Our July Investment Insight section looks at the work of Jeff Evans, who is a Partner & Managing Director at Volta Global – a diversified private investment group focused on direct investments in venture capital, private equity, and real estate. Volta was formed in 2015 to manage the proprietary and permanent capital of its founder and partners of the firm. Prior to joining Volta, Jeff had over a decade of multi-faceted experience as an active investor in both public and private companies, and as a co-founder of a venture-backed technology company.
Tell us a bit about what makes Volta Global’s philosophy and company culture unique?
Everything about our investment philosophy and corporate culture stems from our permanent capital base. Because we don’t manage a fund or have external investors to answer to, every investment decision we make is viewed through a long-term lens and must pass the test of being undoubtedly the best usage of the two resources we care about most – our capital and our time. Because we are active in so many different areas and maintain a relatively small headcount at the corporate office, our culture remains very entrepreneurial and filled with intellectual curiosity.
Can you give an example of how your personal investment approach has evolved during your career?
Like many people drawn into this field, I’ve always considered myself to be a value-oriented investor. The idea of being one of the first to discover a business with an underappreciated competitive advantage (or “moat”), and that was currently mispriced by other investors, was an idea that captured my interest very early in my life even before I started doing this professionally. As my career has progressed and involved making investments in many different markets, I think realizing how the characteristics of competitive moats themselves can change or adapt over time has been an important evolution. Many elements that defined what a sustainable and durable competitive advantage looked like 10 or 15 years ago may have been drastically altered over time by factors like technology and changing consumer behaviour. Think about large incumbent businesses in the consumer goods space as a good example. For many decades there existed a hugely profitable moat versus smaller upstart competitors – big barriers to entry built up over time thanks to distribution being incredibly expensive and difficult to accomplish at scale, and the advertising dollars necessary to match brand recognition and awareness with the big players being prohibitively costly for most. Fast forward back to today, and businesses like Dollar Shave Club and Harry’s have leveraged direct-to-consumer distribution models and extremely low-cost (but equally effective) marketing efforts to steal almost one-fifth of the razor market from the big incumbents in only a matter of years. I still believe that investing with a focus on the original value principles is the best path to long-term success today, but investors need to be aware and attentive to how sources of competitive advantage can evolve and erode over time.
What types of businesses does Volta look for in your private equity strategy and can you share one lesson you’ve learned from your activity in the lower middle market buyout space so far?
From a high level, in our control investments we are seeking to acquire profitable and durable businesses, each with between $3-10 million in annual cash flow at time of purchase. We tend to like businesses that most people find boring and unexciting, and where we can make them just a bit more exciting. We also prefer situations with an existing management team in place to stay on and operate the business after a transaction, or where we are facilitating a transfer of the business from one generation of family to the next.
The quality of the relationship developed with the sellers or controlling shareholders of the target business is hard to overstate. Not having a proper alignment of incentives in place, or expecting something that starts out as a poor relationship to eventually sort itself out after you have acquired and taken over the business, can be recipes for disaster. For this reason, we choose our partners very carefully based on their track record of displaying integrity and honesty, and we make sure there is personality fit and proper alignment early on in the process process to avoid pitfalls down the road.
Do you have any guidance for how the average investor can improve the quality of their investment decision-making?
Learn from the best. Find great investors throughout history and be an avid reader of their writings, teachings, and experiences. A strong sense of financial market history is also important – what tends to be “new” is often just an old idea that has been repackaged in a different form. Mental models and internalizing a few big ideas from multiple disciplines beyond finance can also be quite useful as an investor. The idea of compounding is powerful, and how continuous, minor self-improvements every day accumulate over time – simple math tells you that a 1% improvement in a skill compounded every day equates to an almost 38-fold total improvement in that skill over one year. Lastly, surrounding yourself with intellectually curious people that ask a lot of questions is a great way to test your own assumptions about the world and continue to expand your own mental framework.