Speaker 2 0:02

Welcome to this week's edition of the Dan Rayburn Podcast, the show that curates the streaming media industry news that matters most, unvarnished, unscripted and providing you with the factual data you need to know, without any of the hype, the pulse of the streaming media industry.

Speaker 3 0:23

Welcome to the Dan Rayburn Podcast. I am Dan Rayburn, back with another special edition of what I call the Executive Interview Series Podcast. So every couple of weeks I'm interviewing an executive tied to the stream media industry who brings a different perspective of what they see in the market, based on a specialty of what they do. And for this interview, it's the perfect time to talk about what we're seeing in the market, with valuations and raising money based on what we saw last week with earnings from Paramount, warner Bros, discovery just two of the companies that we saw just in our industry alone that took huge goodwill impairment charges Paramount, almost $6 billion in the quarter writing down their legacy media business. Then we also saw some from Warner Bros Discovery as well. So I thought it would be great to just talk about what we're seeing in the market when it comes to valuations and write downs and everything having to do with finance. So joining me today is Michelle Noon. Michelle is the founder and managing partner of Clear Haven Partners. So, michelle, welcome, appreciate you being here.

Speaker 1 1:29

Thanks, dan, great to be with you. Appreciate you having me on.

Speaker 3 1:45

I met for the first time and really got to hear more about Clearhaven Partners, what you invested in your background previously in investment banking at Morgan Stanley and I really liked how focused you are, because I deal with so many different private equity firms, but also others tied to other pieces of the financial system institutional money managers in the buy and sell side and it's interesting how so many of them are spread across so many different industries and verticals, different use cases and applications. But I liked how your core focus was really on software businesses and how you emphasize data, video and content. So maybe you could just start by giving listeners an overview of Clearhaven in terms of what your focus is and what you're investing across.

Speaker 1 2:29

Absolutely so. Clearhaven Partners is a private equity firm. We're based in Boston and, as you noted, Dan, we invest exclusively in enterprise software businesses, so complete focus on that segment of the market. Today we manage approximately a billion dollars in asset center management across our equity funds and our sweet spot is to really back a software business that's below about 100 million in ARR revenue. Who is targeting that significant milestone over the next three to six years? Who is targeting that significant milestone over the next three to six years? And we look for companies that operate in good markets with long-term favorable trends I'm sure we'll talk a lot about that today and that have strong, well-built products that will scale with continued investment. Those two things must be present for us to be potentially interesting.

Speaker 3 3:24

Interesting. That's a good focus. So how do you define enterprise when you use that term?

Speaker 1 3:29

Really it's broadly B2B software. So we're not doing B2C or consumer-oriented software solutions. We're looking for software that helps an enterprise or a business run in one form or another.

Speaker 3 3:44

Got it Okay and we're going to talk later about some of the investments you made in the video streaming side. So you recently acquired ZigZee, you've invested in Wowza and Sunday Sky, but before we get to that, one of the things that you really talked about in person and one of the things you've highlighted is that you're looking for investments where there's, to your words, predictable, repeatable and a scalable process for sales, marketing and product. Can you talk a little bit more about that? Because what I thought was interesting there was the word predictable, because a lot of the PE firms I talk to it's incredible how they're investing in industries or companies where they don't know the predictability.

Speaker 1 4:25

Well, that's one of the things that I love about software companies generally when you have a true software company and we can get into some of the hallmarks of what a true software company is. But when you have that, you tend to have recurring and repeatable customers in the form of one to multi-year contracts, and so that, right off the bat, gives you an innate sense of predictability of the revenues. One of the important aspects for us is the portion of the revenue base that is recurring and reoccurring with high predictability. So to us that's really inherent to what a software company should look like, and so we look for that off the bat. We see companies that again I said, we target companies that are in good markets with good products, and we see companies and, frankly, where we see an opportunity to create value, not necessarily completely primed to capture that market opportunity with their products, and that's where we get involved as a partner.

Speaker 1 5:25

We are an operationally oriented private equity firm. We partner closely with management teams. We invest in a select number about a half a dozen deals give or take per fund, which is a much smaller number of investments per fund than a typical private equity firm and certainly many fewer than a venture firm, and we do that so that we can really partner with these companies to build on the predictability of their revenue that's inherent in a software model but help them to scale and scale efficiently. And we can get back into some of the market trends in a moment. But what we've seen are that companies like the ones we target, the ones we look to build, are those that ultimately are attractive and more highly valued because you have those sleep well at night factors.

