THE BOB JOHNSTON PODCAST
By Bob Johnston
April 1, 2021
SEASON
1
EPISODE
36
Titans of Finance – Jon Korngold, Blackstone

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’s Bio

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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SELECTED QUOTES
It's not enough just to find the winner, you have to make the winner
On bringing deep resources to each portfolio company
Everything gets a little better if you pay it forward
Jon's view on the importance of personal charitable work
EPISODE MARKERS

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?

ESPN

Channel hopping - CNBC, FOX, etc.

Popular Science

Ideas and discoveries, gadgets

The Week

Bloomberg

Business Insider

CNBC News

Twitter - hard for him to navigate and extract the information he is looking for

GUEST FOOTNOTES
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