When Herald Chen was growing up in a small town not far from Pittsburgh, he dreamed of someday running the town’s steel mill. Years later, when he was graduating from the University of Pennsylvania, the steel mill no longer occupied Chen’s maturing career aspirations.
“My two job offers were to either go make soap for Procter & Gamble at a manufacturing plant in Baltimore or go to Wall Street,“ remembers Chen, who adds that the offers for the seemingly different jobs came as a result of his having graduated from UPenn’s Management and Technology program—a curriculum that offered a dual degree in engineering and finance.Read More
Chen chose Wall Street and in 1995 landed at KKR, the private equity firm that had feasted on leveraged buyouts in 1970s and 1980s.
Recalls Chen: “I had a front row seat for meeting many CEOs and CFOs and invested behind a couple dozen of them, so I learned a lot about what the good, the bad, and the ugly look like in these companies.”
Twenty-seven years later, KKR can arguably be seen to have been the mother ship of Chen’s finance career, a place that over time he would leave and then return to as the investment house provided him with the wherewithal to open new professional chapters—the longest being from 2007 to 2019, when he headed KKR’s Technology, Media, and Telecom practice.
Along the way, Chen demonstrated a rapport with C-suite members and company boards that distinguished him from other investors, a trait that led to a growing number of invitations to sit on different boards.
“I had figured out that I wanted to be building businesses, but I also knew that I wasn’t the smartest or brightest or most charismatic person in the room, so maybe the best way for me wasn’t actually sitting in the CEO seat but instead investing in and sitting on boards and helping CEOs,” comments Chen, who has held a number of board seats, as well as served as board chair for such companies as Internet Brands/WebMD, Optiv, Epicor, BMC Software, and Mitchell International.
With a boardroom track record that few of his CFO peers can match, Chen attributes his success in part to being a good listener. “I would invest behind CEOs and CFOs who others just didn’t understand—they just didn’t comprehend what these people were trying to do—because I would find that I could create a lot of value with them just by taking a little extra time to hear them through,” remarks Chen.
When asked to offer advice for CFOs seeking to lower the temperature of certain boardroom discussions, Chen shares a story involving notable KKR financier Henry Kravis: “When I was at KKR, I made a mistake in some of the numbers one time. It was late in the transaction, at the point where on Wall Street you’d expect to get yelled at and there would be this big blowup—but I remember Henry Kravis just getting very calm and saying, ‘Hey, we’ll get through this and come out the other side.’” –Jack Sweeney
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CFOTL: Tell us about AppLovin … what does it do, and what are its offerings today?
Chen: AppLovin is a leading marketing and monetization software platform company focused on the mobile app ecosystem. So, we’re in a space that’s actually only 10 years old, if you think about it, and just has a tremendous amount of growth potential. We also own a portfolio of mobile apps that provide first-party data to feed the machine-learning engine.
Very simplistically, three things drew me to AppLovin.
One was that the size of the opportunity in the company was tremendous. There have been some companies in which I have been able to invest that were niche in size; you would get them to a reasonable scale and then sell. This was an opportunity to really build a large platform company.
The second was just the technology that they had and the speed with which they were developing the technology—a pace that I had never seen before. Third was that the combination of these two factors, along with the presence of the then-CEO and -CTO—who are fantastic executives—just said that here was an opportunity that if done right could actually enable the building of a very large platform company. Such conditions and opportunities just don’t come up that often.Read More
Another side of it is that I like to build businesses. At KKR, I had the opportunity to help to build the technology media telecom business over the past decade. I felt that there were maybe a couple more years to go there in building it out but that the biggest impact that I could have had on that business had already been made. There were some amazing people who worked for me who are now running that group and doing extremely well without me, and it was great to see them take that over.
Inside AppLovin, we’ve moved tremendously quickly to be able to go public and to do the acquisitions that we’ve done. I think that if we execute well and have a little luck, we’re on a trajectory to build a very large platform company. I’ve learned a tremendous amount along the way, too, which is always invigorating.
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