Skip to main content

Private Equity Q&A: Douglas T. Lake, Jr, Godspeed Capital

Investing in the defence and government services sector requires a robust network, a deep subject matter expertise, and, just as importantly – a lot of patience. AlphaWeek’s Greg Winterton spoke to Douglas T. Lake, Jr, Founding Partner at Godspeed Capital Management, to learn more about his views on the sector.

GW: Douglas, to begin, what’s the rationale for investing specifically in the defence and government services sector? Are there any moats around this sector, for example?

DL: The rationale is that Government budgets are transparent and consistent and offer a backlog element that delivers long-term visibility into earnings and cash flow, a model that lends itself effectively to private equity investing. The defence and government services sectors are huge and offer numerous sub-sectors with compelling growth. And yes, there are various moats around these underlying areas to include past performance qualification requirements, security clearance requirements, and customer intimacy, thereby creating defendable positions for long-tenured incumbents.  

GW: Godspeed’s investment timeline isn’t typical of the private equity industry. Tell us more about your approach here.

Douglas Lake
Douglas T. Lake, Jr

DL: At Godspeed, we focus on building innovative and differentiated strategic assets of scale over the long-term. To this end, we work closely with our management teams on organic and inorganic growth strategies with a view towards a ten-year horizon. This long-term planning approach equips our management teams to make the right investments today to drive growth in the future while enhancing our support of our customers and to ensure our employees continued professional development and advancement. We have found that this long-term focus and deep partnership generates the best results. 

GW: A recent investment Godspeed made was in Image Engineering Group, which you bolted on to your Huckabee Architects platform. What are some of the synergies you see here and what are your future plans for the Huckabee platform?

DL: The acquisition of Image Engineering Group brought a new engineering capability into the Huckabee Architects platform, which focuses on providing Architectural, Engineering, and Consulting (“AEC”) services and solutions to the education and government markets. Day one, there was a meaningful revenue synergy opportunity. Image Engineering Group was the third acquisition into the platform, alongside Rachlin Partners and TSK Architects, thereby, diversifying and expanding Huckabee’s services and solutions offering while enhancing our competitiveness in our core markets. In particular, now Huckabee can insource engineering work to the Image Engineering Group team that was previously subcontracted out to other firms, enabling us to keep more gross profit in-house. It’s a win-win.   

GW: Cybersecurity is as hot a topic as there is right now. What are some of the challenges in investing in cyber providers right now? And isn’t there a bigger picture that this technology is sellable to customers outside of defence and government, and is that part of the plan?

DL: Admittedly, the commercial cyber market is experiencing challenges as of late in line with the broader technology sectors, including over-hiring and a hyper focus on rapid revenue growth with no profitability. This is not where we focus at Godspeed. The defence and government cybersecurity markets offer a stable and visible alternative, alongside growth. Through our current cyber investments and new opportunities that we are pursuing we see significant growth potential that is profitable. One challenge is the evolving competition with the commercial technology sector for technical talent, but with the recent market shake-up, this competition for talent appears to be shifting towards defence and government services companies. We remain disciplined and focused on the defence and government services markets where we believe we have a competitive advantage, based on our sector specialization and the firm belief that there are meaningful and profitable investment opportunities in the defence and government services cybersecurity market.

GW: Lastly, Douglas, what are some of the technologies that might be nascent today but will, in the next, say, five years or so, be more embedded in a government’s defence strategy?

DL: This industry is evolving, and we are excited for what is to come. Looking out on to the horizon, the key technologies top of mind right now for our team are artificial intelligence, advanced robotics, hypersonic capabilities, kinetic cyber, lasers/directed energy, and advanced manufacturing.

Douglas T. Lake, Jr, is Founding Partner at Godspeed Capital

Content role

© The Sortino Group Ltd

All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency or other Reprographic Rights Organisation, without the written permission of the publisher. For more information about reprints from AlphaWeek, click here.