(upbeat music) - Thank you very much, Richard. And that last fireside chat was so
good that it just blown the lights out of the room. And just want to introduce our
panel here. Very excited about this panel to get started the first panel of the
day. Girl Focus Finder, how investors are leveraging their entrepreneurial roots, next
gen family members and unique models to allocate and scale.
just take two minutes to talk a little bit more about you, what you're looking for,
you know, what your business is, what your family office is, and just give us a
two minute introduction for the room. - We work with family offices to deploy funds
into directly into corporations. We really act like a executive producer for movies.
So we find deals that are attractive, we bring in the capital, we bring in the
management, We facilitate the relationship with the seller and then we close the deal
that way Thank you. Well, first of all, I want to thank Richard and his staff for
having this event here. I love Honolulu My vacation here a lot and also got married
here
We facilitate for family offices. I owned a financial planning firm for 30 years
During that time, I focused very much on entrepreneurs and business owners. I did
that primarily for several reasons. One is that business owners and entrepreneurs are
people who need information now. They can't wait a month. Even though we all know
Tax Day is April 15th, what's interesting about that is that maybe a particular
entrepreneur or business owners in a position where they need to be able to have
capital at that time, so we have to plan for it. During the time that I had the
financial planning firm, one of the most interesting things about it was is that in
looking at how individuals in this country
are-- have individuals in this country who have a $10 million net worth or more or
one and one -half percent of the individuals in this country so the idea is that
what we want to do is facilitate work with business owners and provide the services.
I believe that my my purpose on this earth is to have meaningful conversations with
with business owners and entrepreneurs and also with our family office clients so we
can get them everything they need. Thank you thank you very much. Aloha I'm here
from Maui and in the Hawaiian culture everybody's very active so I know we've been
sitting a long time so can we can we stand would you guys would you guys do that
for one second nice
I like that stretch back there that's a 10 that's a 10 I'm originally from Denver
Colorado I graduated with an MBA from the University of Denver and have completed an
entrepreneurial master's program at MIT as well as executive education programs at
Harvard and at Wharton.
Keep standing and stand with me. If you, in your business or in one of the
businesses you invest in, use a tool like TrainUl. If you don't use TrainUl, if you
never heard of it, sit down. Sit down. Sit down. Good. Good good good who here's
used loom in their business loom .com loom .com Okay, if you're still if you're doing
that, and you're still up good otherwise sit All right, who knows what EOS is
entrepreneurial operating system. All right anybody still standing Are you're a legend?
if
You don't know what those platforms are and if you've never used them in your
business or in a business you invest in, don't leave the conference without talking
to me first. I'm a founder at heart. My business is in the manufacturing industry
and I literally started it in my basement and it's a product that you've all
literally held. You probably held it at dinner last night.
Since founding the company and Starting a couple more, both successful and what I
call expensive pieces of education, also known as a failure if you're a founder, is
that systems scale. It used to be that people would invest in people. And that was
a great thing to say, but the truth is you need to invest in the person and you
need to invest in systems that will grow and scale. And the tools that I just
mentioned are some of my favorite tricks. They're super easy to implement. I don't
work for any of them, but I love them. I use them in all the companies that I
invest in. And I really wanna thank you guys for being here today. I hope this
panel provides a lot of value. So thank you so much. - Thank you so much, Kyle. I
appreciate that. That's definitely the Hawaiian culture right there being active and
hiking quite a bit, which is why Richard moved out here. How about you, Lane? Can
you tell us a little bit more about yourself? - Hi, I grew I had a one, I got a
one -month year old, so I'm not allowed to travel. So thanks for coming all the way
here just for me. So a little bit back on me in a previous life, I used to be
an engineer. I bought rental properties very, very early, right out of college, 2015
had 11 rental properties. And then that's where I got into real estate syndication,
buying apartment complexes. Today, as the operator over $2 billion of real estate
acquisitions. But as you guys all know, interest rates went up the last few years.
