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October 21, 2020

Episode – 14

Larry Namer – Media Entrepreneur, International Business Tycoon, Master Dealmaker

Description:

Larry Namer is the President and CEO of Metan and COO of Fanvestor. Along with Alan Mruvka, he founded E! Entertainment Television and Movies USA Magazine. They eventually sold their stake in E!, which is now owned by Comcast.

Larry is a recognized expert in the business of international media and entertainment. After E! he started Comspan Communications which promoted or produced several hundred rock concerts in Russia. They also brought the Harlem Globetrotters to Russia in 1995 for the first time in almost 50 years. As CEO of Metan he helped create a series called Hello! Hollywood!, a weekly entertainment news series tailored to Chinese audiences, offering up the latest in celebrity, pop culture and lifestyle news.

What you’ll learn from this episode:
– How to deal with business failures and setbacks
– How to get ready for the deal table
– Deal breakers and how to avoid them

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Full Transcript:

JP Maroney:

Greetings and welcome to this episode of the deal flow show. I’m JP Maroney, your host, along with my cohost, mr. Paul Nicoline here at Harbor city capital have a great guest. And I was reading over your bio. Larry, I’m excited about diving into your background and some of the things that you’re working on right now, but we have Larry namer with us. He is the founder of E entertainment group. A lot of people would be obviously familiar with that in the consumer market. He also is the COO of fan Vester, which I am excited to learn more about. I just took a little bit of a peek at the business model, but really excited to learn about that as well as president of may ton. And we’ll talk about all the deals you’ve got on the table. So I was looking at your bio and it was one of the things I pointed out to Daniel Penn Orenda, our producer for this show.

Who’s also in our business development group at Harbor city. And I said, it looks like you’ve done a lot with taking existing assets, uh, entertainment assets from the U S re-purposing and repositioning them overseas, which is very interesting from a deal-making perspective. So I want to get into that a little bit today and talk about that. Also want to talk a little bit about the Harlem globe Trotters as I hear that in the sound of their music in the back of my mind that you took them over into Russia, I believe for the first time in 50 years. Uh, and so we’re going to talk about a lot of exciting things, but maybe you could back up just a little bit. You created E entertainment group and with a partner, I believe in a fairly modest amount of capital and the company is now valued. I know y’all exited, but the company is now valued greatly and obviously has impacted a lot of lives. Can you kind of talk a little bit about that start and the early days of what y’all did there and then let’s bring it forward to today?

Larry Namer: 

Sure. Um, myself and a friend of mine named Alan morose gut, Al’s a friend from New Jersey that, uh, was actually in the real estate business, but, uh, one of the real estate deals he got involved in was taking over a small little studio here in LA. And you know, when your New York kids and you’d come out to LA, you get the bug and you want to be in the entertainment business like everybody else. So I had been in the cable business since high school, but more on the, uh, uh, the technical and the operations end. I actually started as a, uh, an underground splicer in Manhattan, uh, when I first got out of school, cause I couldn’t find a real job. Um, and then I kind of grew with it. But, uh, well, when I came out to California, I came out to be the vice president general manager of a company called Valley cable, which was the first 61 channel two-way cable system ever built in the U S and you know, back then, you know, we’re talking 1981.

Um, there weren’t a heck of a lot of channels out there. So while I had the capacity for 61 that were in 61 that existed, so I called up the studios and said, Hey, you know, I see movie trailers only when I’m in the movies. Why don’t you show them to me when I’m in my house? So make me want to go to the movies. And they said, well, we really can’t afford it. And whatever I say, great, send me the movie trolls. I’ll put them on a channel. And then we’ll, uh, you know, you’ll invite me to all those parties and premiers, uh, and they were more than happy to do that more. We did, um, kind of audience surveys. What’s your favorite channel? They go, I love MTV. I love ESPN. I love that trail with the channel. And when the company that I worked for moved back to Canada, I said, you know, I didn’t go from New York to LA to go to Canada.

Um, so I, I kept thinking about that saying, you know, I get the best two minutes of a $15 million movie for free. And a lot of ways, it’s just like at PB, you know, where a host would turn to a green screen and saying, Madonna has a new video. I said, well, why can’t I just have someone turned to the green screening age Watson as a new TV show or a movie. And so then Alan and I just kept kicking that around. You know, we’re going to be entertainment tonight, 24 hours a day, MTV at the movies. And we wrote a business plan and we thought it was logical. Everybody we met with said, this is a great idea, but you know, you’re not time Warner or you’re not TCI. And, you know, wake up in the morning and start TV networks. That’s not the way the business works.

And Alan, I just weren’t smart enough to listen to them. So we just kept going. And at that time, the going rate to get a TV network on was somewhere between Oh 60 and a hundred million dollars. And I’m finally after three and a half years, and we were, we were almost ready to give up. Um, we, we met a investment banker on wall street and he said, I love this and I want to fund it. And we said, yay. When can we get to 60 million? And he said, well, I’m only allowed to sign for two and a half. Um, you know, we go, Oh, well, what are we going to do with two and a half? And then we thought about, it said, you know what, we’ll figure this out. So we took the two and a half million and, um, I called the friend and, uh, university of Texas in Austin and asked him if he had kids in the radio TV program that, uh, needed intern jobs. So he literally sent us 31 intern. And so we started the company with 11 employees and 31 interns. That is

JP Maroney: 

Cool. Okay. So to my original point, though, IE entertainment, the original channel was repurposing movie trailers. This is a theme in your life. Where did, can you identify a point back early at? So, I mean, I know you started out, as you said, with the Spicer cable split bikes or whatever, but can you, at some point in your life, was there something that clicked that connected the dot for you of taking one thing and finding a place for it? Because that is, I see that theme obviously through everything and you just named another one.

Larry Namer:

Um, well, you know, it really didn’t start till I got to Valley cable and, you know, it was just at the time that, um, cable TV was really beginning to blow up and expand and stuff. And, and I, I marveled at MTV, you know, which was this when it started, it was just this incredible phenomenon. And I said, that business model is amazing. They’re getting the best musicians in the world to do music for them. And they’re, they’re getting that, you know, that, that two and $3 million music video for free, and they’re standing a host in front of a green screen and, you know, paying the host, you know, a thousand bucks a week to do it. I said, you know, I love that model. And, and, you know, just at that time, you know, you have the cable channel explosion. And, um, uh, the, the phrase that I kept hearing bandied around was cable TV is like an electronic newspaper and LLI.

We thought about it and go, you know what, it’s a CNN is the headline. ESPN is the sports. The home shopping network is the, is the ads we said, but the thing that’s missing from that picture is the second most read section of any newspaper. And that’s the entertainment pages. So we, that’s what we set out to be the entertainment pages of the cable newspaper. Um, you know, because we knew people would love it. And we actually thought more of it because it was international. People’s love of Hollywood and stars and gossip and stuff was not just restricted to us. The way a lot of cable networks were restricted to us, but we figured we had something international. And we, we knew that we could do it economically because we were going to get, you know, clips from movies from free. And then, you know, after we got started, I would go to the studios and say, listen, you know, why don’t you send a video crew on the set while you’re making the movie and I’ll promote it six months before it comes out instead of a week before it comes out and they were thrilled to do it.

So we were getting all of this incredible video content literally for free. Um, and you know, that, that gave us the basis for being able to start small. And then once we established, um, you know, it just, it was one of those overnight successes that took three and a half years to cultivate itself. Um, but we, you know, we started getting advertising money and then we said, okay, now we have a little bit of money. We could get a little more creative with the programming. So we started with things like talk soup and Howard stern and new Hollywood choose story. And I, you know, so we just built on it and basically was built on internal cashflow,

JP Maroney:

All exited, right. And, and had that liquidity event walk us through because there are a lot of deal makers that watch this show, listen to this show who are looking to their first exit. So that’s on there, that’s the goal for them as y’all built towards that. And I know you said something very, um, unbelief, and you said that, you know, you were too dumb to know better than to keep going or whatever. Um, and as entrepreneurs, I know we’re bullheaded. A lot of times we just keep pushing, but, and sometimes we prove other people wrong, but when you got close to that, and as you were coming up on that exit, walk us through the process as y’all were, we’re putting the deal together and ultimately making, making the exit and having the liquidity,

Larry Namer:

Uh, you know, once we got on the air, you know, the old, the cable industry, the big cable companies, that timing, and then move, which we can find more on TCI, United cable. And, you know, a lot of those companies won’t merge together and they don’t, they don’t exist anymore, but, um, they came to us and said, Hey, you know, now that we really can understand what you’re doing, uh, we’d like to invest in you. So we took in seven of the biggest cable operators as, as investors in the company. And we grew astronomically the first year, we were in 14 other countries, other than us, we were the fastest growing cable system in the U S and it just, you know, it, it got so big, so fast that, you know, for me personally, um, who’s a creative person, you know, at the end of the day, um, found myself, spending more time reading financial statements and sitting in boardrooms and fighting over next year’s budgets and ad sales, projections and stuff.

