Well, let us give you our plan on how to do that." We gave them two playbooks. First, we gave them, "Here's our idea for leads." The problem is, when you have a guy on the phone calling to get leads for the guy that's on the field making that sales process, the guy on the phone is really focused on the low hanging fruit. Because he knows he's not going to get that commission for a year when his partner in the field closes that deal. He literally sell selects for what could possibly be the lowest hanging fruit. Not the thing that actually drives the most value, which is probably the getting that long sales cycle customer that's worth a lot more than the small ones.

An example of how we help this company grow is we said, "Listen. Every day, if that outbound sales person makes 30 calls for the entire week, they get a 50-buck bonus." We said, "If they're successful, the process is you make the phone call. You set up a conference call. You set up a demo. You set up an in-person meeting and then the contract." You just have these five steps. Instead of just commissioning that person on the final step, which is signing the contract, you said, "Okay. I'm going to compensate you on the quantity of calls then the number of demos. I'm going to compensate you on the number of in-person meetings. It's a step function and difference. If you were putting numbers, you'd say, "Okay. If you do your 50 calls, I'm giving you $50. If you get four in-person demos, I'm giving you a thousand dollars. If you get those meetings to contract, I'm giving you $10,000." What you do is your person now on the phone is not just focused on what can make me the quick sale. He's like, "Listen. I just make the calls. I'm going to get more meetings, more demos." They're incentivized to continue to grow. That's better for the company. We've found this to be an incredibly powerful tool for those people to build their businesses.

Another example that I think is the one that you were referencing is sales territories. I've always struggled. I remember running GBI, the New York region was always the highest point of reason. Even though I love the salespeople, I always wondered. Is that really the best sales person? Is that because they have that territory? I think if you talk to people generally in sales, there's a few regions in New York, Chicago, LA, there's a few areas that are always the highest performing. In the same as that company, we said, "Give us all your sales data." We had no transaction with this business. We said, "Listen." We took the data. We said, "You know what? Now going forward, you need to collect this information. For every meeting you have, you have to say, I met Patrick. He lives in New York. He's a really big Jets fan. He likes our product for reason Y. He hates our product for reason Z. He's married and he's got two kids." "He went to an Ivy league school." After you collect this data of attributes, every single meeting you go to, you notice some interesting patterns. What you find is you say, "Hey. You're a New York sales guy. You've done an amazing job. Did you know that your close rate on the Ivy League-educated guy that lives in New York is 90% but your close rate on women is 2%? Guess what? You're no longer the sales guy for New York. You're now the sales guy for the guys that are just like Patrick and who liked the product for the thesis that you're the best at selling at." We gave this away. That company after a quarter, it was a dramatic increase. A little bit of luck and lo and behold, we ended up getting a deal out of that. We are incredibly data-intensive about qualifying everything from the lead to the salesperson. That random email you get has been tested hundreds and hundreds of times with the characteristics of what kind of response rate will the guy like your profile open or not.

Patrick: [00:50:53] It's funny that a software business isn't thinking in these terms, right? That this structure that you're talking about, I guess in some ways, this is like a CRM system. You could do this within a CRM. I'm curious about literally the nitty gritty of this. How are you doing this analysis? Were you just doing an Excel? Was it something more complicated?

Savneet: [00:51:11] We built an app. Yeah. One of the funny things we did is we worked with them to build the app. If the sales person did not fill in the app within 24 hours of meeting Patrick, she would not get that commission. You create buy in day one and then you click this date. You're constantly analyzing to see different patterns. Some of the patterns are obvious. There are certain sales people that are amazing. A female but not great at male and vice-versa. The more subtle ones are, "Hey. You know what? Patrick's profile? They don't like the cold call. They love watching the recorded webinar." The people that like our thesis for that reason X, they love our product for reason X. Let's feel it. That guy gets the white paper but the person that's doing it because he heard other people are doing it. Let's send him a packet in the mail. You're constantly collecting data and optimizing everything from your leads to your end sales people. We've created just such robust playbooks behind that. If I'm trying to pitch you to sell your business and say, "Hey. Let me buy 75%. You keep 25%." They can see that there's going to be value added from that process.