Speaker 3 6:14

Makes sense. Okay, and that's the level of focus and granularity that you're bringing when you're looking at those companies, it's clear you're also looking to help I'll use the word accelerate to your point. They haven't necessarily reached key scale yet. You're providing that You're clearly hands-on. How much of that, and how many times, in terms of when you're getting involved with these companies, is part of that. Really just changing the management team and the structure of who's running the companies.

Speaker 1 6:43

Well, the management teams that we back are crucial to success of an investment, but we do not come into investments that we believe we've got to completely change out the management team. That's not our approach. We're typically evaluating the team that's present, the seats that are filled, the seats that might be vacant, or maybe one person is wearing two hats, and we need to separate role and responsibility for next level scalability. So those are certainly part of our evaluation. We are often adding to management teams as we invest in businesses and as they scale, but we also very much rely on the teams that are running our businesses. While we are operational in nature, while we are partnership oriented, we don't run our companies. That's really to our management team. So we've got to be backing great teams that have vision that we support, that will ultimately scale those companies.

Speaker 3 7:36

Makes sense. Interesting. You mentioned the two hats because we see that in a lot of companies of the ones that you've made investments in of that size and the streaming space in particular, it's incredible how many times the CEO is also the CTO.

Speaker 1 7:48

Yes.

Speaker 3 7:48

Where it really should be, two positions. So, management team to your point. Invest in people over ideas. That's where you're going to see success.

Speaker 3 7:56

So let's talk about some of the challenges in the market. If we're thinking about four years ago, you know just the interest rates were so low. Many in the industry called it free money because it was so easy to get money. And if you look at some of the companies out there that were raising over a hundred million dollars a year that didn't even have or sorry, we were raising a hundred million dollars in a year and didn't even have $20 million in revenue. That has certainly changed quite a bit.

Speaker 3 8:23

And just for listeners, I put up a post on LinkedIn talking about just some of the funding rates recently. Amc Networks, fubo, an affiliate of Nielsen, televisa, univision we're talking about interest rates here of senior secured notes of 8.5%, 9.2%, even higher than that 10%. So can you explain to listeners? Just many of them don't understand how that works because they're not tied to finance in terms of okay, you're borrowing money, you're paying it back over a certain period of time. Many companies lately have pushed the debt out further and agreed to pay more interest, so they have more runway. Maybe just give a quick recap of how you've seen that change over the last couple of years.

Speaker 1 9:09

Sure. Well, you're absolutely right that for a while, businesses were able to operate in a relatively speaking free money world and, as a result, the cost of debt was in many cases negligible. And that's an important source of capital structure financing. As those loans came due, you know, five, six, seven year terms came due and or additional funding was needed for business purposes, you got to go back into the market. And when you go back into the market now, you find yourself in a position that is, you know, not unprecedented by historical times, but certainly not relatable in recent history, and that is, you know, fed funds rate as a basis rate. As a base rate here, that's over 5% currently, which was down in the 1% to 2% range five years ago, and so that alone sets a higher floor for the cost of debt. And that simply means that a source of a use of cash flow is going to be to pay that debt, whether that's in the form of amortization and principal payments and or in the form of interest payments. You alluded to the concept of kind of a pick note, where a company might be able to defer the cash payments of some of that interest for a higher future payments in the form of paid in-in-kind type of structure and look, that does kick the can a little bit. It might be the only solution if a company is still working on generating the cash flow it needs to service that debt. So, on the one hand, the actual cost of the financing structures in the debt capital markets is absolutely higher across the board in the debt capital markets is absolutely higher across the board, and, on the other hand, it's a problem that's exacerbated by the kind of spend to grow or growth at all costs environment that we've been coming out of, particularly in technology. That was really at its peak in kind of 2021.

Speaker 1 11:21

And so a lot of companies were not rewarded for being efficient, were not rewarded for generating cash flow in the public markets.

Speaker 1 11:28

It was a growth at all costs valuation environment where growth was rewarded, and in the combination of you know, kind of the shine wearing off of that approach, the reckoning that cash flow matters and a rising interest rate environment, you just got a confluence of factors that make it very difficult for businesses to do all of those things differently than they had been, and all at the same time, and on the one hand, you have these hard costs, these real, you know cash costs and on the other hand, you have the opportunity cost, which is to say that management teams are now being forced to. They must focus on managing their capital structures at the expense of business operations. There's only 24 hours in a day. So you know, you've got a combination of things that are kind of a perfect cauldron in many respects, things that are kind of a perfect cauldron in many respects, and in many cases these are surmountable. But it takes time and it takes, you know, some pretty different behavior on the part of businesses than they were rewarded for, particularly in the public markets.