So, you know, after a while it just stopped, you know, you know, in year nine or something, it just got old for me. Um, so I just decided, you know, I didn’t want to participate in the day to day. And so I just went on the board and I hired a C CEO to kind of run the day to day. And, um, and so, and then we just, we just sat there with the one thing we did, which was really smart, um, was when we negotiated those deals, um, we negotiated dilution protection, uh, for Alan and I. So even though HBO and time Warner kept, Oh, we could run the day to day so much more efficiently than Larry ever did. You know, they spent another $75 million over budget building it now. And I just sat and wept, you know, we go, this is great. Keep pouring that money into the company. And they did. So, uh, it was, you know, we, we were fortunate stopping, you know, at that time, the cable companies knew that growth was inevitable. So they really didn’t care about throwing an extra 75 million into operating. Talk a little bit

JP Maroney:

About what’s going on with Matan now. Um, I know you’ve got that. You also have a fan Vestor, which we’re going to talk about, but I want to talk a little bit about may and just a moment before we do, if you’re listening or watching this episode of the deal flow show, you can go to the deal flow, show.com and get access to our archives as well as a subscriber, follow us for future episodes as well. That’s the deal flow show.com. All right, Larry. So talk a little bit about what you’re doing today with Matan and the interest it could be. You can talk about us globally. Um, I read a lot about where you’ve, again, taken shows overseas repurposed content. It’s very interesting,

Larry Namer:

You know, w while I was still at E I’m, a lawyer friend of mine in town asked me if I would go over to Russia with some clients or peers that were basically a merchant banking, and somebody proposed an entertainment deal to them. And, uh, the lawyer wasn’t sure how real it was. So he asked me, could you go there and tell me what you think? And no, I just thought it was fascinating to go to Russia, you know? And, uh, so I didn’t, of course the deal that they were looking at was not really a good deal. And so they ultimately passed on that, but, um, I really liked the place and I liked the people and I could tell the changes were coming. And, um, so I had met the mayor of st. Petersburg, uh, and, you know, he asked me if I would help them start a charity to raise money for the children’s hospital and the children’s orphanage there and via doing a music festival.

And, you know, my first reaction was, well, you know, I would love to help you, but I don’t know the music business. And he goes, well, you gotta know more than I do. And I went, all right, I’ll give you that one. And, uh, so I set out to start, what’s called the white Knights crash, the wall, uh, which is now in its 30th year, um, now. And, uh, it was a charity, but to get, uh, to get people to play, um, I would kind of promise them, you know, unusual venues, unusual experiences and stuff like that. And then I’d go to the mayor and say, listen, I had a problem as David Bowie, he could dance on the graves of the zines, uh, and the mayor would go, yay. I just go see Vladimir. And, you know, it turns out Bladimir the vice mayor.

His last name was Bruton. Um, so, you know, as, as his fortunes Rose, um, he ended up in the Kremlin and he made a friend of mine, um, the minister communications, and they realized that they had to, um, they had a kind of, we think media regulation, they have, so that if they’re going to have a consumer economy, you got to bring in goods that people actually want to buy. Um, so that means you’re going to bring in Western goods. Western market is, and they’re going to be used to certain things existing, like advertising on TV is 30 seconds. Not whatever you feel like today, or if you know the right guy in the communist party, you can have T instead of putting the ads on. And yeah, it was kind of Willy nilly. You know, people did whatever they wanted. Um, but so I had helped them do that.

And then, um, about 11 years ago, the Chinese government, how to realize they also have the media reform, if you’re going to build this consumer economy. Yeah. Because they wanted Coke and Pepsi and, you know, all the usual PNG and the usual cast of characters in, and they had to make that media environment look, you know, a little bit more like what they were used to. And so they liked the Russian model. Um, the Russians said, Oh, no, no, no, we can help you. But there’s a guy in LA who did it, you know, for us go see him. And so I got invited by the government and government agency to go to China. And again, for me, it was like, wow, this is a great adventure. Um, and, uh, so I went there and I did that, and they allowed us to start a, um, uh, an experimental media company there.

And, uh, so we’re, we’re still there. And we do, uh, well, you know, the pandemic has caused a whole bunch of problems, but we did TV shows. We do internet content. We do feature films. Uh, we actually have a consulting group in, uh, Beijing that helps Western companies come into the market and build their brand really at a very ground level, understanding of the way China works, uh, which is, you know, you may need accountants and you may need lawyers, but then again, you need practical entrepreneurs who know how to maneuver. Um, so we do that for some Western companies. Uh, we, um, you know, have done, we’ve had major shows on TV there, you know, and there is a little different sub besides bringing stuff there, like, uh, buying formats of American shows and redoing those in, in Mandarin language. So you take a show like gossip girl.

So, you know, instead of spoiled rich girls in New York and spoiled rich girls in Shanghai, you already had the basis for, you know, a hit show there. And, you know, it, the English version proved very popular to have why not the Chinese version. Um, but then we started creating original stuff specifically for the market. We had, uh, eight years of show called hello, Hollywood, uh, which was what is the Chinese audience want to know about what goes on in Hollywood about which very different than a U S audience. And, um, you know, that was, we’re doing some, a lot of travel shows, Chinese, China’s the largest group of outbound tourists in the world these days. Well, it wasn’t until the pandemic anyway. Um, so, you know, a lot of countries are interested in attracting the Chinese to come. So we do some shows that, you know, we just, we’re pretty shooting the Balkans and stuff like that, you know, where they want to bring Chinese stories there or did want to bring them before the pandemic. And, uh, so we just do it, you know, lots of, lots of stuff there. I mean, it’s really varied. And, uh, and I, I spent, you know, about half my time on may 10 related business,

Paul Nicolini:

If you’re watching or listening to this episode of the deal flow show, you can get access to our archives as well as subscribe and follow us to get access to future episodes by going to the deal flow show.com, Larry, you, uh, you’re currently serving as a COO of fan Vester, which we want to hear all about, but you mentioned an artist before. One of my personal favorites, David Bowie, I had recently saw an interview. You did, what influence did the David Bowie brand or how he branded himself has to do with also fan Vester? Could you share that with us please?

Larry Namer:

I got involved with fan Vesta, which is kind of like it’s an online platform where fans of any artists, whether they be accredited or nonaccredited investors could actually, you know, invest in securities or bonds, some kind of financial instrument that relates to their favorite artists, uh, could be within the field that the artist is, could be something the artist is passionate about. That’s sort of a presumed musician. It doesn’t necessarily have to be music. Uh, they may want to start a fashion line and stuff and want to invest money. But the Bowie thing I thought was very interesting and was a great opportunity to, because when I really researched that, you know, David, at some point realized that every dollar, if they came in on his related to his music, the record company was getting 87 cents and he was getting 13. Um, so he, his people, his management, people were very smart.

They created a financial instrument, gold Bowie bonds. And what they did was they from David’s fans, they raised the money, um, and they bought back the library from the record company and they basically flipped the equation. So now every dollar that came in, went to David, you know, David’s company of which his fans were invested. So they benefited greatly also. Um, and I started to think about that and they said, you know, especially now during the pandemic where, you know, what was a reasonably rigid industry, you know, when you go to people in the music business, they go, well, that’s not the way we do it. Um, you know, that was six months ago. Um, now when I come in and say, I got a new idea, how you could make some money, you know, get some revenue, they are loosening.

JP Maroney:

That is, it has shuffled everything. So give us the, the, maybe a couple of project examples or something that would kind of give our audience an insight into the platform and how it works.

Larry Namer:

Sure. Um, so fan base that, you know, you have a lot of, you know, platforms like Kickstarter and those things, which basically you’re not security or securitize things you use sign up and get a product. There only are a product of the discount itself, a fan dress to kind of runs the gamut. So number one, it’s it, it has sec approvals for certain kinds of investment levels like reg CF levels or reggae’s and stuff like that. So you could raise a reasonable amount of money from, from, from the public. And, um, so you could go either to the web app or the mobile app, uh, you know, sign up and you become a fan fan member. So you could invest in certain projects. And again, it could be a music star, his next album, you know, where they don’t want to do it through the record company.

It could be their next tour where they don’t want to sign up with live nation and, you know, do that kind of thing. Or it could be as simple as somebody wanting to start something a little bit outside of their core business. Uh, like, uh, I’m working now with a major league baseball player. Well, all of Famer, um, who wants to start a fragrance line, um, he’s got a huge social media following fans love them. And, uh, you know, rather than they go to the traditional VC route, they’re able to raise money, you know, a much more economic basis, uh, you know, through their fan base and the fans get to own it. Um, you know, in the sports world, I think they, the interesting model is we may package, um, people don’t realize that the packets are actually owned by their fence. They issued a public stock and the fan zone it.

And, uh, they, um, you know, I don’t think they’ve had an MTC in 50 years and the fans are interesting because they’re not necessarily looking for huge ROIs. And though the way you may look at, you know, when you invest in Pepsi or Coke or something, but, um, yeah, they liked having that certificate on the wall and nobody likes to lose money, but they’re not looking, you know, for crazy returns on it and stuff. They’re, they, they love having that closeness with their, uh, with their team. And, you know, the team does special days for those shareholders and stuff like that, and deal works great. So we say, you know, there are, there are soccer teams out there that, you know, want to raise a bunch on, sell off a piece to raise money, to go buy a new store. And so just so many opportunities there, and that’s kind of what got me jazz about fan best stuff.

JP Maroney:

So that I’m clear on it though. Are they, are they, are they investing in fan Vester or are they investing in the

Larry Namer:

Individual celebrity or sports figure? Fan dress skirt is just not a digital platform, which facilitates investments, but the investments themselves go into the individual projects. Canvas just takes a fee certainly much less than, you know, what a VC or anybody like that will take. Um, so it could be for investments like that. It could be for, um, raising money for a charity. Um, we just did a thing with the Jonas brothers where they wanted to raise money from their fans, uh, for COVID relief efforts. Um, fan blaster is great at that, you know, so we, uh, we, we put that up there and we raised money for it, you know, we’re still going. And, um, you know, so that thing, we did some more Ryan Seacrest’s, we’re doing jumped on Paul Oak and field now. Um, so you know, it kinda, while there are companies that do little pieces of what fan vested does fan dress is really the first one that brings it all together. So we could do a security’s raised that has, uh, uh, experiences involved that has a sweepstake or a contest or anything like that. All kind of, kind of in one package

JP Maroney:

Regulation, is that raising under then

Larry Namer:

We could do right. CF, uh, you know, Chris smaller raises up to 1,000,070 thousand. We can do reggaes. We could do reg DS. We could do, um, reg S okay. Very interesting.