Patrick: [00:52:06] I'm sure you've thought a ton. I know you've thought a ton about Constellation Software, which is the paradigmatic perfect software roll-up company that trades publicly. It really hasn't needed to tap capital markets for funding. It's self-funding. It's this incredibly virtuous cycle that happens in the way you're describing you hope to build Tera. Talk about maybe any lessons from watching Mark Leonard and watching Constellation and what the key differences are. My guess is one of them is centralization. I think Constellation basically buys companies and completely leaves them alone. I'm curious what you've learned from Constellation as a capital allocation engine, as an acquiring engine in software specifically.

Savneet: [00:52:45] Discipline. Constellation was started 23 years ago by a former venture capitalist who realized that the stack of maintenance revenue on software is really, really, really sticky. He said, "I'm going to go buy these companies with high maintenance software. I'm going to keep the management place but I'm going to tell the management you have to get to 40% cashflow margins and then you get a bonus." He would buy a company and get us a 40% cashflow margins. Take the money that that business went off and buy the next business. It was very much the cigar butt scenario where you're milking the existing asset. Every single year, you're raising price 8%. You lose 8% of customers. You lose 6% of customers. You still grow 2% a year and you're able to take this amazing cashflow and then to keep reinvesting. What I think we've learned from studying Constellation and interviewing tons of people from Constellation, is they are the most disciplined buyer I have ever, ever seen. If it's one penny above that ... There's a story of Warren Buffet and ABC. If you're 25 cents above that price, you won't go. These guys are by the penny. They have an amazing structure there.

Source: Corum

I think the second thing that's interesting about the way he's done it is it's a process. It is not that we are experts in software. It is not that we have a vision of the future. What he literally looks for is your retention right here? Is your revenue here? Can we buy your company here? Okay. We'll buy you. By making it completely process-based, you can hire hundreds of people to keep finding deals for you. When we look at that, we said, "We learned a lot that the model of buying recurring revenue at cheap prices works really well to compound capital particularly if you can reallocate it." But what we also said is, "That probably works less favorable when you have larger amounts of capital and where there's lots of people that have figured that out, too." That's where this operating lens came in for us. Where we said, "Imagine if you had that power, that many businesses and the power that that has." You said, "Guess what? 200 companies of ours, here's this playbook for sales and marketing that's working for Company Y. You're in the exact same space. Why don't you try this, too?" Trying to figure out what are the best practices we can apply across that and then taking the talent to do that, which is another thing that I think most holding companies haven't gotten gotten to for good reason but we're exploring it.

Sourcing, Diligence, and Portfolio Construction

Patrick: [00:54:40] I can't help but start to have an outside investor diligence hat on thinking about your process. I'd love to hear about the top of the funnel that you've built. You need to source. Maybe talk about the universe. How many companies, software companies are there of size and type that fit your criteria? How do you get in to see them? How are they hearing about you?

Savneet: [00:55:01] Yeah.

Patrick: [00:55:01] You've been all over the place meeting these people. How's that happening?

Savneet: [00:55:03] We think worldwide, there's probably 100,000 software companies that are in the target range and size that we're looking for. What's interesting about that number is it's growing.

Patrick: [00:55:11] Huge number, yeah.

