Invest Like the Best with Patrick O'Shaughnessy
Graham Weaver - Building Alpine - [Invest Like the Best, EP.425]
Tue, 27 May 2025 08:00:00 -0000
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My guest today is Graham Weaver. My guest today is Graham Weaver. Graham is the founder of Alpine Investors, a large private equity firm targeting an interesting market inefficiency. Alpine focuses on the thousands of $20 million revenue businesses whose baby boomer owners want to retire, but lack succession plans. Alpine buys companies and installs 28-year-old military veterans and top MBA graduates as CEOs, leveraging 25 years of intellectual property on how young executives can successfully run established businesses. Alpine's CEO-in-training program is now the most applied-to job at Harvard, Stanford, and Kellogg business schools. We discuss the past, present and future of their unique approach. Please enjoy my conversation with Graham Weaver. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Ramp. Ramp’s mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Go to Ramp.com/invest to sign up for free and get a $250 welcome bonus. – This episode is brought to you by AlphaSense. AlphaSense has completely transformed the research process with cutting-edge AI technology and a vast collection of top-tier, reliable business content. Invest Like the Best listeners can get a free trial now at Alpha-Sense.com/Invest and experience firsthand how AlphaSense and Tegus help you make smarter decisions faster. – This episode is brought to you by Ridgeline. Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. Head to ridgelineapps.com to learn more about the platform. ----- Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes: (00:00:00) Welcome to Invest Like the Best (00:05:13) The Journey to Private Equity (00:06:59) Early Influences and Personal Growth (00:09:54) The Power of Wrestling and Rowing (00:11:45) Choosing Your Path and Making Decisions (00:14:48) College Goals and Rowing Success (00:18:05) Lessons from Early Business Ventures (00:26:24) Founding Alpine and Early Challenges (00:34:46) Core Beliefs and Talent Development (00:39:07) Fun Board Meetings and Team Dynamics (00:40:42) Platform Building 101 (00:44:08) Talent and Training Programs (00:49:12) Employee and Customer Engagement (00:52:27) Financial Outcomes and Asymmetric Returns (00:55:52) Incentivizing Young CEOs (01:00:26) The Role of Emotional Intelligence (01:02:45) The Alpine CEO in Training Program (01:03:40) Teaching at Stanford and Influential Mentors (01:07:58) Helping Students Find Their Passion (01:10:22) Visualizing Your Future Self (01:11:19) Scalability of Coaching (01:12:15) Personal Growth Through Teaching (01:16:16) The Role of Executive Coaching (01:24:45) Lessons from a Bad Deal (01:31:50) Daily Routines and Success (01:36:13) The Future of Private Equity (01:35:24) Unleashing Heroes at Alpine (01:38:09) The Journey of Building Alpine (01:41:31) The Kindest Thing Anyone Has Ever Done For Graham
Chapter 1: What does Alpine Investors focus on?
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This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing.
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Chapter 2: How did Graham Weaver get into private equity?
When you think about 5X MOIC, why do you care about that? Why that number? Where did that come from?
We went through a really tough period in the recession. We didn't have a fund for a number of years. So we had three years to kind of work on our business and really do some deep thinking. I hired some executive coaches. We can talk more about that. But part of that was kind of the questions you're asking. Why are you doing this? What's your goal? What are you waking up every day to do?
And I think we wanted to create something that was going to get us just jumping out of bed in the morning. And so we said, hey, we want to be the number one performing fund of all time. So we looked at all the data that was public on some of the pension funds websites and information. And we said, hey, if we could deliver 3x net consistently on every fund, that would put us in the conversation.
We've been outperforming that. So we increased our goal a little bit.
What's underneath it? You're probably a person that could build a whole variety of different kinds of businesses. Why is high-performing private equity one that's interesting to you?
I never knew what private equity was until I graduated from college, so I didn't have this background. This was never a goal of mine when I started, but when I got recruited out of college to go into private equity, I just thought it was... I had a real burning interest in business, and I thought...
Once I learned what private equity was, I was thinking, wow, this is the best expression of building businesses. We get to do it over and over and over across a bunch of businesses. In terms of why I try to be the best, I guess ever since I was pretty young, I just never thought about doing anything other than trying to be the best in the world at it.
