E8 – Mike Bryant of Knox Capital Holdings
36:56
companies, business, Technology, people, privacy, big, data, facial recognition, creating, services, investor, Kodiak, EU, related, legal, growth, happening, Africa, deal, passwords
SPEAKERS
Debbie Reynolds, Mike Bryant
Debbie Reynolds 00:07
Hello, this is Debbie Reynolds of The "Data Diva" Talks Privacy Podcast, where we talk with industry leaders around the world related to data privacy issues and things that businesses need to know. Now, today, I'm very happy and proud to have my friend and mentor Mike Bryant from Knox Capital Holdings. He's a partner in a venture capital company here in the US. We had a great conversation. And actually, Mike and I talked had this podcast recorded, there was a bit after the US presidential election where Election Day had passed, but it was during the week that we did not actually know who won the election. So some of the talk that we have is about sort of before after the election, but Mike has some really interesting things to say about what he thought would be happening after the election. You know, as it relates to regulation, data, privacy stuff, we talked a bit about antitrust and the big tech companies, as well as some other stories about our time working together, as well as some of the other things that he sees in the future related to investing, and what investors look for when they're trying to put money into companies. So this is a great podcast, and enjoy. Thank you, Mike, for being here.
Mike Bryant 01:34
Thank you, Debbie. Always great to see you.
Debbie Reynolds 01:37
I love to talk a little bit about your business journey. So you're very much a builder. You're like a mover or shaker or a builder, and you like to spin off things and move to the next thing. You just sort of climb your own ladder, have a feeling your career. I love to hear just a little bit about your trajectory.
Mike Bryant 01:56
Sure, well, you know, some of this history is we spend several years together on this journey. But I grew up at a time in the mid-80s, where it was typical to start a big company. And that's where the path that I took and in looked at Eastman Kodak Company, IBM Xerox were the big three that I was focused on even kind of through undergrad and I had interned at Kodak. And when I, when I was applying at Kodak, they were really driving growth in their b2b division. And I drew what I thought was a short straw at the time. And my first assignment after 16 weeks of training was to tackle the legal market in the upper Midwest, Minneapolis. So I didn't really know anything about how lawyers worked and how law firms worked at the time. Based on the type of role that I was in, I really needed to understand how law firms made money and really the entire workflow. So I immersed myself in it. I was fascinated by it. And really developed a knack for that market at Kodak. And it served me well was promoted into a new division at Kodak that was more service-oriented, where just like IBM and Xerox, Kodak got into the services game. And really, it was a way to wrap outsourcing solutions around equipment and systems. And the legal market was my vertical focus as a dozen of us or so left the systems group to form and drive the growth of what was called Kodak imaging services. And I really got hooked on not just the legal market, but services in general, and particularly Technology-enabled services, which led me to kind of a jumping-off point after three, eight years in the Systems Group and three years on the services side. I moved over to Donnelly Enterprise Solutions, which was and as you know, it was a spin-out startup inside of RR Donnelly hyper-focused on the legal market and the bulge bracket investment banks, two of the most type-A clients you can find, you know, very demanding. And we embraced it. And you know, my role in that business was to start an IT outsourcing group. And you know, it was fun to be part of a startup within a startup. And that business as you recall, because I think that's about the time that we started to work together. Was a company that we took public and then ultimately we're in we were bought off the public markets buy another public company Bowne, which is when I moved to New York and really started to get more familiar with private equity and M&A in general, we started to buy businesses and integrate them into the bigger company. So, that was kind of the initial journey. But I'll pause there because I recall when we work together, you know, one of the things that I loved about you so much is that we were growing so quickly and launching adjacent service lines. And I always remember talking to you about a new opportunity, saying, Debbie, I have an opportunity for you. And, you know, you were always willing to jump into a new growth area, a new service line. And I think we're one of the first services companies that put together a, you know, Litigation Support offering for big law and you managed that engagement, that operation for what was then if I recollect, Sonnenschein Nath and Rosenthal before they became part of the juggernaut that is now Dentons, but you will always raise your hand and jumped in I appreciate that
Debbie Reynolds 06:18
And Sidley & Austin, I did that. Yes, yeah. Your path, though, in your career, really has been about digital transformation. So it's been about taking people from maybe the old way they are doing things and sort of changing or shifting the way they're doing things, but I feel like data was very much the center of that. What do you think?
