Bryan Taylor, Advent’s Managing Partner: Europe is nearing its golden years of tech investing

Stefan Pauls: Hello, my name is Steffen Powelts and I am the CEO and founder of Moonfair. Welcome to Dealtalk where we bring you face to face with the top minds in private equity. Moonfair is the largest digital platform for investing in private equity. We offer carefully curated funds with remarkable loan. Joining our community of world class investors is free and only takes a few minutes. @moonfair.com we do this to give more investors direct access to one of the most attractive global asset classes. With our Dealtalk webinars, we aim to democratize access to the knowledge surrounding it. Enjoy. Hello everyone, my name is Stefan Pauls and I am the founder and CEO of Moonfair. Welcome to our Deal Talk series where I have the pleasure to interview some of the most respected dealmakers in the world. This time I'm in sunny Palo Alto at the offices of Advent. And it's not only sunny outside, there's also sunshine in my mind as I have Brian Taylor with me today, Managing partner and head of Advent's technology team. Advent is one of the powerhouses in private equity globally. It's been in the industry for over 40 years and currently manages more than US$82 billion in assets. The firm consistently ranks among the top private equity firms in the world. Brian, it's a pleasure to have you here with me at our Dealtalk.

Bryan Taylor: Thank you, Stefan. It's good to be here.

Stefan Pauls: Brian, you have been investing in tech for over 25 years. Six years with Advent. Given your experience, how is technology investing different today compared to when you started?

Bryan Taylor: Yeah, in the early days, I remember for software investing in particular, it was almost impossible to raise debt. We had to go around. There was one division of one bank who would lend to us. As I reflect over almost three decades, like I think the most important lesson for me has been just how resilient tech is. Over 25 years, we face crisis after crisis. We've had boom cycles, we've had bust cycles throughout each of those on both revenue and earnings. Tech outperforms the rest of the market. I think that's a remarkable fact that people often miss that just no matter what the environment is, tech continues to outperform. The other thing for me is as I reflect on how technology has evolved, it used to be a cottage little industry where there were a handful of us doing it. Today it's become not just mainstream private equity, but it's actually become the source of innovation for so many different industries. We talk about internally, we talk about it as tech has become no longer a Vertical, it's become a horizontal and it's permeating the different sector and geo teams across our entire ecosystem. And that's what we focus on in investing, is trying to find tech where it's happening, deep in the geos, deep in the sectors that are part of the Advent ecosystem.

Stefan Pauls: Look, what I find uh, fascinating is that the tech disruption potential, and we will talk about AI later, is even accelerating and becoming more and more. But before we go there for uh, Advent, technology is one of your five key sectors alongside financial services, consumer, healthcare and industrials. And look, there's as you know, the big discussion out there about being a generalist or being a more sector focused fund. How do you make sure that you have the necessary depth and network in each of those sectors?

Bryan Taylor: That's a great question. At Advent, while we're, as you mentioned, a global firm, 40 years, $80 billion, four continents, we're actually a collection of specialists. I'm certainly a tech specialist. My Entire career in 25 years has been doing nothing but tech investing. But we also have chemical specialists who have done nothing but chemicals their entire career through 30 deals. We have payments team like uh, where else do you see that type of diversity and specialization? And so when we think about it, we compete. Each of our sectors, each of our GEOs competes like a local. That's what we strive for and it's one of the secret sauces of Advent.

Stefan Pauls: Let me ask you about one thing that is obviously on top of mind of virtually every private equity dealmaker um, currently in the world, which is Liberation Day and associated the tariffs. And the tariffs probably, you know, with all hope, put it aside, will not go away anytime soon. M. So obviously that has a huge impact for globally playing private equity firms as they are dealing with global assets. How has your investing playbook uh, changed in light of, you know, the tariff crisis?

