David A. Posner, the 32-year-old founder and managing partner of Chicago-based startup Cambridge Capital Partners LLC, credits his risk-taking ways to watching his entrepreneurial parents at work.
In the early 1960s, Posner’s mother opened what was to become one of the largest art galleries in the country, Posner Fine Arts, in Milwaukee, before moving the business to Los Angeles.
“And my father was in the investment business,” says Posner. “Really, private equity real estate. What has always excited me about the investment world is being part of the entrepreneurial process.”
Although drawn at an early age to investing from “the desire to build equity value by taking a more proactive approach to value creation,” Posner says his arrival in private equity was pure serendipity.
Posner, whose first private equity job was with Banco Santander in Madrid as an analyst, later worked at DN Partners, a middle-market private equity/M&A firm, and at Waud Capital Partners, a $115 million private equity fund, before going out on his own.
Enterprising by nature, Posner early on knew he wanted to create his own firm. With old friend Rick Kash of the management-consulting firm The Cambridge Group, he agreed to start Cambridge Capital Partners as a differentiated service business. CCP draws upon the experience and analytical resources of The Cambridge Group in exchange for equity if the deal succeeds. They measure success based on IRR targets and the size of the return rather than using a flat fee structure.
Posner and his team have access to an investment information center that is staffed with seven Ph.Ds in library science. Additionally, Cambridge spends up to $1 million a year on databases, a huge hidden asset, according to Posner, who earned a master’s from Harvard Business School after graduating summa cum laude from UCLA.
“So I can pick up the phone [to the library], and say, I’m interested in learning about reimbursement.’ By the end of the day, I’ll have a foot of the latest industry reports and analysis out there. And that’s a huge advantage to other private equity firms,” Posner adds.
The relationship with the consulting firm also translates into senior level consulting advice for CCP’s portfolio companies – 40 hours a month each. That CCP invests in middle-market companies that would otherwise be unable to afford high-priced consultants is an enormous competitive advantage for Posner’s companies.
“For example, for a food company we’re working on, the partner at the Cambridge Group is the former head of marketing for Quaker Oats. So here’s a branding expert, who worked on Gatorade, helping a smaller private business, which is getting one of the best marketing professionals in the country,” he says.
This strategy also allows Posner to focus on the private equity side of the business, rather than specialize in a particular sector.
Posner says he prefers being a generalist investor because of the constant opportunity to learn. Also, he doesn’t want to limit his investment opportunitites.
“Interestingly, what I’ve found over the years is that no matter what people make or do, the best companies share commonalitites,” he says. “That’s what I build my experience around – what makes a good company.”
However, Posner doesn’t open his firm up to investing in just any companies – he has a way of weeding out the potentially bad investments.
“I only talk to the success stories. Before I get on a plane or have someone come in, their company has to hit a lot of positive aspects,” he adds.
Particularly satisfying was his involvement with Waud Capital’s investment in DS Medical Supply, a provider of specialty medical products to people with spinal cord injuries. He learned about health-care reimbursement law and the difficulties of spinal cord injuries, and was able to stand behind a business that “improves the quality of life of its customers.”
Shell Ausman, a partner at Cambride Capital who has known Posner all his life, calls him tenacious, an organized thinker with an excellent analytical mind, and praises his hard-working habits.
“There isn’t anything he isn’t willing to pick up and do,” Ausman says. “If he asks me to do something, I know he would do it himself [if he could].”
Making It Come Together
Whatever the business in which CCP decides to invest – and it considers proposals from about 2,500 companies a year – Posner says the biggest challenge is convincing entrepreneurs or business owners that he and his firm understand their life’s work. “You have to tell them why you want to be in that business. The first question out of your mouth shouldn’t be What’s your Ebitda?’ It should be Where do want this business to be in five years?’ Then, What’s most important to you?'”
Posner says the most important aspect of his own business is integrity. If the firm is ultimately successful, Cambridge Capital will have created great value for its portfolio companies and investors, as well as for his employees.
“I’ll have taken care of people who have worked here and given them great opportunities to learn and grow and make money. Ten years from now, I hope that we still have an entrepreneurial environment where people come to try to create value,” he says.
Combining Body and Seoul
Martial arts have everything to do with David Posner’s tenacious personality and his success in business, he says.
“The discipline and focus required to be successful in martial arts really parlays into private equity,” he says. “If you think about negotiating, for example, or skill development, it takes a lot of effort. And in martial arts, you don’t get to the next level unless you work really hard.”
Posner is one of the highest-ranking non-Korean martial arts masters in the country. He has a fifth degree Black Belt (Hapkido and Tae Kwon Do), is fluent in Korean and Chinese, as well as in Spanish, and is the head instructor of Martial Arts Programs at The East Bank Club in Chicago, where he teaches 60 students three days a week.
Posner began learning martial arts when he was eight years old in his hometown of Milwaukee.
“My instructor was Korean,” says Posner, “and he spoke English pretty poorly. But I got so involved in martial arts that I thought, if I really want to understand martial arts on a philosophical level, I need to learn Korean.”
At 18, Posner headed to UCLA on a full scholarship under the Asian Economics program. He also went to Yonsei University in Seoul, Korea, as an exchange student and became what he calls “an Asian expert.”
Aside from his martial arts activities, Posner is founder and chairman of The Chicago Association of Private Equity Executives (Capex), which is now the largest private equity association in the country, with about 1,800 private equity professionals throughout the Midwest. “It was fun to create something that is now kind of bigger than me,” he says.
He is also president of The Crimson Investment Fund, a club of Harvard Business School graduates in Chicago; director of the Harvard Business School Club of Chicago, a separate entity; and trustee of The Caswell Foundation, which he describes as a charitable foundation that invests primarily in health care and education.
David A. Posner
Cambridge Capital Partners
Born: April 2, 1969, Milwaukee, Wis.
Education: B.A. in economics and international studies, University of California Los Angeles, 1991; Yonsei University; M.B.A. from Harvard Business School, 1996
Career Path: Banco Santander 1989; Citibank 1991 – 1994; DN Partners 1996 – 1999; McKinsey & Co. summer 1996; Waud Capital Partners 1999 – 2001; Cambridge Capital Partners 2001 – Present
Last Book Read: A Walk in the Woods
by Bill Bryson
Favorite Book: The Moral Animal
by Robert Wright
Last Movie Seen: Ali
Favorite Movie: Good Will Hunting
Favorite Food: Sushi and Mexican
Favorite Web Site: www.ceoexpress.com
Wheels: 2001 Porsche convertible
Pet Peeve: Long voice-mails
Favorite Travel Destination: Costa Rica
Favorite Sports Team: Green Bay Packers
Most Admired Historical Figure:
King Saejung (“the Korean Ben Franklin”)
Favorite Quote: “If I could know anything, I’d like to know where I was going to die. Then I’d never go there.” – Warren Buffett
Investment Philosophy: “Provide more than capital.”