Transcript
00:00:00Poor people stay poor because they want a fast way to get rich.
00:00:03And instead, the richest people that I know pick one of these four paths,
00:00:06play it for a decade, and then end up with more money than everyone else
00:00:09that is just chasing shortcuts.
00:00:11And just a fun reminder for you, no president, no economy is going to make you rich.
00:00:14You have to do that for yourself.
00:00:15So in this video, I'm going to show you the four paths to mega money.
00:00:18And I'll show you how to pick the right path at the right time for you.
00:00:21Let's get into them.
00:00:22You've got your money and your business.
00:00:24You've got other people's money and other people's businesses,
00:00:26and then permutations of those.
00:00:28And so your money, your business, right, is a bootstrapped business.
00:00:32If you have other people's money and your business, now you're raising capital.
00:00:38If you have your money and other people's businesses, now you're investing.
00:00:43And then finally, you have other people's money and other people's businesses,
00:00:46which is fund management.
00:00:49Now, to give you some proof points around this,
00:00:51I actually looked up the top 11 richest people currently on the Forbes list,
00:00:56and I'm going to tell you where they are.
00:00:57So you've got Elon Musk.
00:00:58He's a raised capital guy.
00:01:00Almost every single company he's had, he's raised outside capital,
00:01:02and then he's continued to fund it and grow it.
00:01:04Larry Elson, who's number two, raised capital.
00:01:06Mark Zuckerberg, raised capital.
00:01:07Jeff Bezos, raised capital.
00:01:09Larry Page, raised capital.
00:01:10Sergey Brin, raised capital.
00:01:12Steve Ballmer, bootstrap.
00:01:13Microsoft is bootstrap.
00:01:14A lot of people don't know that.
00:01:15Underneath of that, you've got Jensen Wang, raised capital.
00:01:17Warren Buffett, investing.
00:01:18Michael Dell, bootstrapped.
00:01:20The Waltons, as in Walmart, bootstrapped.
00:01:22And so that's the top 11 wealthiest people in the world.
00:01:26Now, you might have noticed that fund management wasn't there.
00:01:28If I go like six deeper, you'll find people who did fund management.
00:01:31Now, one of the interesting things about each of these constructs is there's a little bit
00:01:33of risk, and there's a little bit of trade-off with each of them.
00:01:36And I personally have done one, two, three, and four, believe it or not.
00:01:40And so I'll actually walk you through my own examples and which one's right for you.
00:01:44So let's start with number one, bootstrapped.
00:01:47Bootstrapped just means that you fund the business from your own savings and cash flow.
00:01:51You have no outside investors, and you grow through reinvesting your own profits.
00:01:56You have a website, and you've got a cell phone, and you've got skills, and you start
00:01:59trading one for the other, get a little excess money, take that excess money, and then continue
00:02:03to build.
00:02:03Now, typical examples for this are usually low-cost businesses to start.
00:02:08A lot of times, that's services.
00:02:09So agencies, home service businesses, B2B services, professional services, things like
00:02:13that, sometimes nowadays, you can actually do this with software.
00:02:16It didn't used to be that way, but now it kind of is.
00:02:18Education businesses, e-com brands, if you do dropshipping, if you don't do dropshipping,
00:02:22you'll have to front some capital in order to get the first inventory started.
00:02:26Local businesses, most normal companies.
00:02:29Now, to be fair, that scope has continued to broaden because the cost of entering business
00:02:32is going to continue to drop.
00:02:34Now, for me personally, my first brick-and-mortar business was a gym, and so that was bootstrapped.
00:02:40I used the profits from that to start Prestige Labs, which was a supplement company,
00:02:43which was bootstrapped.
00:02:44I started Allen, which was a software company, which was bootstrapped.
00:02:47And so all those companies were bootstrapped.
00:02:49Today, acquisition.com is taking some of that capital, investing it into other people's
00:02:55businesses, while also having some companies that we start de novo from our hold cow, which
00:02:59is kind of semi-bootstrapped and also kind of reinvesting our own capital.