So it's hard to make deals pencil with the holding costs, insurance, taxes, et
cetera. I got one of my properties. Taxes went up $150 ,000 to $300 ,000 in the
last few years. So I also stand here as a multifamily office representing my
client's money to find deals outside of the world of real estate. So we're a couple
of hats, real estate operator, multifamily office. Thank you. Thank you. It's a
really complete panel. We have a little bit of tech, real estate, a lot of
different managers here. So when you guys are looking at opportunities right now,
what are some of the things that are very exciting? You know, I know some of the
conversations earlier. There was some geopolitical risks and different things happening
right now. So how are you guys going through due diligence? What are some
opportunities that you're finding? And can you talk a little bit about some of those
deals that you're sourcing right now that are very exciting? You want to get it
started? Roland? Sure. So we really love the lower mid -market. We're talking about
enterprise value, 20 million up to 100 million. And for these companies, there of
thousands of them coming online right now for sale. They were created by baby
boomers or, you know, back in the 80s or so, and now the owners want to exit.
They're children, don't want the companies or some cases, maybe not really qualified
to run them and they do the right thing and they want to put those companies on
the market and they are profitable. They've gone through several recessions and we
think those companies are primed and in fact we really think they're undervalued by
definition because what happens is you get an owner that's had a company for a very
long time, he makes good money, he makes, you know, whatever the salary is for
quite some time, and then he gets to a point where he didn't, he may be under
invested in technology. He may have not included new processes. In fact,
most recently we came across a company, a $50 million HVAC company in California,
that we love the company. We asked to see the sales team. The owner said, I am
the sales team.
So obviously, that's an opportunity for us to come in and say, OK, well, that's
concentration and sales process.
We're going to have to knock the value down a little bit because of that. But at
the same time, that's an easy way to bring in a professional manager, build out a
sales team, and really grow the company organically. And then like I said, this is
a company that's almost 40 years old, very durable, been through many recessions, and
has really come out of COVID, like a rocket ship because of the Northern California
market. And that's just one example. And we think that there's, we're starting to
come across in portfolio, a couple of dozen examples like that of companies in
different businesses. Yeah, there's been a lot of conversation surrounding the silver
wave of businesses and now with the wealth transfer happening, I know Michael Scott,
that's in the room, is really big on that. Have you guys seen anything like that
or any other particular deals that have some promising returns coming up?
Yeah, My family office is called Windward Equity, and my favorite type of business
to invest in is one that's founder led, where the founder has, the business has
outgrown the founder, and the founder is literally trying to do everything, from
being the chief sales guy to, he's doing the hiring, maybe he's doing 10 million
with maybe one to two million in Ibada, but he's the bottleneck of the company, and
maybe doesn't realize it because what that allows you to do is plug in some tools
that will allow that business to scale. You keep the founder in place, let them
take some equity off the table and really pour some fuel on the fire by installing
a few tools. One of my favorites is EOS or the entrepreneurial operating system and
what that allows you to do is give every single person within the a number and
they're going to chase that number on a weekly basis. Now it's designed to be
achievable yet they've got to concentrate and they've got to focus to hit it and
they're going to maybe hit that about 80 % of the time if they're an A player. And
what that allows you to do is is build out a leadership team so that the the
primary founder he or she can then focus on what they're best at.
What is their power as the founder. Let's get them focused on that because it's
probably not everything. At least I haven't met that founder yet. And if we can
build out a leadership team that gives them the resource that they need to grow,
let's get them an outsourced CFO. I want to see those books every week. We do
weekly accounting at all of my businesses. We literally close the books every Friday
for the previous week. It's not very expensive to do if you're using outsourced
accounting. If you're doing in -source accounting, you can have that done by the end
of the week. Making a decision on month old data, it's too slow. The world moves
way, way too fast for that. So weekly accounting and have a great CFO.
The number that I love to see and that I check for first, which is typically
ignored, is called return on investor capital and here's what that means if a
company has a return on invested capital of 50 % that means we're gonna make 50
bucks for every dollar we leave in that business and in my own business we have a
return on invested capital of 200 % and now why do I like that number because what
that means is if I were to exit my own $40 million business manufacturing company I
would literally have to do better than 200 % returns year over year in order to
make me want to sell this business and get into something else. So return on
invested capital. Sounds good. And then this question now is for Lane and Neil,
since you guys are advising ultra high net worth families all the time. How are you
guys scaling and maintaining their balance sheet right now? Well I think you got to
look for unique opportunities. I think that's the first thing. And maybe a niche
that you wouldn't normally go into.
One of the areas that I've been looking at, and believe it or not, is RV
areas with different parks and the real estate with regard to it, and all the
ancillary cash flow that's involved that comes with it, which is really nice. That's
ongoing. But from an appreciation standpoint, if you can find properties as an
example that you can create the value add, then you can 2x and 3x sometimes. So
that's very unique. It gives you the cash flow plus also gives you the opportunity
to be able to to have the appreciation over time. Sounds good. How about you, Lane?
