Private Equity Post COVID-19
The Era of ESG, Diversity, Inclusion & Talent Management
In 2019 we interviewed Omiros D. Sarikas, the visionary CEO of Brookstreet Equity Partners – a London-based fund innovating the Private Equity and Venture Capital asset class – about the concept of investing in ‘asymmetric’ markets to generate alpha returns. In 2022, we ask Omiros what has changed in the aftermath of COVID-19. He talks to CEO Today about the development of Brookstreet 2.0, the era of ESG, and brings to the table Lucia Labuzikova to highlight the importance of Diversity, Inclusion and Talent Management in unlocking value for private equity investments.
Omiros, good to have you back. Please reintroduce our readers to Brookstreet Equity Partners.
Brookstreet Equity Partners (Brookstreet) is an award-winning, Mayfair-based investment platform that seeks out global asymmetric opportunities in undercapitalised markets. We set up the firm with the intention to be a beacon in the industry and developed a solid infrastructure.
By means of example, our legal counsel also advised on Softbank’s $100bn+ Vision fund, our administrators handle $1.3+ trillion, our senior professionals have worked at McKinsey, Bulge Bracket Investment Banks and top tier Cross-Border Funds, our teams were educated at Harvard, Oxford and London and train at the British Venture Capital & Private Equity Association (BVCA) and the CFA Institute. In the meantime, we have over 20 Experts as Entrepreneurs in Residence (EIR) including top CEOs and Chairmen in Shipping, Banking, Big 4, Corporates as well as Multi-Generational Legacy Families and Celebrities.
What makes Brookstreet different?
We differentiate and disrupt the market in many ways, including positioning and DNA. With regards to positioning, we invest in Growth which blends the excitement of Venture Capital (scalable and innovative firms with intellectual property potential) with the sophistication of Private Equity (detailed due diligence, commercial support, board/management enhancements, downside protections).
We have commercial DNA and affiliate links with Candesic, a leading Management Consultancy owned by my partner Dr Leonid Shapiro, that supports us in Commercial Due Diligence and Corporate Strategy. Last year, we brought Lucia Labuzikova in-house, to leverage the talents of our teams across the firm and our investments. She has been a gamechanger in managing our people and our relationships with Portfolio CEOs and Founders. It is of note that our value-adding services are offered at no cost to investors or assets.
What changed since COVID-19?
Everything…The pandemic has influenced the investment management industry in many ways and transitioned everyone to their next stage of evolution. In business, the disruption to the supply chain, labour workforce and capital flows tested every organisation on the planet. In addition, many of us lost families, friends and colleagues. For me, that was a triple shock and more – a divorce at home, a pandemic at work, and the loss of George V. Bolos who was instrumental in my life – both personally and professionally, all while managing a physical disc injury.
However, in such times you stress-test your mind, character, stamina and processes. Our business continuity plans kicked in as soon as the pandemic emerged and I recall we had an investment committee, with heavy heart, the same week that George passed away. During this period, we remained fully investment active, initiated weekly portfolio reviews, broadcasted motivational Brookstreet TV seminars with our leading EIRs and we partnered with Austrian Hedge Fund manager Gottfried Springer of QINO GS to exponentially expand our firm and offer our assets the security of strength and global reach.
Meanwhile, the lockdowns accelerated our relationship with technology and remote teams. We invited fellow HBS alum Tom Sperry, CEO of Rogue Ventures USA, to enhance and advance our assets in the post-COVID Tech era and at the same time, we strengthened the European-coverage team with Spyros Papaspyrou, a C-level banking executive who used to manage $32bn, to steer all portfolio ships to safety.
In the middle of an imperfect societal structural reform, the role and impact on technology is growing.
Unlike VCs who cover dozens, sometimes hundreds of firms, our thesis was to focus on a few assets with maximum attention. Then, diametrically opposite from Buyout funds, we do not use leverage in our deals, so our assets do not have to pay hefty debt burdens during periods of working capital constraints.
Instead, we supported our assets operationally, provided liquidity and extended our investment programme with proprietary origination in targeted markets led by Kostas Maramenos and Vasilis Bolis. In the meantime, Kostas Tsitsis automated fund operations and, supported by Kostas Mitropoulos, developed the Brookstreet 2.0 Management systems. Natalia Bolou from Paris, George’s daughter and successful investment banker in her own right, shared with us ideas on ESG initiatives from the public capital markets. You will notice a few Greek surnames in our team as we heavily invested in tech opportunities in SE Europe, which is on track to produce a few Unicorns this year, with the recent Viva Wallet and JP Morgan deal being one example.
To this day, we are particularly proud we never furloughed a single Brookstreet employee and we pulled together as one family – stronger than ever before. In the aftermath of COVID-19, the era of ESG, Diversity, Inclusion and Talent Management emerged.
Tell us more about the era of ESG.