Mike Bryant 06:41
Yeah, no doubt, I think what, you know, what I, what I realized at a certain point is that if, if you could enable service offerings, with technology underpinnings, you create a much tighter relationship with the client. And, you know, when you could get to the point where you knew more about their business than they knew about their business, and the particular areas that you were touching, through some of the unique metrics that you could bring to bear, it really tightened the bond, and you became indispensable. So, you know, I do think that you know, it was, it was during that period that, you know, I realized that, you know, I needed to spend more time on technology companies, pure-play software, businesses, and we began to make that pivot at Bowne. And then ultimately, you know, I really enjoyed working with the entrepreneurs, that that we would identify and purchase their companies and integrate into the, into the bigger business. So when we sold Bowne Business Solutions to Williams Lea, that was kind of a natural jumping-off point. To get more entrepreneurial, and, and, you know, ultimately, you know, move in the direction of investing in technology companies and investing and service companies now at Knox and, you know, you don't have to look much further Debbie, you know, some of the software, companies in Electronic Discovery space are so impressive to see the growth. And, you know, Relativity, for instance, is rumored to be in discussions with Nuix. At this time, and when you put those two companies together to just contemplate the scale if that combination were to come off, you'd have, you know, a $400 million business with 30% profit levels, you know, 120 million of EBITA, that is phenomenal. And, you know, to think that it wasn't that long ago that I was sitting in a tiny office sublease from Scadden. And when Andrew Seja as he was starting off the company, and now that business is worth in excess of likely $3 billion dollars a year. So you notice, just the growth of, you know, the Electronic Discovery software players alone, it's phenomenal.
Debbie Reynolds 09:41
Yes. Excellent. I agree. It is interesting. It was a business that didn't really have a name for a long time, right before eDiscovery sort of came along. So we were kind of doing it before it had the official name before a lot of people know about or talked about it. I love to talk with you about your experience in doing and buying companies and selling companies and the considerations that come across your desk, related to, you know, possibly due diligence relates to like cybersecurity or data privacy, like what concerns come up, that people talk to you about.
Mike Bryant 10:27
At one time, when doing diligence on a company, a lot of the focus was on, I would say, financial, there was a financial workstream, where you would, you know, validate the company's earnings, and you would do a quality of earnings test, basically, through a third party, you would also do, you know, there's a legal workstream, where you're looking at all, you know, the documents in the company, you're looking at insurance, you there's an operational workstream, always and that's the part that I typically get involved with, as well as Technology, third party workstream. And what's new, however, as part of that technology workstream, because oftentimes, we're buying companies that have, they have, if they're not a software company, a pure-play software company, they're certainly a services business that has technology enablement, so we're really looking at any technology assets they have, what we are doing, in addition to that more now is a complete risk assessment relative to their cyber posture, to their overall technology environment, we look at the infrastructure, we look at the specific applications in a deep way, you know, as to their rigor in the development process, their product management process, we look at the, you know, the talent behind the Technology, and kind of do a scorecard on that. But we've had to now because of, you know, well, if they don't have cyber insurance, currently, we're going to be adding it post-close. So we need to button it up and really look at, you know, how, how they've managed, you know, their environment, how vulnerable they may or may not be, and that takes a specialist to come in, we found that someone that might be good at looking at an application is not necessarily able to, to put a position statement together on their cyber profile. And so we've had to go out and begin to identify partners to assist with that work. It's really an important part of the diligence process now.
