Amex Global Business Travel: The World’s First AI Take Private with Long Lake CEO Alexander Taubman

Alexander Taubman: So we've taken an approach since the beginning of investing very heavily in our horizontal AI platform, which we call Nexus. I'd say roughly 80% of the infrastructure is shared across the verticals. And then there's a lot of work to take it and deploy it into those end markets. And the deployment involves mapping workflows, understanding data sources, cleaning up data sources, integrating with them to make them easier for the models to access. And sort of our next platform sits in between the models on one side, and we're model agnostic, and the data sources, the skills, the workflows of the business. And so that takes a lot of customization and significant applied AI engineering capabilities, which we've built at Long Lake.

Alexander Taubman: We think that you can drive better win-win business outcomes with deeper alignment. And so by actually owning the companies and owning those customer relationships directly, we can drive better results. Software companies are wonderful. We partner with many of them. But when you're just selling software and you don't actually then care what happens with the business outcomes, you just don't see the same business outcomes. Our team views our employees and our team members in the field as the customer. And that feedback loop internally, that's the other point is we have a much tighter feedback loop. So, you know, the old Skunk Works thing of you want the engineers in the factory to be co-located so you can have more innovation. That's what we have at Long Lake. So our team members and our engineers are together in the field all the time. I think there's, of our engineering team, they're probably in 20 different states right now, sitting with team members across our architecture business, across our HOA business, across our HR services, or specialty tax business. And so there's sort of, and there's a deep amount of change management that's involved. So this is a lot of, sitting with the team members, understanding their pain points. And so there's a real like solutions orientation of how do we take the pain point, and then we build a tool within Nexus to solve it. And that feedback loop is really important.

Alexander Taubman: Yeah, so because we were purpose-built from day one to kind of be this cross-functional company with technology and DNA, change management, and M&A, we were able to attract, you know, the right type of people from network. And so I think 100% of our first 20 people were through network. We knew them really well. And people from, you know, places like Palantir, Ramp, Robinhood, some of the top glean, some of the top sort of modern AI and data companies. And so, Rasmus, our co-founder and CTO, he and I were connected through one of our, early investors and board members who've, we've all known each other for kind of 15 plus years. We all started our careers together. And it's really rare, by the way, I think for many business people to have those deep technical networks, like what I've observed is that often these are separate worlds. And technologists are very bad at hiring business people early on, at least in their careers. And vice versa, business people tend to be awful at hiring engineers. And so you end up with these mismatches on the early teams.

Alexander Taubman: Yeah, so because we were purpose-built from day one to kind of be this cross-functional company with technology and DNA, change management, and M&A, we were able to attract, you know, the right type of people from network. And so I think 100% of our first 20 people were through network. We knew them really well. And people from, you know, places like Alantir, Ramp, Robinhood, some of the top glean, some of the top sort of modern AI and data companies. [...] our private equity team comes from, our M&A team comes from top private equity firms. So Manny, one of our co-founders and M&A lead, came from GTCR. He actually worked on the most profitable deal in their history the month before he left to come to Long Lake. [...] We have folks from Blackstone, TPG, HIG. And mostly the reason they come to Long Lake is because, you know, even though these firms are extraordinary firms at what they do, they're not AI native. And so I think for those subsegment of those M&A professionals that really believe in our thesis, there's not many places that look like Long Lake today.

Alexander Taubman: This is a 111 year old company. It was started in 1915 by American Express as a way for them to get their travelers' checks customers out of Europe during World War I. [...] So I mean, these are businesses that have navigated a century plus worth of technology transformation. And so, and we think they're going to be, it's going to be an extraordinary franchise for another century to come. [...] the reasons are, it's a mission critical service. It's high cost of failure. Most trips are revenue generating. [...] the customer trust that this franchise has built over 100 years is really extraordinary. [...] our vision is to really double down on the company's existing AI transformation strategy. And we see it as, any industry that we operate in, we see our Nexus platform as giving our team members superpowers, deliver better customer outcomes, faster response times, faster disruption resolution. And imagine basically you're a travel counselor with AI superpowers. That's kind of the future we envision for MXGBT's customers.

Alexander Taubman: We have had a really good, our message has really resonated with business owners and management teams, I think, because I think it is solving a really important need, which is having a long-term permanent capital partner is already a wonderful thing. But having that partner with deep applied AI engineering expertise and a platform that you can deploy day one. Because these folks never see anything like that, right, in terms of the industries that they're currently in. Yeah, we have to, you know, AI is very, very under penetrated. It's probably around 1% penetrated in terms of real enterprise AI use cases. And when you think about sort of the, you know, the overall economy, first of all, 99% of businesses in America are small businesses, and they don't have access to the resources of big companies. But even big companies, are having a hard time figuring out how to drive maximum impact from AI. So we are sort of a, we're solving many needs. And in terms of the philosophy I mentioned before of, we've kind of tried to design the product you want to use as if we were a seller or if we were a management team, to be the optimal partner. And that's how we've designed Long Lake. And so we have this cross-functional team. They become your partners day one. I mean, you get to partner with Varun or you get Varun, Taras, Pratik, and Jason and our extraordinary engineering team will basically live in your office for the next two years, helping you fix all your problems. It's a pretty good value prop. And so, and then we also encourage rollover and equity alignment from existing shareholders or management and founders. And so in our first for verticals, service lines that we've gone into, we have significant rollover participation from the original founders and leaders.

Alexander Taubman: I'll tell you, so this is kind of a non-obvious thing that I've observed, which is actually most of these service companies are growth oriented. And most of these founders built these companies from their bootstraps over 20, 30, 40 years by knocking on doors and, you know, figuring out how to, you know, convince people to use their service in a certain market. But it's actually now, it's really painful to grow because in these industries that are very labor intensive, if you grow 20%, you might need to go hire another 20% people. And then you got first, you got to find them, you got to train them, then you have to manage them. And if you're already making a lot of money and you're kind of, you know, you don't, you know, it's this, and then by the way, so you do all that work to hire those people, and then you only keep 20 cents on the dollar of every incremental dollar of revenue that comes in because, you know, most of it goes to incremental labor. So that's like a very high marginal tax rate essentially on the growth activity. So what we've done with AI is when you make your existing teams 30, 40% more efficient and they can handle more customers, it changes the whole mindset of the organization. Now you're growing, you look like a software company now where you're now growing with high incremental margins and that allows you to invest more in growth, be more growth oriented.

Alexander Taubman: I'll tell you, so this is kind of a non-obvious thing that I've observed, which is actually most of these service companies are growth oriented. And most of these founders built these companies from their bootstraps over 20, 30, 40 years by knocking on doors and, you know, figuring out how to, you know, convince people to use their service in a certain market. But it's actually now, it's really painful to grow because in these industries that are very labor intensive, if you grow 20%, you might need to go hire another 20% people. And then you got first, you got to find them, you got to train them, then you have to manage them. And if you're already making a lot of money and you're kind of, you know, you don't, you know, it's this, and then by the way, so you do all that work to hire those people, and then you only keep 20 cents on the dollar of every incremental dollar of revenue that comes in because, you know, most of it goes to incremental labor. So that's like a very high marginal tax rate essentially on the growth activity. So what we've done with AI is when you make your existing teams 30, 40% more efficient and they can handle more customers, it changes the whole mindset of the organization. Now you're growing, you look like a software company now where you're now growing with high incremental margins and that allows you to invest more in growth, be more growth oriented.