00:03:02So you can see how some of these boxes merge.
00:03:05Now, who is this right for?
00:03:06So if this is your first business, I recommend starting with bootstrapping.
00:03:10And the main reason is just that you want to pay off ignorance.
00:03:12The last thing you want to do is take your friends and family's money and then lose it
00:03:15because you don't know what you're doing.
00:03:16That's my opinion.
00:03:17Everyone, you know, your results may vary.
00:03:19You can stick to the names on that list that I mentioned.
00:03:21Jeff Bezos, the people that he knew invested.
00:03:24Bill Gates, the people, I think he had rich parents.
00:03:26I'm sure they helped him out in the beginning.
00:03:27I don't know the actual public documentation of that, but I think he had a little bit of help
00:03:31in the beginning there.
00:03:32But the thing here is that, like, I don't think you're going to want to go raise a ton
00:03:36of capital for everyone you know, maybe even VCs, if it's your first shot.
00:03:40Again, you know, your results will vary.
00:03:42Your life is unique.
00:03:43But the main thing is that bootstrapped will typically be the slowest of the four paths.
00:03:47And that is usually because it takes money to grow.
00:03:50And if you have to make the money to grow, it's almost like having a car factory built
00:03:53inside of the car.
00:03:54It's very difficult to do.
00:03:56Humans do it.
00:03:56We have human factories inside of our humans.
00:03:58Weird stuff, right?
00:04:00But in business design, it's much, much more difficult, right?
00:04:04It's slower to build the capital reallocation machine while also building the machine that
00:04:08makes the capital to begin with.
00:04:09You kind of have to have both.
00:04:10Now, the main advantage of this is that you keep the control and the equity.
00:04:14So you have a bigger slice of the pie.
00:04:16You decide the pace, the strategy, and ultimately you can exit on your own time horizon or never
00:04:20exit at all, right?
00:04:21And the goal is that you design a compounding vehicle, which is either recurring or reoccurring.
00:04:26Within the business, and then you let that over time do the heavy lifting.
00:04:30That's the end goal.
00:04:31Now, a lot of first businesses don't have any of those things, but you buy a dollar, sell
00:04:35for two, and you make money.
00:04:36There's nothing wrong with that.
00:04:37Here's some of the trade-offs.
00:04:39When you bootstrap, you incur more debt than any other vehicle.
00:04:44Now, you're like, wait a second.
00:04:45I thought I was using my own money to start this thing.
00:04:49Yes, but you incur every other type of debt.
00:04:52And oftentimes, every other type of debt is harder to pay off than money is.
00:04:56So what do I mean?
00:04:57If you're starting with your own cash, it's very difficult for you to attract like a star
00:05:01talent team of 10 people that all need a million dollars plus per year to work and actually grow
00:05:05this thing.
00:05:05If you're venture-backed, you can do that with some stock and then also decent cash compensation.
00:05:10And so that becomes harder to do.
00:05:13So you incur lots of management and leadership debt.
00:05:15If you can't get the high enough level of the softwares that you need in order to build
00:05:20your software company or whatever, if you start low, you're going to have some technical debt
00:05:26that might incur as along the way.
00:05:28Same thing with your data debt.
00:05:30So you're going to have lots of debts that money could have otherwise solved for you, but
00:05:33you don't have money as one of the things that you're in debt for.
00:05:36Now, to be clear, there are pros and cons there.
00:05:38Like the pro is that you can stay alive a lot longer because you typically keep your cost
00:05:43basis a lot lower.
00:05:44The downside is, is that it goes slower.
00:05:47And so your capital constraint will oftentimes limit the size of what you can pursue from
00:05:52day one.
00:05:52If you wanted to start an AI robotics business to go global, it would be incredibly unlikely
00:06:01that you would succeed because the amount of capital it would cost to just build one robot,
00:06:06let alone many robots as you scale.