Debbie Reynolds 12:58
I think you're you end up working with companies that want to have customers that are in other countries, right. So they have a business, other countries. So that's sort of touches on a lot of privacy issues that you have to consider that you would not have probably had considered before with a business, for example, that's just in the US.
Mike Bryant 13:20
Yeah, there is there. You know, you know, because I see a lot of your thought leadership on just how, how much I think more seriously, some countries take privacy and the amount of regulation that exists, in those countries. You know, I think it's it's certainly going to trend that way here, too. Yeah. So, you know, we do have to think about the global implications of these businesses. And again, in the past, most of that would be focused on tax right locations.
Debbie Reynolds 13:59
Exactly.
Mike Bryant 14:01
You know, now, it's a much more robust risk assessment around issues of privacy.
Debbie Reynolds 14:12
I work a lot with companies that are in emerging Technology. So like, one project I'm working on is creating privacy standards for virtual reality or augmented reality spaces. And it's really interesting because a lot of it is about, you know, the movement of your hand, how it takes pictures of your eyes, the listening of ambient noises in the background, all those things create a lot of privacy issues, especially, I think, when people think about virtual reality, I think about gaming, but actually, virtual reality is really going into healthcare. So especially now with Covid-19 where, you know, literally someone could have you put on glasses, you're at home, and they're diagnosing you in some way. You know, for health. So it really is a huge area. I'd be curious to know if you were to give advice to like a young company like an emerging technology company working in different spaces, and knowing that a lot of those companies are probably seeking, you know, investor, whatever, what type of advice would you give them, especially around, you know, privacy and Technology and cybersecurity.
Mike Bryant 15:29
They're in a very high profile industry that is going to get the attention of not just the regulators but the bad guys.
Debbie Reynolds 15:45
Right.
Mike Bryant 15:47
I think they're gonna be held to a higher standard. And we've seen how, you know, facial recognition, for instance, has flaws, right, in terms of racial bias, and in the law enforcement circles. And I think there's a lot of companies that, you know, we're kind of going down the path of leveraging, whether it be facial audio or object recognition, and are really having to think through not just the technology implications of their go-to-market, but the social implications. So I think there's a whole nother dimension of, I think, responsibility and risk management, in these areas that I think that's where you need to be very sophisticated, you need to lawyer up, you need to make sure that you have the measures in place to protect yourself. And because you're going to be, you're going to be, you know, poked and prodded by both the good guys and the bad guys.
Debbie Reynolds 17:00
Yeah, I think that's true. I think that's true. What things just, it just personally, have you had concerns about related to privacy with Technology in general. I know for me, I can tell you my story. I want to hear your story first.
Mike Bryant 17:16
I think I think the part that is a little bit scary for I think, an investor, you know, someone that grew up operating businesses and now an investor is that if big firms like I mean, firms that I really respect like DLA Piper, Foley Lardner, Seyfarth, you know, and we know these, but we know the in, in those cases, we know the CIOs, you know, and so the business people that sit on top of those firms are very, very good, the best, best in class. And if they're, you know, getting ransomed, that is the part that is that does keep me up at night, you know, what, what can we do, to protect, not only at a system level, but at an end-user level, you know, to really kind of improve our posture, both technically, but also from a user standpoint, just creating more and more awareness. Think. Now granted, these are high profile targets, there's some companies that I work with that are not as high profile. But I think anybody that's collecting any PII, or, you know, credit card information, you have to be so diligent, and it's going to take some money and talent to, you know, to shore things up. So I think it's that continued the continued attacks that are taking place in there and, you know, within entities that, that I have a great deal of respect for, you know, that's concerning.
