NEW PODCAST! DO YOU NEED A TRACK RECORD AND DEAL EXAMPLES

  • Buying mission critical SaaS companies
  • Tactics to be present in life
  • Do what you want to do

Listen here!

https://www.vernehq.com/post/track-records-deal-examples

Brent Sanders: [00:00:08] Yeah. Yeah. So we, I don't know where do we even start with this? Because I had a conversation with a mutual friend of ours who. No, w we threw this idea out that, Hey, we're gonna spin up a fund and call it essentially a search fund, or I don't know, micro PE fund some cross between the two and his background's in venture.

And he is his one piece of advice. And he does have a Epic track record is to, you need a great track record, which is like a cart before the horse problem. So how do you start something when you have no track record? We have one deal going and I've been beating this drum was like, you gotta crush this one deal.

In the next six months start seeing some really good returns and at least the trajectory of Hey, this is what we can do with our in-house skillset. Even though the approach that we plan on taking with the fund is different. So with this fund, which I think we're the working title is now Vern , after Jules Verne , Is find a business that, has some MRR that we like and some similar to the deal that we did recently and execute some sort of playbook, but put someone in as a CEO or operator, con

Colin Keeley: [00:01:19] So that's a distinction with a fund versus , like a private equity fund versus a search fund is going out and acquiring one business and installing yourself as the CEO.

Brent Sanders: [00:01:27] Yeah. W we don't plan on running, which that I think is probably the harder part of this than what we're doing with , with blinks Hills, like Blake said, we it's a known quantity. We can work on it. We can put our skills towards it, but the variability of, we got to find a CEO and , I've been through this, in that the studio model I think we talked about in private or prior episode is.

Trying to understand fitting the right operator into the right business. But I think the thing that keeps us going on the idea is that because it's not a startup, which is supremely harder to place a CEO in than, having existing. Revenue coming in and just running an operating business and growing it should be a significantly easier, but that is the interesting part of this.

Anyways, his feedback was you got to have a good track record. You got to point to some wins and without having any. Track record other than one deal. How do you go about doing that? When I, if I were to be put putting my self in the shoes of a LP or somebody who's gonna put money into to something like this is track records definitely important to me, I'm very much like a Midwestern, show me the numbers and I'll make a.

A wise decision based on track record or gut feeling around the founders may, more on a venture side of things, but I don't know. People that start funds. I swear to God on Twitter, everybody's got a fund of some, like a rolling fund and maybe you can look at their background and make an assessment.

You can look at, the decisions and tweets they've made. I guess that's how people do this on Twitter. I dunno, like what's how does, how do people get this done?

Colin Keeley: [00:03:04] So I got a lot of thoughts on this. I'll just start going through them. But so yeah, when you're raising capital, having a track record is like the biggest thing. So yeah, it'd be lovely to have an amazing track record, but you have to, no one has a track record when they start. So you have to start somewhere, so you start small and that's what we did.

And then you do bigger and bigger versions of that. So we, we don't have a track record doing exactly this, but we have, I'd say that like the credibility, the skills, the trust of doing very similar stuff , and not having the money is like a solvable issue. So if you don't have the money, you could do search funds.

So I came out of Chicago booth. So a lot of folks do that , at , Stanford booth, HBS. So that's like a, trodden path of. Someone with a nice pedigree goes out and raises capital buys a business and goes from there. So that's with outside capital, you could do an SBA seven, a loan, which is a little trickier for these SAS companies, but doable again for things on the smaller end.

Or you could go the syndication route, which is what we're basically talking about. So I would say it's way harder to raise a blind pool of capital, which is what a big private equity fund is. So if you came to me and said, Hey, we should go raise a billion dollars and buy out, startup unicorns, I'd say that's probably hard, but you could do these smaller deals in , like a great deal is just a great deal.

So with conservative growth rates and like a solid playbook, I think you could deliver amazing returns and that's not. I dunno, like as dependent on us, it just, it is what it is. It's a good deal. You secured it. I think he could raise capital around that.

Brent Sanders: [00:04:32] Yeah. So that begs the question. It's like the role of identifying the opportunity is what you're even banking on is Hey, we just, you're finding something that if you put. Energy Intuit, even in a moderately good operator it's going to do, it's going to produce returns because mind you, it's already, all these businesses are already generating revenue.

There's somebody who either wants to get out of the business or, they started in and weren't necessarily equipped to continue it. The, Oh, what got you here? Won't get you there type personality. And you put someone in who's. The, it's going to take it from B to Z, not from the aid of the B stage.

So it's interesting. I don't know. It's hard to say , the opportunity itself will be the. The deciding factor. You can't take people out of it, but it begs the question around where are you going to get your bench? And were those, what's the pedigree of the operators and how are they going to be?

Cause I feel like that's almost the track record we could go after, which is, don't look at us. We're not gonna be the ones running it. Although we do have experience picking. Businesses, identifying opportunities. That's something we do have some track record with, and then you point to the operators of the CEO's, but it's hard to have the CEO's ready when you don't have the business done.

And when you're still fundraising, right? So it's this whole like chicken and the egg on a multiple scale.

Colin Keeley: [00:05:52] Yeah, I think in all likelihood, you secure, like with a letter of intent to business, you finalize the capital, you secure the deal and, best case scenario, you have a CEO lined up to take over and Two to three weeks, but realistically it's probably your step again, you're implementing some of the low hanging fruit that you identified and then you have a CEO ready and like within three months.