Bryan Taylor: We probably had the same reaction you did when Liberation Day happened, which was kind of a say what being a private equity firm. Within 24 hours we had a global, uh, partner meeting, the 13 of us and we had a readout on every company from our capital markets team and our portfolio support group. And we were actually surprised by the limited amount of exposure we had, um, even in businesses that seem like they'd be very exposed. Like we have a German company that manufactures chemicals in Asia and sells them to America. You think that would be the poster child of tariff problems. But we quickly looked through the announcements and its products had actually been carved out of the tariffs because they're so mission critical and so we actually had very little exposure. Within days, we had a call with all of our LPs. I think the more important point is, for us, we're not macro investors. What we strive for is situations where we control our destiny. Um, around the table of the managing partners at Adventure. The average amount of experience is 25 plus years. I'm, um, the average in terms of experience. We've been through crises before. This is no different. What we try and strive for is where can we control the outcome? And that's an easy thing to say. It's a very difficult thing to do. And you have to do it company by company, value creation plan by value creation plan, and try and create returns that are independent of macro environments. You can only be so successful at doing it, but we find that that approach has served us very well.

Stefan Pauls: Look, the other topic that is on top of minds, in particular of the LPs, um, but for the entire industry, is liquidity. And we talked about, uh, the Super Return earlier today. And I don't know whether you saw it, we had these cappies from Moonfair where there was this labeling on it. DPI is larger than irr, which was a funny idea I found. Uh, what is your. In light of, you know, the current environment, M and A, um, you know, market still, um, very modest. IPO market is there, but not strong. What is your approach to, um, exit planning?

Bryan Taylor: We've been, I mean, knock on wood, we've been remarkably successful so far. Like, 2024 was actually our second biggest exit year ever. More exits than deployments. 2025, we're halfway through. We're more than deployments. And so we've been fortunate. But it's also part of our strategy. For most private equity firms, exiting is the afterthought. It's like, hey, we need dpi. We're about to raise another fund. Go through your portfolio, pick these two, go sell them for us. We systematically make it part of our underwriting. And what we're looking for is what we call multiple exit ramps. Not just one option, but multiple options to get out. And time and time again, what we're striving for is in this deal, in this company, can we create multiple ways to exit? We've had great, um, strategic exits in the last two years. We're also a great IPO story firm. We've had some fantastic IPOs. And so I think the key is just creating multiple ways to exit and then building great companies that can take advantage of that.

Stefan Pauls: Look, then there's another big theme out There, which is the uh, valuation gaps or the different expectations from buyers and sellers in this regard. And I've been talking with many, many people about it. Next year is going to be better, next year is going to be better, but it's still out there. So what do you think needs to happen to start seeing deals done at the scale we were used to a couple of years ago?

Bryan Taylor: Uh, it's a great question and importantly, it uncovers two secret dirty truths of private equity. The first is for most firms, 60% of the deals that they're doing are buying from other private equity firms. The other truth is most of the deals done in 21 and 22, the prices were too high. Uh, and so when those firms go to exit and they're looking for their private equity buyer, they can't find a buyer. We try and stay away from that. So at Advent, 75% of our deals are primary. We've bought from a founder, we bought from a family office, we bought from a carve out, we bought a public company and took it private when it had kind of lost investor sentiment, investor trust. If you buy from those sources in general, you're just not exposed to the same dynamics. And that's what we strive for, is trying to find deals that are off the beaten path.

Stefan Pauls: And when you think of the broader industry, is it a matter of just holding, uh, periods going up and it takes longer and irr goes uh, down, but necessarily not an impact on money multiples?

Bryan Taylor: Time will tell. I think for private equity firms that's the outcome they want to solve for. For the LPs, there's more pressure to try and find liquidity sooner. We also keep, as you mentioned, we keep waiting for that dam to break and suddenly have the deal flow. For example, we did some analysis and there was 150 billion invested in tech in growth equity in the 19 to 22 period. 150 billion. We estimate that 15 billion, just 10% of those investments have found an exit. The other 135 billion is still there. And for us, we feel like we're a great buyer of those types of businesses which didn't reach the trajectory to go public, couldn't quite be the number one in their industry that got bought by a strategic, but are still good businesses who are looking for the partner who can take them to the next level. We feel like that's a great place for us and we're looking forward to that day coming.

