Can you walk us through just for people listening and maybe that are unfamiliar with how this works, could you walk us through like a step-by-step of a deal? Like the timeline, how long it takes? What, what does it look like when you're line-lining up your capital stack? Are you, are you raising money individually for each deal? Do you have credit lines? H- Can you walk us through like what that process looks like?

Yeah.

I mean, there's, there's a lot of different types of investors out there.

I mean, there's venture ca-capital, angel, um, kinda growth equity.

We fall into kinda leveraged buyout category, so that's buying more established cash flowing businesses.

We buy it with a certain amount of debt.

So if you say you're paying fifty million dollars for a business, you put twenty-five million of debt and twenty-five million of equity.

Um, I'm curious to get your take on, like, what do you, what do you think over the next few years the private credit situation is or the, the private equity situation is with boomer retiring age, uh, entrepreneurs? There's just so many things moving in this space, so I'd love to get your sort of macro view on what you think is gonna happen over the next couple of years with all this sort of private credit craziness that's, that's going on in, in all of these, uh, all these portfolios.

I'd love to hear a little bit more about that and why that's been successful and how that's evolved.

Yeah, it's really been a strategy from the beginning.

Most PE firms, they may go out and start out doing deal by deal.

And then after a few, they'll raise a fund and go the traditional route.

We really doubled down on kind of the high net worth accredited investor.

And really, that's where we bought.

We've really brought the firm to where it is today is we have over 500 clients.

But I'm just curious, what do you think makes a great independent sponsor for those people that are thinking about it?

I find that kind of fascinating when, you know, you just see someone, you kind of make a judgment call on their background, right? Talk a little bit about that, your humble beginnings and some of the stuff you had to go through just to get to where you are.

Yeah, I can talk a little bit about that.

I mean, I'm very fortunate at this point to kind of understand and be introduced to the kind of magic of capitalism here in the U.S.

But I didn't start out that way.

I mean, I was raised by a single mother.

She had dropped out of high school and she was a teenager when she got pregnant with me.

So as you can imagine, she didn't have much, much chance to be introduced to kind of the the benefits of capitalism and benefits that we have here.

Um, hey who wants in right but in the very beginning right you have a deal you need capital right you find uh whatever three million dollar ebitda business and you're like okay like i'm not funding this thing myself so in the beginning how did you what was the reach out like and how did you get people on board for some of these deals or did you just go to the bank

What's your philosophy on investing and how does that part correlate?

Well, our best investments have been where the owner really cares about their employees.

Those businesses and employees care about their customers.

The businesses do better.

And if we maintain kind of what the owners built and really just be a nice steward of those strong investments, businesses, those transactions do very, very well for us.

So we continue to support the charities in those communities that these businesses operate in.

We continue to support the employees and really try and grow these businesses.

How do you handle continuing the culture side of the business, especially in cases where the founder is going to leave?

Yeah,

I mean, those are the easy...

There's a lot of levers that you can do to really get a nice return in private equity.

I mean, number one is just paying...

The company pays down the debt over a period of time.

So if you buy a company with... 50% debt, 50% equity.

You pay that debt down over five years, you've doubled your equity.

But why do you think it is Sequoia that there are so many people that are starting to become interested and not just interested, but actually investing their money into these types of investments? Yeah.

How about for founders thinking about selling, what should they evaluate beyond just purchase price?

Again, a lot of times these lower middle market businesses, they're going to be involved for the long term.

They're either rolling over some equity.

They may have an earn out or a seller note.

And most of these founders, they care about their employees.

They don't want their employees to... to, um, lose their, their jobs.

So I I'd say that the founder really needs to look at somebody that's aligned, that they see, um, that was going to take care of their business.

Any ways that you advocate for capitalism and free enterprise, like outside of your direct business activities?

And then maybe what's your focus with deploying and allocation?

Yeah.

So our original plan was like most traditional lower middle market funds was to do a couple of deals and raise a fund and kind of buy companies.

Again, our box is kind of mostly family businesses, lower middle market businesses, businesses under 200 million in revenue, 20 million of EBITDA, those types of nice deals.

generational businesses.

And, um, but after, so the first deal, like, like we said, we had 28 investors on that.

And that was really just everybody I know.

What, what have you found useful when communicating to them?

Can you talk through a little bit of how you structure the actual acquisition from the capital stack side of it?

Yeah, when I first got into the investment side of the business, that was the part that was, I didn't come from another private equity firm or investment bank where I was used to raising capital.

So when I started, I really went around to my friends and network and we put together a pool of capital for the first acquisition and that went really well.

We had 26 investors in that original pool.

deal almost 10 years ago and really nice exit, nice investment.

And over the years, our investment network has really grown up very similar.

A lot of family offices, a lot of ultra high net worth individuals, and really just a lot of credit investors.

Just for people who have never had exposure to this sort of space before, these deals look different than a real estate deal where you've got the equity and the bank note, right? Can you kind of go into what that typically looks like?