This is the second part of the conversation from episode two of Accessing the Pipeline, a McGuireWoods podcast for Black professionals in private equity and finance, where hosts Rubin Pusha III and Greg Kilpatrick are joined by 5th Century Partners’ co-founders Jessica Patton and Bruce Hampton. Jessica is a Principal at 5th Century Partners, and Bruce is a Managing Partner.   

In this episode, Jessica and Bruce continue to talk about their professional journeys, how diverse managers in this space can be supported, and the importance of advocates in your career. They also share valuable advice they have received from mentors and thought leaders, offering listeners rich insights into their successful paths.

Featured Guests

Name: Jessica Patton

What she does: Jessica is the Co-Founder and Principal at 5th Century Partners. Throughout her career, Jessica has focused on bridging culture and technology by bringing more Black investors and founders into tech spaces. Jessica has worked with and advised companies at all stages of growth, most notably even starting her own company.

Company: 5th Century Partners

Where to find Jessica: LinkedIn 

Name: Bruce Hampton

What he does: Bruce is the Co-Founder and Managing Partner at 5th Century Partners. Throughout his career, Bruce has represented more than $2 billion in enterprise value, completing several buyout transactions across multiple industry sectors.

Company: 5th Century Partners

Where to find Bruce: LinkedIn

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

This is Accessing the Pipeline, a podcast for black professionals in private equity and finance, brought to you by McGuireWoods. Join host Rubin Pusha III as he welcomes special guests offering insights into access and capital, deal making, accelerating portfolio optimization, and developing relationships among black professionals in the private equity industry. Tune in to access the possibilities.

Welcome back to Accessing The Pipeline. This is part 2 of our episode featuring Bruce Hampton and Jessica Patton from 5th Century Partners.

Switching gears just a little bit. As Greg mentioned, we're focused and as you all well know from coming to our events, and we're focused on building this ecosystem of black professionals in private equity. And as a sub-part of that, we're focused on building communities of black led emerging managers across the country. We'll be in Dallas next month at the emerging manager conference, which I hope you guys will [inaudible 00:00:57] and we'll do something there. And we're obviously focused on doing that here in Chicago, but we really want to drill down on some of the pain points of being black emerging managers at this time in this space. And some could argue that this is probably the perfect time given what transpired during the COVID pandemic from a social unrest standpoint, from a social justice standpoint in America. But then we're a year sort of removed from what I consider as the heart of COVID and things are a little bit different. Some of those things aren't talked about as much and the economies in a completely different space. Credit is expensive, all these things.

And so just really want to drill down on some of the themes that you all saw develop when you were out on the road meeting with LPs and really just rousing in the moment here I am this young black person doing what we traditionally don't see blacks doing in this space, which is we're out fundraising. We are out, we're the people, we're the face of this business. And I just want to see, and this is not obviously we're not out to make anybody look bad, but I think that you could probably look back on that experience and say, these are some of the things that we notice either about ourselves or about the people we encountered that allow us to go back to the table and say, okay, we should do this differently. Or we should really not shy away from this aspect of what it is that we're doing and trying to build as we go out and try raise money.

I can start and I'll have Bruce in. But I think that we've always been authentic to who we are. I think we're very rooted as people, as professionals, and just why we started the firm, what we bring to the table, and just how we came together and just telling our stories. So I think we've been pretty unwavering to that. And I think this is agnostic of who you are, what you look like, what your strategy is you, you're not always that thing for that person. And that's okay. And I think we get on calls and realize this isn't resonating, and we would go through iterations of asking questions. Was it the way that we told the story or was it just there just wasn't chemistry or resonance and you work on iterating so you can better answer questions.

The first meetings we took we're sorry to the people that we met because we were probably explaining and showing texts that were not the most professional for sure, it was our first time doing the thing. But as you go along, you iterate, you become stronger at telling the story and connecting the dots and demonstrating to people the fulsome part of your strategy, and then asking the questions after, did we answer all the questions to the best of our ability? Did we, were we true to our strategy and then you just say, "Hey, this just didn't resonate." And that's okay. And I think that that's totally fine just with anything in life.

So I would start out by just really emphasizing that. We talked about the track record, we talked about the gatekeeping pieces, which I think are really important and I won't reemphasize those, but there are ways of doing things that are pretty traditional in the LP world, which evolve around taking and tying track records, taking and tying have people work together before, that can combat some of the initiatives to bring in diversity to an emerging manage manager's sphere.

