What would you do? (not ibanking)

m_1's picture
Rank: Senior Neanderthal | 4,342

Just curious, I'm not really sure what the right location for this would be, so I figured OT is the way to go. The reason I'm posting this on a forum full of ibankers is because you guys are probably the most qualified to answer this, and won't give me room temperature IQ answers like "INVEST IN BROCOIN."

Please read the whole post before replying. I'll stick to bullets since it will make this less of a PITA to read.

Basically:

24 year old dropout.

Bootstrapped a few companies to 7 figures a year. Two should hit 8 figures within 2 years.

Have $250,000 - $450,000 a year coming in relatively passively. Maybe 10 hours a week as the aforementioned companies have management installed so they are hands-off for the most part. I just help with product market fit plus general strategy. This passive amount should hit $1M in the next year or two.

Have been doing angel deals as I go here and there.

Have also been starting new companies, hiring management immediately and training them. Consumer brands are my specialty and that shit isn't biotech, so you just need kids that are young & hungry. Don't have to pay them much and structure each co. so I only really lose $20,000 - $40,000 tops per co with potential payoff being $150,000+ in dividends within 1.5 years for each co. So risk/reward profile is sensible for this approach. I'm working on automating it all, just building out the right team.

Had a few offers from VCs, but the math makes no sense to me. I'm not sure if I'm missing something but the loss of freedom (mandatory hours), fixed salary, and some carry aren't really enough to justify leaving my existing holdings?

Can raise dumb money fairly easily if I want. Also have some "good" offers from VCs, but the deals I pursue don't really meet their unicorn hunting parameters as I build companies so I can collect dividends usually. It's not sexy but it works.

Looked at starting my own PE fund, buying into smaller companies in the $10M - $20M range, adding excellent digital marketing (you'd be shocked at how many consumer brands don't know shit about marketing) + building direct to consumer channels, and then holding the stake for dividends or flipping it. The DTC thing works REALLY well because margins go way up and the data the company gains is priceless. With DTC you can talk directly to your customer and figure out what they want.

I want to 10x from here, and don't really see a clear path to it. If I keep doing what I do now I can grow my income well, but it's not very intellectually stimulating at this point. It's become very formulaic which is good for money but bad for personal growth. Most of what I do has been properly systematized so I only do "mandatory" work like 10 - 20 hours a week, and that's if I decide to do calls/network more.

I don't really have enough cash to pursue my big ideas like a cool system I came up with for launching biotech companies that hedges risk, but I need $2 - $4M liquid and I don't really think VCs would fund it since it's more of a company launching system that involves a lot of pubco activity.

I dunno, basically looking for advice on what to focus on. I like the idea of buying up some massive company with a PE fund's help because I have a good track record, PR, etc... and I could gain a lot of knowledge running a big company but I'm not sure it's actually a good use of time? I also fucking hate operating as you can probably tell by my approach above, but I don't think a guy running a company doing $25M - $50M a year is really doing the same bitch work a guy running a co doing $10M a year is.

Thoughts? What do you guys think I should do? I always wanted to get into finance when I was younger because I love how creative you can get with financing and deal structuring but it seems like I'm best at adding qualitative value to companies.

Comments (23)

Feb 6, 2018

Won't let me edit my OP, but the reason I'm not pursuing my own fund is that I don't think I have enough pedigree to raise more than $30M - $40M. Most of that would come from people I do business with. A fund that small would yield very low ROI for me personally due to the fixed costs related to legal fees and other overhead.

Also it's much harder to make money when you're managing that much money compared to low 7 figures as the deals are harder to come by, I think?

Jun 6, 2018

My $0.02;

Congratulations.
Be sure to distinguish between good fortune and brilliance. There are plenty of people making great money on Amazon and doing DTC web marketing. Sort of a gold rush but it will even out. I chased a rollup of these businesses a couple years ago but all the smart money believed it was a transient market dislocation and that margins would come down. You're also (in those businesses) living at the whims of google and Amazon.
Prepare for rain. It will come.
It's not pedigree keeping you away from raising $30-$40M. It's experience and seasoning. Don't worry, those come with time. I'd rather be young, rich and naive than old and wise so enjoy it while you got it.

Congratulations, good luck, have fun and enjoy the ride.

    • 1
Feb 6, 2018

I don't really touch Amazon because you lose customer data which is how the algos are fed for expanding FB PPC campaigns.

Funniest
Jun 6, 2018

I don't know why the above is red and highlighted?

    • 2
Jun 6, 2018
Distressed Industrial Buyer:

I don't know why the above is red and highlighted?

You're obviously a robot, bro.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

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Jun 7, 2018

I'd split my time (unrealistically I guess) between infrastructure real estate investing in emerging markets and running/owning a couple restaurants.

Jun 8, 2018

The restaurant business was always fascinating to me. I don't know the specifics but if you have at least decent food and market well, then you would make some decent money, right? Location also seems pretty important. If you are deep in a complex with no marketing, then no one will know you exist but if you are right on the side of the road, more people will at least give you a try.

Jun 7, 2018

That's the gist of it, but there are a lot of specifics that go into it, especially when you're trying to figure out what kind of place you want to open. Food costs, labor (and turnover), and rent costs are all going to be huge, and in order to have a quality product you really need to make sure it's either on trend or a staple. Otherwise, it's the least safe bet there is.

I have some pretty fleshed out ideas that I think would really catch on in a few markets, but one of them would be harder to find capital in (Eastern Europe) and one is very competitive (sort of fast casual here in the US).

"Restaurant Success by the Numbers" is actually a pretty interesting read if you ever want to get more involved with it.

Learn More

Side-by-side comparison of top modeling training courses + exclusive discount through WSO here.

Jun 7, 2018

Dropped out of college. Started a "few companies" on a tight budget that now bring in 6 figures/year. Hire kids that are "young and hungry" so you can pay them peanuts while you reap most of the profits. Take a small loss up front to get them started. Big proponent of DTC advertising. Want to scale business larger but not sure how to raise the funds.

Drug dealer confirmed.

Jun 8, 2018

Does anyone else hate all this 10X'ing everything shit?

heister:

Look at all these wannabe richies hating on an expensive salad.

    • 1
Jun 7, 2018

Just saw some guy with a hat that said that, the fuck is it?

Jun 8, 2018

A guy wrote a book about how to 10X your business and now it's a meme. People want to 10X fucking everything overnight. What happened to incremental growth?

heister:

Look at all these wannabe richies hating on an expensive salad.

Jun 10, 2018

I mean, I only hate it cause I don't really have any idea's how to 10x my net-worth.

Jun 12, 2018

Redevelop old apartment complexes with good bones in regentriyfing areas into millennial focused housing. Run everything through Air BnB with optionality to lease long-term if you can. Incorporate art murals, espresso machines, fast WiFi, etc... Have a flexible common space with desks and offer a membership for cheap workspace.

I know one thing is certain - home ownership in America will continue to drop. This continues to present enormous opportunity for those willing to take risks and employ creativity.

Feb 6, 2018

It's a cool idea but the potential IRR doesn't really strike me as that attractive.

Jun 12, 2018

Depends on the hold period and more importantly cap-rate inflation/deflation. That said, owning real-estate is playing the long-game - not much risk to owning a tangible asset where replacement cost and renter demand are constantly rising (assuming A grade location).

Big money is made in large-scale development with others people's money as the GP if you hit the promote.