00:06:08And then you'd functionally probably lose money on building that first robot.
00:06:11And then after you lost money, the first robot, you'd somehow have to get more money to then
00:06:14build more robots.
00:06:15It's very hard to do without outside injections of cash.
00:06:18And so this box does constrain to a degree, what kinds of opportunities you can pursue.
00:06:23And there's a reason that some of the biggest people in the world start here, which is a
00:06:26perfect segue to, okay, so what is other people's money into your business?
00:06:30This is raising capital, right?
00:06:33So you start and you run the company, but you raise capital from investors who buy a slice
00:06:37of equity to fund the fast growth.
00:06:38Normal examples of this are tech platforms, social networks, marketplaces, manufacturing,
00:06:43pharmaceuticals, where it takes years and years and years to get a drug pass and then
00:06:45it makes money.
00:06:46Typically, anything that has huge amounts of upfront costs, then increasing margins or gross
00:06:50margins later and or winner-take-all dynamics, meaning you have to lose money for a long time
00:06:55to get the whole market.
00:06:56And then all of a sudden, you have a network effect and then everyone buys from you.
00:07:00Amazon famously lost money for like a decade plus before they really started turning a profit.
00:07:04Facebook too, lost money for a long time, but they were mapping networks.
00:07:08So who should take this path?
00:07:09If you have a very big dream of what you want to build and there's functionally no way to
00:07:15make your thing profitable without using other people's money, like is it like you will just,
00:07:20you know you're going to lose money for a year, two years, three years in order to actually
00:07:23have this thing work.
00:07:24Then you have kind of like a predefined path that you're going to have to raise capital.
00:07:27So I've experienced with this because school is venture-backed, right?
00:07:31And so we raise capital at school to continue to grow the company and we're able to give
00:07:37pricing, which is absolutely absurd, like $9 a month, which by the way, is very little
00:07:41with inflation.
00:07:42It's basically free in order to get as many people who want to start a business, all the
00:07:47tools they need to do it.
00:07:48Now, the main advantage of this is that you start with a bigger thing, you can hire the
00:07:52top talent, you can outspend competitors, you can be negative in your acquisition costs.
00:07:56I mean, you can lose money getting customers, right?
00:07:58You can build infrastructure faster than you could with your own cash alone.
00:08:02And on a personal level, you can incur way less personal debt because, you know, there'd
00:08:05be no way that you would be able to fund a lot of this out of your own pocket.
00:08:08Now, if you can, if you're already rich, then you can take on raising capital style big
00:08:12opportunities and then fund it with your own cash.
00:08:15And that's really an amazing combination, but not available to most people.
00:08:19But this allows you to pursue rarer opportunities.
00:08:21And one of the advantages of that is that it actually prices a lot of people out of the market.
00:08:25So to agree, there is an element of risk with raising capital because typically the opportunities
00:08:29that people pursue are high risk, high return opportunities, but there's typically far fewer
00:08:34competitors.
00:08:35And so, you know, you can count the number of competitors who are well-funded even in a space
00:08:38maybe on two hands.
00:08:40If I said, how many social media marketing agencies are there?
00:08:42You're going to need a lot more fingers.
00:08:44And so within our car analogy example, you actually just start by building the car factory.
00:08:48And then even though you know you're going to lose money up front, once the car factory is built,
00:08:53you know that every single car you're going to make X dollars of profit, right?
00:08:55And that is how you end up recouping it and justifying the return to the investors.
00:08:58Some of the trade-offs here are significant.
00:09:00You now have two customers instead of one.
00:09:02In Bootstrap, your customer is just the end customer, right?
00:09:07When you have raising capital, your customer is both the end customer and the investors or
00:09:12venture capitalists.
00:09:14And so that's one element is that I have to serve two masters, which can oftentimes be at odds,
00:09:19which is a bit of a pain.
00:09:20The second kind of big downside is that you're going to dilute your own equity.