Savneet: [00:55:12] Think about the VC darling of seven years ago that caps out at 10 or $20 million in revenue. That's an amazing target for us. These cycles of venture capital are actually great for buying "boring" businesses later on. Because not everything becomes a unicorn. That pool is growing every single day. We think that the market size is just enormous. The way we source is as follows. We've built a database of 10,000 companies. We literally went through every single company and put it in a bucket of, do you think it'll have the recurring revenue with the retention rate we want? Do you think it's in the size range we like? Let's go reach out to the founder. As you can imagine, when we go into companies and give them the sales, we have the same type of analysis. If we're reaching out to a compliance software business, we have a science on what the highest open rate of that is. More than anything else, when we do the Redux and talking to the companies after we've become friends and got to know them, what we realized is they resonate with us because we're not coming in there as capital. We're coming there as like, "Listen. We're some operators. We started these businesses. We'd love to help you build your business," and they respond. The data here is pretty incredible. Our open rate on a cold email is 20 to 25%. When we interview our friends at work in private equity, it's closer to 5%. I think it's the combination of having all the science when we reach out. Also, that first email, that first outreach is so deep. It's not just, "Can I have a cold phone call with you?" It's like, "I looked at your business. Here's what we think about it. We'd love to talk to you."

Patrick: [00:56:32] What are the levers that drive that conversion do you think most? Is that the title of the email? It's the depth of the sections? Like you said, there's a lot of science behind it.

Savneet: [00:56:39] I think it's sincerity. You come off with a sincere interest in what they're doing and how you could add value. I think one of our biggest advantages of sourcing is when we go meet a company, we go in as ourselves. We go in the same clothes. Every time I've seen you, I wear jeans and a button down shirt and a sweater. I go meet a company, I'm exactly going like that. I make a joke that the person who served connected me and Ro, my partner in this endeavor, his younger brother works at one of the best software private equity firms in the world. We happened to be seeing the same company one time, which is very rare. I see him sitting there and he's 25 or 26 years old. I love him so I could make fun of him. He's going in with a pocket square and Armani suit. A fancy watch and flying first-class. I'm pretty sure when he goes and meets that 65-year-old who's retiring and wants to sell his business, it's not the right impression. I don't know if you want that guy sitting there and saying, "Wow. This guy is 26 years old. He's flying nicer than I ever have. He's got a nicer suit than I ever had. He's got nicer luggage than I've ever had." I think that relatability really helps us. We walk in the door and we come in with backpacks and we say, "Here's exactly how we think your business. It's not just a pile of money." That's been a huge advantage. That's direct. We are ninjas at sourcing. We will find a nugget and chase that person down. Half these companies don't even have LinkedIn accounts. It's amazing. We get on a plane. We've been on 70 flights in six months. We try to meet them in person because I think that's how we can show our value.

The second way we look through is intermediaries. Everybody looks at intermediaries. We haven't really gone down that path because it's a bit harder to give our pitch, which is, "Listen. We're probably not the highest bidder but we're going to be the most value-added person, too." The last is venture. When we started we said, "Hey. Venture capital is the best place to be." Because if I'm the GP of a venture firm and I have that company that I've owned for seven years and it's topping out at 15 to $20 million of revenue, that's not going to return the fund. Every day that doesn't sell, it's probably going to hurt my IRR. What we found though is the problem with taking venture money, you develop really bad hygiene. You assume that there's endless money. You assume that the problem is throwing money at it. I remember one of our first transaction we were excited about. We're sitting with the founder and he was going 100% a year and then he started going 15% a year. It was a market size issue. It wasn't because the VC mistook the market size. We're saying, "Hey. We'd be a great alternative for you. We're going to build this business." He says, "Yeah. I need to hire a dozen more people in marketing because this marketing tool is working." I'm like, "Well, where's the money come from that?" He's like, "We'll go raise another round of funding." You develop these really bad habits about throwing money at the problem. The second problem is your talent doesn't want to stay anymore because your options aren't worth what you thought they were, you got a complete redo of the employee base. I think VC will be a place to play it at some point. Right now, I think that those two issues make it harder.

What we found though is the problem with taking venture money, you develop really bad hygiene. You assume that there's endless money...you develop these really bad habits about throwing money at the problem.

