Torc investor, Recognize, on talent and inflation as top priorities

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Recognize co-founder: 'Talent and inflation' are companies' top priorities

Transcript

JULIE HYMAN:
Well, Russia's invasion into Ukraine has been causing ripple effects across the globe, as we have talked a lot about. What about business actually in Ukraine? I want to bring in someone who has experience in that area, as well as broad experience in tech investing. That is Charles Phillips. He's managing partner and co-founder of Recognize.

And Charles, there's a lot I want to talk to you about. But I think we do have to start with Ukraine because your first investment as part of this newest venture of yours is called [INAUDIBLE]. It is a cloud native digital engineering firm. And it's got a big presence in Ukraine. So what are you hearing from your employees? And what do you see the company do in a situation like this?

CHARLES PHILLIPS:
Yeah, good morning. As you can imagine, it's a pretty complex situation. And so [INAUDIBLE] is technically headquartered in London, which is where the CEO and the CFO are. But you're correct. There's about 3,000 engineers, software engineers on the ground in Ukraine. And I've been over there in October. One of my partners just returned from there. We're doing daily calls with people on the ground. So I think near term is the safety of all the people. That's our biggest concern.

We're moving people to areas that are easiest and most logical to go to—Bulgaria and Poland. We're able to get visas; in some cases, you don't need visas. More importantly, we're looking at the long-term trajectory of the business—how can we preserve those jobs and help people transition? These are resilient people. For those unfamiliar, Ukraine has produced excellent software engineers for years—many IPOs have come from Ukraine-based teams.

So we're also moving work to other locations. Software development is cloud-based, so it’s somewhat easy to shift work globally. Clients have been fantastic—they want to support Ukrainian tech companies. We’re working through it as we speak. It’s an unusual time period.

JULIE HYMAN:
It is a very unusual time period, early on. We still don’t know what’s going to happen in the coming days, weeks, months. Under that uncertainty, do you assume folks will need to remain outside Ukraine for some time, and that you’ll need alternative infrastructure?

CHARLES PHILLIPS:
Yes, some people will be outside Ukraine. Not everyone wants to leave—many have deep ties, families, homes there. For those who do relocate, we’re arranging long-term stays and funding their families, too. We’ll take it week by week as conditions evolve.

BRIAN SOZZI:
You sit on some prominent boards—Paramount, CBS, American Express. What are the biggest boardroom challenges outside the Russia-Ukraine situation?

CHARLES PHILLIPS:
At ViacomCBS (now Paramount), many contractors are based in Ukraine—talent follows where it is, whether India, Ukraine, or the Czech Republic. But that’s not material for them. The more pressing issues are talent and inflation: it’s costlier to hire and retain people right now, and some employees aren’t ready to return to the office.

JULIE HYMAN:
And from the VC/tech investing side, how is talent inflation and market volatility affecting deal flow?

CHARLES PHILLIPS:
There’s a disconnect between public and private markets. Public markets have become volatile, but private valuations lag. Right now, private valuations remain strong and competitive. Private equity firms have ample cash—last year’s distributions were phenomenal—so valuations are still at a premium.

JULIE HYMAN:
Is that divergence typical? How long can it persist?

CHARLES PHILLIPS:
It’s typical for the two markets to diverge. Most private exits aren’t IPOs but sales to strategics or other PE firms, so they can stay elevated for a while. But public-market pressures—talent costs, inflation, tougher IPO environment—will eventually seep in.

JULIE HYMAN:
Finally, on diversity efforts: you helped launch the Black Economic Alliance and a campaign to hire one million Black people over 10 years. What progress are you seeing?

CHARLES PHILLIPS:
It may not be in the headlines, but it’s prominent in boardrooms. With partners from American Express and Merck, we’ve hired about 25,000 people in four months—focusing on those without college degrees. Companies need this talent; it’s good for business, not just a social program.

JULIE HYMAN:
Fascinating. Thanks so much, Charles Phillips—managing partner and co-founder of Recognize.

Read the Yahoo! News article:
https://news.yahoo.com/recognize-co-founder-talent-inflation-162158815.html