Falconhead Capital: At The Crossroad Of Charity And Commerce

FALCONHEAD CAPITAL: AT THE CROSSROAD OF CHARITY AND COMMERCE
PrivateEquityCentral.net - Meet The Manager 9/11/06

Private Equity Central: What sectors does Falconhead Capital invest in?

David Moross: We are a firm that specializes in the leisure and lifestyle industries, targeting numerous demographics, including the baby boom generation.

PEC: Why did you choose this sector in particular?

DM: Primarily the megatrends in the baby boom generation have compelling dynamics that create great opportunities in leisure and lifestyle. Baby boomers have been spending; they are the richest generation in history. They’re aging longer, they’re living longer, there’s an age wave associated with this generation. What’s happening is they are retiring younger and are richer with a convergence of earned wealth and inherited wealth. The generation is looking for new ways to exercise, new ways to spend their leisure dollars. They are becoming youthful again and they are also looking for anti-aging opportunities. There are so many demographics associated with this generation that what we felt was whenever you invest and you have a big megatrend behind your investment thesis, the obligation then becomes to you as the investment manager to pick the right investments. However, you have such a great megatrend that it can shorten the duration of any recessionary environment. If you look at our portfolio, it’s made up of assets that have essentially captured these megatrends and in good and bad times our portfolio companies have historically had very good returns in good and bad cycles and that’s another major tenet of what Falconhead does.

PEC: Can you go more into detail about each sector your company invests in?

DM: We’ve just bought a company recently that is not necessarily associated with the baby boomers. It’s the largest in-hospital photographic business taking photographs of newborns and it photographs about 40% of all newborns in America. That’s a lifestyle. We have made investments in the sports industry. We think the outdoor arena, as it relates to sports, is a robust industry. There are definite opportunities in the outdoor arena today. People are not just playing golf and tennis, they are looking for mountain biking, mountain climbing, canoeing. They are doing things that historically generation upon generation had been great enthusiasts of. These trends have been very robust. 

PEC: Other than the baby boomers, what are some other demographic trends that affect what your company invests in?

DM: There’s the echo boom. The next generation after the baby boomers, the children of the baby boomers. That’s another big group. They’re moving in the same direction as their parents did. There are products that echo boomers might buy. Youth is clearly what people think about. Could we buy in that area? Absolutely. Are their big trends? Very faddish usually, something I usually stay away from. That doesn’t mean you can’t make money and find the right investments that cater to youth leisure and youth lifestyle. 

PEC: What was the firm’s latest deal?

DM: We just closed a transaction about a week ago called Growing Family Inc., which is a photographic marketing services business. As I said, the company takes photographs of 40% of all newborns in America. We have contracts with 2,200 hospitals throughout the country, on an exclusive basis. What happens is a mother comes into a hospital, signs a form to release her information to us, then she enters into an agreement to buy a $30, $40, $60 package, whatever it is. One of our photographers goes in and photographs the newborn, with the mother, with the father, the newborn by himself or herself. The only way you can get access to those photographs to buy them or download them is by our Web site. We have close to 40 million page views per month. 

PEC: What did you do prior to founding Falconhead? How did this prepare you for running your firm?

DM: I was in the private equity business my whole career. I was the vice-chairman of Whitehall Financial Group, which was a family office that focused heavily on doing private equity deals. Whitehall did other things, but private equity was a major force for us. My specialization was in numerous things, but financial services were what I primarily invested in at the time. 

PEC: Why private equity?

DM: I guess it’s personality and the ability to help grow and build companies, which has always been one of my fortes as an operator and a deal guy. I’ve always been charged and challenged with the growth of businesses. Seeing them grow, being able to hire the right people, being hands on. Not just doing the analysis, but applying the analysis has been something I’ve always been attracted to.

PEC: What inspired you to found a charitable foundation? What does the foundation do?

DM: We formed the foundation three years ago and basically, the idea was, to create an enterprise. It’s a children-oriented charity and if you look at the various contributions, investments we’ve made, they are very specific. The answer to your question is to give back. I’m on the board of the Dana Farber Institute, which is a cancer research institute affiliated with Harvard Medical School. Falconhead selects certain charities annually. We contribute to Dana Farber annually, we contribute to a scholarship program to allow less privileged kids who want to go to university, we’re part of the Silver Shield Foundation, which guarantees the child of a fireman or policeman who dies a full college education. 

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