How does private equity businesses operating better improve our retirement savings? Wont they just improve the PE fund performance and benefit only the investors ?I am genuinely curious as its very difficult to find public information on how they actually function
Read Matt Levine's newsletter, it's a VERY simple business model built on financial engineering (it's rare they do something "novel"). But broadly, if you've got money in any sort of mutual fund, pension or retirement asset, the people managing your money WILL have some sort of allocation into PE funds. Even if you own a stock standard ETF like SPDR, PE funds like KKR are publicly listed.
In my 20 years of engineering, all my distributed systems knowledge was learnt in a period of two years under two amazing engineers working in two failed startups
One was like those legendary OG dogmatic distributed systems software engineer that you can meet and the other was an OG data platform person. They have zero social media presence but they have guaranteed jobs whomever they call.
I learnt my transactions and services from engineer 1 and my analytic/data platform fundamentals from engineer 2
I have made more money in the enterprise land but I think the two failed startups did 10x more to help me grow as an engineer
I am rather confident that an AI cannot come close to what I do and my management knows that
I'll try again- if market increases are bad, why is it bad to lag behind certain sectors in he EU? (sidestepping the inconvenient truth for the author that a majority of Americans are invested in the stock market). If a shrinking labor market is bad, why are AI productivity gains bad?
you're _Google_, your own work is always at risk of getting co-opted by others, and external people will view and criticize your work accordingly.
This rang so true to me and it probably applies for all large tech companies. I have realized that getting attached to a particular project is bad for my mental health.
Google is not a good example to look at if you are thinking about enterprise software as these need to be supported long term and Google is not very good at that. They have a history of making breaking changes and discontinuing products.
Microsoft is a much better example for business software as they are (were?) paranoid about backward compatibility.
You're confusing software engineering with corporate product support. You can have top-notch ongoing lifetimes for trash products. See for example SAP or anything Oracle.
Product support is an integral part of enterprise software engineering.
Product management does not know what adding a new feature or deprecating an old feature means. It is the responsibility of engineering to provide the dependency matrix.
For example, engineering usually tells product, if you change feature A, then it will also affect feature B, C and Z. Otherwise you may end up with contract breaches and SLA violations.
Product lifetime and providing incremental features is a big reason why SAP and Oracle have been successful in the enterprise space and people still pay a lot of money to buy them.
It's readable - though obviously you're going to need experience in RDBMS theory (Codd's paper, etc) to grok it.
It is very verbose, though.
Fortunately, the only people who need the ISO SQL spec are the vendors: the people writing SQL engines and tooling: it's next-to-useless for people who are designing databases or writing queries against them, chiefly because no RDBMS implementation, ever, has come close to implementing the full specification, and everyone has their own extensions to SQL - so all the vendors put out their own documentation and the world's largely been happy with that for the past ~40 years that SQL's been relevant.
It's not too hard to find the standards in PDF form if you know where to look - and as someone who does a fair bit of SQL, I'll say I've only ever referred to the standards to back-up my more controversial posts on StackOverflow.
I'm heading in the direction which is engines/tooling and I'm amazed at the number of corners of SQL that I have discovered that I don't know properly. You can use it fine for decades but when you need to know precisely what is acceptable to the GROUP BY/HAVING clauseS... then you suddenly realise you don't. It's quite surprising.
it would be useful to have that standard. Thanks, will have a hunt.
In that case I'm curious what it is about GROUP BY and HAVING that you recently learned - everyone I know that groks division knows their RDBMS-of-choice's SQL dialect inside out - it's like it's impossible to learn one without the other.
I use both in SQL regularly and without any problem, done so for decades. The problem is if you're actually implementing something then those rules you informally understand suddenly start to look less obvious when you try to write them down. Even SQLite got it wrong:
.
6. Aggregate Queries Can Contain Non-Aggregate Result Columns That Are Not In The GROUP BY Clause
For example to find the highest paid employee:
SELECT max(salary), first_name, last_name FROM employee;
ISO SQL permits aggregate queries returning (“plain ol’ data”) non-aggregate/non-grouping-key columns - but only when the engine can prove a functional-dependency from the grouping-keys - this isn’t exactly the same thing as what SQLite supports (and MySQL 4-5’s weird behaviour was disabled by default in v8) - but Postgres supports it now too.
