Despite a global pandemic, it’s been a remarkable year for the markets, both public and private. The Dow and NASDAQ reached (and are still reaching) record highs and the number of private equity and venture capital deals has been at a fever pitch.
My guest today, Jon Korngold, has a front row seat from the world’s largest investment firm – Blackstone. Jon is the Global Head of Blackstone Growth (BXG), which provides capital, resources and a deep network to high growth companies.
Jon and I dig into the current markets as well as BXG’s investment philosophy, focus and incredible resources that the firm brings to its portfolio companies.
Of note: Jon started fundraising last March at the beginning of the pandemic and recently closed the fundraising with subscriptions in excess of the $4.5Bn initial target (Boom!).
Many VC and Growth Equity firms have an incentive to invest in a lot of companies because a bull market naturally encourages more activity when “all boats rise” and so that they can deploy their funds faster en route to raising their next funds. In contrast, Jon and his BXG team have differentiated themselves with an investment philosophy characterized by a comparatively more-focused portfolio construction, along with a more operationally intensive approach to partnering with entrepreneurs to build companies of significance over a long-term horizon.
We touch on a number of other areas in our conversation, as well, ranging from his view about sitting on boards (hint: less is more) and taking a thematic approach to investing…his early career at Goldman Sachs and working in Beijing…plus Jon's background coming from a family of doctors and why that instilled a strong sense of commitment in him to support children’s charities.
Jon Korngold is the Global Head of Blackstone Growth (BXG), which is focused on providing capital to companies seeking to manage the execution risks associated with high-growth environments. Jon is a member of both the BXG and Tactical Opportunities Investment Committees.
Prior to joining Blackstone in 2019, Jon was head of General Atlantic’s Global Financial Services and Healthcare sectors, Chairman of the firm’s Portfolio Committee, and was a member of the firm’s Management and Investment Committees.
Jon also previously worked at Goldman Sachs in the Principal Investment Area and in the Mergers & Acquisitions groups in London and New York, respectively. Jon has spent extensive time in China, where he studied Mandarin Chinese at Peking University and did pro bono work for the U.S. Embassy’s Foreign Commercial Service in Beijing.
Jon is active with Harvard University, where he serves on the Harvard College Fund’s Executive Committee. He is a member of The Council on Foreign Relations and has been an Adjunct Professor at Columbia Business School, a member of the Young Presidents’ Organization, a Young Global Leader of the World Economic Forum, a Commissioned Kentucky Colonel, and a member of the Rockefeller University Council. He also serves as a Trustee of The Dalton School, of The Central Park Conservancy and of the 92nd Street Y.
Jon received an AB in Economics from Harvard College, graduating with Honors, and he received his MBA from Harvard Business School.
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05:55 What he’s been doing in these unprecedented times
On a personal level - he’s had more time with his family
Always been good about work-life balance
On a professional level - joined Blackstone a little over 2 years ago
with growth-equity vision
7:28 Closing out a fund?
Blackstone growth (BXG)
Subscriptions in excess of the 4.5B external capital
Started the month the pandemic started
8:30 They use institutions a lot for big pools of capital
Starting fundraising via Zoom at the beginning of the pandemic
A lot of funds going through “re-ups”
The world was so volatile
10:35 His personal thesis on tech growth
Not all tech are being penalized
Discounted future cash flows
The economy might grow
All time high savings rates
1.9T of stimulus on top of all this
Interest rates might rise
2001 of the Fortune 500 - only 37% still exist today
Valuations in certain sectors being separated from fundamentals
14:45 Retail participation at unprecedented levels
Interest rates at historically low levels
Some are underemployed and have stimulus money
Encouraged retail investors to come in
Many are investing on “gut” instead of traditional investors
15 years of a bull market
16:51 We’re not depending on the next fund to stay in business
We take a long term view
To build a company of significance you have to have that 10-15 year mindset
Long-term horizon - you can ride through air pockets
The vast majority of growth equity firms start as venture capital firms - when you’re a tech investor - binary risks - invest in a lot of companies (massive diversification)
Portfolio remained highly diversified
Not enough just to find the winner, you have to make the winner
Growth and technology investing environment necessitates an operationally intensive approach
21:30 When fully deployed - the funds will span over 15-20 companies
No one will sit on more than 2-3 boards
Act as more of a partner
Heightened valuation environment
All companies are in hyper growth mode of development
Accelerates their growth
25:37 Started his career at Goldman Sachs
He comes from a family of doctors
He still has a strong interest in medicine, especially pediatrics
His wife is a Pediatric Occupational Therapist
He applied at Goldman Sachs right out of school
27:18 Spent time in Beijing
Somewhat of an externship
Figured a way to get better at speaking Mandarin was to be immersed in the culture
His time in China was extremely formative
28:40 What prompted him to leave Goldman Sachs?
He wanted to be in a standalone investment firm
He wanted to be focused on growth equity
Large scale controlled buyouts was his focus at Goldman Sachs
30:10 Spent most of his time in tech
The bigger opportunity is that tech enabled large traditional industries
Ecommerce and retail are one in the same
Fintech and financial services are one in the same
Risky to not be in growth equity
Every part of the economy is going through this unprecedented wave of innovation
31:40 Everything they do is thematically driven
Get to know the companies well before it’s fashionable
Difference between a fintech company and a tech company that uses financial services
You have to be a student of history in the sectors you do cover
We want to get into companies that are beyond the binary risk
We don’t invest invest in broad technology risks
Not stepping into businesses with unproven unit economics
Preserved capital mindset
We’re investing in a later stage of company
These companies are looking for a partner not an owner
37:00 Who are their competitors
The companies choosing to do nothing
The best companies really don’t need your capital
Convince them why it’s worth being a partner
There are so many pools of capital available
Our business model doesn’t require us to invest in 30-40 companies a year, instead we are investing in a few 5-6 global investments per year
39:50 The successful firm is going to be more successful
You’re also fighting selection bias
We’ve never been through such an innovative period of time
40:50 Interested in Nonprofit Sector
Parents always taught him to be giving
I’ve been blessed to help not only with my time, but an ability to give
Children with pediatric illnesses
Childhood is such a special time in everyone’s life
Central Park is a big reason he is in New York City
He sits on Central Park conservancy board
The 92nd St Y
His children’s school boards
Active with his alma mater as well
A lot of anonymous giving
Everything gets a little better if you pay it forward
45:45 His contrarian view
Everyone of his views compared to his wife’s!
One of the 'other' NY teams – Jets, Giants, Rangers – will win a championship
47:25 What’s on his browser?
Channel hopping - CNBC, FOX, etc.
Ideas and discoveries, gadgets
Twitter - hard for him to navigate and extract the information he is looking for