Speaker 3 12:38

You know, back in the peak of the tech boom, yeah, and what you're really talking about there is I'm going to use the Amazon model of get big fast. Hey, that was Amazon's approach from day one of just grow, don't worry about how much money you're losing. We obviously saw that with Disney and others, who then, to your point, were all of a sudden not really all of a sudden, it was. It was over a couple couple of years, but it was pretty quick that all of a sudden, they were no longer rewarded for growing streaming services. It was okay, you're losing too much money. One case $1.1 billion ina quarter. So you're losing a hundred million dollars a day.

Speaker 3 13:11

Frankly, I don't know why people didn't see the reckoning coming. I don't know why they thought they could continue that. So when you're talking about really growth versus profit, right, how are companies being valued today based on the balance sheet that they have, whether it's little debt, a lot of debt, how much cashflow? Because pretty much every company out there has to do layoffs to a degree or scale back their business to your point. So if they can't spend a lot of capital and can't raise it, how do they truly grow their business?

Speaker 1 13:43

Well, I'll give you our perspective on valuation. To start as a private equity investor, clear Havens focused on what the fundamental value of a business is, and that's based on the business operations first, before taking into account any considerations of capital structure. So the starting place for fundamental value is the free cash flow generation potential of a company no-transcript, and many of the companies that we target in fact all of them that you referenced earlier have gross margins north of 80%. That means that as those companies scale, they have the opportunity to drop additional cash flow to the bottom line, or we may choose to invest further for additional growth. But we're starting with some, you know, nice operating leverage inherent in the system that increases the value of a business ultimately gives you more optionality and the ultimate expression of valuation is the form of a multiple, typically based on revenue multiple, arr multiple or EBITDA multiple as a proxy for cash flow. So as we think about any company and the valuation we might ascribe to that company, we assess it on this basis. All else equal right. The higher the recurring revenue, the higher the gross margins, the higher the EBITDA or free cash flow, the more valuable a business, and embedded in that are assumptions around revenue retention, again, operating leverage and the trade-off between investing now for future cash flows versus minimizing costs and maximizing current cash flows.

Speaker 1 15:41

There has been a bit of I'd say too strong a view that there is a one-for-one trade-off between growth and profitability. In our view, in software you can grow and grow profitably. What that comes down to are some of the unit economics and some of the efficiency metrics and effectiveness metrics around what you get for what you invest, whether that's in the form of an R&D dollar of investment or in the form of an investment in sales or in marketing. If you know what your return on each dollar of spend in those categories is, then you know how to think about the tradeoffs and over what period of time you're going to return an investment. But that's fundamentally how we start to think about what the value of a business is.

Speaker 1 16:27

And I think if you look at the public markets, if you look at software, you look at video software, you look at infrastructure software, what you'll see is, over the last couple of years, post 2021 peak, there has been a stronger emphasis and therefore higher multiples whether that's multiple of revenue, arr or EBITDA ascribe to companies who can balance growth with profitability. If you're not growing and not profitable, that's a bad outcome for multiples. If you're growing and not profitable, that's a medium outcome and if you're growing and profitable, that's a great outcome right now. And so those companies are still being valued quite highly High single digit multiples. In some cases low double digit multiples I'm referring to revenue multiples. But if you didn't demonstrate an ability to show operating leverage, show profitability, then those companies are not being rewarded. And I come back to gross margin, because some of the companies that you see in video software in the public markets don't have 80% gross margins. They have 60% gross margins or 30% gross margins.

Speaker 1 17:37

So you're not really going to have the same opportunity without making some fundamental business changes. That's where your union economics kind of fall apart. So those things, all you know, go into the soup if you will, and we do think the public markets are more rational right now as relates to some of these factors, but it has been, you know, a hard reckoning for a lot of companies over the last few years.

