Episode summary
Why “Boring” Private Equity Beats Venture Capital
How I Invest With David Weisburd
· · Hosts: David Weisburd · Guests: Monty Yort
Summary
Monty Yort argued that private equity outperformance comes less from finding a one-off star deal than from repeating a disciplined playbook better over time. At GenNx360 Capital Partners, that means proactive sourcing, investing in sectors with fragmentation and recurring revenue, partnering with strong leadership, and executing buy-and-build strategies with a very low loss ratio. He said the firm has completed 33 platform investments and more than 100 add-on acquisitions, and that newer funds have performed better because the team has continuously refined its process.
He traced GenNx360’s evolution from early exposure to cyclical industrial manufacturing to a sharper focus on industrial services, then to proactive sourcing, growth-oriented value creation, and eventually buy-and-build as a core engine. Monty Yort said organic growth has been the biggest driver of value, with add-on acquisitions helping lower purchase multiples and expand scale. He also said the firm keeps its scope disciplined, growing fund size only within a controlled range so it does not drift outside its core expertise.
Monty Yort also discussed continuation funds as a way to keep funding strong assets rather than forcing premature exits. He said the firm uses them only for performing businesses where it knows the management team, industry, and add-on pipeline well. Leadership was a recurring theme: he sees the hardest challenge as evaluating whether a founder can take the business to the next level, and he emphasized surrounding founders with stronger operators rather than waiting too long to make changes.
Key takeaways
- Monty Yort said GenNx360’s edge comes from consistency, not complexity, and that the firm targets a zero loss ratio through repeatable sourcing and execution.
- He said proactive sourcing lets the firm identify fragmented industrial services niches early, often close the platform and first add-on quickly, and sometimes buy add-ons at better valuations.
- Monty Yort said organic growth is the biggest driver of returns, while add-ons typically come about 2.5 EBITDA turns below the platform and improve blended economics.
- He said continuation funds work best for already-performing single assets like PAG, where the team knows the business deeply and can support a longer growth runway.
- He said the hardest private equity skill is leadership evaluation, especially deciding whether a founder should stay in place or be surrounded by stronger operators.
Notable quotes
“Our our goal is to have a loss ratio of zero and and the way we set up that opportunity is by being consistent in the types of investments that we make”
“We learned that we weren't targeting the right area and specifically we were in industrial manufacturing, lumpy businesses, cyclical businesses”
“we use AI to help us source the sectors of interest. We use AI to then help us diligence those sectors of interest”
“So every transaction today now has a proactive sourcing strategy around it a growth strategy around the operational influence and then the growth strategy and the buy and build”
How the episode opens
One of the theories that I've been coming up with is this asymmetry in finance, specifically in private equity and venture capital. And venture capital is a little bit more pronounced, you know, about this power law where if you get enough shots on gold, one of them will be the next Uber, the next SpaceX, the next Anthropic. But I also think that that happens in private equity, perhaps not with 100x returns, where if you stay in business, you do the right blocking and tackling, you get the shots on goal, and you'll have one of these pads where it might go 20x.
Have you found that to be the case? I do believe in private equity and venture capital are very different, right? Our our goal is to have a loss ratio of zero and and the way we set up that opportunity is by being consistent in the types of investments that we make.
That proactive sourcing strategy, identifying sectors that have the appropriate characteristics, partnering with the right leadership, those are critical, you know, building blocks to what we're going to execute on and then executing on that strategy. We've now done 33 different platform investments at GenX, over 100 add-on acquisitions. Our loss ratio is very low because of the consistency.
Now, it's evolved over time. We've gotten much better at what we do. So if you think about our more recent funds are performing better than our more historical funds because we've just gotten better and better at it.
And I think private equity enables you to do that. You enhance your strategy, you evolve your processes, and you continue to execute with a great team.
Double click on proactive sourcing. What does that mean? And how do you implement that on database?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private equity vs venture capital
- proactive sourcing
- lower middle market investing
- buy-and-build strategy
- continuation funds
Companies and tickers mentioned
- MS
- GenNx360 Capital Partners
- Schroder Ventures
- Aurora Capital Group
- Morgan Stanley
- Salomon Brothers
Watch the episode
Watch “Why “Boring” Private Equity Beats Venture Capital” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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