00:09:24Here, you have 100% of the pie, right?
00:09:26Whatever you make is yours, and that's your pie.
00:09:28Now, you can give profit shares.
00:09:29You can give equity slices to key teammates or partners or whatever.
00:09:32But they're usually in the business.
00:09:34They're actually helping you succeed within the business.
00:09:35Whereas when you're raising capital, a lot of it's going to depend on the terms.
00:09:39Sharon, my partner, tells a story about his first exit ever.
00:09:42He learned what a ratchet was, which is that he had a very large exit in his first company
00:09:47that he started in his teens that then I think he exited around age 25.
00:09:52It was many tens of millions of dollars.
00:09:54But because there were liquidation preferences and ratchets on those liquidation preferences,
00:09:59the investors got paid out first and with some excess.
00:10:02And so when he saw this very big number, the amount that he and the other founders were
00:10:04left with was less.
00:10:05Now, to be fair, he did fine.
00:10:06But it was less than what he thought he was going to get.
00:10:09Now, as you continue to scale this, typically, if you do multiple rounds, each person who's
00:10:13going to put money in also wants a seat at the table, quite literally a board seat, which
00:10:17means that over time, you can absolutely get voted out of your own business, which happened
00:10:21to Steve Jobs, right?
00:10:23And so these are real risks that happen.
00:10:24You can lose control of your own company.
00:10:26And a lot of this is going to depend on the terms of other people's money.
00:10:29If someone gives you a trillion dollars for 1% equity in your business, that's an amazing
00:10:33thing.
00:10:33If someone gives you $10 for 90% equity, that's going to be kind of tough.
00:10:37And so this one is very much the devil's in the details.
00:10:40And your ability to raise is going to be a combination of two things.
00:10:43Your ability and track record as a founder and the size of the opportunity that the investors
00:10:47believe you're going after and the likelihood that they believe that you can actually hit
00:10:50it.
00:10:50And I'll say the last downside here is that typically venture money is kind of grand slam
00:10:56money.
00:10:56It's like they just want you to swing for the fences and know that they're going to have
00:11:00a lot of people strike out.
00:11:01But the economics of having somebody get 1,000x on their money allows them to have many
00:11:06losses.
00:11:07But if you're the person who takes the loss and N equals 1, as in it's 100% of your life,
00:11:11that is where there's a sea of tombstones of failed ventures and founders who gave 5,
00:11:1710 plus years of their life and pretty much worked a job, but with way more stress for a
00:11:23long period of time and then ended up having nothing to show for it, which is tough.
00:11:26And they don't even have the story of the big success at the end.
00:11:29So this is actually far more common than the big headlines that we see.
00:11:33And the reason those things make big headlines is because they're rare.
00:11:35Which brings me to the third way of making mega money, which is investing.
00:11:39Now, this is the one that probably a lot of people have more familiarity with, right?
00:11:42It's your money and you're investing into other people's businesses, right?
00:11:45So you take the cash you earn actively from other places and you buy pieces, tiny chunks of
00:11:50other people's companies.
00:11:50It's kind of the equal opposite of raising capital.
00:11:52Now, you don't have to buy into venture type products.
00:11:55You can just buy cash flowing businesses, you can buy public stocks, you can buy real estate.
00:11:59There's a lot of different things that you can buy with money.
00:12:02Now, the clear thing here is that you don't run them, you fund them.
00:12:04So me personally, I buy kind of, I'm split in my investing.
00:12:08So I have ACQ Ventures, which is our venture arm.
00:12:11So that's where we are basically the raising capital partners for SMB Tech.
00:12:15And so that's exclusively what we invest in because we understand it well.
00:12:17And then on the other side, we have kind of the private equity style investments that we do,
00:12:22but we also add some sort of service because we have a whole service layer at ACQ.
00:12:25And so those are typically more cashflow investment businesses, but also obviously of enterprise value.
00:12:29And so who should take this path?