Stefan Pauls: Uh, look, despite all what we have said about deal making, when you by the way, take the absolute Numbers. The deal making activity, both in terms of deal volume and number of deals in 10 year horizon is still pretty healthy, by the way. It is just not what it used to be. Um, but the best deals still attract a lot of interest. And what I personally find impressive because I know from my time at KKR how difficult it is, is, is that you are still very successful at winning some of the really high profile deals, uh, also very recently. So what do you make different compared to other firms out there?

Bryan Taylor: I appreciate you saying that. Um, one of the other truisms of our industry is how much deal sourcing gets done by a call from an investment bank. I think many of my peers, they get a call and the conversation goes, hey, I know you're interested in this company because someone on your team called the CFO two years ago and said you're interested. I'm the banker who just got the mandate and I'm calling you and two dozen of your best friends to come take a look at it. That's a lot of private equity. Still today we're trying to take a different approach. We have 300 investment professionals in, uh, our firm. They are out every day trying to create deals, to shape them from the bottom up and to find the off the beaten path situation where we have, we hope, an advent angle, a unique perspective of how we can change the trajectory of the business. And as a result of that, oftentimes when the deal starts. We've already had years working with the management team to put together the value creation plan that will drive performance. We recently bought a business which makes, um, if you think about a vaccine, everything but the chemical that's in the vaccine. They make sterile injectables. We spent years about spinning that asset out. And so when it finally came time to do it, they ran a process. But we had years of buildup of finding the right executives who could partner with us, developing plans of what we can do with the business. That's the secret to these deals. I remember, I won't say the deal or the firm. There was one transaction we did where we got on an airplane here in San Francisco to head to New York in the expectations of signing a deal that we'd been working on for five years. Just a few seats in front of me on the plane, there were a senior partner from one of the big public private equity firms sat down on the plane. I just noticed they opened up a binder that was 2 inches thick on the company on the way to their first management meeting. And so when we signed that Deal up. Two weeks later they said, oh, uh, they're crazy. Like, how could they act that fast? It's because we had five years of Runway before we signed the deal. That's the secret to winning some of these deals, I think.

Stefan Pauls: Congrats. Very smart. Look, you know, there are 5,000 private equity firms, um, out there. And one of the reasons for being full of moonfair is that we really try our best to, uh, select those that make sense for our investor base. So curation is everything. And um, this is very interesting because the gap between the top performing managers and call it the rest of the world, is growing. So dispersion is even going up. That was different, by the way, post financial crisis, where it was pretty easy to throw some money at the wall and make money. So what would you say separates?

Bryan Taylor: It's never just to interrupt, though it's never felt easy. In hindsight, you're right. But it never felt that way at the time. I just want to make sure I clarify that.

Stefan Pauls: Absolutely. But now look, I swad up this far more difficult. So what would you say separates? So to say the winners, the best one in our industry from the rest of the crowd. Yeah.

Bryan Taylor: Um, this is a very good question and I have a bit of a different take on it. I think the most important decision an investor can make is what type of alignment do they have with the private equity firm. What I mean by alignment, the public private equity firms, they are now in a different business. They're in the business of aggregating capital and developing, generating management fees. As an investor, what you want is somebody who's, uh, aligned with you around driving equity returns. At advent, we are 100% aligned with investors. If you give a dollar to a large private equity firm who's public, half the economics that come off of that dollar go to public shareholders. Maybe it's founders who are no longer with the company. At Advent, 100% of the dollar goes to work on team members who go out and try and find the compelling next deal. And once they've made the investment drive value. That's the most important decision in my mind. The second is what's the strategy. And firms have very distinct strategies and if you listen, they'll tell you. And as an investor you should decide, does that align with what I want? Our strategy is to drive high money on money returns. We want to be world class private equity investors as measured by money on money and create breakout returns and deals. What we celebrate internally around deals is when do we have these juggernaut like Businesses, these off the beaten path, people didn't see it or understand what we did at the time and why we did it. But in hindsight it seems obvious because it generated or created these juggernaut type deals. That's what we care about and that's what we try and that's what we try and excel at. Uh, we're not always perfect, but that's what we're trying to do. And I think that decision, that alignment, they aligned with my strategy. I think it's a really important part of that decision.