JP Maroney:

Talk about, you’ve had some, obviously some great successes. I haven’t met a single person over the years of building businesses myself that’s ever had any success that also hasn’t had what I call learning experiences. Others call them setbacks, failures, challenges, whatever they might be. I want to talk about that in just a moment, but before we do, if you’re watching or listening to this episode of the deal flow show, you can get access to our archives, as well as following subscribe to get access to future episodes, by going to the deal flow show.com the deal flow show.com. So Larry namer here, obviously founder of E entertainment group, as well as now involved with fan vestors COO of that, and may ton entertainment group. So let’s talk a little bit about the other side of success, and that is those times when everything doesn’t go exactly right. Walk us through it’s part mindset, it’s part strategy, it’s part having a process. How has it worked for you over the years when you hit the wall? How do you approach that? How do you get around it? How do you move forward?

Larry Namer:

Well, you know, I, you know, we go back to, uh, you know, and I got to say that I wake up every morning with 10 new ideas. Um, nine of them are usually by the end of the day, I realize how stupid they were. Um, I’m smart enough to throw them away and not focus on bad ideas just cause they were mine, but, you know, going back, um, uh, we were managing partners in an LLC and we own one of the greatest domain names in the world called television.com. Um, and somebody came along and offered us $7 million for the domain name. And we just said, no, no, no, no, we’re not selling out. We’re going to launch this on shelves. And it’ll be a, you know, if broadcast.com was a billion, this is to, um, so we launched it. Um, and it was a huge success from the audience point of view.

We were one of the first people that really use streaming video and stuff like that. Although, you know, the streaming video wasn’t as robust as it is today. Um, and without any marketing money, we were up to a million users a month. And this has gone back to the late nineties, early 2000, and then the, um, uh, the internet bust came and you had all these websites that, you know, everybody was selling video ads at $25 a thousand and know that our economics are great. But then when everybody started dumping their inventory into the marketplace, the ed cost went down to 25 cents a thousand. Well, we couldn’t afford to feed someone in, you know, a video and at those kinds of rates. So the more people that use the service and the bigger we grew, the more we would lose. And, you know, we begged zoo a Google to delist us, please don’t tell anybody we exist.

We don’t want anybody coming here anymore. And you know, of course they wouldn’t do that. And it was just one of those things that no matter what we did, um, this thing kept growing and the more it kept growing, the more money we would lose, uh, until eventually we just shut it down and realized that, you know, sometimes the world takes over and doesn’t make a difference how smart you think you are. So that’s kind of been one of, for me, it was a great lesson because I really learn, you know, that sometimes you got to put your ego aside and go, you know what? It seemed like a good idea back then, but Andy just constantly reassess the things you’re doing and, you know, have the nerve to go, you know what I thought it was good. Wasn’t next, you know, and instead of trying to focus on saving it, get rid of it quick and focus on the things that actually can make money.

Paul Nicolini:

What’s your pregame, what’s your, how do you, how do you get yourself ready for a deal? And also with that, what are some of the deal breakers that you’ve come across? And what is some of the red flags? So kind of a two part question. How do you prepare and then what, what do you do when you see those red flags?

Larry Namer:

Well, I mean, you know, lots of research, um, I read late into the night. So literally before you go into a meeting with anybody, I researched the heck out of it, stuff like that. And I try to know as much about their businesses. They might, uh, not possible of course, but, uh, I want to make sure I have a good understanding of what all the underlying dynamics are in that deal. Um, and you know, so having that really coming up with, what do you think a fair deal is going to be a good time? I’m a great believer that if both sides don’t come out with something good, the deal may get done, but it’s going to die on the vine. Um, eventually the other person will realize it’s a one sided deal and they’re gonna find a way to, uh, to get ready to get out of it.

Um, so, you know, coming up with something that I think will work for both sides, but the, uh, the deal breakers typically, you know, when, when somebody proposes something to me that I recognize is one sided, a lot of people want to, they want to build their business based on someone else’s reputation and successes. So he just wanted to be near you so they can announce. And now I’m in business with Larranae my, the founder would be, and, you know, stuff like that. And then, you know, a month later there’s really nothing there, but they got their press announcement now. So, you know, I look for that and do it. That’s the thing that turns me off is when people right off the bat answer exclusive, they go, okay, we’ll do that deal, but we want to be your exclusive, whatever. Um, you know, to me, exclusivity is something you need to earn. You don’t get it at the beginning of a deal.

Paul Nicolini:

What excites you now? What keeps you going? Like, are there, is it goals you haven’t achieved or is it projects that you go, man, this is just a cool idea. And I want to be a part of it. What is it that gets you up in the morning and keeps you excited? It’s going through those 10 that he thought about, right?

Larry Namer:

Yeah. I love doing new stuff. I love things that actually give me the opportunity to learn and grow. Um, for me, I, you know, I got involved in fan vestors and adviser, um, uh, cause I thought it was fascinating and it took, you know, kind of my understanding of the media and entertainment business. And then what was really taking me into the world of finance, um, you know, on a much deeper level than I’ve ever had to be involved. And um, so, you know, that was it, it was, it was learning. Uh, and so couple that, with things that I think are exciting, I think there are new opportunities. I, I always look for kind of, you know, the silver lining in every cloud, um, even with the pandemic, um, you know, it’s, it’s horrible, you know, it continues to be horrible, but I think there’s some incredible business opportunities that arise from, from this that maybe weren’t there before.

Um, like I said, when you, when I deal with people, particularly in music or film or whatever, um, I could propose something new to them six months ago and they go, ah, that’s not the way we do it. Uh, now everybody’s going help us out. We needed a new way. We needed a new path. So those things are frightened for me. That’s what I like doing. I like doing a lot of stuff that revolves evolves. I’ve been doing diversity way before diversity became a cool thing. I mean, my whole history in the cable business is about, you know, letting smaller voices, you know, participate in media, democratizing media in many ways. And, uh, yeah, so those are the, those are the things I hate. I tried golf, I hated it. Um, and I said, you know, if I don’t keep finding new things to do, you know, I might be forced to play this game and I just don’t want to do that.

JP Maroney:

Good answer. Good answer. Are there any types of people, obviously Harbor city and the deal flow show team, we’ve built a network ourselves prior to the show, but through this show, now we’re approaching 30 episodes for season one that’s launching in this fourth quarter of this year. So are there any kind of people that you would like to connect with or what is it that is the things that are on your horizon? What kind of people or deals would you like to be approached with?

Larry Namer:

Well, I, you know, I, I’m pretty focused on fan Vesta related business these days. And, um, you know, anybody who has, um, reasonable size social media presence, God’s fan base was really based on, you know, people who are looking to raise money, having a very active social media presence and stuff. So whether it’s a CF, a small raise, you know, have a million dollars, um, or, you know, a reggae, uh, if the fan base is there or access to a fan base, is there, um, those are people that would be real interesting for me to be needing

JP Maroney:

Incidentally do y’all cross promote. So in other words, do you take other other celebrities that have raised or done projects on fan Vester and cross promote your new projects?

Larry Namer:

Yeah. Well, we do that in, as a matter of fact, we just started and again, I’m only a month in, so, you know, uh, you know, to an active role from when I was just an advisor, um, we’re also doing another thing of taking, uh, more or less startup companies or early stage companies that are looking for brand ambassadors. On the other hand, we’ve got, you know, particularly a lot of sports celebrities and stuff that are not working the way they used to that. And we’re becoming a marriage broker in that sense. And again, that stuff is fun, figuring out who really makes sense that, you know, represent certain types of businesses,

JP Maroney:

Love that we’re going to be in touch with you about that when we get offline. Cause we’ve got some, in fact there was one other guests, several people, but one of the guests that we had on the show that has a, an audience or a portfolio of people that are a perfect match for this, I’m very excited about the model that we’ve talked a lot about reggae, a little bit about CF, but a lot about reggae on this show. And in fact intend to do a special round table talking about reggae. And I think you offer a really unique perspective on that. I’d like to invite you to potentially come back for that round table and be a part of that. As we bring several people in to talk about the reggae, I think that’s one of the most exciting opportunities that certainly a democratized capital raising in a way, and, and taking a lot of the power away from the good old boys network. So it’s gonna be really interesting to see where that goes over the next few years.

Larry Namer:

Yeah. That’s, you know, the, the, one of the fun things about fan vestors, it really doesn’t see color or religion or gender or anything like that. It’s, if you’ve got fans, those are making a difference who you are, what they are and stuff. Um, it’s an online platform that pulls it all together.

JP Maroney:

Have you primarily worked with, uh, let’s say name people are, y’all now working with some of the social media influencers. They didn’t have a name outside of social media, but they blew up on YouTube or tick tock or something of that nature.

Larry Namer:

Yeah, both. I mean, it really comes down to how much of a social media influence people have. So they could be, you know, a Sully could be a rock kind of celebrity on one hand, or it could just be, you know, somebody who’s an engineer only employed as long as they’ve got a reasonable sized space and they’re willing to be active in promoting the project and the fundraising that, that matches up well to what fan best they can do best.

JP Maroney:

All right. Other than the fact that you don’t like golf, is there anything, is there anything that our audience are the people listening to this wouldn’t know about Larry? Is there something that you could share?

Larry Namer:

I’m an avid avid chef. I read a cookbook a month. I practice in the kitchen. It’s kind of my, um, psychological release. Whenever I have a difficult day, I go in the kitchen, I cook and I kind of forget about everything. So rather than go to the psychiatrist, I go to the kitchen.

JP Maroney:

Interesting. Wait, hang on. Where’s our invites, right? Well, I’m going to invite myself because I want to work on it. We’re working on a show where I’m going to be having breakfast with interesting people. And if you’re game for it, we’ll make it a date and you can cook breakfast. And then we’ll talk about some other things. Business and success

Larry Namer:

Works for me. I love cooking for other people.

JP Maroney:

Awesome. Sounds good, Larry. Um, what is the best way for somebody to get ahold of you or to reach out? Is it through a website, an email? What would be the best way for you?

Larry Namer:

LJN and LJN media.com you know, which is my kind of holding company, uh, uh, you know, I’m on Facebook, I’m on Instagram, I’m on all those, you know, like I do, but I do Facebook myself. Um, but you know, the Twitters and the other stuff that somebody from the office tends to be quite honest.

