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Trident Founder on leveraging tech to find small business potential

Eric Taylor, Trident Founder, CEO, and CIO, joins Yahoo Finance to discuss investing in underserved businesses and communities.

Video Transcript

ALEXIS CHRISTOFOROUS: Private equity firm Trident is investing in underserved and overlooked areas of the US through a lens of social equity to not only create returns for investors, but to also have a positive effect and impact on those communities. Joining us now is Trident's founder and CEO, Eric Taylor. We are also joined by Yahoo Finance's Reggie Wade. Eric, welcome to Yahoo Finance. Thanks for being here. Tell us why now is the right time to be investing in these underserved businesses and communities.

ERIC TAYLOR: Thanks so much, guys, for having me on. Now's exactly the right time. Trident is a private equity firm that specifically focuses on small businesses across the US. Quick numbers for you, there are about 30 million small businesses in the US, 160,000 of them that do between $10 and $100 million in revenues. And the institutional capital markets have left these businesses generally overlooked. We here at Trident see that as an opportunity.

It's a business I founded about 4 and 1/2 years ago. We use data and a proprietary algorithm to build a wide funnel of addressable assets and effectively figure out what's actionable. And as you mentioned, as a second or third order consequence of what we're doing, of course, after returning capital to LPs, we're thinking about how can we create social impact in the communities that need it the most, in particular, the Black community.

REGGIE WADE: Eric, Reggie Wade here. You talk about communities that need it the most, especially Black and Brown communities. How challenging was it working with these underserved businesses and communities during the pandemic? And how does that affect the way that Trident operated?

ERIC TAYLOR: Look, I think an institutional approach is really going to be the difference maker. When you've got a business like ours that's well capitalized, that has a great slew of backers, it means that we can remove unconscious bias in terms of how we invest. And that's, in particular, what the technology is used for. That really helps us in two ways. One, again, we use numerical ways to address and effectively analyze businesses. Doing that helps us remove unconscious bias in our investing.

And number two, it makes the process really consistent. That difference maker allows us, again, to build a wide funnel of assets and use the exact same process to invest in deals one and two, like we would in deals five and six and deals 10 and 11.

REGGIE WADE: Eric, a lot of people when they hear that people are investing and firms are investing in underserved communities, they, unfortunately, look at it as charity. But we've spoken before. And you say there's a real opportunity for investors here. Why do you believe that?

ERIC TAYLOR: My firm's been around for 4 and 1/2 years. We've been commercially successful during that time. We've returned 23% net. There's intentionality around diversity here. We're a Black-owned business. 60% of my people happen to be people of color. 40% of them happen to be women, and that's not women in back office roles. That's women in senior investing roles. That influences the portfolio, where 60% of our businesses happen to be run by people of color. 40% of my CEOs happen to be women.

So these things aren't coincidental. And the reason is because we think of diversity as an asset instead of as a liability. Our diversity is a major part of our success. We've got diverse schools of thought internally. I think that positively impacts the portfolio. And that leads, frankly, to better outcomes for our limited partners.

REGGIE WADE: Eric, this week, Trident announced that they've secured anchor seed funding from Robert F. Smith and Bank of America. Could you tell us a little bit about that partnership and how Trident will work hand in hand with Mr. Smith and Bank of America?

ERIC TAYLOR: Of course. You know, look, this is an opportunity for us to accelerate our growth. We're super excited about it. You know, Robert, he's a great guy. He's a great mentor, an obvious legend in the industry. And I think the difference for Robert, for Bank of America, for Moody's in particular, is just the fact that they see not only the opportunity to impact small businesses positively, to impact underserved communities, but talking about it is one thing, executing is a different thing. And we've built a track record of execution over the last 4 and 1/2 years. And this is just an opportunity for us to accelerate that. So we, here at the firm, are obviously really excited about it.

REGGIE WADE: Over the past four years, what has been the biggest challenge getting this off the ground?

ERIC TAYLOR: So, really, two things. One is building a process that works. I mentioned we've got a proprietary algorithm. We've got a number of different heuristics that we look at that are both qualitative and quantitative. That's not something that happens overnight. Building that algorithm, building that technology has taken time. And then applying it to small businesses in particular, that's difficult, right? You've got to hone it. You've got to redo it over and over and over again in some cases. And that takes time. And again, we spent 4 and 1/2 years doing just that.

I think the second thing is really getting folks to believe and understand that diversity is, indeed, an asset. We live in an industry that can sometimes not see that. And I think Trident is an opportunity to not only show the theory of it, but to actually show that we can execute.

ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Trident's founder and CEO Eric Taylor and our very own Reggie Wade, thanks so much, guys.