Brent Sanders: [00:06:15] yeah, that makes sense.

Colin Keeley: [00:06:16] I, so I've, I probably know, like these other holes, the companies that do this better than just about anyone else that hasn't done it yet. So I know their playbook. I know how it works for them. So I've literally just copying other people that have done this well. And I think the market is super big that it's not an issue and we're not really going to be.

Brent Sanders: [00:06:32] What do you do once you start? So let's say we fast forward six months, like how do people articulate or publish their track record? Obviously you put it in the rosiest terms possible. The most favorable way to reflect against you, but it's like, Hey, I was able to turn this revenue into that revenue, this type of returns it was just straight up like IRR.

Colin Keeley: [00:06:53] Yeah, I would say you , like I could model out what an IRR will be with a pretty conservative growth rate and, layer on debts and whatever, or other basic improvements that we're going to do on for each deal. And I have 30 to 50% IRR is like completely credible and what a lot of people are seeing in this market.

And that's just like an amazing deal to invest it with, with these B2B. SAS companies that are like missing critical. The downside is not really that big of an issue. Like they're mission, critical SAS companies, people aren't turning at like an extraordinary rate. You don't lose all your customers overnight.

If anything it'll decline slowly, but in all likelihood you could turn it around and start growing it slowly.

Brent Sanders: [00:07:34] Let's talk about that. Mission critical. So blink sale , we, it's an invoicing company and like it's the lifeblood of so many of the clients that we have, and they are definitely willing to give us feedback and work with us and try to make the product better because it's, it has such an impact on their business.

What are some of the other areas that you thought about it that sort of these mission critical pieces? Cause invoicing is like a no brainer. That ones. The money's coming in to the business. That's the top of that top of the food chain.

Colin Keeley: [00:08:03] Was like the best case scenario would be like a golf course runs all his business on this software. And things go up and down, but you can't cancel your software cause you'd be effectively canceling your whole business.

Brent Sanders: [00:08:15] Yeah. Yeah. Moving it over. Like QuickBooks has enjoyed, I feel like this. This position and why so many people have jumped into that accounting space jumped into , yeah, I guess mission critical is the right way to put it. And it's it's just the operating systems for your business. And , making those choices are very sticky.

That's always been the SAS stream, right? It's like Intuit has crushed and it's you're going to, they're going to take it, take you through the process of getting all your data and then. It's just very hard to get your data out. And then it's not like we are trying to make it hard to get your data out, but it's just a matter of Hey, you've you're in this system and the every day you use it, you're getting more in, in master entrenched.

I should say, into that system.

Colin Keeley: [00:08:54] Yeah. This isn't like a new idea. Like constellation software has been buying, I dunno, 300 or 500 of these mission critical SAS companies for 30 years now or 20 years now. And they've had probably the, not the best run of like capital growing that anyone has ever had. I think they've compounded over 30% year over year for this whole period they've been in existence.

Brent Sanders: [00:09:20] Yeah. Can you use like track record as alright. Point two comps point. Okay. These are other funds where we're basically using a similar playbook. You may not be able to get your check in to theirs. We're going to do ours. We're going to use ours slightly different. We're going to go after this model, but it's roughly like the same class of assets.

Colin Keeley: [00:09:37] Yeah, I think that'll be part of our pitch deck, which I have to create at some point here. You could, but if you look at statistically for, venture capital, private equity funds, it's actually the first time funds that do the best is people care the most, they're deploying a smaller amount of capital , and then over time , returns to grade because they raise bigger and bigger funds.

They lean more on that two instead of the 20 in the compensation structure. And so I do think it's appealing to get involved early. And so I don't know what the path is for us, but I think we'll syndicate. I would love to do , I want to do one in the next six months, but I think maybe three in the next year is not crazy.

And then think about raising a fund from there. If you have the track record to show it.

Brent Sanders: [00:10:19] Yeah. Yeah, I like it. It. It's , it's always fun to talk about this with somebody, especially going back to anchoring back on our friend who was basically telling us, and, you gotta have the track record and make things a lot easier. And it's don't have that. But , thanks for the advice.

But yeah, I think, in terms of just one deal , I think we're in a good position with , at least the first venture, even though it isn't part of this. Same search fund necessarily. It's being operated slightly differently, just pointing to that as okay, this is the sort of impetus for syndicating.

These deals out and broadening the spectrum is we feel like we could do this on a grander scale and magnify the results. We just had capital, which I think it's a good, that's a viable pitch.

Colin Keeley: [00:11:00] Yeah, I hate all these people that like. I I want to do this in the future. So I'm going to do this, and this, and all this horrible stuff before I actually do the thing I want to do. And it's Hey, like you can make excuses to the end of time. Or you could just, start doing that thing you want to do.

And it's going to be hard or horrible initially. But yeah, start where you want to end up is the playbook. Hey, this is especially an issue with MBAs or I would say just smart individuals. Generally is like you get analysis, paralysis yourself to death and you never do anything.

Brent Sanders: [00:11:28] Yeah, and this is by the way, this is also a pretty scary thing to just jump into. I would say we, we executed on the prior year pretty quickly. We were done within a month. We both were just like, all right, let's just do this. Let's just try it. Let's see how it goes. And it's a scary thing to just do, but at a certain point you have to act.



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