And it's one of those things that's kind of a struggle, it's a chicken and egg thing because you understand that this is the way that the thing has been done and this is the way that have created success for portfolios before. So it's hard for LPs to get off of that. And it's also if you're serving up to a higher boss and you have to explain why you're taking a differentiated risk on something and underwriting in a different way, that becomes a difficulty. So what people tend to rely on and go back to is they say they want to back emerging managers and at times diverse managers, but then there becomes a circular issue with the traditional ways that they've connoted success, which becomes part of the problem. And so that's one thing that I think underlies the emerging manager space and needs a lot of work on ways that people do due diligence on emerging managers and diverse emerging manager. I think holistically there just needs to be a differentiated way of doing it.

The second thing I will say that we're maybe so moreso stepping into now and thinking a lot more about now is how does a diverse emerging manager pool of capital relate to growing up? So there are a number of diverse emerging manager pools that focus on, call it funds one through three. Smaller size checks, sometimes 1 to 2 million or may maybe max 10. But as you get larger and that proportion of capital becomes smaller in what you raise, how does it continue to grow or how can people continue to grow the strategies and also create a bridge to, if you're a fund to funds, if you're an endowment, or even a corporate, how does that money or that pool of capital grow into the traditional pool of capital? And I don't think those bridges have been created yet, which causes tension in the system because again, the idea is to create and bring up more diverse emerging managers. And we're talking about particularly black and brown and probably even from a gender perspective, women managers. But there's a lot of things that can be unintentional blockers or haven't been fully thought out in strategies.

Yeah. If you don't mind me I would like to underscore some of those points. So one thing that we try to be, and we don't have it all figured out or there's mistakes or there's things where we've had to make concessions, but it goes back really to me around this whole values alignment and there's values alignment amongst our team, but we want to have some level of alignment with our LP. So some of the issues Jessica's talked about where, for lack of a better term, you don't want to get put in a box. Right? Because then fundamentally it may stunt your growth long term because you were an initiative at the time where, I'm just being frank here, different company, organization says, "Hey, we want to, we're all of a sudden excited about the back end, this community and here's a pool of capital," and then all of, okay, you rise to the top as a person. But then the question is, well, what happens when you fast-forward, now we're in 2023 and there's other challenges. Is it going to have that same level of support or not?

So I think what we try to do is be very thoughtful and intentional about understanding where we fit with certain LPs and if there was going to be support outside the parameters of an initiative or something that could be here today, gone tomorrow. So I think that that's really important. Now it's a hard thing because as a first time fund, in many ways you're just trying to raise money and it's like where does it come from? But I think you have to have those honest conversations with yourself and the team first, but then with certain LPs that you're seeing how they're showing up and you've got to ask the next order of questions and say, "Hey, as we grow and scale, how are you able to support that growth?" Right?

Are we able to... Maybe we have to start in this because of just how their underwriting process works, but there's a path to graduating to a certain size parameter where we can be amongst call it the bigger pools of capital. That's the important piece, is not getting put in into a box at all.

And then we've been... I know I'm being long-winded, but we've done that I would think with our LPs. But even on the strategy when you asked me about that, we're very intentional about not boxing ourselves from opportunities. We support all types of people and stuff and want to find good deals, but we don't want to just be... Because and we've had to deal with this a little bit in the marketplace, but talk to an investment banker and he's like, "Great, love it sounds great. All right, when I find a black and brown business, I'll throw it your way." It's like, whoa, time out. That that's not what this is here. I want to see your best PPM healthcare business that you're going to send or whatever that fit. That's what we're looking... We're looking for that same thing too and let us figure out the diversity. That's not your job. Your job is to find qualified buyers that have the capital, the experience to help these companies grow. Let me figure out if I have a unique angle because of sourcing or because of the human capital or whatever. That's for me, that's not your job. So again, this theme of don't get yourself in a box, I think is really critical to long-term success.

That's great. I think people need to hear that. People need to know that it's not just, even when they think about this initiative that it's not just to support minority owned or black owned businesses at the ground level. We hope that that's an not an unintended, but we hope that that's one of the things that does happen from this. But at the same time, we're in the private equity business and we want to work on the best and biggest deals. We want to work on the deals that make sense and it's just added value for us to be able to do it with people that look like us, that share our values, much like what you all talked about.