So we have a little bit of more contrarian point of view. I'm just a dumb real
estate investor. I don't I don't think I can predict when big ideas will fly.
So I invest off of P &Ls and financials, right? I mean, that's why I like
apartments because you can look at the last two years P &Ls, see the run rate.
We've developed 500 multi -family workforce housing in the past, but that's about the
only thing that we'll do that is kind of a guess shot for us. I think what's been
successful for us is finding people that we've kind of grown up with. I think
That's our unique thing is we are grassroots, so general partners, vendors, like
these are the people that we're finding a deal flow from because we had a previous
working relationship. So case in point, when we're kind of going through 2022 to
2024, we need to bring in contractors that needed to work with us in pricing.
So where did we find those people through our relationships? And these are the same
people that we worked with who also have big family office office portfolios bring
us in the deal and these are these kinds of relationships that we've kind of found
from a grassroots point so it's not particular any industry but it's more for the
people and their relationships that we've kind of worked through by first kind of
working as a vendor or consultant first yeah and that's something I always advise to
some of the first -time capital raisers in the room a lot of investors and family
offices they're not looking to do one -off deals. They're looking to find partners
that they can grow with. It's kind of like dating, so I really appreciate you
mentioning that point. So now regarding, you know, real estate and other core
industries, how are some ways that you guys are, you know, utilizing special deal
structures or special technology to kind of enhance some of the efficiencies or
opportunities there. Anyone wanna jump in on that one? - So for real estate deals,
it's very common that a developer gets stuck without a couple, you need a couple
million dollars, right? Their funding gets cut short, the banks freeze up. We've been
in the situation ourselves, right? As operators, so we empathize very well when
people run to this type of situation. I've seen a lot of deals come through like
Austin, where this is the case, right? And this is where the opportunity comes up.
Hey, so -and -so needs $2 million to get over the hump. We find a lot of these
relationships by working, again, this is with grassroots relationships with the real
estate brokers. I mean, how many family office people talk with brokers on that
level, what we do, right? 'Cause we're on the level. So those are opportunities
where somebody is a little desperate for
We could work with that. Yeah, it allows you to see deals first and have better
valuations. Anyone else? Sure. One of the things I would tell everybody here is that
look at the last tax bill that just passed on July 4th It has a ton of incentives
for fine deals, right? And you know part of this is kind of what we do is we
look at Direct and we help direct investments in the C -Corps and specifically in
that area you can have some opportunities for, they've increased the capital gains
and the small business credit. So 10X up to 15 million of your capital gains is
gonna be tax -free. Also, they've added a rollover. So you'll be able to roll that
into other investments post that. Now granted, the application here is that you do a
five -year hold on these investments. And in addition to that, they just announced
investments into opportunity areas. So what that's gonna allow us to do is,
it's gonna give you either larger exemptions. So if you can find a company in a
rural area or maybe a depressed area and you can make a direct investment into that
seed corp, then you'll have an expanded opportunity to get tax -free returns or your
capital gains in five -year holds.
And regarding, you know, next gen, I know we mentioned a little bit of the silver
wave. I know some people are utilizing seller financing and kind of helping some of
these boomers retire, which, you know, their time is more important than the business
itself. Sometimes they want to do things that they probably haven't had the chance
to do the last 30 years running their business. So are you guys implementing any
next gen programs with any of the investments that you guys are doing right now?
