🎥 Hg's Nic Humphries - investing at an inflection point in history

Welcome back to the Alt Goes Mainstream podcast.Today’s episode is about mining for investment success in enterprise software by going “an inch wide and a mile deep” with someone who is one of the industry’s most prolific private equity technology investors.We sat down with Nic Humphries in Hg’s London office. Nic is the Senior Partner and Executive Chairman of Hg and Head of the firm’s Saturn fund.Hg, one of the top 10 largest PE firms globally based on the PEI300 ranking, has built an impressive investment engine focused on mission-critical enterprise software. The firm has built a portfolio that is a “transatlantic ecosystem of software and services businesses” — representing over $180B in collective enterprise value across its 55 portfolio companies.Nic is responsible for Hg’s strategy, management, and governance. On the investing side, Nic focuses on larger software investments that provide daily-use mission critical applications for accountants, tax / compliance professionals, and designers / engineers / scientists. He has brought his electrical engineering background to bear to go a “mile deep” into a category where Hg has become an unquestioned market leader.Nic balances being both a detail-oriented specialist with a vision for both the enterprise software industry and Hg as a firm. We had a fascinating discussion about enterprise software investing, how to create European software giants, applying AI to make companies more efficient, and much more.We covered:* The origin story of Hg.* How Hg grew into one of the industry’s leading software focused private equity firms.* How an engineering mindset has helped Nic become a leading investor.* Why Hg focuses on mission-critical enterprise software and why it’s a compelling investment thesis.* Why enterprise software investing can be considered a low volatility investment strategy and how Hg has delivered consistent returns to investors.* How to effectively manage exits and DPI.* Why Europe, why now?* How AI could impact technology and services businesses.Thanks Nic for coming on the show to share your wisdom and expertise about enterprise software and private markets.Clip #1: Unprecedented portfolio consistency.Clip #2: The structural shift in private markets.Clip #3: The AI platform shift and cost revolution.A word from AGM podcast sponsor, Juniper SquareWhen was the last time things were easy for GPs?Fundraising remains challenging, providing liquidity to investors is even harder—and broadly speaking, most GPs are underwater operationally.It’s not about to get easier, either. 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Visit junipersquare.com/agm today to learn more.Show Notes00:00 Introduction to our Sponsor, Juniper Square01:37 Welcome to the Alt Goes Mainstream Podcast04:07 Nic Humphries' Background04:54 Bringing an Engineering Mindset to Investing05:24 Long-Term Business Thinking06:11 Enterprise Software Investment Strategy06:58 Growth Factors in SMB Market09:21 Impact of AI on Enterprise Software09:51 Platform Shifts in Technology11:30 Adapting to AI in Business12:36 Mission Critical Software and Market Dynamics15:28 Embedding Products and Services18:03 Organic Growth vs. Acquisitions21:32 Geographical Expansion Strategies22:28 Challenges of Expanding in Europe24:00 Underwriting for Long-Term Success24:18 Management Teams and Expansion26:59 Jurisdictional Differences in Payroll Software27:44 Investing in Market Leaders29:35 Enterprise Software Market Size30:53 Software's Ubiquity in Business33:33 Hg's Investment Strategy39:31 Consistency in Returns41:38 Understanding Recurring Revenues42:28 The Importance of Discipline in Investing43:21 Learning from Past Mistakes45:11 Maintaining Team Excitement and Focus47:18 The Role of Realization Committees48:43 Continuous Improvement Culture49:45 The Importance of Early Cash Returns51:04 Exit Strategies and Realization Committees52:40 Re-underwriting Investments54:50 AI's Impact on Software Development56:28 The Rule of 40 and AI's Potential56:54 Investing in AI: Startups vs. Established Businesses58:20 Hg's Growth Strategy01:02:11 Specializing in B2B Back Office Software01:04:07 Segmenting Investment Funds by Scale01:05:59 Expanding into the Wealth Channel01:07:52 Lessons from Hg Capital Trust01:08:47 Communicating with a Broader Audience01:09:25 The Importance of Brand in Wealth Management01:10:17 Connecting Private Markets to Everyday Life01:14:02 Hg's Ownership Structure and Growth01:15:23 Reinvesting Profits for Long-term Growth01:17:19 Future Growth Opportunities for Hg01:19:40 The Role of AI in Future InvestmentsEditing and post-production work for this episode was provided by The Podcast Consultant. DisclaimerThe views and opinions expressed in this episode are those of the speaker and do not necessarily reflect the official policy or position of any affiliated organization.Any references to past performance, including IRR or MOIC figures, are presented on a gross basis and do not reflect the deduction of fees, expenses, or carried interest. These figures are illustrative and not necessarily indicative of future results. Statements regarding industry rankings, success rates, or performance consistency are based on internal analysis and may not be independently verified. No representation is made that any investment will or is likely to achieve results comparable to those discussed. This content is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities or investment products.Join over 12,300 Substack subscribers & followers who are thought leaders and executives from top private markets firms and wealth management like Blackstone, Apollo, Ares, KKR, EQT, Carlyle, Blue Owl, CVC, TPG, Brookfield Oaktree, Vista, Goldman Sachs, J.P. Morgan, BlackRock, Fidelity, iCapital, Franklin Templeton, Nuveen, Hg, Permira, General Atlantic, Stonepeak, Hightower, Focus Financial, Cerity Partners, and more. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit altgoesmainstream.substack.com