I don’t know exactly where in the spec it’s defined, though - but I’ve seen people say it was introduced in SQL99.
SQLite would describe this as a feature, because it's a PITA do that type of query otherwise - window functions with rank() or row_number(), or a self-join. (Obviously this specific query could be done with ORDER BY salary DESC LIMIT 1 but if you want the highest paid employee per team or department etc...)
I have firsthand experience of how PE ruins startups. We were a small startup and unfortunately our founder decided to go with a PE firm rather than a VC firm for a round of funding. The latter were upfront about job cuts but the PE firm did not say anything until them took over. The founder got a good paycheck but we were left holding the bag.
There was a bloodbath and they ruined the culture, the product and the morale. I never realized the meaning of a "cutthroat" culture until that time. It was personally the most stressful period of my employment.
From then on, the moment that I see PE mentioned anywhere, I know its time to run.
PE acquired us and was a great partner. Allowed us to do larger M&A deals than we otherwise could have. Supportive but mostly stayed out of the way. Never suggested any cuts or anything that would impact culture. Ultimately led to us being acquired by a strategic a few years later in what I think was a good outcome for everyone.
These are all just anecdotes. My experience doesn't override yours, but I'd be careful drawing broad conclusions.
I think sometimes PE gets a bad rap because they can be a "buyer of last resort" for companies that are already struggling.
My firm supports 100's of PE acquisitions every year and I can tell you that your experience is far more the norm than what the parent comment has suggested.
The idea that PE comes in and sets eight figures of their own money on fire and ruins a business, shooting themselves in the foot makes no sense, yet every other story online is about them doing exactly that.
Of course there are LBO scams going on (more historically rather than currently) but these billion dollar firms don't come in and lose a ton of their own money along with money of their outside investors on a regular basis.
A startup going from being VC backed to PE is one that is greatly reducing its expectations of the future value of current work.
I can see how it would feel like the PE firm is ruining the business to a current employee. Projects that you worked on, saw a lot of money poured in to, that you personally still believe in; get shut down and you think "why would these idiots buy that just to shut it down? Must be finance shenanigans involving write offs and shell companies" when really they valued those projects at $0 or less when they bought the company.
> The idea that PE comes in and sets eight figures of their own money on fire and ruins a business, shooting themselves in the foot makes no sense, yet every other story online is about them doing exactly that.
On How I Built This, they frequently talk to companies that were bought out by PE. Some had negative experiences, but the majority were positive.
PE wouldn't be around for long if they always shot themselves in the foot and made terrible business decisions. They have a bad rap for taking over failing companies (or companies that are just well past their prime) and extracting as much value as they can out of them, but acquiring a startup is generally different I'd think.
They come in, reduce costs as much as possible, keep revenue coming in as long as they can while having huge dividends to said PE until they get so far into debt they are not sustainable. They'll swap to service providers that they either own or get a cut from and pay themselves.
Then their purchased company gets bankrupted, sells their assets to cover their debts (including said PE's 'debts' of services provided.)
They probably make 200-300% of their initial investment back by paying for the initial purchase with debt that is tacked onto the purchased organization and simply drain them dry. PE doesn't make a ton of money by being dumb, they make a ton of money using any and all tactics necessary to make big stacks in short time. Obviously not all PEs operate like this and there are likely many loopholes and strategies.
They bankrupt it by basically pumping it full of debt while taking money out and dumping it once it's out of money - zero liability with a LLC right?
Who’s the one offering them the debt in the first place? You’d think if it were so easy people would wise up to it and stop offering debt to PE owned firms.
This is very, very true. There is a huge proliferation of PE firms now too and many who are very unsophisticated, especially when dealing with smaller, family run businesses.
> yet every other story online is about them doing exactly that.
That's because this strategy is only normally utilized by the biggest PE firms (Apollo, KKR, etc.) who acquire large businesses (Toys R Us, Instant Brands, etc.) and those sell headlines. Net on net returns, it's much harder to turn a $1B biz into a $2B, versus a $10M business into a $20M business. So the large funds typically do a ton of creative financing to achieve returns and hence how they essentially bankrupt the companies. Sub $1B acquisitions usually this strategy doesn't make much sense.
