By Lauren Bailey
Tech-entrepreneur-turned-investor Michael Hyatt approaches his family office investments through a builder’s lens, taking a long view to capital deployment, particularly with private equity allocations.
Private equity investing isn’t for the faint of heart, he said, in an interview with Markets Group. “It takes patience, operational rigor, and a whole lot of nothing. The hardest part is resisting the urge to act. As an operator, I had to completely rewire my entrepreneurial instincts.”
Moving fast to fix problems or build foundations for enterprises comes naturally to entrepreneurs, he continued. “When something broke I jumped in. When something looked promising, I chased it. But as an investor that mindset can backfire.”
Often the smartest move is to wait, watch, and let things unfold, Hyatt added. “I had to rewire my instinct to optimize and control to instead learn to back the right people and give things space. Patience is not natural to most operators (and certainly not me!) but in this game it’s a competitive edge.”
In the 90’s, Hyatt and his brother built Dyadem International, an engineering software firm they later sold to IHS (now IHS Markit) in 2011 for nearly $100M. They also co-founded Toronto-based BlueCat Networks with their father in 2001, after seeing limitations in existing DNS solutions. In 2017, they sold BlueCat to Madison Dearborn Partners for $400M, retaining a significant equity position. In 2022, it was sold again for more than $700M to Audax Private Equity.
He now runs the Hyatt Family Office with his chief investment officer, Elmer Kim, which deploys capital in strategic thirds to its allocations.
From Dragon’s Den to capital deployment
Establishing the family office was a natural next step for Hyatt, a former “dragon” on Next Gen Den, an online iteration of the Canadian Broadcasting Corp.’s popular Dragon’s Den reality television show that sees investors hear pitches from Canadian entrepreneurs seeking seed dollars, similar to the show Shark Tank in the United States.
The office invests a third of its capital across public markets to traditional S&P 500 public equities, another third to private equity, including late-stage growth equity and large institutional rollups, automation, secondaries, and distressed turnarounds.
The bulk of his public and private equity investments are designed for optimal returns with just a little patience and persistence. “Cash pays 3% to 4%. The S&P averages 8-10%. But good private equity should give you 600 – 800 bps above if you’re willing to lock up capital and wait.”
For example, the office recently bought into a private equity fund focused on automation, specifically robotics companies with what he characterized as solid profit profiles. It also invests in distressed debt companies that have successfully navigated turnarounds, as well as funds that do large roll ups. Since selling his company to Madison Dearborn, he’s opted to stay invested in the organization.
“I stick to what I understand. We don’t chase fads. If this were five years ago, we would be discussing blockchain all day. Now it’s [artificial intelligence].”
While Hyatt is a big believer in AI, he believes the industry will experience some fatigue and fallout before the real winners emerge.
The final third of the office’s investments goes to late-stage venture capital, which is where Hyatt brings operational experience. He noted the stark contrast between ownership and partnership, pointing out that the difference really lies in just how much stress is worth the upside.
“You’ve got to ask yourself how much stress you’re really willing to endure. Buying and operating a business means getting in the boat and rowing — it’s a lot harder. You’re aiming for a much higher return, but that also comes with significantly more risk. But if you’re going to fly to different countries you, sit on boards, deal with management turnover, and live through all that operational friction, you better be making a premium to the public markets.”
When sussing out investment strategy, Hyatt takes an approach more akin to an operator, not just betting on outcomes but identifying opportunities to build a lasting footprint. “First, I research if the market is growing, underserved, and if we can help to build a real upside. Then I focus on the team. Can we work with the CEO? Is the management team coachable? Can we have honest, even uncomfortable conversations, and come to a resolution quickly and effectively?”
What he looks for in a partnership are people who can cut through the noise, stay focused on what matters, and do the right thing under pressure. “I don’t invest unless I believe we can move fast, build trust, and create something valuable together.”
The office has backed several startups, including sustainability-driven logistics provider GoBolt, Canadian photonics-based quantum computing company Xanadu, fintech platform Float Financial Solutions Inc., generative AI tax research platform Blue J Legal Inc., cloud-based legal management platform MinuteBox, and data security platform DataStealth.
The Hyatt brothers were also founding partners of the Creative Destruction Lab at the University of Toronto’s Rotman School of Management.
“We just try to back great entrepreneurs in great markets. And when we invest, we assume we’re holding for at least 10 years.”
AI as a gatekeeper
On any given day, Hyatt may get dozens of pitch decks from startups or funds.
To reduce time spent reading through each, he uses an AI tool to weed out the most compelling proposals. The model is pre-programmed with the lenses he uses when evaluating companies, including business model viability, founder history, competitive landscape, and market dynamics.
“It analyzes the company from all angles, scrapes the web for background intel, checks out the founders, gauges the competitive environment, estimates potential saturation, and ultimately scores the opportunity,” he said.
Within minutes, Hyatt said he gets what would take a team of three associates a full week to produce. Most of the time, he is in full agreement with the tool, but he admits that on rare occasions, he may catch something it missed.
“The technology gives me a sharper lens, a broader perspective, and more time to think strategically rather than just swim in a sea of pitch decks. So, if you’re sending me one, just know: my AI is your first audience. And if it makes the cut, then I’ll grab that coffee.”