Speaker 3 18:03

That's super helpful, and I appreciate you going into detail on that, because one of the things that we and I'll say myself, a member of the media is guilty of when we write about a lot of these deals when they're announced many times we put valuations on okay, the company got three times projected revenue, forward projected revenue, but really what's taking place is all the things behind the scenes. Where you're talking about ebita free, free cash flow, you know there's a lot of details and parameters that go into the methodology of you deciding what the valuation is of a company, and that changes based on all the different factors that you just talked about Is. Is there a way, though, that you can? If you can't, that's okay, but is there a way that you can say a company that has, you know, a certain amount of revenue that's projecting 10% growth year over year can get, on an average, three times multiple? Are there numbers like that, or is it not an exact science right now?

Speaker 1 19:03

I think there's lots of ways to think about grouping and cohorting the public market comps right now. One of the ways and one of the simplistic metrics to think about the balance of growth and profitability is something we call Rule of 40, which is simply the summation of revenue growth plus free cash flow margin, or we use EBITDA margin as a proxy for free cash flow margin. So the summation of those two and the idea is that you know 40 is good and 40 will be valuable in the market, and you can get there through, let's say, 30% growth and 10% EBITDA margin, 20% growth and 20%.

Speaker 2 19:48

EBITDA, margin, etc.

Speaker 1 19:50

I think you won't find the same reward for the Rule 40 metric coming from the poll. So say, 40% growth and 0% EBITDA margin, or 0% growth and 40% EBITDA margin, growth and 40% EBITDA margin but you will find that companies that are approaching rule of 40, meaning they've balanced that in one way or another generally speaking are going to be more highly valued and many companies can exceed the rule of 40 metric as well. You get faster growth and you get that operating leverage I was referring to. That's a very valuable business and those companies that are exceeding rule of 40 are in many cases still in the high single digit revenue to low double digit revenue territory.

Speaker 1 20:32

Today, if you look at the kind of infrastructure and video software comps, you can see a pretty clear delineation. We don't even have to go to rule of 40. Let's just take rule of 20 plus companies that have gotten consistent growth rule of 40. Let's just take rule of 20 plus Companies that have gotten consistent growth and some profitability. The revenue multiples are still mid to high single digits. The companies that have not gotten to any profitability and are slowing growth or, in some cases, negative growth, they're well below two times revenue. So there's a big bifurcation in the market. That, I think, is reflective of this balance between growth and profitability and we believe that's healthy and appropriate as we think about fundamental value of a company.

Speaker 3 21:16

So do you feel that there's companies in the market right now, vendors, particularly in the software space, that are public, that should be exiting the public markets? I'm thinking of somebody like Brightcove as a market cap of less than 100 million, 200 million in revenue, projected, three years of declining revenue, very little declining, you know one 2%. What is only going to burn. Their estimate is one to two and a half million dollars this year. So pretty clean in terms of a balance sheet, but not having growth in the business, a market cap that's very low. Are those the types of deals that private equity firms are really looking at right now?

Speaker 1 21:52

Well, I won't speak specific to that name, but there are a number of companies in the market that have that similar profile you described and many of those companies have good products, good customers.

Speaker 1 22:04

They're caught in tricky capital structures. That could be for any number of reasons either debt loads too high, cost of service, the debt's too high, or they don't have the right equity holders behind them and those equity holders might have a duration appetite that is too short for what the company needs to accomplish and get acknowledged or rewarded for. So there are a number of companies that I would argue and I'm biased, I'm a private markets investor but I would argue should not be making those changes in the public eye. That's not the supportive equity investors that they need, nor the duration that they need to get through to the other side. But these are fundamentally good companies. So there are quite a number of companies that fit that mold, I believe, out there today and you know, look, going private can give air cover to businesses to focus on operating the business, not focus on earnings releases and public market reaction. That can be very short term in nature.

Speaker 3 23:09

Yeah, agreed, I think we'll see more of that for sure. To your point, not mentioning specific names, it's interesting how many vendors of late, when talking to me about who's currently holding their stock, wants gains at a different rate than the company's aiming for. So, to your point, if you can swap out who some of the holders are and they understand your long-term play and objective for the business, it gives you a lot more flexibility. Let's talk about two of your recent one acquisition, one investment. So you recently acquired ZigZee. You put in money to the company along with some of the founding team, and then the other one was I can't get the exact date, but you invested in Wowza for the last round as well. So maybe you could just split those two out and talk about. I was curious as to what you see as the opportunity in the businesses, that they're in in the markets, that they're in for growth and in terms of you were talking free cash flow, but just the balance sheet aspect of the business for what we'd call a platform investment.