One thing I'm curious about, you alluded to this a little bit, is that there's this system and the system doesn't necessarily jive with what people's sort of lip service is to these particular initiatives-

And I don't think it's lip service by the way. I think it's authentic. I think there's a lot of interest, but the systems haven't been broken down to meet the true authentic interest in breaking barriers because it's actually really hard. So continue.

Right. No, yeah.

Yeah.

Oh great. I'm glad you cleaned that up for me. What are some of the unique ways that you've been able to mitigate the sort of gaps between this new commitment to impact and DE&I and some of these other things and the slower evolution of the systems to better support those initiatives and those desires to look at not only emerging managers, but also diverse emerging managers as viable, successful, good investments. But I think about just if we look at what our counterparts, what our non-black and brown counterparts leave their fund with the Rolodex this big that, what... Did you guys have some of those similar challenges where it's like you're looking at your Rolodex and maybe it's full of people that that will sort of come from a similar community or look like you. Did you have to rebuild the Rolodex or was it the opposite where you had the same Rolodex but you're calling on people and again, they just don't have all the systems in place to really sort of say, "Okay, hey look, we've got this group, they came from a great... They all have the right background, first invested, but I'm not sure how I sell it."

Was it more the latter or the four?

It's going to be something in the middle, which is, I say that maybe there's two ways to address this and there's a way we addressed it and I think there's a way that we're trying to address it now. The way that we addressed it in our fundraising was by, and this wasn't... We didn't intentionally set this up, but now I tell people that you should try to intentionally create this, but you should have a person that can help you talk to the gatekeepers and that's not you. You're selling a product, your strategy and your fund, but you need someone that has professional resonances that knows some of the gatekeepers, that can call and say, "I'm invested in this fund and I think this is why you should invest as well."

And it has to be strategically done. It has to be after there's already some interest. It's at at the right time and I couldn't... There's tactically ways of doing. It's not like, oh, I had one meeting with this person now try to go get to the gatekeeper. But as we would get toward investment committee, we'd have particular, maybe I call it two to three people who are those calls into the gatekeeper to say, "Hey, this is 5CP. Wanted to give you a little bit of information. I realized they're in your pipeline. Wanted to give you some contexts on who the professionals are, why I've backed them and get a sense of where they are in your process and understand what some type of risk you see or what might stop you. Because I can probably provide a lot of context about ways to mitigate that." And that was really transformative.

And again, you don't know the opposite of if I didn't do that, what would've happened or I can't play back to you truly how it had effect an effect. But I do think it was a differentiated way to go out and reduce some of that bias without having the perfect team track record that was a line that we rolled out of a traditional firm type of thing. And I've seen it be successful with other folks that have done fundraising. It's just by having that advocate.

Because effectively when you get to the highest levels, people are saying, should I invest in X, Y, Z named traditional, fund 15 or should I put more risky capital to work and investment 5CP fund one? And you need someone to help to... And I think that by the way, research proves that 5CP or whatever the emerging manager fund one is a better investment to make because first funds tend to just do better. There's much research that connotes that it's a safer bet to invest in brand name fund 15, 20 because if that fund doesn't return, you as an LP isn't going to necessarily get in trouble. Like, oh, well then we'll see where it goes. Okay. Because that's just the way that things work.

The second point I was making is trying to have conversations now with a couple of LPs who are trying to think about how they do due diligence on emerging managers, especially diverse emerging managers, and change a little bit about what is it that we're asking for through our due diligence period. How can we change up the system to best meet our long-term interests?

Hey, just one piece to underscore there is just this whole perception of... It's perceived risk, right? Because there's this thing of put aside whether you're the first fund or not, but emerging manager, oh, well like, I pick this person and I might lose my job versus if I pick this firm has been in for 20 years. If it doesn't go well, no one's going to say, well, you picked the... Right?

But I actually think there a lot of data supports earlier stage funds outperforming the guys that have been there for a long time. So it really comes down to you've got to have advocates just in any point of your career on a personal level. You've got to have multiple people that can go to bat for you that can add additional data. I mean by no means are we... we want to go through the process, we want you to peek and poke and all that type of stuff.

No one's saying that we're trying to circumvent. But it's also helpful when you've gone through that and some of those key issues come up when you've got other people that can advocate and say, "Hey, I hear you, but this is an outstanding group of people. This is what they've done in other capacities and et cetera, et cetera." And that's another reason.