LBO is how the PE firm finances the acquisition. Think of almost exactly like a mortgage. The bank ( = investment bank) doesn't want to maintain/manage the house ( = company) so they help fund the acquiring cost. Typically it's 50/50 (50% the PE firm uses its own fund and 50% it uses a loan from an investment bank "mortgage).
Post close, they might utilize a credit facility (usually a bank loan) where they can put debt on the company's books for specific initiatives (add-on acquisitions, hiring, etc.). There are some huge advantages to this because they usually can get loans at way better rates than a company could get if they went to a bank and got an SBA loan, venture debt, etc.
Not anymore, and almost never at small scale. It was massively abused in the 1970s to early 1990s but it's generally associated with the 1980s and specifically the book Barbarians at the Gate (which is an awesome read).
Today I would guess it's most associated with the Toys R Us and Sears failures, but surprisingly no one tends to talk about the Best Buy LBO for some reason...
No, it's one of many PE strategies. Almost all private equity firms utilize leverage in some form, but it's not universal and certainly not as extreme in all cases as the LBO shops.
What's also funny is the general certainty that the CEOs of Microsoft, Google, Apple, and every other large company are eager to destroy the company for short term profits.
Not that I don't believe you, but my personal experience dealing with outfits (as a customer) that have been acquired by PE firms is that they have ruined the thing they acquired approximately 100% of the time.
Growth equity blurs the line between traditional PE, on one hand, which spans buying and responsibly operating good companies to LBOs, which require cuts, and venture capital, on the other hand, which is more hands off but also more brutal if you don't look like you're flying moonwards. This ambiguity as to what "private equity" is might be clouding the data.
That's true. I equate Growth PE with "minority interest, positive profitability", VC as "minority interest, growth at all costs" and PE is simply "majority acquisition, typically profitable".
Maybe PE firms are ok and mine was an extreme example but I got burned pretty badly.
If I do have to work on a place backed by a PE firm for some reason, I would start out as a contractor and then see how it plays out before committing to be a full time employee.
do you tell this often? i could swear I've read this exact comment before (pe acquired, great partner, enabled m&a, ultimately acquired by a strategic)
If PE ruined more businesses than it helped then people wouldn’t be doing PE (either the finance guys or the companies).
So technically there should be more wins than not. At least on paper. How that looks for lower level employees may be different but often PE is there for a reason.
You can turn a low-profit “boutique” business that pays the salary of 100 people, into a high-margin marque for an acquiring larger-sized corp where every one of those employees get thrown out on their asses because they’re redundant post-consolidation.
If you built the boutique business to get a payday, maybe you’d consider that a win. The market certainly would.
If you built the boutique business because the megaco had a monopoly and was stagnating and awful and you believed in a vision where you can do better — then the PE firm just forced you to take an L by selling to that same megaco and hollowing out your business to just become another head of its behemoth.
If you built the boutique business to work with your favorite people in a non-hellish work environment and ensure they all get to live comfortably — you’ve probably developed cirrhosis from all the regret you’re drinking away.
It's not all black and white, at least from my experience
A similar thing to what you described happened at a software company where I used to work at, culture destroyed, many people let go. I will name and shame the PE firm - it was Hg Capital
However currently, I've been at a company for a few years who is owned by Morgan Stanley Capital Partners, and it's a completely different story. The culture is great and hasn't changed at all
A previous firm I worked at was bought as part of a roll-up (market segment consolidation). If you're the firm that they're rolling all their acquisitions into, that's great & exciting. If you're one of the roll-ees, not so much.
They bought us not for our technology but our customer base. They intended to convert them all to their other firm's product. Little did they know that a lot of our customers had left the other firm for us because we treated them better.. So what happened is in addition to the back office staff & sales staff being laid off, they laid off the developers & testers too (they kept a few managers for a year for continuity). I realized this when the folks they sent to town refused to go to lunch with us in an rather awkward moment.
That is funny as the exact thing happened in my startup as well (we were one of the roll-ees)
We got some suits sent by the PE after the funding round.They politely said that they had other plans when we invited them for lunch.