Debbie Reynolds 19:01
It is concerning. I mean, especially for a smaller business, you know, they, you know, we're seeing a lot of breaches of the news with these gigantic companies, and people think, Oh my god, what can happen to a gigantic company? Like what, what do I have or what can I do for myself? So that's always interesting. I think I have a story that I want to tell. I did some research on this, spring it on you. So over the years, we get together periodically and have breakfast, or you're like the king of the breakfast meeting, but in 2007, I lived in DC, and you sent me a message like hey, I'm gonna be in DC, you know, to hang out and we were gonna have drinks. So we ended up I worked in here the White House at the time, and so we ended up at a bar near the White House. And you know, you came into the bar we were like, so happy to see Other we're just talking, laughing and then you may not even I remember this. We looked around at the same time we were like, everybody here looks miserable. It's like, what is going on? We couldn't figure out what was going on. So we started thinking about it. What you know what was happening in Washington that day. And this was around the time of the Valerie Plame issue was going on with Scooter Libby and Scooter Libby had been. He had been sentenced to prison for 30 months. And I think he's supposed to start his prison term the next day or something. So once we figured that out, we just could not stop laughing. It was not like we were laughing at the people. We were laughing because we were like, we're not from here, because we were the only people who have any fun in this bar. He actually got off. He got his sentence got, you know, Bush commuted his sentence. So he didn't go to jail the next day. But those guys felt like he was going to jail. Yeah, he's gone to jail for sure.
Mike Bryant 20:58
Oh, yeah. No, I remember that. And it's so interesting. You were right. I think you were right on K Street. Right. I mean, you were like, right, in the capital area. And
Debbie Reynolds 21:08
that was on Pennsylvania Avenue, was a Pennsylvania.
Mike Bryant 21:12
And it was, I mean, they're literally, you know, where the Politico set hangs out, you know, you know, what bars, what restaurants and, you know, you can almost read the tea leaves as to who's in power? What's happening based on who's in the room? You know, who's having these sidebar conversations? And it's an exciting place. And, you know, I'm sure that was an exciting time for you to be right in right in the middle of it.
Debbie Reynolds 21:40
Yeah, that was a, you know, that was a very inside the beltway moment. Sure, I was going on. I love to talk about, you know, one thing that I'm really interested in, and one thing I'm concerned about is, and you touched on a little bit, it's kind of biometrics, you know, facial recognition, pattern recognition. You know, and also the bias of that, where, if you have a phone, you're probably using our thumbprint or your face. And, you know, as, even though there have been moratoriums on facial recognition used by some big companies of law enforcement, you know, still being used very much commercially. So still is like a booming industry. You know, what are your thoughts about that? Because I feel like it's just so much more data about us as being recorded in a lot of different ways. And that's an interesting one.
Mike Bryant 22:44
Yeah, no, there. There's no doubt. I mean, I think that Well, a couple of things. I think that you know, one of the companies that we're invested in is Authenticity. And, you know, Mike McDonald is the founder and CEO. And what I like about his AI architecture is that it's a multi-engine based system. So, you know, he can. He can really pick and choose the best transcription tools that are out there, the best engines that are out there for each of the use cases that he has. And, you know, there's, you know, I think more and more having a portfolio of engines to deal with identity issues. Are is the right approach, architecturally, I think, I think more and more, it gets overlooked, I think audio is more reliable than facial recognition. And when you put two together, it's even more reliable. And then there are certain AI engines that are just better trained for darker-skinned identification. You know, like there's a, there's a firm that cut its teeth in Africa and is now migrating up into the US there, they're beginning to get some traction in the US. They're just superior, and their Technology is superior at identifying dark-skinned people more accurately than some of the Technology that that was developed in North America originally. So I think it's it's a combination of knowing, you know, which tools to use for which use case and, and, and not being too tied into any one technology.
Debbie Reynolds 24:49
Yeah, I don't think you know. I know that a lot of people are very much in favor of moratoriums, which you know is fine. I agree that if if you're using Technology in a situation where it can be harmful to someone's life, it should be accurate, right? Just like evidence. Yeah. But, you know, I feel like, I don't think that Technology is going to go away. So it has to be improved. So I think having diverse people working on this problem is was definitely needed. It's funny to talk about Africa. So I was a judge this morning. Well, it was a ceremony this morning. So I was judging Cyber Women in Africa event and just blown away by the talent, Africa with like cybersecurity and stuff. So that doesn't surprise me that you say that Technology that has come out of Africa is fantastic.