Patrick: [00:59:09] You mentioned the holding company structure as the way that you're going to go about doing this. A middle piece of one of the three common threads you found across compounders being taxes. Thinking about taxes. Maybe talk a little bit about that angle. How you think about I guess keeping Uncle Sam out of the compound growth rate of Tera Holdings. What lessons have you learned there? How do you think about that?

Savneet: [00:59:29] It was a really big decision early on to try to be a holding company, not a fund. Obviously, when you do something different, it's not always easiest to raise money. What we decided early on was the beauty of these businesses is that that recurring stream of cashflow. There is a stack of cash under each one of those recurring revenue streams. It would be unfortunate to buy one company. Take that money. Dividend it out and then pay taxes on it and not be able to reinvest it. What we said is, "Let's create a holding company where if we have three companies in portfolio and two of them are not growing or generating great cash, we could take that cash and reinvest it into a business that should have better growth prospects or take it and buy the next business." That allowed you to recycle the cash far more effectively than constantly paying it out to investors. By nature of not having to charge Carrie, there was no impetus to make. You're not making money by selling the business. The original insight we had was, "Well, if you got a great business, why do you sell it?" The answer was, "Well, how do we make money?" For us, we said, "We're in this for the 20-year game or the 50-year game." We'd rather compound that well as opposed to charging fees for it.

Patrick: [01:00:31] As you think about the portfolio itself, diversification portfolio construction, something I'm trained to think about always when viewing even something like this that's very different from say, a public market portfolio. How do you think about that? Whether or not you want to intentionally drive different kinds of businesses. Maybe you want some concentration in industrials and some in energy and some in materials. How do you think about diversification?

Savneet: [01:00:53] I'd be lying if I said we've given it more than a 2% thought. One of the things I think we're doing differently is, as we started talking about this thesis and developing it and building these playbooks, we had lots of money thrown our way. We made this conscious decision and said, "Listen. Let's go figure this out ourselves. Let us go buy the first deal ourself. Let us go spend that time recruiting an amazing talent, making this deal happen." We'll come back to you because we wanted to build the right musculature around the culture. As an example, our first hire was a Warren MBA who literally came on to work for free. He had no interest at all besides learning. This is a guy who has more years of software private equity experience than I and my partner combined times five. Yet he was willing to come and work for free because he said, "I love the vision of what you're building and I want to help do it." He does everything from making photocopies to getting on planes with us. That's something. If we were trying to buy 10 companies and create a portfolio, it would be harder and harder to create that type of culture day one. The second part is because so much of our value is trying to create operational strength with these businesses, you need time to build again, that musculature. That what works, what doesn't work, what looks good on paper, what doesn't work. We're nowhere near the idea of having portfolio construction. I think in a dream world, of course, we have something from industrials, whatever. Telecom, et cetera, but for now, we're very much focused on what are the most defensible businesses that are just going to be there forever that have these stacks of cash flow underneath it. Where there is massive inefficiency that we can help fix.

Patrick: [01:02:14] How do you think about capital sourcing? You've got your own capital, equity capital let's say. You've got the potential for outside investor capital and then you've got different types of debt. Seller debt and bank debt. If you've got those four options, how are you approaching that problem? You already mentioned you're starting by yourselves. In the future, how will you think about those sources of financing to get this thing going?

Savneet: [01:02:34] We are not scared of debt. Again, one of the differences that we have with any of these big holding companies other than Gamble and most of them don't use lots of debt. I actually think software is a beautiful business to use debt because you have great visibility into that revenue. If you can lower your cost of capital by taking on debt, it's a beautiful thing. I think we intend to use lots of debt. In most of the deals we negotiate, there is a form of seller debt. I think over time, we'll bring on investors because I think the opportunity set was so much larger than we expected. When we got going, we said, "Wow. There's a lot of private equity firms. There's a lot of search funds. There's a lot of people going after this space." What we've been most excited about is how many people said, "I will never sell to private equity. I really need to find a partner like you." I mentioned this before. Every single deal we do, we're the only party at the table. There's no one competing on the other end because it's very much a partnership.