JP Maroney:

Absolutely fantastic. Larry, I appreciate you being on the show. Yeah. We’re going to be back in touch when I know we have some connections that are gonna, that are gonna make sense. So it was great to have you on and share your special perspective on what we’re doing at the deal table. Uh, once again, if you’re listening or watching this episode of the deal flow show, you can get access to our episodes future and past by going to the deal flow show.com on behalf of myself, Paul, Nick, and Leni, my coast here at the deal flow show. I’m JP Maroney and we’ll see you again on another episode very, very soon. Take care, everybody. Thanks again, Larry.

October 19, 2020

Episode – 13

Dave Anthony Wealth Management Expert, Radio Show Host, Entrepreneur and Dealmaker


Description:
Dave Anthony, CFP, RMA, is the President and Founder of Anthony Capital, LLC, a registered investment advisor firm. He also founded Side by Side, Quotes.com, and FBIAS: Fact-Based Investment Allocation Strategies.

Dave is a seminar speaker and presenter on retirement income planning, investment management strategies, and veteran’s benefits. He is the host of “The Retirement Income Show with Dave Anthony, CFP®, RMA®” He is currently working on his first book on retirement income planning strategies. He works with affluent retirees and pre-retirees and helps them invest, grow, and manage their wealth. He focuses on Financial Planning, Asset Protection, Tax Strategies and Insurance Planning.

What you’ll learn from this episode:
– How to handle failure
– The importance of finding a great coach or mentor
– How to adapt your business to Covid-19

Connect with Dave:
Linkedin

Full Transcript:

JP Maroney:

Welcome to another edition of the deal flow show. I’m JP Maroney, your host. This is Paul Nicoline. Our cohost for this episode, Paul is the regional director here at Harbor city capital. And, uh, we’re excited. We have a great show planned for you today. We have Dave Anthony from Anthony capital out of Colorado. He’s going to be joining us for the show here for this interview, going to be sharing from his storehouse of knowledge, sharing principles, strategies, tactics secrets on the deal, making process, and talk hopefully a little bit about his business, how they do business, and also his process for keeping his pipeline full. Dave, we’re going to jump in by just talking a little bit about your background, cause I think it’s nice for people to maybe have context or framework on your background as a business owner, as a financier, as a capital raising guy. So let’s talk a little bit about that background ground, and then we’ll get into some of the more detailed question.

Dave Anthony: 

Oh sure. JP I’m a, I’m a certified financial planner. I own a registered investment advisory firm in Denver. Uh, we, we are a fee based firm. Um, you know, I started in the business 20, 25 years ago where I went to school at Utah state university and they had one of the first CFP certified financial planner curriculums in the country. And so one of my advisors was actually on the board for the CFP program. So they kind of incorporated that as I went through and I was doing my studies, but that was, that was right at the height of the, of the.com you know, movement 1998, 1999, 2000. So I can very vividly remember as I was trying to determine my major in life, uh, you know, if I’m spending my time working for money, I wanted to understand how money worked and, and to get money working for me.

Um, so I, you know, I was fortunate enough where I got that CFP designation right out of college. And then I started working on wall street as a day trader as a, as a proprietary trader, right in March of 2000, this kind of when, uh, it’s kind of when, when we started the, you know, that, that, that spring and summer of 2000 unbeknownst to us, right, the market had already taken a turn, but that was a great way for me to get, to get some keen insights into really a different side of the business on the, on the proprietary trading side. And from there I’ve, I’ve done stints at Merrill Lynch and UBS before I went and started my own investment advisory firm, uh, about five or six years ago.

JP Maroney:

Excellent. Um, let’s, let’s talk a little bit about the, the boom and the bust, right? So, cause we’re talking about this deal making process, ultimately, I’m not sure if you’re aware of it, but we’re going to be taking a lot of the content from the deal flow show and putting a book together called deal-makers deal breakers. And so it’s a lot of these principles and strategies. So having come up and I think a very unique time, I was like, you I’d been building companies at that point for a few years, but, uh, maybe about 10, 11 years at that point. And, uh, was right in the middle of the publishing industry when that whole boom and bust happened. We built our first website right around that time. It was a very interesting time to be in business. Talk a little bit about how you managed through turbulence in the, in the market. And in these times, the, the, maybe the little bit about the mental side of this and how you keep your composure pain points. Absolutely. Because we’re dealing with it right now, right. With COVID and all of this people are having to navigate a very unique and interesting situation.

Dave Anthony:

Absolutely. Sure. Sure. Well, when we talk about deals and the art of the deal, I mean, my, my firm now is kind of structured more along the retail side, where I meet with accredited clients and accredited investors, mainly it’s retirees that are in their sixties or seventies, and they have a couple of million dollars of assets. And so we’re trying to put together a plan for them on how they can, how they can work with our assets for, for the rest of retirement. So we’re talking about taxes and insurance and investments. So I’m going to talk about the deal. I mean, this is, this is kind of my niche and working with those accredited high net worth individuals, but my, my background kind of bodes into this, this pressure type situation. When you talk about the boom and the bus. I vividly remember when I first started working on wall street as a, as a proprietary trader, they weren’t necessarily looking for guys that had the Ivy league pedigree and, and the Harvard MBAs, um, because they could find people that have the knowledge, what they couldn’t find and what they couldn’t assess was your ability to deal well under pressure, uh, in, in, in this essence it was trading.

So I think a key thing that kind of, that kind of, um, you know, was, was beneficial for me. It was my background. I, I don’t want to say as a risk taker, but growing up in the mountains, you know, I had a strong background with snowboarding and climbing and some of these adventure activities. So someone who had the ability to take calculated risks, understand the dangers that were there, but they could still move forward with the plan and the fall, that plan, that, that team, to that, that seemed to bode well, when you have millions of dollars on the line and you’re trading a, a proprietary account. As a matter of fact, I remember one of the best traders that I was ever with. Uh, you know, didn’t come to work and in a three piece suit, he actually skateboarded down to wall street. Um, our, our office was on the one. Uh, we were out there at the mercantile, the New York mercantile exchange. I’m this kid we would put into wall street and you wouldn’t know it but day in and day out, he’s making 50, 75, a hundred thousand dollars of monies as a prop traitor and escape boarding back and forth more so kind of funny.

JP Maroney:

Interesting. So we could say that you snowboarded to work, it’s this

Dave Anthony:

Dynamic of just, you know, understanding what the box is, understanding what the risks are and making sure that you have the right equipment, the right instrument, the right tools to handle that, uh, that risk as mentioned above I’m a big climber. So if you’re prepared and you’ve got the right gear, you know, everything’s fine. But if you don’t, it should be an enjoyable trip. Can turn, can turn South rather quickly.

JP Maroney:

Right. Right, right. Yeah. We understand.

Dave Anthony: 

Do you have a radio show? Yeah. My radio show is called the retirement income show with Dave Anthony in the domain for that as the retirement income show.com. But I’ve on the rail on the radio about four or five years now, uh, as, as I would go to different conferences and networking events, I’m a big believer in coaching and finding people that are, that are smarter than you, right. And who are really knocking the ball out of the park and just finding out what systems are they implementing? What things are they doing that are making them successful and specifically making their life more efficient and more effective. And how can I copy those types of things? I mean, they, they put their pants on one leg at a time just like me. So, you know, if they’re successful doing certain things, why can’t I learn from them?

I’m a big believer in coaching and finding people that are, that are smarter than you, right. And who are really knocking the ball out of the park and just finding out what systems are they implementing? What things are they doing that are making them successful and specifically making their life more efficient and more effective. And how can I copy those types of things? I mean, they, they put their pants on one leg at a time just like me. So, you know, if they’re successful doing certain things, why can’t I learn from them?

So it makes the process or the deal a lot simpler because they’re comfortable with the strategies and the techniques and things like that throughout there. So it brings in a different type of client versus someone who’s just showing up at a, at a workshop or a mailer that we may send out as well. Is that a local show or is that a national show? Well, it’s, it’s in the Denver market, but we’re being picked up, um, you know, by, by more and more syndicates, I know in the Chicago area and we’re down in Texas, we got picked, picked up by a station in Washington. Uh, so w on one of our syndicates is the gab radio network. Um, so we’re, we’re constantly picking up additional, additional airtime as it becomes available in other markets.

JP Maroney:

I, years ago, I learned something and I’ve been sharing this for a long time. I often say that people buy in layers, they learn in layers. They also build trust in layers. And what you’re talking about makes complete sense because when you’ve got, um, people that you’re trying to build relationships with, every single one of those episodes that they listen to is another layer of trust that’s built on. And we’re big on content marketing and content as a way to build relationships and trust and bonding. I was talking to our team here last week, our CFO Davon Dames and I were in a meeting, went into a meeting with a brand new bank that we’re looking to build a relationship with and the CEO, the regional man, or the branch manager. And one of the people that’s involved in the bank had all watched our YouTube videos, had read some of our materials. They were very familiar with us, and it really accelerated their process of doing business with us because those layers were on. I’m curious, you talked about that part of the process. How much do you rely on the deal flow on the, uh, the radio show to keep your deal flow pipeline full in terms of like, w how, how important is that to your overall process of deal flow?

Dave Anthony:

That’s really a great question because on one end, you’ve got the component of, of, are you a, a shotgun? You know, are you a machine gun? We were going out there and just shooting at everything, or are you a sniper I’m using this, this Hunter analogy. And we found more benefit in being a sniper and having a very, you know, calculator approach to who the exact type of client is that we can help. What, what is our avatar client, and then specialize, and then specializing in that niche, for example, that, that the type of individual that responds best to what we do is someone who’s within five years of retirement, whether they’ve already retired, they have a net worth of maybe two to $5 million of assets. So they’re not, they’re not super, you know, the 10 to 15 to $20 million type client. Although we do come across those every once in a while, it’s that two to $5 million net worth.