Mike Bryant 25:45
Absolutely. I think it's gonna be a there's going to be a whole lot of investment coming into that continent. Yeah. From both European investors, American investors, you name it. That's, that's super encouraging.
Debbie Reynolds 26:03
Yeah, definitely. Are you seeing it? Um, I don't know if a lot of companies are really concerned, especially ones that are doing cross border or transatlantic data transfer to the EU about the Privacy Shield validation recently. Have you heard about this?
Mike Bryant 26:21
No.
Debbie Reynolds 26:22
Well, so basically, there's this transatlantic agreement that the US and the EU have tried to put together over the last 20 years. It was invalidated twice. So far, the most recent one was this year. And it really concerns, because it basically puts businesses in the middle of a kind of a dispute, if you will, between the EU and the US about how we handle data and do things like surveillance and stuff like that. So Wilbur Ross said that it is true that the US has about $7 trillion of commerce every year with the EU. So this, the invalidation of this particular thing, will hamper that in some ways, especially if people from the EU or companies don't want to move data to the U.S., So that's just that's famous is gonna play itself out. I think they're probably waiting until after the election if it ever finishes seeing how that plays out.
Mike Bryant 27:27
Yeah, hoping we have a confirmed winner by Thanksgiving.
Debbie Reynolds 27:33
Yeah, I hope so. I hope so Thanksgiving is canceled. But I mean, it seems that you know, a lot of this privacy, you know, so also an election, California does pass a new privacy regulation that creates like an agency within California to look at data privacy. So it's not, it's sort of like, kind of like GDPR and EU but not as, as robust. But it is the most robust thing that we have here in the US. So we'll definitely see how that happens. I love your thoughts. So if you have been following this at all the antitrust suits that are happening with like Microsoft, and stuff like that, or do you have any thoughts about that?
Mike Bryant 28:21
I think regardless of who wins the white house there. I think the, you know, the large technology players are going to be scrutinized in 2021. And, you know, I think I think they're, you know, there should be some oversight as to what's happening, and more than anything, to make sure that they're, the business practices are fair and reasonable. And they're creating an environment where there can be competition. There can be a healthy competition. There may need to be some intervention in some cases. But, I think it needs to be less political and just more about true antitrust issues. And really, I think, taking advantage, you know, I think there are some cases where you do get too big and too powerful, where you can take advantage of the end consumer, I think that you know, that that is all going to need to be scrutinized, but in an in a non-political way. And there's going to be there's going to be a lot of attention there. And I think the part that I think will lead to, you know, the government will need to thread the needle on is, is not jeopardizing all of the innovation that takes place, you know, and, you know, because we, that's a strategic advantage that we have in this country. So I think that you know, it's really finding that balance, and you know, I think I think it's easy to begrudge a large multi-billion multinational. Because when you see the valuations, when you see the CEOs and the wealth that they're there, you know, creating for themselves and for their shareholders, they become a target, you know, and they have to demonstrate that they're responsible with the power that they've accumulated with the wealth that they've accumulated. Or they will be, they'll be busted up. And it that's just inevitable.
Debbie Reynolds 30:33
Yeah. I don't know. I don't know if I feel like these tech companies are a different animal. So I don't, you know, it's not like big oil, where you say they're, you know, 100 oil fields, you know, split it up amongst, you know, different people, you know, they're really creating these innovations. So are you really saying you want them to give their innovation to someone else? You know, I don't know if you know, having five Facebook's be better than having one? I don't know. Right? I don't know. No, they're
Mike Bryant 31:03
they have, they have so many resources. Now, whether it's Facebook, or Amazon, or Apple, you know, alphabet, Google, they will make very strong defenses on why these businesses need to stay connected and why they're interrelated. It'll be a coup for eDiscovery professionals. If there is, you know, more merger activity at a high level, I think that I think the big deals are gonna continue to be scrutinized, there's gonna be more second requests in 2021.