I am inadvertently part of a PE cleanup, being a PM hired by a guy PE brought in.
I am of the opinion if PE destroyed this company’s culture and strip/sell it off, it’s certainly deserves it and will be better for everyone involved.
This place worked for decades as a cost center. It never made money, routinely losing $10-$40 million a year. Multimillion dollar deals were negotiated and made with handshakes, biting is in the ass. The engineers spent their time making shit, over engineered products with no regards to the little customers we had. Our suite of products have no interoperability. Just last week i again repeated why to a couple of “top engineers” why having single sign on across
Our products makes a good customer experience.
PE is a tech boogeyman here on HN and Reddit. But now I wholeheartedly believe that’s Sometimes PE needs to come in and shut things down.
Same thing happened at a company I worked at, they also constantly tell you how they are investing in the future of the company and will not be doing all of the culture destroying things that they are definitely going to do. So if you are in this position and they say it will be different, don't believe them.
A PE bought a majority stake in the company I work for which for 40 years was a family owned company.
They said they were financial partners only, non-operational and they bought because they liked how we were.
It's been years since and things have only gotten better as far as I am concerned. I mean they were pretty great originally when the family owned it and I had no complaints, but the culture and engagement and such has only gotten better, and the company is growing faster and becoming even more profitable than ever before as well.
Just from what I hear it seems like most go bad. Though I have to assume it's also a case of people are more inclined to complain when things go poorly.
I mean why would people write comments about how such a thing went smoothly and well. People do now and again but not usually spontaneously.
Part of why I felt I should share my own experience. Hard to know what % of PE acquisitions the workers end up liking vs. hating, but I bet it's not as many bad cases as it seems from media or online comments.
A major difference is that VCs (good ones at least) specialize in startups in a given sector and have some understanding of the sector, the product, the market landscape, the culture, etc. They also operate in that sector long term which means they really want to maintain a decent reputation among founders, employees, and even customers. VCs really don't want to get their name associated with "OMG run away!" since it could adversely affect their deal flow in the future.
PE usually doesn't have any special connection to your sector or community. They just buy stuff and try to run it according to bog standard MBA rules.
> PE usually doesn't have any special connection to your sector or community.
I know you said usually, but it really does depend. Thoma Bravo would be an example of one that is tech sector focused. Not that I like TB, just saying that doesn't always apply.
I feel your pain about what happened. I've seen comparable things a few times first hand. My learning was: just leave once the change starts, only stay if you're getting something out of it. It's not my company, I'm only in charge of my life, I'll find something better soon.
I think I would not recommend to run once PE is mentioned, it can also change for the better, but it can be a red flag to look more closely.
This doesn't make it any better for the, you know, entire rest of the company.
It's important to remember that this startup industry relies on selling dreams to idealistic young grads who will usually end up under the bus while the higher-ups walk away with the profit, if there is any. And a lot of us here are complicit, because we rely on cheap labor and false promises to get the next company off the ground.
Once you see your first exit where the CEO walks away with $10+ million and every single other employee's stock (even the first few engineers) was made worthless in backroom dealings, you get jaded about the way this entire business operates.
For me a job is a job, my emotional attachment is limited. It can be awesome, but how the company changes is not in my power, if I don't own an substantial amount of equity.
Usually if a company fails, it happens in slow-motion. As an employee you can often spot that years before it makes the news. Just move on before it makes the news.
> My learning was: just leave once the change starts
As a customer, rather than an employee, that's what I learned too. If a PE firm buys a company that I do business with, the best thing for me to do is to stop doing business with them.
YMMV. Really depends on which PE firm it is. The large cap ones are notorious for what you are describing.
The PE clients I work with are very growth orientated and understand that culture is important for growth, so I don't believe you can paint the whole space with one brushstroke.
I believe they prefer the term "sharp-elbowed", but either way, you can imagine why so many were not interested in having Mitt Romney as a national leader.
By definition, microservices are independent of stack.
Every service in theory can have its own stack.
My recommendation would be to stick with microservices but start migrating each service to modern stack.
With regards to the stack, you can look at Django if you want to move to a python based ecosystem, Spring boot for java and node if you want to look at server side js backed by a classic RDBMS like MySql or Postgres