Patrick: [01:03:20] Do you think that will change?

Savneet: [01:03:21] Absolutely. I think similar to Brent in this time where we're able to build these very close relationships with the founders because we're spending so much time with them. Part of trying to spend the money to find really great young talent is that we're not the only ones doing that. Over time, I think it will be competitive. What I think won't change is the culture. I guarantee if you meet anyone who works with us, they will be no different than I. They'll say, "Listen. I don't get a fee for closing my deal." I'm invested in equity, that business to compound for a long period of time.

Another great example is the average company we'd go to is about 100 employees. When you go to the founder and you say, "Tell me those are engineers." He'll very probably be like, "80, 85 of them." You're like, "Well, how many of them are salespeople?" They say, "Two and I'm one of them." In the beginning, you're like, "Oh my God. This is crazy. Your lifetime value is a million dollars for your customer. Why don't you have 10 salespeople?" When you talk to 100 of these companies, you realize that they are culturally run by engineers. The reward for that culture, that organization was let's create more widgets on a product. The reason I bring this story up is, we coming in there, realizing that there's probably a mismatch and there's a cultural fix. You have to be able to be humble and relatable to the founder to convince them to make that cultural change. Where you're saying, "Listen. Let's look at the data. You have a product. Your customer is using widgets one through 20. Why are you working widget 300? Let's rightsize the engineering department. Let's build a culture on ROI and sales. Let's build something great." That cannot be done by the stick. You really need to work collaboratively to build that. We think a lot about how do we create a "culture" at the top that can pervade down through everybody else?

The Bull and Bear Case for Crypto

Patrick: [01:04:49] Tera is something that I'll certainly be watching closely and look forward to hearing about the various stages of the journey. Obviously, software is an incredible business done right. I never stopped thinking about that Andreessen Horowitz quote: "Software's eating the world". I think that's their mission statement or their motto or something. A really powerful idea. Maybe we'll switch gears for the last 10 or 20 minutes and talk about some of the other topics that you've somehow got your hands into and learned a ton about. The first of which is crypto. You wrote a piece that was, as far as I can tell, probably the most widely circulated bear case on crypto. North of 100,000 people reading your arguments. I know you've got investments in crypto. Certainly, a company like Coventure has a crypto wing to it. Talk about your negative but maybe even your balanced view on crypto as an asset class and its perspective returns for investors.

Savneet: [01:05:40] Sure. Maybe I'll break into the bear and the bull case and then my overarching view. Again, prefacing that. It was all fortuitous that I got into crypto because I was in a business that sold gold. A lot of gold bugs are-

Patrick: [01:05:50] Crypto-

Savneet: [01:05:50] ... At that time, Bitcoin bugs that became crypto bugs. I remember meeting some of the early movers and shakers of the crypto space before it was anything and now seeing them become billionaires. I say this all for the purpose that I still believe there's reasons to be bullish but I'll give you the barricades. The first is, I think the single most bearish thing about the crypto businesses is you're now 10 years into it. There's still not an application that depends on a distributed ledger that anyone uses regularly or has any mission-critical parts of it. That is a little bit alarming to me. We developed this amazing technology that just has no use case potentially. The second thing that I just think was the original use case everyone thought was, "Hey. It's going to replace currency. It's going to be used in Kenya and Zimbabwe and all these countries." I just think that was so shortsighted. If you're a country that has a weak currency, you are not incentivized as someone running that country to have another parallel currency. In fact, one of their greatest controls over you is forcing you to use that currency. India, China, Argentina, Zimbabwe, they do not want a parallel currency challenging the rule of government. The idea that a currency could be used, that it would be used to treat as currency, that argument is out the window. Same reason why gold is not a currency.

There's still not an application that depends on a distributed ledger that anyone uses regularly or has any mission critical parts of it. That is a little bit alarming to me. We developed this amazing technology that just has no use case potentially.

