The Power of Diversity in Private Equity
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Show Notes: Suzanne Yoon
Suzanne Yoon on Kinzie Capital Partners’s Namesake
Kinzie is a Chicago-based private equity firm that invests in lower middle market companies in the manufacturing, consumer, and business services industries. I founded Kinzie in 2017, as one of the few private equity businesses in the nation to be founded and led by a woman. To stand out in a business where so many people are intelligent and driven, we really have to outwork and out-strategize our competitors and deliver the best results for our investors. One of the most iconic landmarks in Chicago is the Kinzie bridge. Kinzie bridge was built in 1909, as the first bridge over the Chicago River. And many Chicagoans know the Kinzie bridge, because it provides one of the most beautiful and iconic views of the entire city. But you can also look at it and see the history of the city, and the progress and new innovation that has come out of Chicago. And that’s really what we’re trying to emulate through Kinzie Capital Partners. It’s just a reminder of how important tradition and stability is even in an ever-changing world.
Suzanne Yoon on her early influences
So many people have influenced me, but I would start with my parents. I’m the daughter of South Korean immigrants, and the oldest of four. I was brought to the United States when I was just a baby, and my parents were clearly very entrepreneurial and adventurous. My mother
was a nurse, and my father was an engineer and then an entrepreneur. Early on in my life, he borrowed money from friends and family and opened his first business, which was a deli in a neighborhood called Cicero in Chicago, which is a very working class neighborhood. Some of my earliest memories are of working alongside him and stocking shelves in exchange for candy bars.
I was definitely a daddy’s girl, and he was always very encouraging to me. And even within a male-dominated society, he always knew that I would be my own person and made sure that I knew that I could be my own person. Tragically, when I was 10, my father, who was 38 at the time, was actually killed in an armed robbery. My sisters were five and three. My mother was only 35, and she was four months pregnant with my baby brother. So overnight, my mother became a single parent, our entire world was turned upside down, and I became the second parent. My mother was working double shifts, as a nurse. She made sure that we prioritized education and that I went to a great high school, which led me to University of Iowa. She did everything she could to help us belong. But I always felt like I was on the outside, looking in wherever I went. But I always had great mentors. And at every point in my life, it was my friends’ parents. One of my friends’ parents was the CEO of a public company, and just being able to see that those things were possible helped me focus on what I wanted to do in life.
The other fun fact is that I was very influenced by 80s and 90s movies: the John Hughes movies, and others like Pretty Woman and Wall Street. And that was my first exposure to the concept of private equity. When I went to University of Iowa, I knew that I ultimately wanted to get into finance. I also took an entrepreneurship class there, where I was very inspired to think outside the box. I graduated from there and ended up joining a global bank to start my finance career. And now, 25 years later, here I am at Kinzie.
Suzanne Yoon on what led her into private equity
I had exposure to private equity very early because I went through a rotational program at ABN AMRO Bank and LaSalle Bank, which was a Midwest-headquartered bank that was owned by ABN AMRO globally. I went through an analyst program and I did rotations through various groups. I ended up in a group called Special Assets. And in the 90s, that was where the off-balance sheet private equity portfolio of the bank was held. It was my first exposure to private equity, which meant a lot of changes and turmoil, but also second chances for companies. I learned what it meant to be a fiduciary of a company, making sure that we were managing operational changes and bringing in the right consultants. What really intrigued me was that most of the time, great effort turns into great results. It was a unique asset class where we could really roll up our sleeves, work hard, and effect a lot of change and value creation.
Suzanne Yoon on being a woman of color in private equity
I had executives that I worked for at LaSalle Bank and future companies who really gave me a chance. They saw potential, they were willing to put in the time and energy through an analyst training program. I had great mentors, and they all happened to be men. I’m very grateful for them, because private equity is an apprenticeship business, and there’s really no way to learn it without being in it every day. You can’t learn it in school, so the people have to give you a chance. Culturally, at Kinzie, we believe in that too, we know that it’s an apprenticeship business, and we have to put in effort; it has to go both ways. So you have to want it really badly as the apprentice, and you also have to be focused and dedicated to putting in the time as a manager to develop your apprentice. So I’m really fortunate that I had that.
With that said, it’s very lonely being one of the few women. Early in my career, trying to break into private equity and investing, I was always the only woman and many times, also the only minority. So I had a little bit of a double whammy going in, and I always felt like I was a little bit on the outside. Of course, one big challenge faced by most executive women I speak to is when you are the most senior woman in a room, and people turn to your junior partner or vice president who’s a male and address them as the boss. Also things like being asked to take a coat or coffee. But those are also opportunities to show up. Right. And I have found throughout my career, when I was prepared, and I opened my mouth, and I presented facts, a lot of times the energy in the room would change immediately as I started talking, because it was clear who was who was the most senior person in the room.
Suzanne Yoon on what separates Kinzie Capital from other private equity firms
What we do well is identifying, within the industries that we know, companies that are primed for growth, but usually facing some sort of transition. Whether that’s a generational transition, or they don’t really know how to get to the next level, or they need to put in more operational changes and need a partner to figure that out. Our Kinzie Formula is that accelerated value is a function of capital operational improvement, compounded by technology. I think that’s really our biggest differentiator: we have, in the lower-middle market, developed a very unique strategic partnership with a group that has 150-plus professionals who are focused on enterprise-level companies and in the market every day doing very, very complex technology improvements and implementations. We bring that to the lower-middle market. Having operators and advisors that we’re partnered with, who also bring functional and industry expertise to the companies that we’re investing in.
Right now we’re invested in five platform companies, two of which are control investments. And they’ve done very well. We’re a pretty new firm, so we’re continuing to invest out of our first fund. We’ve gotten great momentum in the market, so we’re looking to do a lot more in the future.
