Best industry/job for entrepreneurship?
news flash: sorry kkr MBA-associates yall are never reaching even 50m plus net worth ever post ZIRP and multiple expansion.
Been reading a ton of the Forbes list mfs stories, and it seems like unless you’re the top macro PM at citadel during 2022, generational wealth achieved in one lifetime usually requires personal risk taking through insane leverage combined backed by a structural or cyclical tailwinds at the right time. (E.g. the internet, lng adoption in the US, digitalization in emerging markets, globalization of commodities markets etc)
I realize that oftentimes being in the right place at the right time got these guys their ideas that allowed them to become wealthy, and it makes me wonder what industry do yall think is the best place to 1. position yourself to know about insanely mispriced quality assets that can stably compound 2. Even have the credibility that will convince investors to entrust you with their money if you’re not nepo 3. Give you operational experience to actually be a good business owner once you’ve bootstrapped your deal.
If you read about a lot of the guys on the Forbes list, it’s not clear to me that their intelligence or hard work got them there, but what is admirable is their ability to size up and really go for it.
That being said, what career out of undergrad actually gives you the surface area to be exposed to good opportunities that you can personally leverage connections and debt to acquire while not having to go live in boston and get 3 masters while earning 50k a year so that you can discover some niche drug that you sell at at 3600% markup.
Thought about some ideas to get us started; curious to know what yall think.
1. Private equity - obvious. Constant LBO reps and analyzing businesses. Always on the lookout for deals and also have boardroom XP for street cred. Probably gives some LP credibility but fundraising is really a different beast that idk a PE vp could realistically even bootstrap a deal like that.
2. Commodities trading - learn flows and supply chains. Cmmodity houses Increasingly larger players in infrastructure. Could pull of a Kinder type move with LNG infrastructure where you buy assets from your former employer for dimes on the dollar. Not to mention you’re getting high cash comp and good aura. Also the industry seems pretty Wild West relative to Wall Street and you personally interact with tons of important counterparties and gain the personal trust of many UHNW individuals since your image is everything in commodities whereas you don’t even know your LPs until you’re senior in PE, and even then do you really own those relationships?
3. Consulting - don’t know much about it, but seems like it could be kind of light on the valuation skills and heavier on the operational stuff. Could be great for distressed buyouts and turnarounds.Not sure about this.
Let me know what you all think.
Bump
I think it’s an early career in Real Estate (REPE/Development)+______ (specific knowledge in a growing field and relationships with capital, strategic partners, and governments).
real estate is a great field to see asset type and geographic arbitrage, and hone your long term visioning, while helping you develop conviction (a killer instinct). End of the day, there are multiple ways to achieve sustainable success, including the most likely which is doing well due to your knowledge of local opportunities and nuances. That’s less easily commoditized.
Working for brand names and smart investors (thus having strong academics and hustle) could help you develop the background for attracting investors.
With a development skill set, you’ve created a multi-million dollar business from scratch. Doing this repeatedly and seeing the full investment cycle gives you a playbook to start other types of businesses. You really learn how to delegate and “work on the business” instead of getting stalled “working in the business.”
When you do start something on your own, it will probably be small. For example, I worked on over $10 billion in investments via my work (around 50 deals) before starting my first company that cost $2.3 million to start. You stack these experiences, and learn from the past.
To add to my observation. If you’re in college, find one long term trend you are interested in that is still out there in the future. It’s ok to dream.
For example, the space industry. Say, you love space stuff. You’re in college. You plan to be in finance right after college, but you have this passion for space. You join the Space Club at your school; rub elbows with engineering students. You go to a space conference as a student. You read books about the space industry. Read message boards. You graduate and the first five years of your career you are doing finance and real estate. You’re analyzing asset intensive investments (so happens to be buildings). The mega fund company you work for has a small team in a different city that is investing in industrial/R&D buildings around a growing space port. You email them and introduce yourself and you keep in touch. You read the Investment Committee Memos, and learn all you can. Meanwhile, on your own dime, you are attending conferences.