It's like, there's a great quote by Daniel Burnham who says, make no little plans for they have no power to stir one's blood.
What's the earliest that you can remember having that sensation or feeling?
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Chapter 3: What are the key beliefs that drive Alpine Investors?
And so I just got to feel this incredible power of being able to really change the trajectory of your life by just deciding you wanted to.
It was really cool. I just got done reading the stories that Dan Gable, is that the guy's name?
Yeah, he's incredible.
What is it about wrestling? Like it seems, we'll talk about rowing too, which I know you did a lot of as well. What is it about, maybe those two are similar, the extreme nature of those sports? It seems like it has a lot to teach, maybe even more so than other sports.
Dan Gable is one of my favorites. He has a great quote. He says, once you've wrestled, everything in life is easy. I think that's dead on. It's dead on. So I think that wrestling is just the most primal sport. In our high school, wrestling was a big sport in the Midwest, in Ohio. They would turn a mat light on. The gym would be packed. People are yelling and screaming. There's a mat light on.
The lights are off in the whole arena. And it's just you and one other person. And you're trying to defeat the other person. I mean, it's crazy. It's a pretty intense sport. And then the weight loss and the training and everything. Hardest thing I ever did. I think it's something about just the primal nature of that.
Can you say maybe one degree more about this idea that you can just choose? Sounds so simple, but I've experienced that same thing. And every time I do it, I'm amazed how powerful it can be. But I want to understand the contours of it from your perspective. What does that mean? What does it feel like to choose? What do you choose? What was the process? Whatever else you can say about this.
The first thing I'd say is that if you watch most people, they're kind of asleep or unconscious. I am too sometimes. Imagine you get up, whatever your routine is, you brush your teeth, you get ready for work, you commute to work, you have a tough commute, you get to work, you have a couple of meetings.
Some Zoom calls, then you eat, then you return some emails, you have a few more meetings, you get home, return some emails, watch some Netflix, go to bed. There's all this busyness. You're just kind of doing today what you did yesterday. You're doing tomorrow what you did today. And you're stringing together that and calling it a life. So there's this real level of unconsciousness about it.
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Chapter 4: How does Alpine develop young talent as CEOs?
When they posted the boats and my name wasn't on there, I did the math and I said, okay, women's, heavyweight, I was a lightweight, lightweight. And I did the math on how many people got cut and how many rowing machines there were. And so I was like, okay, I got to get here really early because all these people are going to be using the rowing machines. I show up the next morning.
I worked all the way back. I talked myself into getting there at like 5.30 in the morning. You know the punchline. I get there. There's nobody there. There was no one there at 536, 7. No one ever showed up because Land Warrior was a euphemism for you just got cut. Yeah, you got cut. I stayed in road and I met this guy who was training for the national team, Mike Tatey.
And he and I were the only two guys in the morning at the Princeton Boathouse. And he ignored me. He's a legend. He coached the US Olympic team. He went on to coach the US Olympic team to a gold. And I didn't know any of this at the time. I just saw this tall, skinny guy just hammering this erg. And eventually he kind of took me under the wing a little bit.
after I showed up at 5.30 in the morning for like three weeks in a row, he's like, okay, this kid really means, he really is going to do this. And he taught me a little bit. So anyway, progress forward, I get better, a little bit better my freshman year, better my sophomore year. By my junior year, I had one of the top times, maybe the top time on the 2K rowing machine on the team.
And then by senior year, I was captain, we won nationals. And so it was just, everything came together. But it was just a really linear expression of If I put in a certain number of hours, this is what Mike Tatey said. He said, here's the formula. It's really simple. Sit on this machine and row as long as you can, slightly below your aerobic threshold. Basically, you'll hit your goals.
I was like, that's it? He's like, yeah, that's it. He was very simple. And I just did that.
And it worked. It just required a lot of hours. Is there anything else between ages 12 and 22 that without which you would be a wildly different person?
I'll just say a couple things about my dad real quick. So my dad started a veterinary practice about the time I was born. He and his father went in. My grandfather's a veterinarian too. They started this practice called Weaver Animal Hospital in our hometown. And they had a falling out of some kind. I don't know what happened. I never heard the whole story, but my dad like stormed out.