Stefan Pauls: Brian, what you're saying is so much resonating because I'm convinced when you are a great investor, you have to see things that others don't see. And that's exactly what you're describing. Look, I wanted to, uh, change gears uh, a little bit and talk more about AI. I had a meeting this morning with Peter Fanning, the former, uh, founder of Benchmark. We were talking about AI and the various application layers and how it's evolving. Um, and would love to know from you, uh, what is your focus there? The horizontal layer, uh, large language models is probably done and dusted, uh, given the valuations where they are. Is it more on the infrastructure side? Is it on certain application layers? What is your focus there?

Bryan Taylor: Yeah, well, I'm curious to see your talk with Peter. He's one of the great minds in, in tech investing. He and I actually worked together at Bain and Company almost 30 years ago. Um, so look, our approach to AI, I think it's a really important topic in technology. Having been around the block as long as I've been, I've seen a lot of tech trends come and go. I think AI is for real, not just generative AI, which is trying to impact how we all search for information and plan our lives, but, but also inside enterprise. Um, you correctly ask the different layers, I think of it as. There's an infrastructure layer, data centers, energy, power in tech. We don't invest in that. Some of the other parts of Advent will. We have a couple of investments that have been remarkably exposed to those trends and will create, I think, outstanding deals. Then there's large language models, the actual guts in the engine behind AI. All those, those two things together. Hundreds of billions of dollars of investment that we hope will become commodity for our companies, which is the third layer and what we call applied AI. That's where you take all of artificial intelligence and all of the capability it enables, but you apply it with workflow and data and context to a very specific problem. We're Going to take this huge body of investment and we're going to solve this problem inside of our control point. Software. That's an easy thing to say, but let me give you an example. Um, we invested recently in a company which does software to help big industrial companies manage the maintenance schedule of their really expensive equipment inside the manufacturing plant. These are million to $10 million pieces of equipment that need to be maintained on a regular schedule. It's really interesting business. Fantastic prospects. As we started looking at the investment, they said they were just starting to think about AI. About a year ago we looked at it with them. We said, you know, you have 30 years of data that comes off all these manufacturing machines and you know the outcome, you know, when it broke unexpectedly and some of these plants, if you're in a chemical plant, uh, and a big piece of equipment breaks, you lose everything in process. It costs you $10 million. If you can predict it, it saves you a lot of money. And so we started running software applications using AI, uh to predict when it may break. We went from an idea to pilots. In six months we already have six pilots that are 50 to $100,000 a year pilots. And we think we're going to convert the first customer to a seven figure contract this quarter or next quarter. That's where we think most of the value of AI is going to accrue in big enterprises.

Stefan Pauls: You know, Peter said this morning that he believes over the next couple of years there will be 8, 10 companies in the application layer world, uh, being worth more than 500 billion, uh, so an incredible chance. But he also told me that benchmark, obviously because of their focus on early stage, has in the past other deals, non AI related, left quite a bit of money on the table and left it to other private investors or later than the public markets. And um, there is a natural space in my view, where the buyout firms, the private equity firm should step in, given with all their knowledge, connectivity, global footprint and money that they have. Do you see advantages of a uh, you know, traditional buyout private equity firm like yours versus the VC landscape?