One day, a big economic downturn happens and you are laid off. You say, F* it I’m going to get off the corporate hamster wheel for just a while. Nobody is hiring anyways. You find a small space company that does a particular service for the rockets, let’s just say, they store the fuel for the rockets. They are looking to expand to this other space port in a market you covered at the MF. You cold intro yourself and drop the names of the players your past fund invested in. Things pick up from there…
Something similar happened to me. Since my undergrad I was really interested in demographics and aging population. I studied sociology. After flirting with law school, I decided to get a masters of accounting. I became an auditor, and parlayed into an investment analyst at a large REPE. I was in SF, but I would bug the guys in Atlanta who had a specialized fund within the MF for senior housing. I later got laid off during the Great Recession and started looking for opportunities in senior housing in my city. I found a company that was experiencing distress and when the CFO left, I started helping them right the ship finance wise. I used that experience for my MBA applications (Berkeley Haas) and also went to work for a developer. Eventually, starting my own companies in senior and mental health, starting at age 35. My prior background in real estate gave me a great foundation.
Having this long term passion, helped me to never compare myself to my peers. I played my own game, because I knew for myself it would work out in the long run.
I think this path is repeatable.
I’m curious though would something like infra PE be in a similar category since it gives you ability to assess tangible asset prices thoroughly, while relying upon intangibles less to expand the business (brand image, management, culture, etc)
If you think about it the infra business is pretty similar to real estate in that it’s a stable cash flow generating hard asset that allows for insane leverage that is also fragmented across different regions. What would you say about a start in infra PE to be on the lookout for assets?
Tell us about your first business. What were the costs associated with opening it? What was the business strategy and how did you scale it?
First business was buying houses in Phoenix, AZ in 2016 (age 35) and completely gutting them and turning them into luxury residential assisted living homes. I have a partner who I met at a real estate meet up, who used to run a distressed asset fund and noticed one house had way more revenue than the rest of the portfolio (this is a classic theme for identifying viable adjacencies - happened to me 3X). Upon further investigation, a tenant of one of his houses was running an assisted living. He became interested in starting a company in that, mainly because the yield on homes were less than a 5% cap rate while these senior livings were higher than 10% (he spotted arbitrage on the operations - and I noticed arbitrage on the costs - the cost to renovate a residential house was so much lower than a commercial building).
Furthermore, there was SBA financing to start this business, and my experience during the Great Recession with the senior housing company and other experiences along the way helped convince the bank to led us money. What really helped was my partner had enough net worth to guaranty the loan. We ended up scaling to four homes, building a management team, refinancing with HUD, and overall things are going well.
The issue with these kinds of businesses is the market becomes very competitive. We were one of the first to build high end, purposed built residential assisted living homes. The cost limited supply initially (normally a service done by immigrants); but investors have gone into the space.
Another takeaway was I met my partner just by chance. I already was going to try to start a senior living company and just so happens I meet a guy with resources who wanted to do it too. Instead of trying to convince someone to invest, I found someone serious about doing it from the get go. It is usually better to find someone already interested, than having to convince someone.
Also, I mentioned finding an adjacency, an outlier in the portfolio. To be able to see that, you have to be in the game. Sometimes you are doing things conveniently (a single family distress fund is not rocket science), but keeping an open mind and curiosity, will give you insights. My partner, who is older than me, was attending conferences about senior housing, even before meeting me. There is no age limit.
As far as operating the business, there were so many stories. I’ll give you one, my worker walked off the job and I was able to convince another staff to fill in temporary long enough for me to buy a plane ticket from the Bay Area to Phoenix and fly there (with a layover in Vegas) to be the caregiver overnight. You do whatever it takes.
I learned to scale other businesses as well. Next one went nationwide. The other became the biggest in the Bay Area.
Also what do we think about commodities trading yall? Good place to gain insight into mispriced assets?
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