Speaker 1 24:16

Our add-on acquisitions, where we make them, can be anywhere in the world. In North America, in our part of the market, there's tens of thousands of companies that would, at the highest architecture of thinking about a market, fit that description, and so that's not a good way to think about going to market right. That's too big an ocean. So the way we go after our target investments is very thematically, and both Zixi and Wowza and Sunday Sky fit across two core themes that we invest behind and have for many, many years, including prior to my founding, clearhaven in 2019. Some of the themes that you see us investing behind in these examples are number one, a theme around hybrid infrastructure, and number two, a theme around content and data proliferation, of which video is a major piece. So let me describe a little bit more of what I mean by that. On the first theme again, when I first started investing many, many years ago now in software, I used to go and observe a software company's server room or server closets and we used to talk about how many lines of code software you know monolithic software platform was built on. That's obviously not the current or future state, but, at the same time, not everything is or is going to be in hyperscale public clouds. So our theme here around hybrid infrastructure is a belief that the end state is a multi-state or a hybrid state for enterprises includes enterprises-owned infrastructure or their own private cloud environment, as well as public and third-party cloud or data center options. So, as a software investor, we love software that, where it matters for the end customer, can be deployed flexibly across infrastructure environments to help ease the complexity of those hybrid choices for businesses for whom it's not a core competency, of those hybrid choices for businesses for whom it's not a core competency. So the first theme that we've spent a lot of time in is a theme around hybrid infrastructure and the related theme which overlaps here is a theme around data proliferation and content proliferation, which is to say that's a potentially very good thing when you can maintain control and compliance and insights derived from that data and content. It's a potential risk to be mitigated when that data proliferates or is unstructured and unuseful can cause security risk, can cause costs to balloon, can cause security risk, can cause cost to balloon. And so we think about again, as a software investor, how do we play on those major multi-decade type of trends and look for software that helps address those pain points or those opportunities.

Speaker 1 27:18

So, getting back to a couple of our specific portfolio examples, wowza provides infrastructure software that essentially operates as a backbone for live and, to a lesser extent today, on demand streaming for enterprises, and specifically for enterprises whose products or services incorporate video but who, for the most part, are not video companies themselves. The exception there, in Wilesa's case, is they also serve many of the OVPs where their software is embedded inside those platforms, but for the most part, wowza is serving businesses that are using video in a product or service, but their business itself is not video, and so that's a very sort of embedded and mission critical use case where Wowza's software is involved. And Wowza has always been able to be deployed in multiple environments, whether that is on-premise, in private cloud environments or other private infrastructure or in a public cloud environment, and so we love that about Wowza, and that's one of the reasons why we were first attracted to the potential investing in the company a few years ago. Zixi, go ahead, dan.

Speaker 3 28:36

I was going to say. You know, it's interesting, just both those companies, because they both have great products. They don't have a problem with the technology. A lot of times you see acquisitions where we know there's a fundamental underlying problem with the technology or scaling it. You've got two companies that have great reputations in the market.

Speaker 3 28:53

I talk to their customers all the time. They like the product, they understand what it does. I see the value in terms of how you can also help. Maybe let's just call it how do you price, package and sell the service a little bit differently than they are right now? And they also aren't trying to do end-to-end like a lot of companies did for so long. We want to play in every single vertical and every single market, solving every single piece of the video workflow, the video stack, which really is impossible to do unless you're Amazon-sized. There's very few who are like that really is impossible to do unless you're Amazon size. There's very few who are like that, the ZigZee one in particular. I'd love to hear where you think they can go with that product with additional support from you and the ability to grow that business, because historically they've been very focused, which is good, but to grow that business they really need to expand a bit into solving other problems.