Well, he has a mortgage and three kids and we have no money. The only money we had coming in was he would take emergency calls at like two in the morning. So his little beeper would go off and he would get up, drive to the office, fix the dog's leg and go back. And he did that. for 25 years. And I think the bad news was he was really never around.
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Chapter 5: What lessons did Graham learn from his early business ventures?
I mean, I think you can have investors in private equity that have the Peter Thiel model. They make few large investments and they sit around and think, and it looks like that. That's not really us. That's not how we're wired.
The way I like to think about it is I like to think about the world in like endogenous, winnable games, and then ones that might be a little more exogenous and or unwinnable or hard to win. And so I don't wanna just go full on brute force in a non-winnable game.
So for example, in private equity today, it wasn't like this in 1984, but today if you have a big business, you're gonna hire an investment bank, you get the game, you're gonna show it to 55 private equity funds. For me to just go brute force in that red ocean as there's a great book called Blue Ocean Strategy, so they would call that a red ocean. For me to go brute force in that
I think, isn't a good exercise. If I have 100 units of energy, I want to use 25 of those units to go try to find a winnable game to play. And then the other 75 would be like the brute force endogenous path.
So maybe using that, I like that framework. If we think about today's private equity landscape, where there are many, many funds that command huge sums of assets, my understanding, it's not the style of investing I'm in, but My understanding is if there's a good high quality asset, it's an auction process in many cases. It's a bidding war.
And there are lots of great, highly professional, super talented investors and firms that can buy private business. Maybe describe the state of the market and what the characteristics might be of like winnable games within that broader market.
I mean, I think there's 5,500 private equity funds at any given great high quality business like you're describing, particularly like take just the extreme high quality business, ERP subscription software business. I mean, it doesn't get any higher quality than that. There's a lot of people that can buy that.
There's a lot of people that can see what that's worth and do some calculation and come up with a value for that. And by the way, it doesn't necessarily go to the smartest person. it goes to the highest bidder. So it's a little bit different where that doesn't mean that they were the smartest person necessarily. It's just a really, really tough game.
And conversely, the winnable game that we're engaged in, and we learned this over the first 10 years of Alpine when we were really hands-on with these businesses, is we're going and finding a $20 million revenue plumbing company in Ball, Louisiana, where the owner's retiring and they need a new management team. There's just not a lot of people that want to sign up for that game.
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Chapter 6: How does emotional intelligence play a role in leadership?
So what did you most learn from those three and then the one that worked right after?
They were in the label printing business, which was a good business because label might cost a penny on a $5 bottle of shampoo, but it contains all the product information. So no one's going to wait. No purchasing manager is going to be a hero by saving a fraction of a penny on the label. Had very good predictable revenue. I missed two things.
One is you were really underwriting the underlying customers. You had to go a level deeper and look at how recession. So the companies in the Midwest, when a recession hit in 01, their clients got destroyed. The revenue went down significantly. That was the first thing I missed. The second thing was I didn't understand how important management was.
And this would become a huge part of our philosophy later on. The founder would retire and then the number two person was there. I just backed them and they were absolutely not backable. I wildly underappreciated how much the management team mattered. And I made that mistake three times before realizing I had made it.
So in the next one, next label business, the underlying customer, the biggest customer we had was Trader Joe's, which was just like the best customer ever in the early 2000s. They just grew 15%. Yeah, 15% a year every year. They paid in five days. They allowed their vendors to have great margins. So it was just, It was a home run deal. I owned it for 22 years and it paid. Oh, wow. Yeah.
I just sold it a couple of years ago, actually.
It paid dividends along the way. Thank God. So now you've got a successful deal under your belt coming out of business school. It sounds like, obviously, at this point, you would have said, this is the thing I want to do. Is that right? Or was there still searching to be done?
Oh, gosh. It was 100% what I wanted to do and I still chickened out. So if you'd asked me any time in the two years, I was like, I know exactly what I want to do with my life. As graduation starts approaching and all my classmates are getting jobs in private equity, I'm getting a little FOMO and I'm also scared. I take an interview, which turns into a job at an institutional private equity fund.
