Fund I $30M; Fund II $85M; Fund III $179M

A quick note before we jump in…

One of the main reasons why KKR, Apollo, Thoma Bravo, and Partners Group have outperformed the public market is that they know absolutely everything about the company at the time of the investment.

As some of their partners have said:

"If you know as much about a public company as we do, you should NOT invest because you could go to jail."

- - - -

The only realistic way to attract the top 0.00001% of business people to your life…

• Folks who run private equity funds which have $640m AUM

• Folks who are longtime members of a family office

• Folks who lead huge organizations of 4,500 people

• Folks who are presidents of NBA clubs / Premier League Football clubs

• Folks who give $1m+ per year to charity

Again, the only way (still very slight chance!!) to attract them to your life is to LIVE an interesting life.

Period.

People want to follow people who do cool stuff.

• Be it building great products,

• be it starting and running businesses,

• be it taking risks on public markets,

• be it buying and selling businesses,

• be it raising capital.

That’s all that matters. People want to follow those who are extreme, who are passionate, who do bad*ss things.

People want to associate with winners.

So, the only way to attract those 0.0001% business people into your life is to live a VERY interesting life.

Focus on you, share your lessons and learnings, and your content will automatically invite others on the journey.

To sum it up: do cool stuff IRL and the right people will come.

- - - -

At the end of the day, what I said doesn't matter BECAUSE if you live an awesome life doing what you like, you will eventually become VERY good at it.

Which means you live an EVEN more awesome life. And that's all that matters.

- - - -

There are private equity folks that invest 45% of their $6.5b fund in just three companies.

That means the average deal size is a little less than a billion dollars.

I'm here targeting $2-10M deals.

There are levels to this game.

- - - -

On Tuesday last week I met an older woman in the old town, she is from Kuwait.

She kindly asked if she could take a quick photo of my kid (a little blonde).

I asked what brought her here. She said they are retired and have been traveling the world for the past 5 years.

"Work hard and a lot when you're young. Have as many children as you can. Then when they're married and have kids, your job is done and you can go travel the world — that's what we did and we're very happy."

Those 5 minute conversations with random people are special.

My gf and I walked on, and for the next half an hour we were wondering what they were doing and what kind of life they were living.

- - - -

The more you read and learn about highly successful deal makers, PE, VC and hedge fund managers.

The folks who keep raising fund after fund after fund...

• Fund I $30M

• Fund II $85M

• Fund III $179M

• Fund IV $305M

While achieving 4-7 moic type returns each time.

The more you realize they have skills that can't be learned...

Number 1/ They don't just enjoy investing and deal-making; they live it. They wake up in the morning and the first thing they think about, while they're still half asleep, is the company they have been researching, or one of the businesses they are thinking about selling, or what the greatest risk to their portfolio is and how they're going to neutralize that risk. (Unfortunately, you can't learn to be obsessive about something. You either are, or you aren't.)

Number 2/ Great investors and deal makers have confidence in their own convictions and stick with them, even when facing criticism.

Number 3/ Their ability to live through volatility without changing their investment thought process... that is probably the most important, and rarest, trait of all. It's because people don't like short-term pain even if it would result in better long-term results.

Yes, financial education and reading and investing experience is critical just to get into the game and keep playing.

However, those with the previously mentioned traits are still extremely rare and very often run circles around the average performing fund managers.

- - - -

These are the few ways to make money on private equity.

1. You take a business that makes $5 million in profit and turn it into a business that makes $10 million (sounds easy, but it's unreal how hard - fyi, I haven't done this personally).

2. You buy something for 5-6 times cash flow and sell it for 9-10 times cash flow (which again sounds easy, but its happening less and less)

3. And there are complex debt structure type deals (which I'm not very familiar with yet. Still learning.)

PE firms focus will be more towards the 1); transforming the company's profit from X to Y.

Private equity is a game of timing.

Funds looking to get 2.5x return on a deal — yes they can, but instead of two years, it might be five.

And growing the business and achieving the desired results — from $5 million to $10 million in profits — may also take longer. Instead of 4-5 years, it could take 7-8 years.

So, the PE firms can make the same capital multiple, but the capital is tied up for longer...

All this really affects the IRR.

- - - -

Starting a small business is the BEST way to build wealth.

A steady $180,000 annual salary is fine, but a company with the SAME revenue in the right industry could be worth $2.5 million, if not more…

Let me explain.

There are companies in the SaaS industry that are valued at 10-20x revenue, if not more.

I'm not a SaaS guy, but I know a bit about the consumer lending space, where companies trade at 3-4x revenue. I mean the private market.

Imagine running a company in this space doing just $1.5 million in revenue.

It doesn't seem like much, but the recent valuation of such a company is $5-6 million.

Now the crazy part:

Imagine growing revenue from $1.5 million to $5 million in three years.

In terms of revenue, the business is far from the big boyz league, but it is a very attractive way to build 8-fig wealth.

- - - -

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

Traditional companies

Just received a brand new database of profitable traditional businesses – 700 of them to be exact.

• $2 to $10 million in revenue

• 7+ years in business

• Last 3-5 years profitable

From there, the goal is to find the ones that:

• A specific niche

• Customer concentration

• Management in place

• Ready to sell majority of the business

Then NDA, term-sheet, banks, investors etc.

A very long journey, but you have to start somewhere.

Consumer loan company

The first few days of bond raising have gone well.

We have 9 new investors in addition to our current investors and the total raised so far is a quarter of a million.

The goal is to reach $650,000 by the end of the period (May 15th).

Take care,

Mikk Markus / PrivatEquityGuy

- - - - 

This week’s podcast:

Ever considered acquiring a profitable, sub $1-5M EBITDA niche business?

So you could spend summers on Lake Como, winters in Aspen, and Saturdays in Las Vegas at the Wynn listening to David Guetta…

Or so you could retire your parents, send your lovely kids to a private school, and buy your wife the BMW convertible she always wanted…

I don't know your exact dream, but owning a business like this makes it all possible.

I have something for you.

I believe Jules Brenner of the Industrial Succession Group just shared everything one needs to know when it comes to acquiring a traditional niche business with $1M+ EBITDA.

• How to find a deal?

• How to find co-founders?

• How to raise capital?

• How to pitch investors so they are actually willing to invest?

• How to manage it all post-acquisition?

Ohh.. and I forgot.

He really walks the talk:

• 3 acquisitions

• $20 mil in revenue

• 50% gross margin

• $4 mil in EBITDA

With a goal of reaching $100 mil by the end of 2028…

And maybe (if a few acquisitions go well) $35 mil already by the end of 2024

Most importantly, him being very open and generous with advice, sharing it all without holding anything back.

I hope you enjoy listening to this episode as much as I enjoyed recording it.

Links to Spotify, Apple Podcast and YouTube.

Thanks a lot for following the journey.