And what we’re talking about kind of resonates with them on what are your needs processes and what are our unique strategy is so that the point of the radio show is we’re going out and casting a wide net, but the people that are responding to this call to action, they’re self identifying to say, I recognize that I have that problem. And I also recognize that you’ve presented me with a solution that I, that I’m comfortable and I want to learn more about. So when someone self identifies, it makes it very easy. When, you know, w w when we’re talking about services and things that we can help with, because now it becomes not a selling process. We’re not trying to sell them a package. We become more of a, of a consultant. And when they understand that we can truly help them set, uh, solve their problem and put them in a better situation than where they, where they were before.

This is where the, you know, the fun of the business comes into play, because not only are we making money, or are we putting them in a better situation, but you really gain this, this, this kind of a, you know, a different relationship with that, with that type of client. And that’s where you get, you get more of a reward than just the monetary aspect. You know, you, you really feel like you’re, you’re changing someone’s outlook and changing their, their future by showing them how an integrated kind of comprehensive approach can in these cases be worth several hundreds of thousands, if not millions of dollars over the next 20 or 30 years in retirement, because of the things that we share with them.

JP Maroney:

We had a guest on one of the episodes talking about the difference between an, an investment packaged and protected in a certain way, and through these other opportunities. And as you said, knowing those little secrets and those little, little strategies that you’re able to educate and share on a show like that can mean the difference between literally hundreds of the same amount of money invested, but the return and the ultimate outcome. Can I so substantially different, I’m going to go back to the show for just a second. I’m intrigued by that whole idea. I had a mentor years ago that said, JP, what would you rather do sell people one at a time, or get them all in one room and sell them at the same time. And that made an awful lot of sense to me. And I look at webinars like that shows like the deal flow show, slow shows like the retirement income show that you do as an opportunity to reach a broad audience with a single message.

You know, that’s marketing leverage. In my opinion, let’s talk for just a second about deal making. So ultimately we’ve got this book coming out called deal makers and deal breakers when you’re dealing with other people in the deal process, whether it’s strategic partners, whether it’s a provider that maybe you’re going to bring a product to market, or it’s actual clients that you’re working with, or maybe a fund, what are the deal breakers for you? In other words, when you encounter a certain personality or a certain issue, what are some of the things that, that it’s like, that’s a nonstarter.

Dave Anthony:

I learned a long time ago that one of the keys of business, and this is why I’m the business owner is to make sure that you do business with people that, you know, like and trust. So on one end, if we have someone who comes in and they might have, you know, five or $6 million of monies, but they’re a jerk and they treat my staff, uh, in, in inappropriately, right. That they’re not respectful to my staff or the system, even though we can help them and they may want to do business, we don’t want to do business with that person. So, so make sure you do people that are nice is, is key point number one, right? Do people do bit do business with people that, you know, like and trust and that you would, if you have that, that affinity with it, that seems to avoid a lot of hurdles down the road.

I was talking to an advisor where he went through this, this analogy of everyone has that, that client, that when the phone calls, you don’t want to talk to that person because of this, that, or the other, you know, you pass them off to your, your, your sub-advisor or your assistant. If that’s the train of thought in your mind with that client, you need to get out of that, of being in a relationship with that. You don’t want to another advisor or fire them as a client, because you’ve only got so much energy in your, in your day. And as a business owner, if you’ve got processes that are taking away of the amount of energy that you have, I mean, this is, this is what your staff should do. They should protect you from these things that suck energy out of your day. So you can focus on what you do best. And again, key number one is make sure you’re doing business with people that you like and who are nice.

JP Maroney:

I love that. That is interesting. There really is. There’s a, there’s a lender, a young broker though. There’s a, I don’t know if it’s a written law or an unwritten law, but there’s a law thing. I teach called the law of emotional gravity. You’ll, you’ll appreciate this. The law of emotional gravity States, that one negative person can pull down five positive people, but five positive people can’t pull one negative person up and you got to get all the negative people out of your life. You absolutely do. Um, are a member of our sales team, business development team, as well as who’s the producer. You’ve talked to him, Daniel Miranda, he’s here in the studio today. And, uh, he was at a party with us one night talking to one of my neighbors who runs a fairly large company in the telecom industry. And he had a funny thing. He used an extra book expletive, but he said never worked for a 10. And I think that could be said, has never worked with, you know, it’s like people that are going to be negative or going to be distract from the opportunity or the deal. So I love that. That’s great advice.

Dave Anthony:

Uh, some people lighten the room when they, when they enter the room and other people lighten the room when they leave the room. Right. So, so which, which type of a person are you, are you bringing the energy? Are you sucking the energy out? Right.

JP Maroney:

I like that. That’s another meme. We need to put that on, uh, on one of our little quotes and things

Dave Anthony:

They tell us other than the radio show, how else do you attract clients? Or how do you do your networking? Well, I mean, primarily the radio show keeps us busy enough with the types of flows that th th th that we’re getting into the types of clients that we’re getting into. We really don’t do a lot outside of radio advertising. Uh, we have our website, we do a lot of word of mouth and a lot of client referrals, but, but the radio is targeted enough. And the types of people that are coming to us and the referrals that we get that keeps our pipeline full in the past, of course, we’ve done a lot of the, uh, a lot of the traditional methods with, with, you know, doing, doing seminars. And there are years and years and years, and I would do educational seminars and educational workshops for folks.

We just find, we get, we get better returns, and it’s a better use of my time doing the radio and casting that big net. Um, but the key with, with everything that we do is this idea of a direct response marketing, or direct response advertising, where someone is self identifying, they are responding to the problem that we’ve presented. So whether we’re using a lot of Facebook ads or you, we have a YouTube channel with a lot of videos that we’ll put out. One of our favorite series is this is a series that we have called retirement plan smack down where it’s kind of a parody, but, you know, we’ll, we’ll talk about these different case studies that people were bringing to me about how they can go out and get the right life insurance policy or longterm longterm care policy, or how they can, you know, what, what, what’s the benefit of converting their IRA over to a Roth IRA. So we’ll put that into a somewhat of a, of a comical case study, but people respond to those. And when they self identify, that’s just a different type of client that you’re working with than someone that you’re trying to pitch a product to, you know,

JP Maroney:

Very cool. Very cool. So let’s talk about the other side of it. The, not the deal breakers, but talk about a deal that, is there one that stands out a you’re proud of it’s memorable. Um, it had all the right elements that you could talk about and why that was such a great opportunity. Just what, what came together, the forces that came together to make that work,

Dave Anthony:

But on one end, you know, being in the business for, for, you know, 20, 25 years, uh, the adage is you become old and wise by sometimes being young and stupid. Um, so, so you can learn a lot from your mistakes and the problems that you’ve had to hopefully learn from those. And the idea is that when you’ve got a compilation of lists, things that you’ve learned by, by first by firsthand experiences, that can help you avoid some of the pitfalls and missteps that come into play. So when I look at where I’m at right now in, in, in my business, uh, you know, I’ve, I’ve done, you know, Medicare cells, I’ve done longterm carousels. I, I used to have a stint where I was going door to door and college selling things. Um, and each one of these has kind of added into, you know, a combination of where I’m at now in, uh, in my practice, when I sit down and meet with clients that when these right things come together, I’ve seen enough of these components to know that the deal is going to work well.

Dave Anthony: 

Like, I’ll give you an example. Um, we started a private placement fund a few years ago that invest in life settlement contracts. A lot of your listeners may not be aware of this asset class, but it’s a, it’s a multibillion dollar business where you’ve got folks in their eighties and nineties who own life insurance policies that they no longer want or no longer need, or can no longer afford. And in the life insurance industry, 90 to 95% of insurance policies expire without a death claim, which means that the folks we have certain age and they say, well, I’m not dead yet. I don’t need my money from this, from this policy. Uh, I’m just going to let this expire well, there’s a market that exists where folks can actually sell those life insurance policies for cash. So when we talk about a deal, we’re trying to create a win, win, win for everyone involved in that process.

Dave Anthony:

But what we’re looking at, the different components of, if we’re going in and we’re purchasing a policy, we want it to be a, you know, a good deal for the investors that we’re working with. We want it to be a good deal for the individual that we’re purchasing that policy from. And we want it to be a good deal for us as the managers of that policy. So as these things come together, there, there creates different different scenarios and opportunities where, you know, we can go in and purchase, you know, two or $300,000 policy with a million dollar death benefit. And then when those policies pay out, you know, we collect them at seven or $800,000 difference between what we paid for the pulse and what we got for the policy. But it’s, it’s really gratifying because it’s a combination of a really the past 20 or 25 years of working in insurance, of working in, in investments. And seeing these things come together at the right place and right time, as, as the adage says, you know, there is no, well, sometimes there’s, there’s, there’s luck and things, but there’s certain types of people that seem to be more lucky now than others. And that’s usually a function of their level of preparation that they’ve got taking, taking into the, you know, the deal there they’re trying to close.

JP Maroney:

Is it the old saying is when preparation or luck is when preparation meets opportunity or something like that? Yeah, I think it was Goldberg Goldman from MGM that said the harder I work, the luckier I get. So, um, let’s, let’s talk just a little bit more about the deal process. Now, any deals come to mind, it’s kind of like the deal that got away, um, that in your own history of doing business and you, do you look back on it and go, boy, I wish I had done that one, or I’m glad I passed or what,

Dave Anthony:

Yeah. Yeah. Well, on one end, you know, hindsight is 2020. So, so we’ve got a plethora of, of, of Dillon options. And right now is a real good example on, uh, just what’s happened with the, with the coronavirus stimulus payments, you know, in my position as managing monies. I remember getting on the phone with certain clients and mid-March when the markets were down 35, 40% and saying, Hey, right now in where we’re at, we’re at certain levels in the market, we’re, you know, we, we should be looking at an opportunity to put money to work here. Um, and you want to buy to weakness and then sell it to strength. And the conversation with some of these clients was Dave, you know, the markets are down 40% right now world’s coming to an end. Right. I’m scared. Right. I don’t, I don’t necessarily want to go in and do that.

