100x outcome with the portfolio of very niche businesses (70-80% recurring revenue)

A quick note before we dive in…

I've come to the conclusion that you want to find people who are willing to bet on themselves.

And then you want to find ways to bet on them.

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If you want to get to the promised land, which is 100x outcome on your investment, you need 20 to 30 years to do it:

*Don't take it from me, take it from the co-founder of Danaher. (If you haven't read about them, do yourself a favor and do so this weekend.)

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Here is a list that I read 5-6 times a year.

Everything I know about buying businesses after 20+ acquisitions and looking at thousands - Xavier Helgesen

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Sometimes it's best to just stay on the course and not listen to the noise.

You have a plan that you have set for yourself and decided to follow…

Then this happens:

Time flies and you discover that 2-3 years have passed and things are not as planned.

You start to seek validation from those who have done what you want....

You start looking at people who buy and invest in traditional cash flow businesses..

You look at the top 1% players and learn a lesson:

For them, staying on the course and not listening to the noise means four things:

1. Building a strong pipeline of great 10/10 businesses

2. Only buying and investing in great businesses (even if years go by and no deals are made)

3. Not getting sloppy by buying a 6/10 business

4. Not taking too much debt when times are good

Knowing this to be true, you should continue working and simply stay on the course.

You'll get there eventually.

(the more you read, listen and talk to people, the more you see that it's perfectly fine if you don't do any deals for 3.5 years and just wait. the longest I've heard is 6 years...)

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Reading a book or listening to a podcast episode of a great investment mind is like feeling them.

You’re allowed to live inside their brains.

By the end of the book or episode, you'll understand how to see investments the way they do.

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Imagine doing this every day before you go to bed.

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Recent fundraising experience (with ten key lessons):

Call #1 - not interested

Call #2 - not interested

Call #3 - not interested

Call #4 - not interested

Call #5 - not interested

Call #6 - not interested

Call #7 - not interested

Call #8 - not interested

Call #9 - not interested

Call #10 - not interested

Call #11 - not interested

Call #12 - ot interested

Call #13 - not interested

Call #14 - not interested

Call #15 - "Send me more information and I'll get back to you..."

A week passes, and that ONE person invests himself and brings 90% of the desired amount from 3 more people.

Some lessons learned:

1.) talk to more people without losing enthusiasm.

2.) the importance of timing in terms of investors' liquidity.

3.) The importance of a great investment product that investors understand.

4.) potential for healthy growth.

5.) you just never now who is interested.

6.) It takes 6-12 longer than you expect

7.) it's not just who you know, it's also who the next person knows.

8.) Trust is everything.  Start building a relationship before raising capital (all these people know me and the company we are building for at least a year)

9.) the power of social reference; one said yes, the other followed. Together they add up to a very meaningful sum.

10.) interview the investor and his expectations - it's not just about you, it's about them as well - and it gives you a better idea of ​​who they are and what they want.

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This week I spoke with a former hedge fund manager who started investing and acquiring traditional niche companies.

There is a catch though...

They start with advisory; they are paid a lot of money just for words.

No inventory, no logistics, no capital expenditures - just wisdom that people and companies pay lots of money for. Think about old-school merchant banks.

Their business model is based entirely on leverage. They don’t need to invest in factories or hire hundreds of employees. They just need people who trust their judgment so much that they’ll cut them a check just to hear what they think.

And the best part? Their business doesn't just generate cash - they give them access. They also invest in them.

Rather than just advising on deals, they take equity stakes and get seats at the table, ensuring they benefit from the upside.

I think this is an extremely smart way to do it. I also asked if he could do the same model if he was 30...he said "only the investing part, but definitely not the advisory part..."

I totally understand why.

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Great news:

We recorded the whole conversation, I will be posting it in a few weeks.

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How has been the week in the small holding company world?

Traditional business

Additional information about the deal I’m pursuing: The $12mm heavy equipment seller and rental company I’ve talked about.

I received more information last week. We sent them a more detailed offer and they sent me a few questions regarding the taxes.

I hired and talked to a tax attorney. Now waiting for the response from the seller. I will share an update next week.

Fintech/Consumer loan company

We secured 10 million euros of debt-financing for the next two years from a Lithuanian credit fund.

We are trying to raise 600,000 to 1M euros as an equity investment.

UPDATE: I have a commitment for 500,000 euros; this and next week I’m working to get additional few hundred thousands, trying to close by the end of March.

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This week’s podcast:

Swedish serial acquirers have cracked the code on how to compound their wealth (at a staggering rate!)

Their holding companies trade at 12-52 times EBITDA.

I mean, they seem to know something that the rest of the world doesn't…

What is so special about Swedes?

I got curious, so...I spent almost 4 hours reading about these folks:

And surprise, surprise, I found the best person to discuss all of this — Niklas Savas from RedEye.

I hope you enjoy it!

Here are the links to Spotify and YouTube.

That’s all for today.

Thanks for reading and talk to you again next week.

Take care,

PrivateEquityGuy / Mikk Markus