FIVE QUESTIONS WITH…RICH LAWSON, Chief Executive At HGGC Capital

1. Congratulations on your new role as chief executive of HGGC, the firm formerly known as Huntsman Gay. Is the firm different from the one you co-founded in 2007 with Jon Huntsman Sr. and Robert Gay?

No. It’s still the same, the same investment strategy. Over these last five years, when you look at the 30 deals we did, we’ve always had the same thesis—to focus on partnering with intensely private, closely held, medium-sized businesses with great people who have the aspirations to go global. That model has continued since we founded the firm.

2. What does it mean to the firm to have Steve Young, a Hall-of-Fame 49ers quarterback, on your staff?

Steve is a full partner, and he’s a force of nature. I don’t know how you can go from being world class in one business and figure out how to be world class in another. That’s the kind of personality he has. 

In the office, Steve tries to act as though no one knows who he is, so our favorite thing to do is find a Tampa Bay Buccaneers jersey or a Sports Illustrated cover and stick it on the wall. It drives him nuts, because no one knows who he is, right? It’s really funny. 

There are many times, I believe, that we’ve been able to get in the door because a potential partner has been a really big football fan. And without a doubt, Steve’s fame is helpful in the middle market. The middle market is really people-driven. And while some people may start with the football piece, they soon find that Steve has been doing the private equity thing for 15 years now.

And, for 13 Monday nights a year, Steve does the pre and post-game analysis for “Monday Night Football” on ESPN. Steve goes to these games, and all the companies that we own will bring their customers to them too. We also invite middle-market CEOs or founders that we’re targeting. This is something that is very specific to Steve, that we draw a great benefit from.

3. Jon Huntsman Sr., Robert Gay and Steve Young all share a common faith. Have common ties in the Mormon Church been an asset for the firm? Is the Mormon Church a social network where people at the firm are introduced to potential business partners, as an investor or as someone seeking to sell their business?

It hasn’t played a part in what our organization is, or what our LP base is. I can’t think of any deals (that came from church contacts) off the top of my head. We looked at 1,800 deals to find the 30 we did in this last fund, and I have to believe that some of them may have been folks (with church contacts). We looked at some Utah businesses, and there are a number of people where we ended up not doing the deal. But that’s no different from the fact that a bunch of guys at a portfolio company we just sold were all Catholic, like me. Religion really hasn’t played a huge part in our firm. 

4. Several news reports mentioned that HGGC is likely to launch its second private equity fund sometime this year. CalPERS reported that as of December 31, 2012, your first fund had returned a 10.6 percent net IRR and a 1.3X net return multiple. That’s respectable, but not top-quartile. Do you expect your existing shareholders to re-up? And will your next fund have a bigger target than $1.1 billion?

The mood is good, and there’s a lot of interest—a lot of excitement. We’ve been really effective in this fund size. We like this market because it is full of really neat management teams and entrepreneurs. They’re not large companies; but our style of investment partnership actually gives us a competitive advantage. So if it’s not broken, don’t fix it. We have a very good model. We want to be the same size, and we want to continue doing the same things we did in the past. 

5. Menlo Park is not known for private equity. How does it feel to be a private equity firm in the heart of venture capital land?

We’re all technologists at some level. Two-thirds of our fund is invested in information services-related businesses, like Hybris and MyWebGrocer. But we fill a different quadrant in the life of a business. Additionally, we fill a gap that is not well-served by the venture community, and we have wonderful relationships (with the venture world) going back 25 years, because we’ve been steeped in technology at a later stage.

Edited for clarity by Gregory Roth