So, so now these clients are calling back to say, okay, we’re ready to put some money in the market when the markets are now back at back at all time highs. So when you look at deals, things that, that, that got away, that’s kind of a, an easy dynamic. And it’s, it’s, it’s, it’s difficult sometimes to, to portray that to clients to say, now is the time to act when it might be a little bit uncomfortable to go in and do that. But yeah, there’s a, there’s a plethora of options of saying, you know, we, we have the opportunity buying, uh, buying this stock or this particular investment. And now look at step three, you know, three to four to five times fold on, on what it was. But if I found that if we can position with clients again, the reasoning on why we’re doing something and show them other ancillary benefits, benefits from a tax standpoint, or from a fee standpoint, or even a worst case scenario, if we do a and AA falls apart, we’ve, we’ve still got safety mechanisms and things in place where you’re going to be okay. And that, and that can help clients pull the trigger a little bit more, as well as showing them, you know, the, the overall impact of what that, of what that decision is having on their plan.

JP Maroney:

What is your deal evaluation process or your due diligence process? How obviously you’re a fiduciary, right? So you’re responsible, you’re, you’re on the mountain sort of looking for the next opportunity, but also looking for the problems that might be out there. What is your process for making sure that you’ve checked things out in a deal that it’s going to be good for your call?

Dave Anthony:

Yeah, we do a lot of private placement offerings with, uh, with, with clients. And this is just, just kind of taking advantage of this, of this anomaly that exists in the marketplace, where, you know, you’ve got the Wilshire 5,000 index, which doesn’t even have 5,000 stocks in it anymore. There’s only 3,500 stocks. And then in the wheelchair are 5,000. So, so boats have this idea that there’s a lot of money in the private marketplace. That’s that that’s looking to go to work. You’ve just got to make sure that you can sift through the good, the bad and the ugly to present those deals to clients, because you’re right as a fiduciary, I mean, nothing, nothing irks me more than getting burned by a deal and putting a client into, into a bad deal. So, so my process of how we kind of analyze what good offerings are or what our good offerings are usually starts at the very top on interviewing management and finding out what w w what their systems are in place that they have, because if someone has good systems, they have good personnel, they can generally weather a lot of the, you know, a lot of the surprises that, that, that, that, that come their way.

And I’m also a big believer in just doing as many, you know, personal visits and in meetings with folks as you can, because it usually gives you a good idea on what they believe in what they, what they stand for, but having good, smart people that have good, strong businesses in place and good processes in place can generally handle a lot of the problems and pitfalls and curve balls that are never really to come their way. And that’s what you want to find out to make sure that you’re working with, with a systems organize type entity. And that’s what I, like you mentioned,

JP Maroney:

The in person meetings obviously COVID has affected that aspect of it. Um, even today in the studio, we have George Devolder, who’s our regional director from our New York office. And he we’ve talked many times about that even like New York city as a ghost town, Manhattan is a ghost town right now, but people have left the city kind of thing, especially the work day. So, um, number one question, I guess, around that is you mentioned meet as many meeting in person is how important is it for you to look somebody in the eye and press the flesh before finalizing a deal? And next, how are you adapting to that during this time? Cause, I mean, obviously this show will come out sometime in Q four of 2020, maybe this is lifted, but I sincerely doubt that this has completely lifted. People are still having to deal with this as well as I think people now are looking at through a whole new lens, a whole new paradigm of doing business. I think many people are going to be willing to do what we’re doing here today, a video conference call when they would have done it in person. So how important is that to you and then how you having to adapt?

Dave Anthony:

Yeah, well, in my business, when, when I’m sitting down with a client and they’ve got three or $4 million, I mean, this is their life’s work. Uh, and so for some of them it had, or the understanding was, you know, you need to meet face to face, you’ve gotta meet eye to eye and need a knee to kind of get this deal done. Uh, when COVID hit shift that online and we’d already had a strong online presence, you know, primarily with our radio show and some of our, our YouTube channels. So what happened in the minds of, of consumers and potential clients, was it shifted to this online format within their they’re watching YouTube channels or listening to more rebroadcasts of the radio show. They’re getting familiar with what we do. And they were okay on doing a lot of these zoom meetings and in these video conferencing meetings.

So I see that, and as it turns out, a lot of them, once they get the familiarity, they would prefer that instead of driving through traffic and coming to the office and stone and so forth. So we’ll, we’ll see to what degree this, this changes moving forward. But I love the aspect of, of having these digital meetings in these digital formats. And for the most part, clients have liked that as well. But if, if it is an important issue for the client, and it’s a deal breaker that we need to meet, then obviously we’ll, we’ll find a way to meet and make it happen. Wonderful them. Can you tell us

JP Maroney:

Non traditional investments and what kinds

Paul Nicolini:

An appetite to your clients have for that? And maybe more specifically, what kind of nontraditional investments do you offer those people?

Dave Anthony:

Yeah, this is a, a great question. Um, and also, I think it’s one of the great growth areas in, in 2020 moving forward. I touched on that a little bit before about the creation of the jobs act that the Trump put into play. And part of the, uh, part of his tax plan was the deregulation of a lot of the restrictions that had had had come with private placement offerings or smaller type companies to be able to go out and raise capital. I mean, before the burden to go through and put these investments in place was just astronomical. But, but now you can set up and set up some of these entities and some of these fundraising ideas, whether it’s crowdfunding or other types of options, that that can be very dynamic. They are non traditional. Let me say traditional are saying outside of, of stocks, bonds, and mutual funds and maybe real estate in that component.

Uh, but there is a, there was an influx and now there’s, there’s trillions of dollars of cash of capital in the capital markets that are looking to be allocated. And folks are hungry sometimes for some outside the box ideas. So we have three different private placement offerings that have worked well for us and our clients. And we’re trying to find solutions where we can get multiple kind of birds with one stone, if you will, uh, solutions that we can offer that give the clients a good rate of return that give them a tax benefit. And they give them, you know, uh, a great cashflow in their money as well. So if we can combine that and show this how, and show them how some of these alternative investments, these private placement offerings can improve their situation versus what they’re doing right now. Again, it’s kind of a win win for everyone.

I made the analogy on my radio show that, you know, you’ve got, you’ve got different types of tools are available in a toolbox. And if you’re working with a, with the w with, you know, a carpenter and the only tool that they have is a hammer. Well, pretty soon everything looks like a nail and they’re just gonna rack away. If you’re working with it’s truly independent, they have a broad abroad, you know, arsenal of tools and instruments that they can use. This is key moving forward, you know, with, with my kids, I make them mower backyard. Uh, and there’s a difference between them going out and trying to cut the grass with a pair of scissors versus using a, you know, a lawnmower versus using a, a riding lawnmower. There’s just different tools and different and different techniques and different instruments. And I find that the alternative asset space, especially some of these private placement offerings when properly implemented, can be game changers for clients moving forward. But, you know, a lot of it is just education that they’re not familiar, or they’re not aware of what these, of what these tools can do. Uh, but you know, with my kids, once they saw, what were they gonna do with the riding lawnmower versus, you know, a push

JP Maroney:

I was going to say, don’t get them used to the riding lawnmower

Dave Anthony:

Default on that with my kids, I would make the Mo the grass first with the push lawn more internally. So they would appreciate the benefit of that that came from the riding lawnmower. Because if you don’t, if you just jumped right to the riding lawnmower, you’ve got to work sets of work, you think that’s, that’s the way that it is

JP Maroney:

Never get them to push it. That’s for sure. Yeah. Good dad. You, uh, you obviously lenient, I spoke about this earlier in the interview. You lean in toward content based or education based marketing, right? At the end of the day, you wouldn’t be doing it. If it didn’t bring a benefit to your business, ultimately, but as a professional in the finance space, especially as a registered investment firm, because we get this question from other RAs, broker dealers, et cetera, how can one like yourself who is, makes up a lot of our audience go out and use education based marketing without violating any of the constraints of compliance? How can you do that in a compliant and, and an ethical way, um, but still get your message across. You’re obviously serving people when you’re educating, but I know a lot of guys that are absolutely afraid to show up on that camera on it, right?

Dave Anthony:

Yeah, this is, this is a great point. I remember when I started working at Merrill Lynch and nothing against Merrill Lynch, uh, but when I sat down and I was meeting with a client and we were talking about, you know, a longterm care solution, uh, we, we presented a solution from, from a company that Merrill Lynch didn’t represent. I said, Hey, I shot the market. And this looks like a good option for you. My manager came back to me and he said, Dave, you’re, what are you doing? Talking about this other company. We can’t sell that company. You know, you can’t make any money doing that. I said, well, I, I know, but I’m, you know, I’m a certified financial planner. I’m supposed to be a fiduciary. I’m working for the best interest of the client. This was the best choice for them. He said, Dave, you know, you can’t, you can’t work in that environment.

So, so on one end, it depends on, on how you’re structured. And if our audience is mainly registered investment advisors, they’ll appreciate this, this takeaway as far as being an employee versus being the business owner. And in, in, in, in the securities world, you know, you’ve got FINRA regulations, uh, in the broker dealer space. And then you’ve got the sec regulations. Part of the reasons that I started my own firm and became independent, was it? So I would have the autonomy to move and to act on some of these investment ideas and options that were truly for the benefit of, of my client, because I remember coming up with a good idea and wanting to move forward with it. And then having that get squashed or having that get handcuffed by our, our regulator at the firm, who said, you know, you can’t do this for this, this, and this reason.

And mainly it was because there had been another advisor who had gone rogue and the dumb things in appropriately that really burned all the bridges and messed it up for everyone else. So again, being independent and having that flexibility to act and having the ability to go through that, truly being able to use the tools that are out there, I think only comes from that fiduciary space of being an independent, an independent advisor. And that’s when you’re acting the best interest of the client. And with my, with my regulatory practices, I always go by the pro man rule, right? If you were, if you were in court and someone was trying to prosecute you, who’d, you, you know, show that the key elements and the key points on why, whatever you were doing, put that client in a better situation than where they were than where they were before.

