Compound at TRIPLE digit rates

A quick note before we jump in…

More and more people have started sending me deals. Good deals.

Here is another one:

The same product for 25 years. 99% Estonian market. 15-20% growth per year. Same % profit every year.

Get on my list here and I’ll send you more information about the deals.

Before getting into the list, a little about me:

• I don't have a crazy IQ in finance, but I know people who do (they want to join us at some point)

• I have been on this journey of building HoldCo for the past two years. Biggest lesson I've learned: Don't screw up your first deal. That's why I'm in no rush!

• I have called 300 companies and then met with 75. There are some great opportunities out there.

• I build in public on Twitter, in front of 30,000 people.

• I recently launched a podcast where I have access to very smart people (I'm recording an episode today with one of the most respected high stakes poker players in the world. He's also an investor!)

In September this year I was visited by a very experienced investor. We looked at 7 companies and I learned very quickly which company is good and which is not. And what type of deals they are looking for — Niche wise. Market wise. Brand and moat wise. Valuation wise.

I learned some incredibly valuable lessons that I think changed the way I look at investment opportunities.

That being said, I'm not the smartest in finance as I don't have a Goldman Sachs, Credit Suisse or PE fund background, but as a lifelong sales person...

I know with enough determination and the right talent. We are building something very interesting for both - hopefuly you, our investors and our employees.

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Favorite piece of leadership advice from a man who runs of $600m aum fund:

Decentralize your operations.

“Hire very smart people and leave them alone, let them get on with it.”

I know a lot of companies that have huge overheads and huge head offices.

We try to decentralize operations which means each silo of our business has all the talent there rather than at the head office.

They are one the ground making change happen.

What does innovation mean to your business?

For us the biggest innovation is being very smart about our balance sheet.

How do we fund our future growth?

Being very greedy about our equity (not just selling to anyone who’s willing to offer us capital).

It’s all about how we structure growth, how it’s fueled. (using cash flow and debt)

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He added, we ran them nicely, we ran them lean.

And we’ve just reinvested those profits so rather than leaving those profits to pay down debt quickly or for the improvement of our lifestyle.

This is how we have been able to compound at TRIPLE digit rates for seven years.

We actually use that to continue buying great businesses at really great prices.

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If you look at the Forbes billionaires list.

Btw it's quite fun to read once a year.

There's about 3,000 billionaires, which is a tiny group of people who control the majority of everything around us.

The single biggest contributor is NOT technology... to get them to that position.

The single LARGEST contributor is private equity ownership.

This does not necessarily mean setting up a private equity fund, but it's the private ownership of companies.

Why not public stocks you ask?

Because there is significantly less arbitrage…

At the end of the day, it's all about how you can buy $10 million for $3 million.

That's the question you should ask yourself.

This is only possible in private markets.

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To give you an example on how to buy these dollar bills for 30 cents:

The same investor who visited me a month ago shared a story:

"I had a friend who bought a business that did $1 million in revenue and $110,000 in profit…at least the seller thought it was $110k. In reality, the profit was $350,000. So the seller thought he made 8x multiple, although in reality it was 3x. Such deals do exist.”

Wealth creation point of view, this is only possible on private markets.

Private > public

*Yes, there are very rare occasions in the public markets where you can buy a share of a company at an extreme discount, but again, it's very rare.

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You never know where the best deal will come from, said by the guy, Sameer, who runs a $600m aum fund.

“The single most valuable thing for their group, and what is putting food on the table…”

Dealflow

He went to a launch with a guy who kept following up.

Sameer said he shared all the secret sauce and a few months later the guy who he helped sent him a deal.

A deal which they could buy 4-5x EBITDA when in reality it’s probably worth 8x EBITDA.

Sameer said he doesn't hold back when it comes to giving advice to people asking for help.

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When it comes to relationships, “a lot of the technical knowledge is useful but actually the soft skills are probably… As you rise the ranks at your own fund or at a bank or an investment fund, the guys who can make it rain…

That is all relationships.”

Good news below.

You can practise, practise, practise.

As speaking of practice it all comes through experience.

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BUSINESS UPDATE!

Consumer lending company - we are selling our bonds.

This week, fewer calls.

So far, together with last week we have 7 people/companies have decided to invest a total of $140,000.

• Individual 1 - $30,000 over 1 year (12.5% ​​interest)

• Individual 2 - $5,000 over 1 year (12% interest)

• Company 1 - $50,000 over 1 year (12.5% ​​interest rate)

• Individual 3 - $5,000 over 2 years (12.5%)

• Company 2 - $10,000 over 1 year (12.5%)

• Company 3 - $50,000 over 3 years (13.5%)

• Individual 4 - $10,000 over 3 years (13.5%)

The goal is to consistently add $200,000 worth of bonds per month. (So ​​if you want to join us in co-investing, get on my list here and I’ll send you more information about it.)

More good news:

• We are now profitable after two and a half years of operation

• As owners, we have invested over a million euros in equity

• When coming to Estonia, Tallinn, come and visit us, you will see more closely what we do. (I really mean it. Many investors have already visited us).

I had my little one visit me the other day, again!

Since starting the company, we have tried to be as transparent as possible.

On an average day we finance $10k to $20k worth of loans. All organically.

Take care,

Mikk aka PrivatEquityGuy

P.S. In case you want to see our future deal flow, get on my list here and I’ll send you more information about the deals.

Lastly,

I have interviewed eleven people on the HoldCo Builders podcast. People have said they loved the show. Which is pretty cool.

Here's a recent one with Sacha:

As always, thanks a lot for following the journey!