The third reason I felt a little bit bearish on this market was it's a little funny to me. A little bit ironic that the biggest business in crypto is Coinbase. It's the modern version of a bank. That was the antithesis of what Satoshi was trying to create. He didn't want it to be a bunch of bankers and Wall Street guys coming in. Essentially, that's what we have. I think people making all the money are traders and hoarders. Coinbase search really charges me a lot more than my bank charges me. I think the last point and this is one that I think taps into why crypto has been successful is, it came at the perfect time of low interest rates, inequality, anti-establishment, anti-government, anti-bank and lots of intellect. You had this combination of this desire to be different. Everyone thought that cryptocurrencies are going to change the world because it's a great technology. In reality, because of speculation. I always joke. How many people, when they're saying you should buy cryptocurrencies tell you it's because of speculation? Do they argue like, "Oh, the blockchain disintermediated every industry in the world." It's more of the latter. That's completely wrong. The price action was right but you were totally wrong on that thesis. I think that's just a bear case where you're winning not because you were intellectually accurate. You're winning because of speculation. That happened because you tapped into all these elements in society. I'll tell you.

The funny last one is, after I wrote that article and I have almost zero presence online. The quantity of hate mail and Twitter hate and medium hate, it was mind-blowing. I think any community that's so emotional is probably less logical than they need to be for success. On the other side, I think the bookcase crypto to me is really threefold. The first is, I do think Bitcoin has created some stored value to it. I think there's a community that will always ascribe value to it. Whether that value is $1,000, $10,000, $20,000, I don't know. There's some inherent value there. Just like gold, gold has very little utility but it has value because you think it has value. I think it has value. The arguments of it should be worth as much as gold. I find that hard to believe. Gold has been around for 5,000 years. Every culture, religion, society ascribes value. Bitcoin is nowhere near that. I think that's one reason there's some bullishness. The second is just a thought experiment. I went to you, Patrick and I said, "Hey. The smartest engineers in the world are all working on one project. The best guy from Google, Facebook, Yahoo, et cetera are all working on one project. Do you want to invest in it?" The chance of you saying no even as much as you and I don't understand venture is still probably pretty low. We're probably going to still invest in that because it's just the way that our minds work. It's hard to price the existential. It's hard to price the exponential. It's hard to figure out these things that you see such talent and it's that FOMO. It's that greed. Again, very, very hard to price. I think the last thing and I don't know if this bullish crypto or not but I think it matters to me. The most amazing thing that's happened has forced us to think things can be better. Things can be different. Why do I have to wait two days for a wire? Why does it cost so much to send money to a different country? I don't know if that's great for the blockchain or not. I do know that it's created this amazing feeling of these things can be better and that will create lots of innovation in the future.

The Sikh Philosophy

Patrick: [01:09:45] I'm a philosophy junkie by background. That was my first love and first passion. I realized that this could be a neat opportunity to hear a little bit about the Sikh philosophy. I really don't know anything about it to be honest. I read a little bit in preparation.

Savneet: [01:09:58] Cool.

Patrick: [01:09:58] I cut it short because I figured it would just be more fun to hear it from you. Maybe you could outline what the broad philosophy is at least as how you interpret it and the impact that it has on your behavior. We talked about a charitable mindset earlier. I know that's part of it. If you could expand on that, that would be very interesting.

Savneet: [01:10:16] Sikhism evolved out of India 500 plus years ago. It really rooted itself in idea of equality. India as a society is not one of equality. It's a caste system. Women are different. There are treated differently than men. It challenged the norm by saying everybody is equal. One of the funny examples is most Sikhs have the last name Singh. Most women had the last name Kaur. Singh means king or a lion. Kaur means princess or queen. The idea was your last name signified what caste you were and how you're treated in society. The idea is if you remove last name from the society, then there's no telling difference between you and me. It ruined this idea of equality, hard work and giving back, which were interestingly not traditional values at that time or that place. I think what happened over time was because it was different, it's gone through lots and lots of prejudice, lots and lots of genocide over time. What that did to the community, I think probably impact on me, although I've never thought about it in a deep way is it created this idea of resilience.