Bryan Taylor: I think you're absolutely right and I think Peter's right and there's a really important role for venture capitalists to continue to fund these businesses. But then, you know, their skill set is geared towards one type of investing and our skill set and experience is geared for another. And you're right that when a company reaches a certain scale, the problems are very different or where it starts to get into much more complicated business model and strategy decisions. The problems are very different. We view AI as something that's going to be part of, especially in tech. Most of our investments will incorporate AI. Most of our companies, outside of tech included, are going to use AI to drive at a minimum efficiencies inside their operations. And we're seeing that already. These are early innings, but we're already seeing the results of this. The really important question is how can you use AI to drive value for your customers in unique, interesting ways and can you do it faster than others? And we have a big effort internally to try and stay ahead of that curve and apply it, apply it around these specific problems. And I feel like we're uniquely positioned as private equity to do that, more so than any other asset class or any other type of investor.

Stefan Pauls: Look, I'm fully with you, by the way. This still artificial separation, you're saying it, between AI and non AI will merge AI very soon. Look, I don't know whether, uh, Brian, you know this, but I started my career at kkr, uh, in the value creation team. It's called KKR Capstone. Before I moved then over to the deal side. So I'm very familiar with how KKR goes about value creation, but I found it fascinating what you guys are doing as well. So what specific strategies? And there's this famous quote from Henry, if I may mention it, Henry Kravis. He said early 2000, financial engineering is over. This is when my job started as an operator. So what are the strategies that you found most effective from an operational standpoint, not the financial side in creating value in your portfolio companies?

Bryan Taylor: This is an area where I think many in private equity talk about their playbook or their blueprint or the levers that they pull. And everyone has a slightly different approach. But I've become jaded over the years to kind of view much of that as so common as to almost betrait. I think the most important piece of building the culture you're talking about is the mindset. Like, what mindset have you instilled in the culture of your people? For us, in the foundations of our firm, all the way to the most senior people, there is a mindset of when we make an investment, we want to change the trajectory. It doesn't matter if that trajectory is it's been negative 10% and we're making it zero, or we're taking a bunch of cost out, or we think this business can be repositioned to take advantage of this wave. Each one of these businesses we invest in it has a bespoke plan behind it and that plan is to drive inflection. We're not always successful, but when we are successful, as you mentioned earlier, when you take something that's complicated and someone can't see and you make it simple, great things happen. Let, um, me just use an example. Um, a couple years ago we got approached about this really interesting deal. You'll appreciate this. It was the software division of a German commercial bank.

Stefan Pauls: Yeah.

Bryan Taylor: In Germany. Software division of a German. German commercial bank. And they wanted to raise a minority investment because they were being pressured by an activist to help run the business. I can't tell you the names of the firms we competed with at the time. Small local firms, banking firms, and local German firms. For us to be successful, we had to bring German industry knowledge. Super important for a bank. We had to know how to partner with a bank and we had to know how to run a software business. And we pulled together and said, we see something totally different here and we can buy this, make an investment. We eventually actually bought the bank so that we could buy all of the company and spin it out as a standalone business. We did M and A. We changed the management team, we upgraded the management team. And you fast forward four years, we had a partial exit as a very different company. What's important is the top five tech specialists in the world. None of them looked at the deal. The first time we made the investment. When we went to recap it looking for a partner, all of them looked at the deal like, that's a mindset difference. That's not one particular thing of, you know, we know how to do pick your, pick your tool. It's, we came in with the mindset of we see this differently and we have the courage to take it on and try and create something that's very different than what people see today. I think that's the secret to driving that type of success.