So I think you've got to figured that out, what those advocates are, what connectivity. I mean the other thing I'll add to that is just even sometimes whether or not the person can advocate, it's also just getting information. You got to understand what people's process look like, right? So everybody's process is not the same. And just even understanding what they care about, what they don't care about, how much time should you spend doing this or that. Just those nuggets of information puts you in a position to be more successful than if you didn't have that level of intel.

Jessica, you talked about this a little bit earlier and I've heard you say this, we talked about this at dinner, is that you want to see other diverse managers in the space. What are some of the things that you all think as a part of this ecosystem can be doing to support other diverse managers? It doesn't just have to be you all at the top. There's enough room at the table for everybody. So what are some things we can do to sort of support that mantra?

Good question. I think continue having real conversations, continue to invite a variety of different folks because people will have different insights and see different parts of the market in ways that they were successful. I'd say probably related to our LP conversation, bringing more LPs to the table to assess how they're thinking about things. And there's a variety of different managers or LPs that are thinking about diverse emerging managers, that are thinking about the emerging manager pool holistically and are balancing out the reality of different things. Especially if they have exposure to both public and private markets. And so I think the more insights that you can bring from LPs to push to GPs to actually try to tap into some of the real thing dynamics within different types of LPs as well. Because we have a wide demographic of LPs, just like you have a wide demographic of GPs who are investing in different things. I think that could be really insightful.

Yeah. There's my... How about those?

Honestly, I mean I think you guys are what you guys are doing is the right things. Right? I think one is just the pure visibility. You can't see if see something, it's hard to envision yourself doing it. So the more you can create a platform where people can see and hear from other people that were of similar age, similar their background, et cetera, et cetera, I think that instills more confidence than, okay, if that person can do it or they have these same set of obstacles and we're able to overcome them, then that gives them the confidence to do it.

I think as Jessica said, again, leveraging your platform to bring together the different stakeholder groups, it's potential GPs, it's LPs, there's other folks that's part of that. So I would just say just continuing to forward those efforts and have real conversations. I mean a lot of folks, what we've learned, people will talk high level about some of these things and give you high level advice, which is helpful. But I think it's the real, when you get down two or three levels deep, when people really tell you like, "Okay, this is what they're really need to be prepared for," or "This is how you really need to show up." That's the stuff that really I think allows you to have success.

Awesome. Well, we're two or three episodes in on our podcast and tend to end them on a fun note, but in a way in which we can enrich the audience experience. We can give them some things about so they know you better, but also some tools that they can walk away to enhance themselves as a professional. So I had a couple sort of round-robin questions. We'll fire away. You guys can decide who takes them first and we'll just rip through them real quick. So what's one book that you recommend that's been transformational for your career?

I would say Unapologetically Ambitious by Shellye Archambeau, which is a book really about in the cannon of the lean in, but also black professionals. Shellye is a woman that led a company called Metric and is the CEO of that company MetricStream. And she's just really thoughtful about what it takes to be successful and balance both professional and personal as a mother, wife and just the work that it took her to get there. I think it's really strong.

How about you, Bruce?

Yeah. There's a book, and I'm blanking on the author, but read both of them. Essentialism and Effortless is really a leadership oriented book, but the first around Essentialism is really to cut to the chase, it's more just about how do you prioritize? And I think in this world where there's a lot of personal and professional pools on your time, you feel like you can get caught up in a tailspin of a lot of stuff. But if you go through a bit of a process to figure out what for that day or that week or that month, whatever time period just matters the most and it's absolutely critical? I think you're able to actually make a lot more progress across even things that are not core to... So it's that a level of intentional, just around your time and stuff that I found really helpful, especially as being a relatively new parent and having a company and all these things.

So yeah, those are a couple that.

Let me take this one. I'm a bourbon guy. What cocktail best describes your personality?

Wow.

Wow. Well, I'll just speak on what I've been drinking.

Yeah, no worries.

So historically I haven't been much into tequila, but I've gotten into it lately. In particular Mezcal. But then to your point on bourbon, I was always drink a lot of Old Fashioneds, just very easy to drink, kind of chill drink. So that all just merged into... So I drink Mezcal-

Little [inaudible 00:54:19].

... Mezcal Old Fashioneds, which I think probably speaks to, I'm kind of a chill laid back guy. I can have a good conversation, but there's these flashes of a little more substance. There are some times where I can have a little bit of fun or get out of my comfort zone. So I think that's probably best describes me. That's [inaudible 00:54:39]

My drink is going to be French 75. Over the pandemic, really got into gin. A very random thing. I think a lot of people have exposures in college and they're like, this isn't the drink for me, but came back to it through a much more sophisticated palate. But the balance, I feel like gin has a herbaceous, it's a good balance. It's just like a... Or both easy. It's an easygoing, can be an easygoing drink, but also has a little spark in it. But also think I have a bubbly, warm personality. And I think the mix of everything in the French 75 is well-balanced, it turns out, but it has all these components that are complex that I feel like really reflect the person that I am.

