Building the top 0.0001% PE firm

A quick note before we jump in…

Private equity, like everything else, is a business of people and trust.

Hearing industry legends say that some of their best LPs said no to two funds before they finally came in.

So what is the right mindset here?

I believe it's, “You just haven’t seen enough of me to make a decision.”

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They’re watching, just make sure you don’t stop playing.

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It's wild!

Who would have thought that manufacturing and selling protective coating material could be so profitable.

(This is Remmers Group and these are the numbers for one of their sister companies in a very small market.)

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A real so-called old money story:

Yes, you can start a raw material trading business in 2012 by working as an airport security guard.

Yes, you can grow that revenue to $1 billion a year in 10 years.

Yes, you can stay private instead of doing an IPO because you want to.

Yes, you can now work little hours a day and spend time with your family & newborn.

Yes, you can read and write about tigers and lions for half a day.

Yes, you can raise $40 million for your country and your soldiers to buy tens of thousands of helmets, bulletproof vests, and other tactical gear.

Yes, the best investment advice were that don't trust anyone.

Yes, these stories and people are real.

Had a conversation with one, thankfully I hit a record.

The podcast episode will be out next week!

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When acquiring a company, you want to become a SUCKER…

An information sucker.

It’s because your ability to absorb everything from the seller’s brains can improve your ROI many times.

While meeting the seller, your goal is to understand the strengths and weaknesses of the business, the seller, and the industry.

Between the numbers in the financial statements, the seller’s story, and the industry research you execute, you are compiling the story behind the business:

• Where has it been

• Where does it go

• Where should it go

• What you bring to the table.

After doing 100 such meetings in last two years, there is one surefire way to do it well:

Become an exceptional active listener.

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When building a top 0.0001% PE, VC or asset management firm, it ALL comes down to a few things...

And 95% of it is your fears and doubts.

Here's a solution to overcome it and make it a reality.

Take these gentlemen:

• David Bonderman from TPG had his fears and doubts

• Josh Harris from Apollo had his fears and doubts

• George Roberts from KKR had his fears and doubts

• Marc Rowan from Apollo had his fears and doubts

One way or another.

The way they overcome it?

They refused to quit and they stuck around long enough.

So can you…

You stuck around long enough… the right people will find you.

They may already be in your life and you may already know them for a while.

You’ve talked about different investment opportunities, be it traditional companies, real estate, DTC, SaaS, fund-of-fund, providing debt, B2b, B2B, you name it.

The people you’ve discussed deals and structures on different industries.

The people you’ve maybe worked together with, had multiple breakfast, lunches, dinners…

Hours long discussions.

Events you’ve done and hosted together.

It’s the people who don’t need to motivate, but it’s the complete opposite…

They motivate and surprise you instead.

• Be it with their work-ethic,

• Be it with their commitment,

• Be it with their knowledge, creativity and experience

• Be it with their courage to say, “let’s go do it.”

These people are real and they exist…. but ONLY if you stick long enough.

Once that's in place, it comes down to having the deals.

Same thing here.

You stuck around long enough… the right deals will find you.

The ones where you can buy 3 dollar notes for 1 dollar… the so-called once-in-a-lifetime difference makers.

Deals that almost scream on how good they are.

The deals when done and shared with fellow fund managers: “Really?? You're kidding?? So good, I don’t believe you!”

The ones that give you that push, trust and confidence as a fund manager and investor.

Finally, the capital.

Work the same way.

You stuck around long enough… the right capital (and the necessary amounts) will find you.

The best LPs spend years watching you.

You then do what you set out to do. Your behavior is always as you said it to be.

They then crush you on DD for the first one, double check every cell of your pro forma.

Question everything. Create discomfort that ultimately (if it’s a good fit) will lead to trust.

If all goes well, they’ll be a repeat investor for YEARS (and tell all their friends).

All of this… again, ONLY, if you stick around long enough.

Btw, sticking around long enough doesn't mean you're there, just waiting for things to happen or smth.

No, no, no, my friend.

You sticking around has a VERY high price that most folks will never be willing to pay.

The good news: You probably already know the price, but haven't decided to pay it.

Once the price is clear and you even know what to do next, it then boils down to the fear and doubt we talked about earlier.

And you, overcoming those fears and doubts…

But you know what?

With that comes the good news too:

You simply refuse to give up and stick around until you find the people, deals, and the capital.

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"PE firms sell businesses to the high bidder. Owners sell businesses to people they like."

- John Caple, Founder at Hidden Harbor Capital Partners

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How has been the week in the small private equity world?

Consumer loan company

Something pretty cool happened!

I started sharing my journey of the small companies we built here in Northern Europe.

A gentleman sent me a DM around 9-10 months ago.

"Hey, let's have a chat, Mikk."

Something along these lines.

We've been in touch since then - I've been giving updates on how things are going and what we're building.

Recently, it became more concrete - the quality of our portfolio, the size of the market, expansion plans, etc.

A few weeks ago we signed the NDA and I sent the materials.

Today he said they have an investment committee meeting tomorrow and are considering investing a $1,000,000 ticket in our operation.

This may be a typical day at the office for many of you, but to me it is surreal.

Although even if they don't end up investing, it's all good and still pretty crazy that it all started with a little hello here on Twitter.

Traditional companies

As I work on a few things, I'll keep you updated on where there is something to mention.

Take care,

Mikk Markus / PrivatEquityGuy

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This week’s podcast:

If you are ever considering buying or investing in a profitable small business…

Or you want to build a holding company where each company is run by a great CEO...

Here's my talk with Xavier Helgesen, where he shares everything he knows about buying businesses after 20+ acquisitions and looking at 1000s

• Currently 17 companies in the portfolio

• Revenue $100 million+

• Spends plenty of time with family and children

Pay for Quality of Earnings even on small deals.

The best way to find a CEO for a business is to ask the seller who has asked about buying it in the past.

Look for the smallest, weirdest niches. Less competition, greater margins.

We discuss:

• Everything he knows about buying businesses after 20+ acquisitions and looking at 1000s

• His MEMO to his 25-year-old self that he posted on his 45th birthday

I hope you enjoy it!

Links to Spotify, Apple Podcast and YouTube.

As a thank you for following the journey – let me know if there is anything I can do to help.