Yeah, I'll take that one One of the key pieces in investment is is getting the
right people in the right seats and My thesis at MIT was on a system that I
developed using AI and automation That's for recruiting and hiring and and here's
here's how it works and I'm probably not the first person to invent this but all
hiring will will go this way I can also teach you how to do this and effectively
what we do is we need to hire a new director of whatever it is at one of the
companies. They have a seat they need to fill. So the tool that I built uses my
own LinkedIn profile and we set a geographic area. Maybe it's the US, maybe it's
local if they need to be in person and it looks at everybody's LinkedIn profile
that's public, their current title, and it reviews what they have put there. Now, if
it thinks they might be a match against the job description, this AI tool says,
hey, so and so, I think you might be a great fit for this role, here's a link to
apply. As soon as they apply, we have them take what's called a culture index
survey. Now, this is gonna tell us who they innately are as a person, right,
person, right seat, okay? Then from there, when they upload their resume, the AI
tool is gonna look at their resume, their culture index survey results, who they are
as a person, and then it's gonna look at their LinkedIn profile that's public, and
then oh by the way, we're gonna look at every single thing they've ever done on
LinkedIn, every post they've ever posted, everything they've clicked like on, who's in
their network, what comments have they posted that might not be good, and what it's
gonna do is it's gonna build a profile about candidate. Then it's going to export
to Google Sheets and it's going to rank order them. So as people apply, it's going
to reshuffle and re -rank all those people every single time somebody applies. And
what it allows us to do is then interview the top five people that applied for
this position. And it will also tell us, here's their strengths, here's their
weaknesses, because it's compared everything they've submitted against the job
description. and it gives us a list of 20 questions that we give to that founder
or whoever's in the recruiting role at that company that they're gonna ask that
candidate in order to make a great hiring decision. That definitely saves a lot of
time, but I think that Lane is gonna mention now the qualitative side of things a
little more. Yeah, I got a low -tech and high -tech solution. So the low -tech
solution because we had to cut our underwriting staff When in last few years because
we're in acquisitions moment interest rates went up So we would just send deals to
our brokers and then the lending broker, right? Hey, we're gonna qualify on this one
this good thing going to underwrite So they didn't really like that after a while
because they caught on to that little game But then the the high -tech solution and
when AI came on board and with Russell's AI things, you guys see how this stuff
works, right? I have like kind of a checklist of 12 quantitative things, like,
you know, like things that like people will fudge, you know, like are the property
management fees in this range is, you know, if the laundry isn't implemented in what
range is this in? Like, you know, not all 70 % or more of your units are gonna
adopt laundry, wash your units, et cetera. But you know quantitative things to kind
of spot check and then if it doesn't hit on that We don't even waste our time You
know a lot of people in our in industry say they look at like a thousand deals.
I'm like, well, that's a waste of time Why would you spend an underwriter to do
that? Right, but you know I would say we we probably go through a couple dozen of
deals every quarter. We try and find one good deal a quarter to do But then you
know AI is kind of made that pretty easy. Of course, you know we then have a
human do it right but AI helps. That's great and you know what are some of the
things that that you look for when your families are looking for new investment
opportunities like the RV parks aside from track record and you know the team what
are some other things that you look for both from a qualitative and quantitative
standpoint. Or for the majority of what we're doing we're really trying to be more
conservative I mean we do We want to be aggressive with the percentage of the
assets, but the key is that I really look at three things, I mean, particularly
with what's happened over the last 10 or 15 years. We want to make sure that we're
looking for people who've been around for 10 years and been successful for 10 years.
Longevity is really important. We want to be able to make sure that their asset
base is large enough, billions plus, so that we're in a position where The third
one is, of course, if something happens, like a pandemic or what, eight interest
rate hikes over a one -year period of time, that poof, you know, the asset's not
gone, or that it's a long time to recovery. Because recovery actually is more
important, really, if you think about it, than return. And it's great to get a nice
return, but if you look at the recovery periods in real estate and stocks and a
variety of other things, you're looking at five or six years just to get back to
even. So I'm just not a big fan of losing it and then being in a position where
I got to recover. That makes total sense. Before I open it up for questions, can
we just go down the row and just provide the audience with a million dollar insight
whether to avoid a mistake or you know something that has really helped you get to
that next level? First insight out is tell everybody, look at the tax bill that
just got passed. It's something I spent a lot of time on. It's going to be a lot
of goodies for the people in this room, especially. So it's going to be things like
we just talked about the opportunity zones. It's been expanded. The also being able
to expense more. So what this means is an investment you make into in a small
business and I'm thinking the kind we focus on between 20 and 50 the enterprise
value. That investment is gonna be easier to expand and give you a tax -free return.
And then you can roll over to the return into a small, I mean, into other
businesses.
Also, just another quick point too, is that expensing,
you'll be able to, you buy into a business now, and that business will spend $2 or
$3 million on technology or whatever, that we'll be able to expense that year one,
and that's gonna be a boost to your IRR. So it's something to consider as well.