You know, how is this beneficial for the client? If you can answer that question yes. And do it convincingly, um, you know, that that works well and why we’re going to move forward and adopt a, uh, a particular strategy. But again, in, in the regulatory space, you know, if you’re not, if you’re not capable of making your own decisions and what’s truly beneficial for the client, then you’re not independent. Um, you know, you’re, you’re, you’re generally working for that brokerage firm. And a lot of times when I do speaking engagements, uh, in, in, in other, in other capacities, whether I’m teaching an advisor or whether I’m in a room full of clients, I’ll ask clients to ask their advisor that question, right? Where is the money coming from? And if the money is coming from the broker dealer, that’s, who’s paying the advisor. Although they may say that they’re working for you, they’re not there they’re being paid by Edward Jones or Charles Schwab or Merrill Lynch, or whoever that firm is.

You know, we get paid by the client, you know, follow the money we work for the client. Um, and in doing so gives us that, that independence to use some of these outside the box, private placement offerings, certain investments that otherwise folks wouldn’t do. And I think a lot of that to JP is because of unfamiliarity that that quote unquote expert might have with a specific tool. And we found that if someone isn’t familiar with something, they’ll generally default to the, Oh, don’t do it. It’s bad. It’s wrong. We’ll just because you might not know how a specific tool works. Doesn’t mean it’s not, you know, it’s not valid when using the tools of the right professional.

Paul Nicolini:

Excellent, excellent. Dan, can you share with us something that the business community doesn’t know about you,

Dave Anthony:

We could go on on the professional side or we can go and kind of on, on the independent side, uh, on the personal side, um, you know, going back to JPS previous comment about, uh, about different videos on the YouTube channel, uh, you know, we, we have a fun little, uh, series called Dave day when I was in college. Uh, I had, I had three college roommates that were all named Dave and we all marry roommates at about the same time. Uh, we’ve done a house called, called the Dave house, and we all got married about this incidentally. We all had four girls, uh, as far as kid wise, I mean, I have six kids now, but you know, our wife’s let us out of the house once a year for this, for this process and this, and this series called Dave day, or, you know, we’ll get together and, uh, and have a fun time. But now when, when all the Daves get together, jeez, there’s a lot of estrogen, you know, in, in that room, that’s kind of a fun component. And if your name Dave, you can come to the next day of day party, there you go. Yeah.

JP Maroney:

Before we finish up, is there, our audience loves to give back. We love to give back. Is there anyone that Paul, myself, Daniel, anyone here at the team at Harbor city or the doom float show team, um, or our audience, anyone that you would, any types of people that you would like to meet to do business with to have reach out to you, uh, strategic partners, strategic alliances, products, issuers, anything, um, and then at the same time, if you want, you’re welcome to give out your contact information at this point.

Dave Anthony:

Well, from, from an advisor standpoint, I mean, we’re, we’re obviously we’re looking for that for that key avatar client that fits that three to $5 million kind of kind of net worth is where our, as our main component is, and someone who values and appreciates comprehensive, integrated, integrated planning. We think these are some of the solutions that we provide. And it’s not just a one time meeting. We’re looking at a process, a comprehensive integrated plan that really puts them in, in a better position than they were before. So it’s not just stocks and bonds when we go through a truly comprehensive process. Yes, we’re talking about your investments, but we’re talking about your taxes and your healthcare and your social security benefits and your home equity and, and annuity and insurance and healthcare, and how all these things come together in a truly comprehensive, integrated plan.

Dave Anthony:

So if that’s, if that’s attractive to some of your listeners or, or they have, you know, they have connections in that space would be, we’d be happy to entertain that you can find us online@againattheretirementincomeshow.com. You can just Google Anthony capital LLC. And our information will we’ll pull up there as well. But we would welcome that again, if your listeners find that there’s value in a truly holistic, comprehensive, integrated approach and where that comes into play. But someone that I love that I love to meet was probably my, my boyhood hero. Growing up, I played, I played quarterback on the, on the football team, and then I’d love to meet Joe Montana, you know, someday, and just kinda, kinda, you know, kick it with him and learn more about his life and his processes and what, and what he’s done.

JP Maroney:

Excellent. Well, on behalf of the team here at the deal flow show, I’m JP Maroney. Paul Nicoline, my cohost for this episode, Dave Anthony from Anthony capital. Good to have the own. If you’re listening or watching this episode, you can find more episodes, more information, subscribe, follow up, contact us@thedealflowshow.com. That’s the deal flow show.com. We look forward to seeing you on another episode very soon. And Hey, if you’ve got a story to tell if you’re a capital raiser, if you’re somewhere in that spectrum of the capital markets, a service provider, someone who does business, that’s putting deals together, a deal maker in the deal making process. We want to hear from you and consider having you on a future episode of the deal float. Once again, I’m JP Maroney, Paul Nicoline, we’ll see you next time for more episodes, visit the deal flow show.com and subscribe.

October 14, 2020

Episode – 12

Barry Habib Entrepreneur, Mortgage Expert, Broadway Producer, and Consummate Dealmaker


Description:
Barry Habib is an American Entrepreneur and frequent Media resource for his Mortgage and Housing expertise. Barry has had a long tenure with monthly appearances on CNBC and FOX.

Barry has had many successful businesses that he has founded, grown, and sold. This includes Mortgage Market Guide, Healthcare Imaging Solutions, and Certified Mortgage Associates. Barry personally originated over $2 Billion dollars in mortgage loan production over his career. He is also the Lead Producer and Managing Partner for “Rock of Ages” – a Broadway musical theatrical production, which was also released as a major film starring Tom Cruise. Barry also plays the part of the record producer in the movie.

What you’ll learn from this episode:
– Skill sets necessary to be a successful entrepreneur
– Current outlook of the real estate market
– Barry’s tips and secrets for great deal execution

Connect with Barry:
LinkedIn

Full Transcript:

JP Maroney:

Greetings and welcome to another episode of the deal flow show. I’m JP Maroney, your host, along with my cohost, mr. Paul Nicoline from here at Harbor city capital. And we’ve got a great guest on the show. So I’m going to let you introduce this guest. You’ve been talking about his background, uh, introduce him, his company, and then let’s jump into our questions today. Yeah, well, he’s got a great story. His name is Barry Habib. Welcome back.

Barry Habib:

So nice to be with you currently

JP Maroney:

Of MBS highway. Let’s start on, uh, your background, give us a little of your background and, um, it will start from there.

Barry Habib:

Yeah, I’ll try and give you the elevator speech, but it’s pretty extensive. Uh, so I have been in the mortgage and real estate industry for a long time, but not just there. I had a good career in the mortgage business where I was top producer in the country for a couple of years. And the entire industry 2019 was named mortgage professional of the year. Um, had a mortgage company that I built and sold, uh, in 1999, then had an idea to transform the mortgage industry by alleviating a point of friction and teaching them the marketplace and built a company sold bad in 2007 called mortgage market guide. Uh, and then after I’d done that, believe it or not did some acting, but in nine different movies, uh, when I was a little younger and probably somewhat decent looking. And then, um, since then had a medical imaging business that I built and sold, which again, alleviated points of friction and I was where people would have hopefully, um, people never have to go to get scans for anything.

Barry Habib:

Hopefully everybody’s in good shape, but when people would go to get scans and maybe people can relate to this, you know, the tech knows what’s going on. However, from our perspective, you know, the anxiety builds up. So it’s like, why do people have to go through this? So actually I had a radiologist there and the concept was so revolutionary because as soon as the scan was over and you got dressed, you either got great news and went home feeling great. And if it wasn’t such great news, at least you had a plan and that’s what people want. So, uh, grew that to three offices and then sold that. And then one of the things I did in the interim, a lot of these were parallel paths was create a Broadway show called rock of ages, which has been pretty famous. It’s been around the world as a movie with Tom cruise.

Barry Habib:

I was in the movie, I played the record producer and that was an enormous success and enormous amount of joy for me, five Tony’s later. Um, and then, uh, all along have been a professional speaker in the financial markets and a motivation for the last goodness gracious 26 years. And I did on my own show on CNBC for 13 years. And my most recent endeavors are a company called MBS highway, which we have grown. We have, uh, 25, 26,000 mortgage professionals in the U S the United States that pay for subscriptions to our service, where we teach them the financial markets, advise them what to do. It’s very, very diverse. In addition to that, we have a certification called certified mortgage advisor where the things that kind of, I learned through my career, we teach to mortgage professionals as well. I’ve got a book coming out, October 27th, called money in the streets, which is a very wonderful motivational book that helps you understand how to identify and take advantage of opportunities. So there’s quite a bit there. I’m sorry for the lengthy background, but I guess I’m old cause I’ve done a lot of stuff.

JP Maroney:

No, it, it, you know, what’s funny yet what we find consistent across the board is deal makers have that persuasion skill at some level of often said to entrepreneurs. And every once in a while you find an operator engineer, technical entrepreneur, but a lot of entrepreneurs are the ones that are forced to go out and do the selling, right? And, and it’s, that’s even one of the toughest roles to replace. I tell people often a quote that I heard years ago is that sales is the only profession where you get paid exactly what you’re worth. And, um, you, you did a good bit of sales training. Talk a little bit about what you bring to the table when you’re in the middle of whether it’s working on a movie deal, working on a, the next book deal, working on putting a team together, how much of your persuasion skills go into that and how do you utilize that tool in the deal making process?

Barry Habib:

So funny because of my book, I talk about sales being very fair. You know, I was pretty decent athlete when I was younger and still okay. But a lot older now, things don’t work exactly the same, but I was, I was good athlete in high school. When I got to college, though, people seem to be passing me by, at a faster rate than I was able to accelerate. I didn’t make the cut because of lack of drive or desire. Just God did not give me as much skill for jumping high or being as fast as some of the other players. And you know, that’s the thing I love about sales. Sales is fair. It doesn’t matter if somebody is faster than you, stronger than you can jump higher than you really doesn’t matter. You need one thing to be successful in sales and that’s this, you just need heart.

