(upbeat music) And this discussion panel is gonna be on finding the right direct and
co -investment opportunities. So a lot of family offices like to invest with others,
many times a lead investor who adds strategic value, maybe someone like Brian, if
he's familiar with remittance investments or something of similar nature. And we're
gonna start out just by going down the line. And Why don't we start with you,
Russell, and then work our way down with a quick introduction. Okay, good afternoon.
My name is Russell Ballew, and I have the privilege of representing Raymond James,
Private Institutional Client Group. A lot of words, what we do is look for,
we actually very conscientiously curate access to utterly asymmetric opportunities to
C's alpha, that's the sentence, putting in regular English. We help folks find those
truly exceptional investments for institutional clients that have at least $50 million,
those truly exceptional investments that outperform. My job is to find them all over
the world.
- Great, thank you. - Our biggest concentration right now is in Arizona Mountain
Vineyards, where we're basically facilitating the transfer of assets,
you know, vineyards from California over to Arizona, where we're using new laws of
distribution, which are that state -by -state you can now self -distribute,
allowing us to go vertical, where we can net over $30 a bottle by comparison to
the old models. basically focusing on two things. One is that the laws in California
only allow you to have one wine tasting room where 40 other states have now opened
that up to where you can open as many as you need. That's the first thing. And
the second thing is that very few companies sell for 20 plus times earnings. The
wine business has always done that. It's very hard in anything but manufacturing to
get that type of a multiple. So we're concentrating on the resale of the vineyards
for our shareholders. Great. Thank you. Aloha. We invest in technology companies.
We've invested in 130 companies to date, all early stage, much like the space that
Brian plays in, as you just heard him. And many of which are from Hawaii, but also
some from out of state. And Hawaii Angels is a local angel group that I've been
involved in from its inception in 2001, there I say.
So been an angel for a long time as well. Great. Thank you. And I'm originally
from California. I spent 20 years in Silicon Valley, starting off as an engineer and
moving to marketing for a large, a lot of reasons, most of it Intel. And then in
about 1999, I said, you know, this 20 years is long enough to work, maybe I'll
just take a year off and smell the orchids. And this is a great place to have
smell orchids. Well, 25 years later, I haven't really gone back to work and I've
enjoyed the retirement. And about 2006 or seven, I found Hawaii Angels for,
and Sharon and I became friends on joining the board for Hawaii Angels. I've done
about 80 individual angel investments, 15 in Israel, about 30 in Hawaii and the rest
of the mainland. Great. And then Cliff, why don't we start with you and go down
the line of the number one thing you'd like to source from the room in terms of a
very particular type of deal like maybe fintech or something to manufacturing or
robotics and then we can go down the line. I think I'm most interested in tourism
tech, I think it's one area, Hawaii has a competitive advantage and for a variety
of reasons, two most important then is obviously we've got a large market for
tourism. And the second reason is that Hawaii is considered international by a lot
of corporate, you know, the Marriots and the Hiltons of the world.
And but domestic by equal numbers, so you can actually sort of bootstrap an Hawaii
company to go both international and domestic. So that's probably my number one
interest. Great. Yeah. So just to echo that, travel and tourism is a space that
we're interested in as well, blue startups. And in addition to that, we invest in
companies primarily in the SaaS, you'd be SaaS space, and specifically sustainability
related solutions. So Circular Economy, somebody mentioned that earlier, that's a space
we're very interested in. And as well as gaming, my business partners are the owners
of the Tetris company. So for those of you who are familiar with the video game
Tetris, anyone? Yes. Yeah, it's pretty, it's pretty well known.
It's actually headquartered right here in Honolulu. So a little -known fact. - Great,
Tom? - In our family trust, we keep 90 % of the money in very conservative
investments, and we put about 5 % into cash flowing expansion companies and 5 % into
startups. So we're always looking for the one that checks all the boxes, everything
that everybody's been saying today about what you need in passion and CEOs and
operators is always important. We consider all those things, but we're looking for
ones that check all of those boxes, not necessarily the biggest winner, but the one
who checks the boxes. - Great. - You know, when you think of Raymond James, how many
of you are aware that last year, JD Powers picked Raymond James as the number one
advised wealth management company. Did you know that? Okay. We're very conscientious.
And if you think of the firms that we compete with, we're one of the only ones
where the founder is still around and has a keen interest in what we do.
So if you're saying to me, "Hey Russell, you know, I'd like Raymond James to
consider us in their platform." The first thing we do is to actually look at and
underwrite the opportunity to see whether it would be a good fit for our clients,
which are ultra high net worth institutional types. We like late stage growth
companies where there's some visibility to an exit, either through a strategic or an
IPO. But we will also consider things that are asymmetric in the sense that they
will sit in a portfolio and be a true source of diversification. Allow me to expand
on that for just a moment. A family office approached us and said, Hey, we have an
utterly uncorrelated asset. It's IP specific music IP.
And so we said, Oh, that's interesting. And they said, By the way, this music IP,
which includes things like Fleetwood Mac, the Rolling Stones, you own that, and it
generates 8 .5 set tax -free. That is a value -adding investment that we can offer to
our clients. That's an example of some of the things we do. Sure. Great. Brian
ended his last talk talking about how he goes on podcasts. He speaks on stage. That
wasn't natural to him. And he gets access to great investments because he puts
himself out there in multiple different formats. And that's how he gets access to
really great deals sometimes. So I'm curious for you and your teams, what are your
best deal origination strategies? Where do you get your best deals besides, you know,
speaking on a panel like this today, do you do anything to get better access to
deal flow? Yeah, I'd like to address that. So as you see me here, overdressed.
