Louis Hernandez, Jr. believes entrepreneurs can make the best investors.
That's the philosophy behind Black Dragon Capital, a private equity firm headquartered in Miami Beach. Hernandez is the founder, CEO and managing director of the company, which has about $800 million in assets under management. All of Black Dragon's principals and advisers are entrepreneurs and executives with considerable experience in their areas of expertise. Their operational model, Hernandez says, distinguishes the firm as a founder-first enterprise.
That starts with Hernandez himself. He's the former chairman and CEO of Avid Technology, a developer of technology for media creators, and Open Solutions, a financial tech firm that is now a part of Wisconsin-based Fortune 500 company Finserv (Nasdaq: FISV). He recently sold Payveris, a Black Dragon portfolio company that he led, to cloud-based payment platform Paymentus (NYSE: PAY) for $152 million.
He's also focused on promoting diversity within private equity itself. According to a 2019 study from the Knight Foundation, only 8.6% of U.S. asset management firms have substantial (25-49%) or majority (50% or higher) women and minority ownership. Black Dragon is proud to say it's among that group, with 70% of leadership team consisting of women, Black and Hispanic partners.
Hernandez spoke to Miami Inno about his investment philosophy, his emphasis on diversity and the inspiration behind the name Black Dragon. The following interview has been edited for clarity and length.
What was the motivation behind starting Black Dragon Capital?
It was born out of my own experience as an entrepreneur. I started my first company in the mid-'90s in Boston and I've basically been an entrepreneur ever since. So many investors would tell me how much they wanted to help me and maybe a third of them really did. But beyond financing, there wasn't a lot [they] could be helpful with. At some point, I thought to myself, wouldn't it be great if we had a financial partner staffed with smart people who understand what it's like to really be an entrepreneur? I wanted to build a firm with people who have been in the trenches. And I wanted to show a diverse firm could outperform. That was the genesis of Black Dragon.
Why was building a diverse firm important to you?
It wasn't important to me early on. It was later, when I began to realize what kind of impact my upbringing had really had on me. I can't speak to being a woman, but I can, for example, talk about being from an underprivileged group in inner city Los Angeles. I started to think more about the value we could gain from [people] with different life experiences.
What does Black Dragon look for in portfolio companies?
We invest in three areas: banking technology, e-commerce and media technology. We look for businesses in growth industries that are being disrupted by digitation. I always tell founders: I've been in your shoes. I can't guarantee everything will work out for you, but I can tell you how I did it.
How does your background as an entrepreneur influence the way you operate as an investor?
I want our founders to know that I understand the loneliness that comes with starting a business. I know what it's like to wonder if you're doing the right thing. We're here [at Black Dragon] because we know what it takes to build something. That affinity is a powerful one for entrepreneurs.
Where did the name Black Dragon Capital come from?
Most interpretations of a black dragon have to do with leadership and power. [They] protect you so you can do good work. The idea was we don't want to do your job for you, but we want to take the noise of out life so you can build the best business.
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