00:12:30Real quick, I'm going to show you the exact 10 stage roadmap from zero to 100 million plus
00:12:35that less than 1% of companies finish.
00:12:37I've now done multiple times.
00:12:39And so I can say with a lot of confidence that these are the stages as headcount increases
00:12:42that you need to get through.
00:12:44And I broke each of these down by eight different functions of the business,
00:12:48what the constraint feels like, like what are the symptoms of it when you're going through it,
00:12:51and then what steps we actually took to graduate.
00:12:53And we've done this across software, physical products, service businesses, brick and mortar,
00:12:59all of this, and it works.
00:13:00And it's my gift to you.
00:13:01It's absolutely free.
00:13:02And so the link's in the description, but you just go acquisition.com forward slash roadmap,
00:13:06just enter your info, and it'll spit it right back to you all free.
00:13:08Well, once you have meaningful excess cash, and you want the upside without the day-to-day
00:13:13operational responsibility, then this is an interesting path.
00:13:16And so the main advantages are that you have diversification.
00:13:19So you're able to make many bets instead of kind of a life or die bet with a single company.
00:13:23But whenever you distribute your bets, you also decrease your upside, right?
00:13:27So Dale Carnegie had a famous quote, which is, put all your eggs in one basket and then watch the basket.
00:13:31And so that's him talking about this, right?
00:13:33Bootstrapping or you're raising capital for your own business.
00:13:36That's you putting all your eggs in one basket and trying like hell to make that thing work.
00:13:39With investing, you're kind of, you're spreading it out.
00:13:41But when we look at the most successful investors, they typically aren't nearly as diversified.
00:13:47They're typically way more concentrated, which then allows them to maybe make five,
00:13:51seven, eight significant bets that they believe they have alpha or upside on above the market.
00:13:57And so with investing, I think that of the four of these, arguably the easiest lifestyle kind
00:14:04of decision because you have no boss and you're technically other people's boss.
00:14:08And so you just write checks.
00:14:10You can inform what you want the person to do.
00:14:13To be clear, you might not have a majority.
00:14:14That's going to depend on the terms.
00:14:16But when Layla and I sold the company and we were just a family office, this is all we did.
00:14:20And I'll say of my entire life, the most chill period.
00:14:23And sometimes I think to myself, like, what was I doing?
00:14:26Why am I back doing this when I don't need to do it anymore?
00:14:30But I want to make a key point here is that this is by far the slowest, number one.
00:14:34And number two, almost no one makes their money this way.
00:14:37They have already have a high active income and then they begin investing.
00:14:41And if you're like, well, I'm going to be like Warren Buffett.
00:14:43Well, did you buy your first stock two weeks after Pearl Harbor when you were age seven?
00:14:47No.
00:14:48And did you do it in a world where there wasn't a Robin Hood?
00:14:50And you actually had to figure out how to do mail-in ballots and call someone as a seven-year-old
00:14:54or 11-year-old, whatever it was, to make your first bet?
00:14:57Probably not.
00:14:59Because you're like, oh, I want to be like Mozart when you're age 30 and you want to start investing.
00:15:02It's like, well, here he had like 19 concertos by this point because he started at age seven.
00:15:06So I wouldn't say, oh, let me look at what the top person in this field did if you're not that person.
00:15:12And so the whole point of this video is to figure out what path is right for you.
00:15:14And to be clear, Warren Buffett is very famous now.
00:15:16But like until he was 60, I don't think many people even knew his name.
00:15:2060.
00:15:21Right?
00:15:22And he's made the vast majority of his wealth from like age 80 to 95.
00:15:26So think how crazy that is.
00:15:27So if you're like, I'm in this for the very, very, very, very, very, very, very long haul,
00:15:32then this is a good path for you.
00:15:34And especially if you're somebody who wants a little bit more of a lifestyle where you're like,
00:15:37OK, I just have to get my passive to exceed my active costs, then it's like, great.