- Thank you. Neil? - I'm gonna go a little different direction here. I think it's
amazing that you can create some incredible wealth. But what about the next
generation behind it? You know, kids, grandkids, has anybody really sat down and
looked at how that's going to affect them and what you're really doing. I mean,
next -gen from that standpoint, in my case, is really key. There's a state planning
attorney who works with very wealthy people in Phoenix, where I spend my winter's
Christine Crackeola. And he took her father's notes, who is kind of,
I think, the godfather of next -gen and wrote a book
called "Fortune Favors the Bowl" and he talks about the Japanese and how hundreds of
years of the Mitsubishi's and the Yasuda's and the things that they've done in
detail 12 and 15 steps to be able to make sure that the wealth that you all and
all of us are helping people generate is going to go to the next generation and
there's a lot of major challenges and I think it's really important To be able to
make money. It's great to be able to be in a place where we have all the ability
to do that But if we can't pass it on and if you look at the stats for
generation to generation You're talking about next generation is around what 35 40
percent third generation is around 12 percent The money goes different directions
because of divorces and problems and things that happen So if you're not doing some
of that work in your family office, I think it's something that's really important.
- Absolutely, there's a saying that aside from, you know, in order to transfer
wealth, you must transfer values and principles, and you gotta bring in the family
members to have full transparency for that shift to happen. - And if anybody wants a
copy of the book, let me know. - Yes, and now really quickly, so we have time for
questions. Kyle, what's your $1 my one million dollar insight is as as the new
generation comes into family offices and the businesses change hands don't just
measure return on investment return measure your return on engagement so if you're
evaluating a company for your family office check to see are the customers of that
business raving fans if they jumped their prices 50 % how many customers could they
keep because those are the businesses that are stable. Those are the ones that are
gonna resonate with the next generation. The ones that are working on renewable
energy, recyclability, climate friendly stuff, things that in the past may be sounded
like a nice to have with the next generation, they are absolutely a must have.
- Thank you. - So we focus on multi -family real estate 'cause that's what we
operate, but when we go outside of the real estate world. We did some online
businesses. We will usually go out and bring in a third -party consultant.
Usually this person is our friend because we have a lot of friends in different
groups, with a lot of founder groups, but we'll usually throw 30 grand at them.
So maybe call this the 30 grand rule. I don't know where that number comes from.
If you multiply it by 12, $350 ,000 a year is a nice, Hey, that's a significant
amount of money, plus or minus 50 grand, who knows, but just to have somebody on
there to give you a third party insight or a third party report, look at P &Ls.
If I was gonna look at a CPA firm to buy, which I would be really interested in
looking at for an AI firm as opposed to just a Philippine outsource deal like that,
but I would bring in one of my CPAs that we use to come in and just look at the
books and verify things for us. Yeah. Double clicking on that. Daniel mentioned that
earlier, you know, focus on what you know, know your strengths and weaknesses, do a
self -discovery assessment, and then, you know, hire other people that can bring that
missing piece. So do we have any questions in the audience for our panel right over
here? Just one second until the mic gets to you. Thank you.
Thank you, Charlie.
- So thanks, everyone. Kyle, this question is for you, right? So you talked about
renewable energy, climate.
A number of you folks have talked about manufacturing as well. All right, when you
look at the geopolitical situation, you know, clearly there's a lot of interest in
kind of bringing, I guess advanced manufacturing perhaps back to the US. We used to
be really good at it We're not as good at it anymore. You're an engineer who went
into real estate You know, it would be great if let's say manufacturing could have
been a good opportunity what I found in a trying to Invest into that space is that
a lot of investors are skittish about it in the US I find a lot of investors from
Asia or from Europe Much more amenable to invest into those highly innovative kind
of new technologies, new areas. It's much harder to find US investors. They prefer
much more to just do more real estate. Any advice for folks who are actually trying
to do innovative manufacturing technology in the US? Yeah, I'll thank you for the
question and I commend you on that because it's a, as you know, that's a bold
statement to figure out how to back US manufacturing when over the last 50 or 100
years it's all it's all gone overseas. I think there's a ton of money to be made
in that and in regard to the political climate I try not to get too tied up in
it or worried about what's gonna happen because anytime there's change that's actually
a great thing because now there's an opportunity. Businesses may be forced to
manufacture in the US So if we can get involved in those industries and those
businesses and the startups and founders that are excited about that, let's do that.
If it changes, the policy changes in three, four years, maybe there's another
opportunity there. But whenever there's political instability, there is a huge
opportunity in business. You lean into the difficulty and U .S.
manufacturing is difficult, firsthand knowledge here. But what's incredible about it is
there's still a lot of people that love made in the USA Plug those those are your
first customers go there first and I wish you luck. I'd love to catch up afterwards
Thank you, I think we have time for one more question
Okay, well, can we give it a round of applause to our panel right over here