Awesome. Excellent. All right, so this one's a bit taboo, but I'm always curious to hear everyone's response to it. But if you could have dinner with one person, dead or alive, who would it be?

My person's Oprah. And this is also, I feel like this is something that a lot of people would say, but the reason why I really want to meet Oprah is because of her ability to really get to who people are and get to their core and relatively quickly. And I think that this type of skill, as I've talked about connectivity with people and building networks is just one of the most important things that you can do. And she does it on a variety of topics with a variety of different people and is able to distill, seem like complex people into understanding what are their motivations and who they truly are. And I think that that's one of the skill sets that I most value.

Bruce.

All right. So I think the investor in me is going to say maybe Reginald Lewis. I've read his book and think about when the era of which he was coming up and trying to make change and do some things for himself in private equity. I would just love to hear, we were just talking about just all the cool hurdles along the way, all the obstacles, all the different things. So just to be able to get some of those insights, because we all know the success side of it, but a lot of times you don't get to see the other side of the hand. So I'd love to just hear a little bit more into that. That could also be helpful for us as we think about growing as scaling and having somewhat of a differentiated strategy just to be better prepared for those obstacles as they come.

You want to take this last one?

Sure. Single best piece of advice you received from a mentor personally or professionally?

I received a lot of good advice, and I think it's all specific to points in time, but something that really resonates that a lot of people have probably told me in a variety of different ways. So it wasn't a nugget of time or whatever, but it's, you are in the driver's seat. So if you decide something different or want to do something different, a lot of what I think people forget is you are generally in control of your life.

So if you want to go off and do something very different or if you want to make a change, if I want to talk to Bruce about changing the investment strategy of part of a particular idea, I'm the person that can help facilitate that. And I think a lot of what we go on, or for me, I'll speak to myself, but most very distinctly, is a lot of my journey has been about trying to continue to come to conclusions of that is if I want to make a change, how do I see that change? How do I get to where I want to be? How do I create that environment? Whether it's finding more mentors in the right networks, finding great people that I want to work with, building great teams, is that I have the ability to catalyze that. I just have to remember I can control the temperature in the car. But it's hard. It sounds so simple. But yeah, something that I hearken back to a lot.

No, that's a good one. I think I have some pretty simple, maybe goes back to my prior athlete days and this notion of almost like every day is an opportunity, but each day you either get better, you get worse, you don't really stay the same. So it's really up to you to figure out what are you going to do today? And I think it's very easy sometimes to get caught into this, I don't know, routine and pattern or fall victim to the circumstance or whatever. But you really, back when I was playing sports, I literally used to have that written in my locker. So every day I went out to practice, I'd be like, "Okay, you got to face this when you get back in here and ask yourself, did I get better today or I got worse?" I didn't stay the same, I either got better or worse.

And I think to having that mentality each day and pushing yourself to say, "Okay, irrespective of the context or circumstances, the barriers or whatever, did I get better?" And it could be something small, it could be a challenge to yourself of like, wow, I want to get better at networking today and let me reach out to two people from my past that I probably just haven't connected with. So you just got to find whatever that is. And I'm a big believer in these incremental gains is what leads to long-term success. So if you can just take that approach each day and you may look up at the end of the year, you're like, wow, I've actually come a long way because I incremented my way to whatever objective I'm trying to achieve.

Awesome pieces of advice. I'm over here, I'm taking notes.

McGuire Woods, myself. Greg, wanted to thank you all for making time. We know you're very busy, so we appreciate you being a guest on the podcast and we look forward to continuing the conversation and helping each other contribute to this ecosystem and our own personal professional goals. So thank you again for being on.

Thanks for having us.

Yeah, thanks for having us look forward to act actually doing some work together and just keeping the ecosystem strong.

Thank you for joining us on this episode of Accessing The Pipeline. To learn more about today’s discussion, please email host Rubin Pusha III at rpusha@mcguirewoods.com. We'll look forward to hearing from you. We'll look forward to hearing from you. This series was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this series, you acknowledge that McGuire Woods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in this installment. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This series should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.