$16m -> $75m exit (5x return); and this is just one of his deals

Today we start with a great advice on fundraising:

Start with the people who will likely say no.

Collect the no’s, get feedback. Learn their mental models.

Their objections will help you tailor your pitch for the partners you actually want.

(From a gentleman who now does capital raising for Fund II.)

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Deal-flow, deal-flow, deal-flow…

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Yesterday I also posted this on X... because I think it's an important message:

Too many folks are playing small...

Or they're playing not to lose.

Probably you as well.

But not the founders of KKR ($686B AUM): Henry Kravis and George Roberts, the tycoons of private equity.

They were also uncertain and insecure when entering into deals for which they had no prior experience. Size wise. Experience wise.

They did it anyway.

The difference between you, me, and them? No matter how much uncertainty they had... they did it anyway.

Today, years later, this is KKR’s headquarters in NYC, at 30 Hudson Yards. I’m not sure how many floors they have under contract, but it is huge.

Lesson here: “Everybody is just making it up as they go anyway.”

Take 95% of successful people and their interviews about their journeys; most of them said there were many times of uncertainty:

• Lack of funding

• Blocked credit cards

• Bank account frozen

• Loss of key customers

• Lack of product market fit

• Multiple failed businesses

• Losing 90% of their revenue

• Betrayal by a business partner for six figures

• Exceptional deals failed at the last moment

Despite everything that happened to them...

They did it anyway.

And they may even look very confident while going through all of it.

But deep down, they, too, have many questions, fears, and doubts...

Naive to think they don't...

So... If only you knew all this about these super successful folks and dealmakers.

Let's take a scenario where Mr. Kravis and Mr. Roberts invite you to dinner upstairs in their office.

They both stare at you like this, and say:

“You know - Mikk, John, Steve-  whatever your name is, we were insecure too, and we still very much are before every very large transaction.”

Knowing this:

1. Would you still be playing small?

2. Would you be playing not to lose?

Probably not...

So don’t be the one who does.

And if you’re still scared and your head is full of doubts...

“Everybody is just making it up as they go anyway.”

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- - - -

Imagine finding your life's work in your 20s, 30s, 40s, and then finding a few other people in the same situation.

Then having another 30+ years to build something meaningful together.

Simply great!

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Last week I flew to the other side of Europe to meet a gentleman in early 30s who has closed ca 10 deals and deployed around $1bn and doubled value in the last 2.5 years.

I asked people on Twitter to submit questions they would like to ask.

Then while we had lunch, I gave him my phone, so here are a few overall answers on how they made 10 deals, invested $1B, and doubled the value in 2.5 years:

Q:  How did he grow rapport so quickly at such an age to be able to thoughtfully deploy that much that quickly into deals that COULD be grown so much so fast? Those are attractive deals that I imagine many were fighting for

A:  Understand the opportunity and industry better than any of your competitors.

Be professional and quick to execute the deal. Sellers will appreciate this very much.

Q:  Did he use the Nordic model to invest?:

A:  Definitely - pay low multiples of free cashflow on entry, reinvest and keep a lean HQ. Let the acquired companies run independently, with your focus on selecting the right people, strategy and driving high impact operational improvements.

Q:  What helps him spot high-return deals before others? Most overlook them. Curious about his blueprint for outpacing the crowd. 

A:  Focus on traditional industries with solid cash flow, which are not overhyped. 

Work hard, have a deep understanding of your market. Most people have only a shallow knowledge and you can outpace them.

MY own biggest lesson from this meeting:

Many deals where they would need to pay 5-10% more despite walking away would have yielded a tenfold return in 2-3 years.

Walking away is not always a wise thing to do…

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Entrepreneurial stress, compared to corporate stress, is a different animal.

Folks who have never worked for themselves and are jumping into entrepreneurship many times don’t understand the real stress. Add family and kids, and it can get wild.

What helps is creating routines.

Routines > motivation

Exercise resets the mind, and gratitude gives perspective.

Yes, "pressure creates diamonds..."

But only if you can withstand it.

It’s important to understand that routines and systems keep you moving when emotions don’t.

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Is this the norm?

Why are the biggest operators the most open?

Had a 45-min call with a gentleman who’s about to close his first 9-fig PE fund to buy businesses from retiring owners.

A few great takeaways:

He's an expert at transforming under-optimized businesses and has multiple 3-5x outcomes.

• Recently grew a 50m company to a $160m, then sold.

• A killer GP and executive team. People with at least 15+ years industry expertise.

• Wildest and THE best part, they are absolutely bombarded with the deal-flow. Getting 20+ deals per day.

And then this:

“Shoot me your email. I’ll send our deck, side letters,sample tear sheets, sector theses. No NDA needed.”

He even shared all 15–20 deals they have under LOI: size, revenue, acquisition multiples, etc.

Contrast that with people who do things 10x smaller, who never share any details and are secretive.

-

Great news:

1. He agreed coming to the podcast 

2. His track record transforming under-optimized businesses

• $16m -> $75m (5x return)

• $400m -> $1.2b

• $50m -> $160m

3. He’s about close his first 9-fig PE fund to buy businesses from retiring owners

4. I will be asking him to share their deck, side letters, sample term sheets, sector thesis, etc.

And how they are able to get 20+ deals being sent to them per day.

- - - -

How has been the week in the small holding company?

Consumer loan company

A short time ago, we launched a credit product for small business owners, and it has been growing well, as we’ve already built a small $850,000 portfolio of such loans. There is a ton of demand for it, and we see that this will surpass our B2C portfolio very soon.

Applications (all organic so far):

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This week's podcast (A very special episode with a real family man. A father of four):

Jack from Gold Leaf buys almond and pistachio farms.

• Year 1 $2m equity

• Year 2 $8m

• Year 3 $20-30m

• by 2023 ~$250m equity (and $100m in debt)

Sor far 20+ acquisitions and $350m in assets.

A few takeaways:

1.  Hybrid model: It started deal-by-deal. They were built as an investment firm + operating company. Financial discipline with hands-on farming. It started deal-by-deal.

2. 1,400+ farms reviewed; they've bought 27 (2–3% hit rate)

3.  Many $1 million checks from HNW/family offices - patient, compounding capital fits agriculture’s decades long horizon.

4.  Start with curiosity, expect a long slog, keep learning and focus on durable, unsexy businesses that compound over time.

A great person and a valuable conversation, I hope you learn a lot.

Here are the links to Spotify, Apple Podcasts and YouTube.

That’s all for today.

Thanks a lot for reading and I’ll talk to you again next week.

Take care, PrivateEquityGuy / Mikk Markus