00:15:42And if you get better and better at that game, you'll have more and more.
00:15:44And then you'll have nothing else to do.
00:15:44And you'll just keep playing the game just for the love of the game.
00:15:46But it does take time.
00:15:48It's unlikely that you're going to get these 50%, 100% plus annual returns.
00:15:53Even Warren for a very long time didn't get those types of returns.
00:15:55And even in the beginning, he was still combating, I think, 50-ish percent.
00:15:58But he was the best in the world.
00:16:00And then once he had more capital, his returns decreased.
00:16:03And a great note on this is that in, I would say, Main Street,
00:16:06real estate is the number one most common path for creating millionaires,
00:16:11but not the most common path for creating billionaires.
00:16:14And to me, that is kind of like a great kind of cherry on top for this little bucket,
00:16:18which is that it is a great way to build and store wealth.
00:16:21It's being smart with your money and allocating it appropriately.
00:16:24It's unlikely to be the thing that gets you all the way to the top
00:16:26unless you have a very, very long time horizon.
00:16:29And let's be real, you have to live to 95 like Warren Buffett to hit the list.
00:16:33Like, that's real.
00:16:34Like, Charlie Munger was 99 when he died.
00:16:37And so, like, in a very real way, like, they had, like, if they had died at 74,
00:16:42I don't know if we talk about them as much.
00:16:44Because they wouldn't have had all the compounding that happened after.
00:16:46So, like, this is a long, long game.
00:16:49Finally, that leads us to number four, which is fund management.
00:16:53So this is, you take other people's money and you invest it in other people's businesses.
00:16:57You raise a pool of capital for investors, which the fancy word of that is LPs or limited partners.
00:17:01And then you use that money to buy pieces or control of other people's businesses.
00:17:05Now, depending on the way that you do it, you can also use debt there, too.
00:17:09So let me give you a visual of, like, this is potentially one of the highest leverage scenarios.
00:17:15It's like this on steroids, basically.
00:17:18And so let's say that you want to raise $100 million.
00:17:21Now, I'm going to use big numbers because I want you to think bigger anyways rather than thinking in small numbers.
00:17:25All right.
00:17:25So in order for you to raise a fund with $100 million, it's typical that the person who raises the fund puts about 5% of the total funds raised in.
00:17:33So you put $5 million in.
00:17:35You raise $95 million of LP capital.
00:17:38That means limited partner capital.
00:17:40So other people put their money in.
00:17:41And then, this is where it gets even crazier.
00:17:44So this is $100 million in total, right?
00:17:47But then you say, you know what?
00:17:49We're going to go buy.
00:17:50I don't have enough space on this thing, so just bear with me.
00:17:53We're going to buy $300 million of businesses because we're going to use $200 million in debt to buy these businesses.
00:18:05And so think about the leverage that you get from your $5 million able to buy $300 million worth of stuff.
00:18:11Now, when this $300 million, let's say it just grows at 10% a year.
00:18:16Let's say you're not amazing.
00:18:17You're just matching the S&P.
00:18:19All right.
00:18:19In seven years, you'll double, right?
00:18:22So this is now $600 million seven years later.
00:18:25Now, if you had a 10% return for private equity, that would be bad.
00:18:29But I'm just going to give you the base case of you're not that good at this, okay?
00:18:33So that means that you have a $300 million delta.
00:18:36So we've got to pay back, right?
00:18:38We've got to pay back the debt.
00:18:39So we have to take our $200 million out because we've got to pay the debtors back.
00:18:42Now, they have some interest in some other stuff there, too, right?
00:18:44Then we've got to pay our LPs back, right?
00:18:46I'm just making the box a little bit smaller so I can draw the rest of it.
00:18:49All right.
00:18:49So we've got to take this back.
00:18:50Now, sometimes there's a hurdle rate, which is a minimum return.
00:18:54You give these guys, say, I don't get paid until X happens.
00:18:56That depends.