Debbie Reynolds 31:39
Oh, definitely. And a lot of
Mike Bryant 31:41
I think a lot of lawsuits flying around, as well, in 2021.
Debbie Reynolds 31:45
I think so too. So I don't know, I don't know, you know, these cases take so many years to go through. So it'll be a while before we get any real decision. But one thing that I think will happen, as he said, I think there'll be more scrutiny, especially as it relates to acquisitions of other companies. Absolutely. That's going to be a super hot area. So I would love to find out if we gave you the magic wine. And privacy can be just as you'd like it to be around the world. What is what would be your whiskey about data privacy,
Mike Bryant 32:23
I think we need to solve this dilemma around passwords. Number one, I think there's got to be a better way to manage passwords. I think there. There needs to be much more awareness around ransomware and better tools for managing those incidents. And probably a little bit more collaboration and sharing across both at a governmental level and at, you know, kind of a regulatory compliance level across the world. Because these incidents, you know, they kind of roll across geography, you see it coming. And then you know, I think enforcement too, you know, when, when we can work together and identify the cybercriminals they need to be, I think there needs to be coordination around that. And there needs to be strong enforcement.
Debbie Reynolds 33:26
I agree. I think, you know, at a high level, like everyone around the world is experiencing the same thing. So I feel like if we can work find some way some common ground to work on this, that will do better, as opposed to everyone trying to do their own thing across that. And then another thing, like he said, about passwords, I thought of as I worked on a thing for MIT, and there was a statistic there, you went to MIT, didn't you?.
Mike Bryant 33:52
Yes, Yeah. I was there.
Debbie Reynolds 33:57
well, they have a statistic. This program that I did with them was it said that the average person has 90 usernames and passwords. And that is not sustainable, that is not going to work is like are you doing is getting more stuff and more passwords. It's like, it's just not gonna work. So I think I think the switch has to go where the view as an individual will be like a bank for your own all your stuff, and then you decide who you're going to loan your data to back and forth. Like, to me, that's really the way that it should probably go, I think it's gonna go.
Mike Bryant 34:32
Yeah, that's great. I think that, especially with just the growth in FinTech, everyone is so accustomed to, you know, really doing transactions. I had a friend laugh at me the other day because I wrote a check. And, like, who uses checks anymore? And I'm like, I know you're right, you know, between all the payment processing tools out there and the tools, it's digital, you know, As a way to go. And you know, I think more and more there's going to be I think adoption of crypto.
Debbie Reynolds 35:07
Oh, totally. Oh, I could totally talk about crypto. Yes. I know. So I have friends that are really they're anti-crypto because of like Bitcoin and like ransomware. But crypto is going to eat everyone's lunch. That's what I think is gonna happen. Because especially B, I think, because of COVID. Two is going to accelerate where people want more contactless payments, but the idea that you can have a currency that is worldwide, and you could get people on it, there are probably unbanked and underbanked. Which means they get more data on those people. I mean, that's gonna be crazy. I totally agree. So how can people contact you or reach you or figure out how what you're up to?
Mike Bryant 35:52
pretty active on LinkedIn, you know, up there, Knox capital, the domain is actually www.Knox-cap.com. We try to be relatively timely on, you know, transactions that were involved with there, although we've closed two deals in two weeks that we haven't been, we haven't posted yet. We'll look catch up and talk more about those in the fourth quarter. Working on a deal as well that may not close until the first quarter. That's really interesting. And the legal tech and services space that it'll be one of those that you'll probably text me when that gets announced. Yeah, that. Yeah, I look forward to staying in touch. Debbie. It's always great to see you.
Debbie Reynolds 36:40
Fantastic. I'm so happy that you were able to join us today. Thank you. All right. Thank you.
