DIvIDEnD - Stephen M. Ross School of Business - University of ...

photo by james bland
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Jeffrey Rich, BBA ’82, sees potential where
others see panic. he co-founded the dallasbased
investment firm PlumTree Partners
llc in the throes of the economic downturn.
“When the market started melting down
in September 2008, I called my [current] partner
and said, ‘Quit your job. now’s the time,’” Rich says.
“I’ve never been able to make money with the herd.
When everybody is running for the door, that’s the
time to invest.”
Rich and his partner Todd Furniss, former president and
coo of management consulting firm everest group, could be
called innovation hunters. they are combing the economic landscape
for places where the recent crisis has spurred creativity
and competitive advantage. they are looking to invest in mid-size
firms, mostly in technology services, that are ready to take the next
step — say from $10 million in revenue to $100 million.
companies born from an entrepreneur’s brainstorm often hit a
snag in that delicate segue from medium to large enterprise. some
need more management discipline, some need contacts at bigger
customers, and others need wholly new processes and systems. it’s
one of the toughest transitions for most organizations, and it’s the
sweet spot for Plumtree Partners.
“the difference between $10 million in revenue and $100 million
is night and day,” Rich says. “companies have to make an evolution
every $100 million or so. you wonder why big firms have bureaucracy.
it’s because they need it in some respects. But what’s necessary for
large companies will kill a small company. you have to know what
stage you’re in.”
SEEK AnD DEPloY Rich developed his instincts for identifying innovation
during his tenure as ceo of affiliated computer services
(acs) from 1999 to 2005. acs is one of the largest business process
outsourcing firms in the world. while growing the firm from $800
million in revenue to $5.3 billion, acs kept tabs on the small, nimble
entrepreneurs grabbing market share. Rich and his staff scouted and
acquired several entrepreneurial competitors as a way to accumulate
new ideas and products.
“if we liked what they were doing long-term, we’d acquire them,”
Rich says. “it’s probably more expensive to do it that way, but it’s
safer. it’s like buying oil production instead of drilling new wells. i
pay more, but i know for sure there’s oil in the ground.”
Rich left acs intending to go into private equity. But he nixed
the idea after concluding the field was over-funded. so he pursued
the development of a late-stage investment fund with friend and
colleague furniss. since founding Plumtree, the partners have
focused on two primary targets: technology services and the emerging
Brazilian market.
“Running a large company is like running a battleship,” Rich
says. “here, we can wake up every morning and shift gears if we
want to. we get to choose what we want to do every day.”
for now Rich is choosing the software-as-a-service (saas) space
because he sees cloud computing as the next big era in technology.
the idea is that one can tap into a “cloud” of available computing
services to fulfill both personal and business-related needs. instead
of purchasing, installing, and hosting pre-packaged software,
companies will pay to access services from an off-site host.
to that end, Plumtree recently invested in Birchstreet systems,
which runs a web-based purchasing program used by hotels,
restaurants, and other hospitality businesses. Plumtree also invested
in the saas company kudzu interactive, which automates
take-out orders for the restaurant industry.
WoRlD ViEW outside the u.s., Rich once again has distanced
himself from the herd. while other investors chase opportunities in
india and china, Plumtree is mining options in Brazil. the country
is enjoying a period of economic stability and growth, is home to an
expanding middle class, and hosts several multinational corporations.
those corporations are going to need the support of service
firms — just the kind of companies favored by Rich and furniss.
through Plumtree, they formed an operating partnership with
Performa Partners sa, a Brazilian investment firm that specializes
in mid-size service companies facing challenges related to growth,
strategy, restructuring, and mergers and acquisitions.
“to me Brazil looks like the u.s. in 1990 or 1995, so we think
we know how the story will play out,” Rich says. “Brazil has a very
strong customer base, and consolidations will happen. it has been
credit-starved and, from a technology perspective, it mostly has
been following developments in the united states and asia. so we
think Brazil is a long-term play for us. i like its economic future.”
the partnership in Brazil is a good example of the differences
between running one’s own fund and working in the c-level suite.
Rich relishes the agility and freedom to align with players he feels
will take Plumtree to the next level.
“most innovation does not come from large corporations,” he
says. “it comes from small, independent businesses or people
unconstrained by the rules.” —Terry Kosdrosky
spring 2010 DIvIDEnD 31