Stefan Pauls: Very interesting. Very interesting. Look, Europe, uh, is talk in town again and at super return, but also, uh, other sources. Goldman for the first time was saying, let's overweight, um, Europe versus the U.S. uh, which is uh, uh, really new and hasn't happened, uh, as far as I can think back, uh, and everybody's talking about the growing opportunities there for obvious reasons. Governmental spending, being forced to increase, military spending, a huge program, as you might know from Germany, 1 billion and even more, uh, almost unlimited. France is doing a lot and so on. Given that you have such a strong footprint in Europe and have been in the regions for decades, would you agree that this market has become more attractive recently or that is my or question driven by this one off spending in infrastructure and only military is sustainable. Probably, uh, is this a, uh, hot topic for two years or so, but not sustainable or will not create sustainable growth?

Bryan Taylor: Yeah, I think about it as Europe has been traditionally a tougher place to make successful investments. With all respect to my partners out of Europe, they have done a fantastic job for decades. The average industrial company in Europe is growing 1 to 2% like their US GDP growth in tech, we're kind of approaching, it's a very different story in Europe. It feels to me like we're approaching a bit of the um, golden years of tech investing in Europe. You have a dynamic of increased spend around innovation. As you've mentioned. You have a maturing of a very large cohort of companies that have been founded in the last five to 10 years who have figured out how to go across border in ways that they couldn't have done a decade ago. And then you have a, uh, still relatively benign competitive environment. You have one or two firms who have very strong presence as tech investors and then you have a long, long tail of companies who have done a deal or two. We view our European team in tech as having some unfair advantage because of our deep presence in Europe that goes back to four decades now. And in Europe, as you've pointed out, it's really still functions often as a land of countries that you need to be local. We have six offices, we have 120 people. We've been investing for 40 years. I think that's a really important factor in how you think about deal making in Europe.

Stefan Pauls: Couldn't agree more. Look, this is why we have at moonfair, in total, nine offices. You can't be in France without being in France. Same for Germany, same for the uk, same for Switzerland, and so on and so forth.

Bryan Taylor: Yeah, that's absolutely true.

Stefan Pauls: Look, we are unfortunately nearing the end already, uh, of our conversation and would love to continue forever. And I want to ask you, uh, now two more personal, uh, questions. One is, uh, look, you live in an area here in Palo Alto, Menlo park, where some of the best entrepreneurs in the world, meager investors and other people, uh, around you. And I guess probably the answer is no. But I want to ask you, do you have any role models?

Bryan Taylor: Role models is a tough one. Um, I feel like I've been blessed because I happen to go to school here and I've been around this area for so long. I've worked with some incredibly talented people, mentors, peers who have done amazing things and I'M incredibly grateful for the chance to have been part of what's happened here in the last 30 years and to have learned from some, as you mentioned, the best investors, the best entrepreneurs that I think exist in the world. Some of them are here and I'm incredibly grateful for that.

Stefan Pauls: Couldn't agree more, by the way. The other one is, look, we talked earlier about, uh, children. And I know you have, uh, children. I have children. And this is why I want to ask you, what advice would you give your younger self? I always want them to benefit and my children are watching this. So benefit and hopefully also, uh, other members of our audience.

Bryan Taylor: From your insights, I look back at my own career and just how important people decisions turned out to be in creating the opportunities that I've been able to be part of. And often you don't realize how important those decisions are. You, uh, go with your gut around a culture of a place or the personality of a leader that you want to follow and learn from. I think investing in particular, I think it's an apprenticeship. I think you have to learn from other great investors. You don't just great investors aren't born, they're actually grown. And I emphasize with my kids, make sure you're working with people that you respect, that you align with on values and that you feel like will really invest in you. And again, I've just been incredibly grateful for the opportunities that those people in my life have created.

Stefan Pauls: Impressive. Brian, this was an absolute pleasure. Thank you so much for all the insights you shared. I've learned a lot and I'm pretty sure our audience as well. For everyone else, please make sure, um, to check our website@moonfair.com we'll find there other deal talks that I've done with very, very famous people in the industry. You might sign up for our newsletter. Uh, you get access to all our educational material. Ah. And maybe you are also interested to invest with us. Hope of course that you will join us for the next deal Steel talk which is about to come and otherwise stay healthy.