Our Investment Approach

We are searching for a business to purchase and hold for a long time. After our last deal we are hopeful that this time around we will be able to own the business for multiple decades rather than having to sell the business after growing it for a few years. In addition to wholly owning one cornerstone asset, we would also like to take minority positions in companies where our advising could make a meaningful difference in the outcome for the entrepreneur. Lastly, we are open to taking small equity positions in companies that fit most of our criteria but are outside our direct experience.

Our primary focus remains on selecting a cornerstone business to purchase in the near term. We envision holding this company for decades to come as our largest asset in our joint family office. In order to get into the position we are now, we needed to sell our last company. Like we mentioned above, this time we hope to hold instead of sell. 

If you are a seller and have concerns, here is some additional context. We technically didn’t have to sell WLE, but we had three main drivers that were motivating us to do so:

1)    Our arrangement with our investors certainly incentivized us to sell as we experienced much better economics if we did so.

2)    We had lots of stakeholders to consider, which made selling seem like a cleaner way to reward everyone for investing in us as a young management team and book a win for our early and young career.

3)    As young entrepreneurs we had reinvested all earnings back into our business as it grew and were living a moderate lifestyle in accordance with a reasonable, but below-market, salary. To get a meaningful amount of personal liquidity we needed to sell and realize some of the tangible gains that previously had only been on paper.

4)    We overall wanted to simplify and improve our acquisition/investment structure. For WLE, we had three operating general partners, sixteen investors and two debt partners (one of whom was the previous owner of the company). We now have the capacity and personal resources to streamline our structure going forward.

Now that we can create a new structure, here is what we are setting out to do:

1)    Remove incentives to sell in the short-term, so that we are free to build a business with a long-term perspective. This honors one of our core values, “Think in Decades” and allows us to apply it to the business we purchase instead of just our personal planning.

2)    Practically, a lot of those incentives get removed by simplifying our partnership structure. We have only two operational general partners now and intend on using all our own equity if possible. If we end up acquiring something large enough to exceed our capital’s limits, then we will raise money from just a few select investors and negotiate economics that keep us long-term incentivized.

3)    Buy the right business that incorporates everything we learned from our first growth story. Our last endeavor taught us to properly value recurring revenue vs. project-based revenue. Now we are actively searching for a business that has revenue in the upper part of the revenue quality spectrum (see chart).

4)    Purchase an asset that will allow us to not need the liquidity from a sale. It needs to have a high enough level of recurring revenue and positive cash flow dynamics to help provide for more frequent distributions and allow us more lifestyle flexibility.