00:18:57But typically, in private equity, it's 6% to 8%, somewhere in there.
00:19:00And then whatever is left over here, you then have a split with them, LPs, and then GPU.
00:19:07So let's see what happens when you actually invest this money and then wait five to seven years.
00:19:11Now, let's say because you're in private equity and you're investing in non-public markets,
00:19:15you get a better than public market return, which is basically the baseline.
00:19:19Like, no one wants to get a public equity return and they have their money locked up for, you know, five to seven years.
00:19:24So if you got a 20% annualized return for six years, you would have 2.98 on the money.
00:19:29So functionally, your $300 million, right, that you bought now becomes $900 million.
00:19:34Ooh, more.
00:19:40All right.
00:19:41So we got to pay back our debt.
00:19:42So we have our $200 million that we got to pay back in debt.
00:19:45Now, there's going to be some interest on that.
00:19:46Let's say that we got to pay them back $100 million in debt payments.
00:19:52Okay.
00:19:52So we've got that too.
00:19:54Now, we also have our LPs, $95 million that they put in.
00:19:58So we got to pay them back that.
00:19:59And then there's some minimum return that we promise them before we participate,
00:20:02which for us is going to be about $40 million if we have a 6% PREF or hurdle that goes back to them.
00:20:10So that is all guaranteed to them.
00:20:13Now, after that, it just depends purely on the nature of the asset class and what you're investing in
00:20:18and your kind of proprietary blend of whatever.
00:20:20There's going to be some split of the profits here that goes to you, the GP, the general partner,
00:20:26that's the operating partner, the person who runs the whole fund,
00:20:28and then some that goes to the LP or limited partner.
00:20:31And so let's say that you had a 50-50 split here.
00:20:36Let's just call it.
00:20:37Okay.
00:20:37That means that after we add all of this stuff up, this slice here is $465 million.
00:20:47Remember we started with 5 million?
00:20:51This is how you get mega rich.
00:20:54Now, to be clear, all of this isn't yours.
00:20:57Maybe two-thirds of that isn't yours.
00:20:58But either way, even if you had 10% of that and you got $46.5 million,
00:21:05you did pretty good on your $5 million investment, right?
00:21:10If you got 20%, now you're looking at $90 million.
00:21:13Even better on your $5 million investment.
00:21:15You see how this stuff adds up?
00:21:16And that's because this is leverage.
00:21:18Now, when we look back at our original kind of sheet here,
00:21:22with each of these four paths, you have to decide on what's best for you.
00:21:26If you have some proprietary way that you know how to source deals
00:21:29and you have a good way of finding capital,
00:21:31which by the way, if you're like, I don't know how to raise capital,
00:21:34you absolutely do know how to raise capital if you have good deals.
00:21:38One of the best pieces of advice I got from a mentor of mine
00:21:39is that there is no lack of capital in the world, only a lack of good deals.
00:21:43And so if you find a good deal, capital will appear, right?
00:21:46If you come to me and say, I have a guaranteed way,
00:21:48which, of course, don't use those words
00:21:49because that's a great way to get good money to run away.
00:21:53But if you're like, there is an incredibly high likelihood chance
00:21:56that I have 5X-ing money in this way.
00:21:59And here's the six different ways that I've mitigated the risks.
00:22:01And let's say those are believable.
00:22:03And if we have that, then I'd be like, okay, well, how much money do you need?
00:22:07And that's how any good investor is going to ask the question
00:22:09because when they do identify good opportunities,
00:22:11you just want to back up the truck.
00:22:12Now, in that setting, the higher, believe it or not,
00:22:15the higher the return and the more private the type of deal that you're doing
00:22:19that's more niche and specific to what you know,
00:22:21typically the better the splits that you can negotiate
00:22:24on the GPLP split of the profits after some certain point.
00:22:29And so who should do this?
00:22:30I think the best version of this is where you build a track record,
00:22:34you figure out proprietary deal flow,
00:22:36and deal flow that only comes to you that no one else has.