It's not a fit for what I actually do. I am a farmer. I'm a farmer. And what I
grow are unicorns. Okay. And there are two ways to grow unicorns.
One of them is to go and actually set up an ecosystem. So at Raymond James, what
we do is we go out to folks that have a pattern, a track record of cultivating
capabilities for founders to actually excel, not just that they actually start a
company, but they see it through to its exit. So that's one source. The other is
family offices. The example I just gave to you. Here's what I'd like to have you
consider. Suppose you have something really that's exceptional or very interesting and
you need 50 million and you already have 30 million, you're trying to come up with
the last 20. If it is interesting and asymmetric, we're interested, so come see me.
Thank you. Anyone else want to comment on deal origination? My whole life has been
investments in different in different areas of dot -coms plastic you know PVC fence
manufacturing, sports technologies, medical, a number of things what we're what I do
for deal flow is what we're doing here getting to know people and people I trust I
never want to invest in any deal that I where I don't trust trust the individuals
that are running it and can carry it to the finish. Great,
makes sense. Yeah, I just, I mean, echo that. We really rely on a network effect
for Blue Startups. We have a huge network at this point. We've been in the game
for 12 years, so we have hundreds of founders, alumni, companies,
250 mentors, 400 investors. These are all the people that we rely on for referrals
and all of our, of course, best deals come from referrals. We get about 600
applications for every session and we take about 10 companies. So it's very
competitive and we need that deal flow. I'd want it to be even more, 6 ,000 would
be great. Right. Yeah. I think a lot of people that have had a recent exit or
just started making enough money to invest. Sometimes we'll see three or five deals
in a year, and then they'll pick one or two to invest in, especially after someone
has a big exit. Everybody comes to them who knows them best and asks for money,
and then they're just investing with who knows them maybe versus what's good
investment. So we see that over and over again. And if you've just had one
pineapple and it's not fresh, then you don't know if that was a good pineapple. If
you've looked at 300 or 6 ,000, you can be a pretty good judge, even if five years
ago, you had never tasted one, right? So I think that's really critical for
investors here in the room to hear. Do any of you negotiate special terms because
you're gonna give somebody access to a strategic door that's gonna open or
distribution or you're gonna put in 25 % of all the money they need? So you
negotiate that valuation way down. I know Brian brought that up. Family offices bring
that up. Do any of you have a special strategy or approach to doing that?
- I, when investing in a, it depends on the stage of the company. So when you're
investing in a startup where, where he's checked all the boxes,
but there's still one question as he hasn't done it before or whatever,
then we control the board until they pay us back. We set it up with a convertible
node or something like that where if they begin to fail, we can bring in a team
and save them.
That's one. And I learned a trick from GE Capital a long time ago. And Auto By
Tell was the first dot com company that went public. I was the president of that
company. And they taught me how to make one investment at one price and make a
second one, you know, six months down the road, another price, which quadrupled their
first one. And so we do like to, we do like to divide up the placements,
not only to protect ourselves in the first and second round or, but to also
increase the value of our first investment. Right. Great point. Yeah. So the prior
speaker talked about the paramount importance of relationships. When you think about
where you might adjust your terms, yeah, of course we will consider it, but it's
not about the price, it's more about two things. One, will this further the
relationship? Are we bringing a partner to help us grow the farm? Are they bringing
a special fertilizer, a special distribution? If they are bringing that, we'll
consider it. The other place that we'll consider it is underwriting. Richard just
talked about how when you're wealthy, people approach you and then you get seduced
into making some investments that you may not necessarily completely understand. We
really like to have our clients understand not only what they're doing with us, but
how it fits with their overall portfolio. I'll say that again, this financial advisor
coming out of me. We want people to understand how this will work for them in
terms of not only their family now but their legacy. I say this to say that if we
have a person bringing to us increased underwriting capacity, that is it's a family
office and they have deep knowledge of a particular sector that we don't have,
that's valuable and that we want to price and give them an accommodation for. I
would say a lot of families who worked with will have like the step in control and
you're talking about Tom and someone be able to come in if things go wrong and
they don't get fixed and they don't get fixed, then okay, you need to be able to
fix it to save your own money, essentially, if you're putting a lot in. Or they
ask for collateral, it could be IP, it could be real estate, etc. Or many times if
you go and you can get 20 % of the capital you're raising from someone who made
all their money in that niche for 30 years, then the rest of the money will come
in quickly and they're strategically helpful. So it's worth having a
But what's been your experience, you know, Cliff, in terms of negotiating specials?
Yeah, I was going to chime in with, you know, one of the disadvantages of being an
angel investor is you are almost always a deal taker, not a maker. But the
advantage of being a member of an angel group is that we recently, this year,
actually led around for a sizable amount of money, at least for us, with a Utah
irrigation company, where we ended up with board seats and favorable terms.
So the benefits of collective money, obviously go a long way. - Right.
- Yeah, I mean, we're a very different animal as well 'cause we're at Blue Startups,
a venture accelerator. So we do always have special terms. We are not just an
investor, right? We're providing a lot of value, 12 week program. It's like an MBA
on steroids. So that's always a battle with the entrepreneur. It's, it can be hard
to explain. And well, I got this investor in at this term, so you should come in
at the same term, so which we can never do. It wouldn't make sense for us to do
that. We're not just providing cash, we're providing cash plus a lot of services and
access to network. So that is something that we are constantly negotiating and we
have a whole bunch of docs and special terms that, um, you know,
create a little bit of friction to be honest, but we have to do it. Sure. Makes
sense.