And I knew in my soul, it was not what I wanted to do. And I showed up and a little bit of me died the day I started. And I did that for a little bit of time. And then I actually had a close friend of mine around that time, around my age had passed away. I just took a little time off and I just realized, hey, when am I going to do the thing I really want to do if not now?
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Chapter 7: What is the unique approach to employee engagement at Alpine?
There's a number of them. The first one I would say is, what's your objective function? Our objective function is MOIC. We have a specific number we put on that. We're trying to do 5X on a fund. Have you done that historically? We've done 5X in our last four funds. We have it marked at 5X in our last three, and the fourth one is well on its way, yeah.
And so we have a objective function that is specifically net MOIC. And I think cascading from that is how long you want to hold businesses, how you're going to invest in them, how you're going to build them, what's your objective function, I think matters a lot, what's your goalpost. And I think a lot of people use IRR maybe, or they're trying to raise their next fund or something like that.
And I think it can muddy up, you know, are you selling your best companies quickly so you can raise the next fund and have higher RRs or what are you doing? And I think the objective function matters. Another belief that we have is, The way that we're really going to create alpha is through talent.
That's probably the foundation of Alpine is just, we think that incredible leaders, CEOs, management teams are going to create amazing results. We'll look at B plus industries that other people really don't look at as much, but we've paired that with an A plus team. We found that to be just a great combination. We won't overpay for the A plus industry.
We'll go down a little bit and I can talk more about that. That's number two. And then number three would be I'm a huge fan in thinking slash using your imagination. We schedule time outside of the office.
In the Great Recession, we were spending a full day outside the office just really thinking, mapping out what do we want to build, what are the capabilities we want to have, using time to work on the business. The expression I use is we're planting seeds of oak trees that will yield us shade five years from now. And if you can do that consistently, you can always create moats effectively.
But it takes a lot of discipline in the middle of all the crazy stuff you're working on to actually take time out to work on something that's important, but not urgent. And that's the imagination and innovation.
When I do my like asking around, I'm always curious if you condense everything down to asking someone, what is Alpine known for? Like, what is the thing? You only get one thing. What you hear a lot is young talent development and relying on 20-something CEOs to run sometimes very large companies and the search and development process of that young talent, those young CEOs.
So maybe you can explain, when did you plant that acorn seed? Why? How has it grown? We can spend as much time as we want on this thing because it does seem to be an elemental part.
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Chapter 8: What are the financial outcomes that Alpine aims for?
Can you give us like a platform architecture or a platform building class, like 101 or 201? Does platform mean roll up? That's a word you hear a lot in private equity. Like what is a platform? How do you build one? What are the steps? So for us, it means roll up and I'll use our best example.
So we started off in plumbing and HVAC and we had this, a guy named- It's always HVAC. Yeah, exactly. This guy, AJ Brown was a CEO in training. We put him in to be CFO of one of our companies. He did great there. We sold the business. We repatriated him. We said, okay, you're ready for prime time. They're going to be the CEO of a platform.
And then we paired him with another CEO in training that was just coming in, this guy, Will Mattson. So they become president and CEO or CEO and CFO initially. We picked HVAC. We had a little experience in that space. They were excited about that space. And then we started just going and visiting tons of companies.
And when you go visit 20 companies in the space, you learn more in one three-hour management visit than you do in three weeks in a conference room. And then what you're picking up in those meetings is what does great look like? And what's cool about it, each company probably does one thing great. The company does recruiting great.
This company does purchasing, training, marketing, IT systems they use and how sophisticated they are with them. But if you add that up across 20 companies and you grab every single piece of that playbook, you have the best playbook in the world. So you're starting to architect what does that look like before you even have bought a company. So we're hiring the CEO, getting the industry right.
We're getting part of the management team right. And then we're getting the playbook right before we've ever even written a check. Then we start going and buying companies. The first couple, we try to buy pretty small. I think our first deal here was $8 million of EBITDA. And we learned a ton. And we bought another one that was like two of EBITDA and building along the way.
And then we're also building our holdco. So we're building out the CEO, CFO, chief people officer. And that's the platform.
That's the platform.
Yeah, the holdco is the platform. Our best companies, we've really overinvested early in those platforms. It's really expensive to do that. And we have platforms that are pretty young that have a $15 million hold co expense. But that's really your foundation going forward.
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