00:22:38And you have some sort of real edge in picking and improving those companies.
00:22:41So oftentimes funds are organized around a singular thesis.
00:22:45So for example, at the very beginning of backwards.com,
00:22:47I got approached by a walnut tree fund.
00:22:51I was like, I don't even know this exists.
00:22:52But they explained how it worked,
00:22:54which is like it takes 30 years to grow a black walnut tree
00:22:56all the way to like full size.
00:22:58But every year after year three, it creates walnuts.
00:23:01And so it cash flows every single year.
00:23:04And then the end of the 30 years, you cut the walnut tree down
00:23:06and you get this amazing walnut wood that you can then sell.
00:23:09And the cost is really just the seed and the time.
00:23:12And that was their entire business model.
00:23:13And they'd done this a number of times.
00:23:14And they had these kind of staggered tree vintages,
00:23:17if you will, I'm using the wrong word,
00:23:18but like the vintage of trees.
00:23:20Every year they had another cohort.
00:23:21And I was like, this is a really interesting business.
00:23:23And they had a fund around it
00:23:25because I don't want to know
00:23:26where the Venezuelan tree farmers are.
00:23:28I don't have those connections.
00:23:29I don't know how to sell walnuts at scale.
00:23:31Could I figure it out?
00:23:32Maybe.
00:23:33Is it worth my time?
00:23:33Probably not.
00:23:34Is it worth my money?
00:23:35If it doesn't take my time?
00:23:36Maybe.
00:23:37And so the beauty of this one
00:23:38is that you have maximum leverage
00:23:40and you can have the smallest personal checks.
00:23:41You have huge potentials for upside.
00:23:44There's also fees that you can put onto this.
00:23:46Typically, the better and the more trackered you have,
00:23:48more you can add fees in.
00:23:50I'd say your first time, oftentimes you have less fees
00:23:52just because you want people to come in
00:23:53and not think you're going to get rich on the fees.
00:23:55They want to have as aligned incentives as possible
00:23:57with the investor.
00:23:59Now, oftentimes, the GP ends up richer
00:24:02than any single LP,
00:24:03obviously depends on how much capital gets put in,
00:24:05that they take from.
00:24:07Now, the risks.
00:24:08You have enormous responsibility
00:24:09and a very long feedback loop.
00:24:12And you're accountable to the LPs
00:24:14and to regulators
00:24:15and to the entrepreneurs who are running the businesses
00:24:18and to some degree,
00:24:19the customers that those businesses serve.
00:24:21And so you have a lot of masters
00:24:22to serve in this time period.
00:24:24And you can be rich on paper,
00:24:26but the entire time you almost feel like a slave,
00:24:28which sucks.
00:24:28And so your job becomes managing risk
00:24:30and reputation
00:24:31and people and portfolios,
00:24:33not just building one company.
00:24:34And if anything,
00:24:35you're almost building the company of the fund.
00:24:37So I got rich bootstrapping my companies.
00:24:40I took some of my cash
00:24:41and invested in other people's companies.
00:24:42That cash continued to compound.
00:24:45And I was able to invest
00:24:46and then co-found
00:24:47school where we raise capital.
00:24:49I obviously promote school as well.
00:24:51And then finally,
00:24:51it's in fund management.
00:24:52So we've raised capital
00:24:54for some of the real estate deals
00:24:55that we've done
00:24:55when we buy big buildings,
00:24:56which we do through ACQ Real Estate.
00:24:59We've only done that privately
00:24:59to some of our higher level clients
00:25:01and portfolio companies.
00:25:02We are functionally general partners
00:25:03in some big real estate buildings,
00:25:05which you can check out
00:25:06acquisition.com Real Estate.
00:25:07But yeah,
00:25:07these are the four ways
00:25:08to make mega money.
00:25:09Pick the path that's right for you
00:25:10and may the odds
00:25:11be ever in your favor.
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