In the last few years, we experience a tectonic shift by investors from focusing not only on risk and returns but also impact. The CFA Institute documented that 76% of institutional investors and 69% of retail investors declared an interest in ESG, because the pandemic and its harsh economic impact has underscored the need to reset long-term priorities and for the investment industry to restate its stewardship function, particularly within the context of Environmental, Social and Governance (ESG) factors. The pace and momentum of change was dramatically influenced by COVID-19. Whereas for the Tech-VC markets the pandemic was a catalyst for hope, hype, and sky-high valuations, in the brick-and-mortar world, it was a time that urgently called for leaders to review, reflect and pivot.
ESG investing has changed finance forever. ESG ratings make proprietary assessments of stocks and bonds. Banks are using ESG factors in their credit assessments. Investment consultants utilise ESG rankings to judge investment managers. Index providers use ESG factors in establishing indices. Investors use ESG ratings to enhance their investment valuation and decision processes. For Brookstreet, we reflected not only on the ESG ratings of existing business models but also on the technologies that can enhance the ESG thematic.
How do you blend ESG with technology?
In the middle of an imperfect societal structural reform, the role and impact on technology is growing. The very evolution of humankind is dominated by technological leaps which have changed the face of the modern world – from wheels to cars, from steam to trains, from boats to planes, from electricity to the internet. Every business and every citizen is disrupted by technologies of automation, interactive communication and digitisation.
The next industrial revolution and human evolution is dawning upon the world in unforeseeable ways as we increasingly rely on NanoTech, Artificial Intelligence, Big Data, the Internet of Things and Digitisation of our world – from monetary transactions to human interactions. The impact of Technology on Environment, Society and Governing of our institutions is changing our world.
For example, nano-coating can make a ship go faster by reducing drift but also, more importantly, save fuel and pollution. Similarly, Internet of Things (IoT) technologies for smart buildings or smart cities, can make a difference in the environment, as well as the quality of life for employees and citizens.
Brookstreet coined the term “ESG Technologies” at the BVCA events of 2021 to describe this niche. We spearhead investments in the niche ESG Tech thematic including so far, NanoTech materials, IOT/AI software and hardware, robotics and cybersecurity.
To separate the wheat from the chaff, we do not invest in concepts, and we do not take MVP risk. We come in at the growth stage when there is a product that sells, a business model that works (even with tweaks) and clear market demand. We then help the founders and managers to build a sustainable business and scale it up for the next investor or buyer. We avoid large companies as they are typically already in a fixed mindset. We also avoid markets with overhyped valuations. In the days of remote working, talent is global. We screen hundreds of transactions to find the right mix of product, price and people and help them to integrate Diversity, Inclusion, and Talent management in their processes.
How do you integrate Diversity, Inclusion and Talent Management in your processes?
At the time of riding the first wave of the pandemic, every owner and manager faced the challenge to make extremely difficult business decisions amidst a global panic. How do you lead during a crisis?
One of my professors at Harvard Business School used to run a leadership exercise by a simulation of a journey to the North Pole. He used to ask: “Who are the people you can trust? Who do you need to take in this adventure to the unknown with limited space onboard? What are the complementary skills required to survive the journey?” These are exactly, the same questions we faced as a fund manager with a range of investments across countries, industries and cultures.
During a meeting of minds with Lucia Labuzikova, founder of Labuzik Institute, we discussed the well-known controversial statistic that 70% of international M&A deals fail. They fail not because of technical or managerial competence, but cultural integration. How do you make sure that the private equity industry can learn from inter-cultural and inter-personal “soft skills”?
Here, I will pass the torch to Lucia.
Lucia, please expand on how you utilise Human Due Diligence Assessments at Brookstreet?
Brookstreet used the pandemic to understand how to strengthen the talents of their team and complementary skillsets. In doing so, we worked for months looking into enhancing every aspect of their transactional lifecycle. We utilised human capital due diligence assessments early in their Origination process, where they first meet founders and managers of prospect investments.
We then looked for the right Portfolio Managers to cover the asset and build a rapport with the founders and managers while interacting as Board Members. Internally, we review everyone in the firm, from Analysts to Partners, to understand how they can work together and explore their collective strengths; for example, matching people with Ideation talent with those of high execution strength or supporting Sales Managers with follow up processes.
It is of note that some of the tools we work with are used by 90% of the Fortune 500 and over 28 million people report that are 6x as engaged in their work as a result. However, we do not stick with one provider or method. We utilise an eclectic blend of tools and techniques to offer Brookstreet assets and employees tailored services that smooth their relationships and boost their productivity. They learn to work efficiently, effectively, calmly and make “alpha returns”.
What are your plans for Brookstreet in 2022 and beyond?
Brookstreet seeks out global asymmetric opportunities in undercapitalised markets and we currently benefit from a wave of investments in the European early-stage venture ecosystem (feeding us next stage, growth capital deals). We currently focus on investing in post-COVID ESG Technologies and planning exits with phenomenal returns. We will grow our platform 5x this year and expanded our team appropriately. On a personal level, working hand-in-hand with Lucia brought not only success to the firm but to my life too. We are pleased to announce that we plan to get married soon.