April Session: Dina Shin w/ Audax Private Equity

Private Equity & Growth Strategies: Insights from Dina Shin

Q1: What are the key factors for successful investment decisions?

The success of an investment hinges on several critical elements. These include evaluating the Total Addressable Market (TAM), assessing the Founder(s) and management team, devising a clear Exit strategy for the investment, analyzing Unit Economics, and carefully structuring the Deal . The overall return is ultimately influenced by these structural components.

• TAM (Total Addressable Market): The overall potential market size for the product or service

• Founder: The quality and vision of the founding team and management

• Exit: A clear strategy for how the investment will be realized

• Unit Economics: The profitability of each individual unit of business

• Deal Structuring: This includes elements like governance, warrants, and equity, which ultimately influence the rate of return

Q2: What are core elements for strengthening a company's competitiveness?

Key elements of corporate competitiveness include People (talent), Product/Service, and Process (e.g., standardization). For large companies, cross-selling is a strategy for synergy, while smaller enterprises often benefit from targeting niche markets. In the software sector, the market's expectation for companies has shifted, now requiring a "Rule of 60" (revenue growth rate plus profit margin exceeding 60%), an increase from the previous "Rule of 40".

Q3: What is considered the most crucial element determining success in deals?

The most critical skill in deals isn't financial modeling or due diligence – it's winning people over. The ability to secure a deal and win people's hearts is emphasized as a core competency. Success depends on becoming a trusted advisor rather than simply a capital provider, creating relationships that generate proprietary deal flow and competitive advantages that can't be replicated through better spreadsheets.

Q1: How is the private market structured, and what are the recent trends?

The private market spans various stages, from Venture Capital and Operating Equity to Growth Equity and Buyout. Recently, prominent sectors drawing significant attention include Software, Cybersecurity, and AI Agent companies.

Q2: What are the common forms of deal structures in private equity?

Deal structures include Preferred Equity, which often guarantees a 1x liquidation preference, Right of First Refusal, and Lock-up periods (e.g., 3 months). Warrant-based entries are also observed.

In practice, many aspects of a deal are not formally documented. If an IPO fails, a strategy might involve converting the investment into private debt. Firms noted for excelling in this area include Silver Lake and Apollo.

Q3: What are insights into Primary and Secondary markets?

The private market consists of both primary and secondary markets. Secondary market (existing share transactions) is often considered more attractive as it allows for purchases at more appealing valuations compared to the last round.

Q4: Why is private equity becoming like the Olympics?

In this "Olympic game," only the top three players are likely to survive. The entire market now tends to form and operate around the top three dominant firms. Thus, while maintaining broad sourcing funnels, firms should concentrate investments in their highest-conviction opportunities.

For instance, the current era sees "Coding AI Agent" companies gaining prominence, exemplified by companies like Cursor AI, which achieved a valuation of $10 billion with just 30 employees, highlighting extremely high "human quality". Deep research companies are also emerging, involving PhD holders and scholars integrating their insights into Large Language Models (LLMs) and selling their expertise.

Q1: What key attitudes and skills are required for finance professionals?

Professional success demands developing specialized expertise that creates defensible competitive advantages. Whether in fintech, software, or emerging technologies, deep sector knowledge enables more effective investment decisions and portfolio company support that generalist approaches cannot match.

Finance professionals must always be proactive, possess strong communication skills, especially in English, and engage in continuous learning through resources like podcasts and YouTube. Key attitudes include having a "Get Things Done" mindset, meaning "no" is not an option, and responding quickly. Additionally, it's beneficial to study the body language and presentation styles of successful professionals.

Q2: How can professionals differentiate themselves from AI tools like ChatGPT?

The rise of AI tools like ChatGPT has already fundamentally altered the value proposition of traditional consulting. Information that once required human expertise can now be generated instantly, eliminating much traditional junior-level value creation. To differentiate oneself, it's essential to possess insights into customers and competitors that ChatGPT cannot provide. Human connection and interaction within the industry are also becoming increasingly vital assets. For meetings, one should always strive to make a "Newer, Better Impression" by preparing at least three pieces of information the other party might not know.

Q3: Which are emerging "white space" investment opportunities?

New investment opportunities are identified in "white spaces" such as female-driven, female-backed businesses in Asia and consumer IP-based models. Startup incubation that leverages personal networks to access proprietary deal flow at early stages creates competitive advantages through relationship-driven sourcing rather than auction processes.

Q4: What does it take to succeed in tomorrow's private equity?

Private equity is also becoming a winner-takes-all industry where only the top three players in any segment capture the best deals and generate superior returns. These leaders build ecosystems that attract additional capital and talent, creating compounding advantages that separate them from the broader market.

To effectively survive and succeed in this highly competitive environment, individuals and firms must become "players" or "champions" within their respective areas. This necessitates exceptional performance, specialization, and a proactive approach to deal sourcing and value creation. Success requires building proprietary datasets, delivering insights that AI cannot replicate, and maintaining the stamina of an athlete in an increasingly demanding environment.

How to Invest "Private Equity and Buyouts" 📖

Q: What can we learn from Thoma Bravo's specialist approach?

Thoma Bravo demonstrates how focused expertise creates superior returns compared to generalist approaches. Their exclusive focus on software investments combined with exceptional cost optimization capabilities and a "buy good companies and make them great" philosophy has positioned them as one of the emerging "legendary firms".

Despite widespread cloud migration discussions, only 30% of enterprises have fully migrated to the cloud, leaving substantial opportunities for software-focused investors who understand digital transformation acceleration.

However, the software buyout space has become fiercely competitive, demanding not only operational excellence but also differentiated sourcing strategies. In this crowded landscape, identifying areas with a lack of capital—yet high potential—is more important than ever. The firms that can pinpoint these overlooked opportunities and enter early with strong conviction are the ones best positioned to win.

From Our Mentees 💬

Gawon, Mentee

Sangeun, Mentee