That psychic residue, whether you're religious or not, you should use stories of people who've fought for you to be here today. You've heard these stories of people who've done great service to others. It just becomes part of your culture, part of who you are. I always said I felt really lucky in that I was a Sikh person born in America because it's the best place in the world to practice this faith. Everyone believes in equality. Everybody's working hard. Everybody believes in actually giving back. Those are actually the tenets we're taught from day one. It's a really unique faith. I think it's a very young faith. It's still finding its place in the world. It's definitely been an interesting experience.

Patrick: [01:11:43] Are there traditions that are common across the tradition that you partake in that have special significance for you? I again, don't know much about that.

Savneet: [01:11:51] Yes. I wouldn't say there are traditions that are fairly different. Most Sikhs go to the equivalent of the Gurdwara temple once a week. Part of that is adjusting to I think, Western society. One of the things that I think that is rooted, very much rooted into the culture is the idea of giving back. Sikhs from day one are really taught that you should give back. In fact, on my right arm, you'll see that I have a steel bangle and most Sikhs do. It's literally a reminder every day to do good and to help others and to act in a righteous manner. A really interesting observation is to look around the world. You will be shocked at how many politicians are Sikhs in countries where they are extreme minorities. 20% of the Canadian cabinet is Sikhs.

Patrick: [01:12:28] Wow.

Savneet: [01:12:29] The observation is because it came from this culture that was rooted in justice and taking care of others that led for them to follow that path. I don't know if there's a particular practice that's unique in any way. I think culturally, it's very much about serving others and doing the right thing.

Patrick: [01:12:43] I'm noticing a common theme across the whole conversation today is these base-level principles. Whether that's culture within a firm, within a religious tradition, within an investing philosophy that's a little more systematic and very principled like Constellation and their discipline. Obviously, I'm extremely biased here. I just think it's such a powerful way to live life. It'd be hard to find the right set of principles but if you find them, it seems like that's a great playbook for existing.

Savneet: [01:13:09] In our business, we often say, "It's the combination of culture and process." We are obsessed with process. If you don't have the culture underneath it, it becomes process for the wrong reasons. Combining the two is really, really powerful.

Al Mountain

Patrick: [01:13:20] We started with an interesting story of real estate in Barcelona, the regulatory arb or a market arb on Airbnb. It'd be fun then to bookend with another interesting story of Al Mountain. Describe what Al Mountain is and then I'll also ask you if there's any other unique, weird, never before analyzed asset classes that people out there, enterprising people out there should consider.

Savneet: [01:13:41] As I mentioned, part of doing a startup is you build this big liquid asset. When I looked at investments outside of that, I said, "Hey. I've got this investment into my company. Plus all these angel investments that I fell into." I'm like, "They're all valuable but I can't really do anything with them." I became obsessed. Again, this idea of finding cash-flowing businesses. When I started literally investing my retirement, I started thinking about what if I just throw in a bunch of small businesses that gave money? That led me to this discovery that I guess a little bit similar to Brent, you can find lots and lots of small cash flowing websites online that are interestingly if you handle the right way, relatively sticky businesses that you can buy for three times earnings. I and some friends took a little of our retirement money and we bought one site. I did this seven years ago.

Patrick: [01:14:22] What was the site? What was that first site?