Speaker 1 29:45

Yeah, so Zixi is just an incredible company. In many respects was ahead of its time and we see the trends kind of moving in favor of use Zixi's protocol or practically any other common protocol. They do have their own proprietary one, but it's not required, and they also provide software that helps orchestrate, observe, analyze and automate complex broadcast and OTT transport networks. So they're really embedded in the movement of high value video content over IP networks. And if you kind of roll back, you know 10 years, a lot of that high value content was just being transported over satellite and to some extent fiber IP was not as viable an option for a combination of reasons. But Zixi had been there at the forefront and arguably with some of the earliest movers utilizing what are quite ubiquitous now broad-based IP networks to be able to transport video. But you've got to do that at very high reliability, very high quality, and that's where Zixi's own proprietary enhancement technology around their platform and their protocol came in as the network for transport. For a variety of reasons, including constraints in satellite capacity and repacking, satellite bandwidth and frequency for 5G, which constrains the availability for traditional broadcast media. And on top of that you've got cloud-first companies, ip-centric companies like the OTT networks, who are born in the cloud and so naturally more accustomed to in fact, welcoming of using IP networks, and so Zixi plays very well in both environments Traditional broadcasters now moving to transport media over IP, as well as cloud-first or OTT providers who are doing the same over IP networks. So we really love that. We love that they have an incredible technology differentiation and a lot of know-how built over many years and the market tailwinds are improving in their favor quite rapidly and we saw an opportunity, you know, to take those great foundational elements and then build on that.

Speaker 1 32:36

And to your point, part of the question for us is not how do we build a better product. Both of those companies in those examples have great products. It's how do we help the business organize itself, how do we ensure that we think about those scalability factors around sales and marketing execution, around innovation and how we maximize the return on those investments. That's where we get closely involved. So we're never going to be investing in a company where we think there's a broken product that needs to be rewritten. That's not our business. It's really about supporting the operational levers for growth, excuse me and we're excited about both of those.

Speaker 1 33:17

A third company that you mentioned at the top. Sunday Sky is a bit different. Sunday Sky of the three companies is an application for enterprise communication, but specifically it's a platform for AI-driven video creation that enterprises can use to personalize and communicate to their customers for a variety of reasons. And so all of these companies really play on those themes around different deployment models and different hybrid infrastructure environments and the proliferation of content. But how do you do that in a way that creates and maintains the value and mitigates the associated with that content?

Speaker 3 34:02

And on the Sunday Sky and the ZigZee. Just real quick to throw out some numbers from them more than a thousand customers at scale, delivering more than 20,000 channels to more than a hundred thousand endpoints. That's pretty incredible in terms of a scale standpoint. So you're acquiring a company that has already proven scale, has a great product and, to your point, definitely was a little early to the market. Just everything was everything was satellite for so long.

Speaker 3 34:30

Moving to ip, we see that's where the vast majority of the market's headed. Not everything will be headed there, but a large portion of it. Uh, wrapping up here, michelle, one of the thing I wanted to ask about was ai, because we have so much money going into companies tied to AI of all kinds hardware, software. Not all of it's tied to video, but I did recently see that 12 Labs raised 50 million in a Series A funding. You weren't part of that, clearhaven, but the idea that they're getting 50 million in a Series A, which in these markets I would say is a lot of money in a Series A, where do you think valuations are going to go for companies that are tied to AI? Because I do feel like the bubble is bursting a little and we're starting to see more realistic expectations there.

Speaker 1 35:24

Well, we can't have a conversation these days without talking about AI, so I'm glad we were able to fit that in. Dan, look, again, we're a private equity investor, not early venture investors, so I can't totally speak for that cohort of the investor universe. But AI is real. It's real, it will be and already is a foundational technology. It is not a displacing technology for many of the applications we're talking about already, but it is an enhancing technology that we look to leverage, frankly, in all of our software businesses already in our portfolio. At the same time, there's certainly hype right, there's certainly hype, and not all of this AI that you see out you know these headlines and Series X investments is tangible yet, and so where we look to incorporate AI is in a much more kind of tangible way in our portfolio, and we do believe that that enhances scalability. Back to how do you think about scaling faster with more efficiency? Well, ai can assist in that, and those are some of the ways.

Speaker 1 36:36

Whether it's in the products that we're delivering to customers through our portfolio companies or it's in our own business operations within those portfolio companies, we are employing AI in many different ways today. We believe that'll continue in many different ways today. We believe that'll continue. Sunday Sky, for example, is an AI-driven video creation platform. I mean, that's a space that has also gotten some pretty pretty crazy high valuations out there, similar to the deal that you just described, and we again come back to well, what does that mean for ultimate cashflow? That's how we value businesses, but there's certainly a halo effect that's going on still in the market and I agree with you. I think some of that has tapered down a bit, but there's still absolutely a halo effect, in part for good reason, because this is truly a fundamental shift, but in part because of hype, and we'll have to see that play out over the coming years to really see how things settle out.