Suzanne Yoon on the challenges of starting a private equity firm
Starting the firm was probably one of the hardest things I’ve ever done in my life, and also the most rewarding. At a high level, the lesson I’ve learned is that you have to be prepared: being an entrepreneur is a huge sacrifice, and not just for you as the entrepreneur, but for your family. I’m really fortunate that I had my partner and children, who were really supportive of the whole process, even though it was very hard. They didn’t see me very often. I have three boys who are 14, 12, and 5 and a half. My youngest just started kindergarten yesterday. I can’t believe how quickly the time goes.
As I mentioned, I came from a family of entrepreneurs. So starting the firm, although it was very difficult, I always knew I wanted to control my own destiny and build a company and firm around a culture that I could be proud of. To be an entrepreneur and start a business – and also to be a very good control investor – you have to be passionate about the businesses that you’re invested in. I really wanted to have the opportunity to be innovative, which is reflected in a lot of the decisions that I’ve made, particularly related to hiring. You have to be really thoughtful. Building a firm is not just about you. I mean, yes, I’m the CEO, I’m the managing partner, I’m the chair of boards. But I’m also the head janitor, the head of HR, the group psychologist. So there’s just a lot that goes into that. And you have to really care about your people.
Suzanne Yoon on the benefits of board diversity in private equity
I think it is core to Kinzie and our firm’s culture, because we do believe in diversity, and are really driven by the idea of diversity of thought. But there is not a lot of diversity on private company boards. A lot of that is because private equity is an apprenticeship business. So if there are not more women and minorities that start early in their careers, they can’t grow into partners and board members and private company board chairs. So we have to, as an industry, be very focused on making sure we’re attracting women, people of color, and not just because it’s the right thing to do. It’s also financially responsible to do that, because we have found that diversity actually does create better results. And there are so many studies that show that. I also just want to note, I don’t only think about diversity in terms of gender and race, but it is important. It’s also about people’s experiences and making sure that different experiences are coming to the table.
So as we think about our boards, by the nature of the makeup of our team, our boards tend to be very diverse, because I’m on the board, my partner who’s also Asian American, sits on boards, and then we bring in outside board members that have different perspectives. We spend a lot of time thinking through functional expertise, and also industry expertise, and always looking for the best people. So not our friends, not our buddies, just people that we are continuingly networking with. And they happen to be women, immigrants who are first-generation Americans coming from different places, and so on. We make sure that is a focus at our portfolio companies. When we’re in a competitive environment, sitting across the table from management teams who have choices, because these are good companies that we’re acquiring, they know that diversity is important to us. So we’re on the same page – usually, I mean – before we even close a deal. I’ve had so many executives and management teams of these lower-middle market companies say, “we know diversity is important, but we don’t know how to do it. I think one of the values that we bring as a private equity investor is to help them think about that. And not just how to think about diversity, equity, and inclusion, but how to implement those processes within their own company we’re acquiring, and how it’s going to make a difference to that company.
It makes so much sense from a business standpoint, because we know that north of 85% of household purchasing decisions are made by women. We know that the demographics in the United States are diverse, and the labor of the United States is diverse. So our boards, even at the private company level, need to reflect the ultimate consumer and the people that we are serving, and the labor forces that we serve.
In addition to that, the world is global. We’re having supply chain issues everywhere, because we buy from all over the world. And so it’s important to have diversity on your teams, as buyers and as suppliers, so that we can communicate globally.
Suzanne Yoon on giving back
Our firm, our employees, and other people around us are involved in 55 different non-profit organizations. We like to support their activities, because we believe in community engagement. And I think it is paramount for leaders – and that’s who we’re trying to develop at Kinzie, our future leaders, future board members, right future investors – to understand that leadership is not just about your paycheck, and what you do within your company, but also what you give back to the community. There’s a handful of organizations that we are really focused on, but we think a lot about what that means. And it also keeps us connected to what’s actually happening in the world: the economic impact on different communities and also globally, particularly now that there are many moments of crisis in the world and in our backyards. How we react to that as leaders is so important, because if we don’t do it, who’s going to?
Suzanne Yoon’s advice for starting a private equity firm
The first thing is: have a great investment thesis. Know what is going to be your competitive advantage. And be prepared. Preparation is everything. It is extremely competitive being in private equity. It’s competitive to win deals, and then when you win over management teams, it’s competitive to convince investors to invest in you as a first-time fund. In many ways, it’s like climbing Mount Everest, so you have to prepare. You wouldn’t go and climb Mount Everest and just say, “oh, I can do this.” You would prepare for years and make sure that you’re ready for all of the challenges along the way.
You also have to be really passionate and believe in what you are doing. And be bold, because it’s scary. You have to have confidence and courage to get through the tough parts, because there are a lot of tough moments in starting a business.
Suzanne Yoon on lessons from philanthropic work
My mother and father planted that philanthropic seed in me very early. Even though they did not have much early in their lives, they were always really generous with people around them. And my father always believed in giving people a chance. When I was young, even though we didn’t have much, my mother and father always made it a point to share. I think that that has transferred into my adult life. And frankly, I have been the recipient of so much kindness throughout my life: people who have given me a chance, having opportunities like scholarships, to be able to get through different programs. Serving on nonprofit boards isn’t just my way of giving back – I’ve also learned so much from the organizations that I have been involved with, and philanthropic board work really has expanded my knowledge of governance in general. Serving on the National Philanthropic Trust board and being on a board with not just incredible business leaders, but also incredible civic leaders.
I do think philanthropy juxtaposes very well with my passion for innovation, because I think philanthropy is really hope for the future and creates a lot of innovation. Philanthropy is where everything starts, and then governments follow philanthropy.