Savneet: [01:14:23] It was a site that gave a directory of Marinas. It's literally like a miniature private equity story. The business been around for a decade. It had never raised price. The way they made money is they put an ad. When you pull up to the Marina, you can pick which place to dock into. They put ads there. The ad rates hadn't gone up in 10 years. The website wasn't mobile-friendly. Those two enhancements and revenue's up 50%. It's a great little way to build a cashflow stream. When I left GBI at that time, I got some friends together and said, "Hey. Let's scale this up. Let's actually make something of this." Because it's a pocket of the world where I don't think the next small business that you're going to hear about is going to be the corner deli anymore. I don't think it's going to be the gas station. I think it's going to be some online business. What Al Mountain does is we look for pockets of the world, verticals where you can compound that knowledge. An example. Al Mountain owns a bunch of pet sites. The reason why is, if you have more traffic, you can get better rates from Chewy or your affiliates. Another area that I'm excited about is, just like I think Airbnb is still underestimated. I think the ecosystems around Slack. Slack has become such a pervasive tool. There are lots of tools that service Slack. They're probably really neat little businesses down. Because you have a beautiful secondary trend behind that. Shopify. I think the world's still underestimate the power of these e-commerce stores. If you're some widget on some Shopify store, that's a really great business. We try to find these places where we can acquire these businesses at really, really, really low price cashflow and then centralize all the technology marketing into one group that are just pros at that. It's still very early. It's still very young. It's been incredibly helpful as we think about Tera and some of the stuff that we hope to centralize over time to just see another part of the world that we don't know.

Patrick: [01:15:58] Have you ever read the book, Gorilla Game?

Savneet: [01:16:00] I don't think so.

Patrick: [01:16:00] All right. I got to send it to you. It's really interesting because it gets into effectively waiting for certain types of this is hardware technology to be installed and become the platform on top of which tons of other services are built. Ancillary services are built. I'm realizing as you're describing a lot of what you've talked about today that companies like Airbnb, certainly Airbnb more so than Uber but maybe Shopify. I don't know much about Shopify, are these new platforms, software-based platforms that create all these little weird pockets of opportunity that are new and fresh and interesting to try to value or roll up. Just like Ali, the conversation with Ali a month or so ago, really interesting to hear about these unique pockets. Are there any other areas like that that I know you're focused on software now. Any other areas like that that you think people are underestimating or represent this opportunity to be the first person in to even think about it?

Savneet: [01:16:53] What I would say is the following. I think whenever you have a new platform business, something that you've talked about a lot over time, everyone always runs to the platform and doesn't look to the ecosystem. The way my mind works is saying, "Okay. The obvious trade is I want to go buy Airbnb stock or buy shares of Airbnb." I'm sure. What are the derivatives of that that people aren't paying attention to? I have seven ideas in the back of my mind that I would feed to Ali and teams that would go operationalize. Today's mission is to build this software powerhouse.

I think whenever you have a new platform business, everyone always runs to the platform and doesn't look to the ecosystem.

Patrick: [01:17:21] You know my closing question for everyone, which is for the kindest thing that anyone's ever done for you.

Savneet: [01:17:24] I knew you were going to ask that and I was struggling with it. At the beginning, it reminded me of a story. It's really hard for me to say. Outside of my family, it's hard for me to say anything kinder than what my parents had done and my brother and my sister have done or my uncles or anything like that. There's one story that just popped in my head that was I think one of the things that I'll always remember. I don't know if it's the kindest. That was my mom passed away in 2008. It had massive impact on all of us. We were way too young. We'd gone through a lot of trauma before that. There was a family friend of ours who we're always close with but we'd never spent lots of time together. I remember it was six months later or a year later and they invited our family over for the weekend. They had three amazing little kids who were lots of fun running around the house, playing games. It was the first weekend that we, as a family had fun since my mom passed away. It was totally unexpected. This wasn't a family we'd ever been to their house before. We always loved them. They were amazing people but I will always remember that for the rest of my life as that was the weekend that we all started to recover and be normal again.

Patrick: [01:18:20] Fantastic. I knew I would learn even more than I've learned from you over the last couple of months. Thank you so much for all the time and insight.

Savneet: [01:18:25] Great. Thank you.

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