Speaker 3 37:36

I like how you say that, not displacing. I agree with that 100%. I've been saying that AI is really an enhancement to something that already exists. Okay, and the content creation side to your point. I think AI has a lot more potential there to really sort of change just how content is being created. But AI is really adding intelligence to products and services that are already there, helping them scale. So, totally agree, it's not displacing, as we run out of time here. Michelle, certainly very much appreciate you coming on today. I know you had a tight schedule, so appreciate you getting on to make this work.

Speaker 1 38:09

Thanks so much Dan.

Speaker 3 38:10

What is the final key takeaway you really want listeners to understand and keep in mind? A lot of my audience will not necessarily be from the financial community Certainly there are some but for the average person who's working in one of these companies and is wondering, like okay, Paramount just announced round of layoffs, Will my company be doing layoffs? One of the things I've always been telling them is understand your company's balance sheet. You're a public company. Look at how much money they're making or losing. Look at what their free cash flow is. So, for those that don't know this space as well, what are just a few things you think they should be looking at and educate themselves on?

Speaker 1 38:47

Well, I think that's very sage advice. I mean, any employee needs to be thinking about the health of the business they work for, and that comes in the form of looking at a P&L, looking at a balance sheet, understanding what that business will necessarily have to focus its attention on. Is it focused on building great products and recurring customers? That's great. If it's focused on managing its balance sheet, that's a distraction. So you know, those are great things to you know to be aware of as an employee of any company.

Speaker 1 39:21

Look in the media space I think there are some major shifts going on, and certainly from kind of traditional media broadcast to more, you know, kind of streaming and OTT first or cloud first ways to consume content, and so there's no escaping that.

Speaker 1 39:42

At the same time, I'm also very, very bullish on video. Video is still the most powerful medium of communication, second only to face-to-face, and that won't change. So the question is, if you're an individual that loves to be in that environment, just make sure the composition of the company around that core kernel is also really solid. At the end of the day, companies need to make money, they need cash flow in order to pay employees, to pay those you know those salaries and to invest in products for growth, and if that's not present, then you know that's certainly going to be at risk. You can play the short-term game when capital is cheap and kind of finance it that way, but the long-term game is that business needs to be generating its own self-sustainability. So I'm bullish on the space generally. There's definitely continued reckoning. That's not been complete, that will have to happen inevitably, but we'll continue to invest in these core companies that provide mission-critical infrastructure and application software around the ecosystem.

Speaker 3 40:51

Yeah, that's great advice, and there's plenty of companies out there who fit that bill. For what you're looking at and other investors are looking at, it's not doom and gloom in the media space or in the video space in particular, like some of the media are putting it out to be. You know, tv's dead, video's dead broadcast is dead. There's changes coming. We've already seen some of it, but, to your point, there's there's some really great companies out there. Michelle, appreciate your time today for for everything that you're sharing here. For a lot of my listeners it'll it'll certainly be something that they don't hear very often. So I appreciate you, you sharing that knowledge and experience with them, and I know I'm going to get some emails right away from people saying how do I contact Michelle? We're looking for an investment. So let's just put it out there Do you want any of those types of inbound leads? And if so, should they just contact you through LinkedIn.

Speaker 1 41:40

LinkedIn is great. My email is on our website, clearhavenpartnerscom. I think you heard our criteria a bit, so if your company fits the bill, we'd love to hear about it. And, dan, thanks so much for having me. I had a lot of fun.

Speaker 3 41:53

Absolutely. Thanks very much. And just you know listeners. Michelle's very good on email, so if you send her an email, you will get a reply. But, like she's saying, be smart here, right? Don't you know what they're looking for? She's not looking to fund your, your newest film project, which I tend to get so many inbound questions about in terms of giving money to create content. So, if you're going to reach out to her, be smart. Understand what they're looking for. She mentioned. Understand what the balance sheet of the company is that you work for. That does dictate how they grow, who they hire, who they have to let go. It's a big part of the progress of the business going forward and what they're looking for in terms of growth. So, michelle, appreciate your time. If anyone has any questions, follow-up questions, reach out to me at any time. Appreciate everyone listening and Mark and Donagan and I will be back next week for another edition of the podcast recapping all the news from the last week and a half. Thanks everyone for listening. Have a good week.

Speaker 2 42:48

If you enjoyed the show, send it to a friend. Everyone for listening. Have a good week. If you enjoyed the show, send it to a friend. Have questions for Dan or Mark? Connect with them on LinkedIn at any time and be sure to check out Dan's blog at streamingmediablogcom.