Barry Habib:

How bad do you want it? Are you willing to commit to it? Because what you have to do is you have to create value. Sometimes you say persuasive skills, some people think that’s wrong. They think that you’re trying to be manipulative. So being persuasive is different because what you want to try and do is you want to turn on the TV set in somebody’s brain and show them what’s possible. And then logically explain a path to get there. That’s just being a good communicator. So I think that communication is much more important than being persuasive. Most of us, when we communicate, we make the big mistake of forgetting that it took us a journey to get to where we are to formulate an idea. And we try and implant that in somebody else’s brain. It doesn’t make sense. We really need to do is better fork. We hold their hand, take them through that journey and show them how we at that and why it makes sense and how it could be beneficial to them. And if you design things like that, then it might appear to be persuasive. But what you’re really doing is you’re really being extremely logical and you’re showing people how you can do good for them and how you can benefit them and how you can help others. And by helping others, we wound up receiving more than we’ve ever imagined.

JP Maroney:

That’s good. You use the word value. I often say that when the, when the benefit received is greater than the price paid value is perceived. And anytime you have value, you have an opportunity, as you said to, to let someone really not even persuade them, but allow them to persuade themselves. Uh, I think it was Jeffrey. Gitomer said people hate to be sold, but they love to buy. And if you can show people a path and a way to solve a problem, obviously it’s a, it’s a great way to lead them, I guess, to a conclusion.

Barry Habib:

Yeah, JP is it’s it’s it’s um, I call it alleviating points of friction. Um, but, um, you’re, you’re a hundred percent, right? When we, when we discuss things like this and, and we, we talk about, uh, helping individuals see that, or, or turning on the TV set in their brain. This is what’s, what’s really important when you can, when you can do that and not just create value, but here’s the real secret. The real secret is to gain trust. Whether it’s in a relationship, that’s your most significant person, your significant other, or with your kids, or certainly in business. So here’s the secret. The secret is after you’ve put a deal together and everything’s done, give them more than what you agreed to. When you start to do that, you build enormous amounts of trust and Goodwill. Now, most people just trying to game it and get what they can don’t do that, put your deal together and then give more when you’re not obligated to, I’ve been employing people for 39 years started very, very early on in self employed.

Barry Habib:

Since I’m 21 years old, employing people never had any turnover. You know why? No one’s ever asked me for an increase because I want to make sure they know I’ve got their back and give it to them before it’s asked. See if you say to somebody, Hey, look, I know you’re doing well. I’m going to do this for you. Without them asking then trust is established. People don’t ever leave you because they don’t get that anywhere else. I mentioned relieving points of friction. So I talked about that in the mortgage business. I talked about that in healthcare, in rock of ages, one way of many ways that we alleviate the points of friction was kind of funny is that, you know, I would see people come into the show, rock of ages on Broadway and you know, Manhattan traffic could be tough. So people would get there a little bit, a little bit late still before the show began and they’d want a nice cocktail, cocktails are not cheap. So it’d be like 18 bucks for a cocktail. They’d wait online to get it. So now time is passing. By the time they get up there, the time they got it, the flights would flickered shows about to begin. And you are not allowed on Broadway at the time to bring your drink to the seats. And I’d watch these people nicely dressed, wanting to have a good time.

Barry Habib:

Why do you have to do that? So I went to the theater owners and I said, let’s allow people to drink. And the seats, they said, no, why not? I said, because we’ve never done that before. Well, if you know me, that’s not an acceptable answer. So it took me awhile, but I was the pioneer I became, I negotiated the first deal in the history of Broadway to allow drinking in the seats. And now all of them do it, but it makes for a much more relaxed and enjoyable experience. So we always want to do is alleviate points of friction in my book, money in the streets. What it actually does is it trains you to be able to see all of the opportunities that are out there and be able to, once you identify the opportunities, problem is not necessarily taking advantage of them. That’s a whole separate issue, but you can’t even reach that point unless you’ve identified them. So it’s really a skill that can be honed. If you understand how to identify opportunities,

Paul Nicolini:

Barry, you’ve built your mortgage mortgage market guide on your blood, sweat, and tears. And I’m sure that was your baby at the time. Right? Take us through the experience of you selling it. And how was that process?

Barry Habib: 

I’ll do mortgage market. The reason I sold it was just a different, um, a different, uh, set of reasons because I did not like what was going on in the real estate market and the mortgage market. When I sold that, uh, saw a change happening in 2006 and the industry just didn’t make sense to me. And I knew it was going to end badly. So I thought it would be a good time. And, you know, everybody thought I was nuts. You know, I remember going on CNBC and telling people that, you know, that they’ve gotta be careful, things are gonna change. Don’t do these interest only Negan loans. I would get actual hate mail for people. So what do you mean? They’re great. I just didn’t like them. And you know, I eat my own home cooking. So I thought that it would be a good idea.

Barry Habib:

We actually sold the business in a bidding war and literally literally six weeks afterwards, the financial crisis started to unfold. Now I’m not that good. I didn’t know it was gonna happen six weeks before, but I knew that something was up and I knew that this was an unstable environment. That’s why I sold that business. Now, other businesses that have sold for, for different reasons and to capitalize on it. But many times, if you’re an entrepreneur, you’ve got a business that you’re thinking of selling, I’ve sold other businesses and just closed on a very big one, literally last week. The reason that I did that, and the reason why you should consider doing that is because when you take a look and you say, okay, if I’m going to be able to, to have a liquidity event, maybe I don’t sell the whole thing, but take some liquidity off the table.

Barry Habib:

Just think about that amount of liquidity that you’re able to monetize. How long would it actually take you build that or to save that, you know, just to, just to, if somebody makes, I’m going to just use some round numbers here, okay. If somebody makes a million dollars a year, that’s a lot of money, but if you a million bucks a year, by the time you’re done with taxes, you’ve got like 500,000. Now, thinking about all your expenses, all of the expenses that you have that constitute earning the lifestyle that you want might be three or $400,000 a year. Because if you’re making a million dollars a year, you’re going to have a pretty nice lifestyle, right? You’re going to fit the role. Well, what does that mean? Maybe you could save a hundred thousand dollars a year if you’re super frugal and you deny yourself, maybe you could save $200,000 a year.

Barry Habib:

Now think about if you had a business that enabled you to get liquidity event of let’s just say $10 million right now you do have to pay taxes on that. But after you’re done with your capital gains portion of the tax on that, which we hope sticks around through this selection period, right? So if that were to be, then you should think about it. If you’re an entrepreneur, how many years of savings would it take me to amass that amount? So whatever it is, 7 million bucks, 6 million bucks. How many years of having to save a hundred or $200,000, would it take to get a lump sum of six or $7 million, take your lifetime. And that’s why, if you’re an entrepreneur, you may want to try and think about that. Now there’s other factors to cake. It’s not that black and white I’m being overly simplistic, but you have to have a business.

Barry Habib:

That’s not necessarily immature. It needs to have some maturity, but not too mature because you need to be able to leave enough meat on the bone for the next buyer to be incented, to want to do this, to see how it can grow. And then if you get the next bite of the Apple and you do everything right, then the next bite of the Apple with the help of a partner that can help you get there becomes even greater than the first bite. So that’s what entrepreneurs, in my opinion, should be looking at it as a liquidity event.

JP Maroney:

I want to talk a little bit about the opposite of success in just a moment, but if you’re watching or listening to this episode of the deal flow show, you can get access to our previous episodes, our archives, as well as following subscribe us to get access to future episodes. By going to the deal flow, show.com the deal flow show.com. So Barry, um, you know, we both know that someone who has success sometimes multiple success events also has had their share of what I call learning experiences. And it could be failures, setbacks, things that you control, the things you don’t control. You talked about the mortgage crisis, obviously right now, we’re all living proof of what has happened with Krone, a virus COVID-19 and the impact of that on our economy and businesses. But what is your personal process for dealing with a setback, a failure, a reset, a learning opportunity. How do you go through? You talked about heart and sales. How do you go through the mental game? How do you keep the heart ride? How do you put together the pieces? How do you put, you know, keep the logic right? And get back up and go again. Anytime you have those, those times where you’re not having the success that you thought you would, all of us are gonna

Barry Habib: 

Suffer. We all have suffered. We all will suffer. Okay? We all, well, this there’s no discrimination there. Every single one of us will suffer. Whatever that heartache is, and businesses are going to have some good times are going to have some tough times. But the one thing that you can depend on is you can depend on the fact that you’re going to have some tough times. But the other thing that you can depend on is you can depend on being adaptable and being resourceful. And the vast majority of people fail, because what they do is they encounter resistance and they say, Oh shit, I can’t do it. Right. What you really need to do during those times is be resourceful. You need to find a way, this is what you need to do. Listen, we’re designed this way. We’re designed this way. Do you know that your, your blood flow, even inside your own body, if a vein gets cut, do you know that your body finds other ways to get the blood around it?

Barry Habib:

And that’s essentially what you have to do, do what your body is born to do. Find ways around it. Be adaptable, be resourceful. When you encounter a setback, when you encounter something that is going to be a difficulty, understand that this is just part of the deal. It doesn’t always work out perfect. It’s not, it never does. So when you do know that that’s part of the deal and what your job as an entrepreneur is to do two things. One anticipate what the weaknesses are going to be, anticipate that, and to be resourceful and adaptable, overcome those. Now everybody should be looking at their business as if they were your competitor. Here’s what I would do. And here’s what I do every day. I look at my business and I imagine I’m a competitor. And I’m saying, how do I attack that business? What’s their vulnerability.

Barry Habib:

What’s their weakness. What’s an area that I can beat them. And then once you’re honest enough with yourself and you look at it from the eyes of your most fierce competitor and see how they can beat you, then it opens your eyes to say, here’s what I need to be doing better. Here’s what I need to anticipate. You’ll still have setbacks, but there’ll be far, fewer and far less severe. If you’ve already done the work to shore up those holes before they happen, the problem is, is most of us, we believe our own press clippings. And we’re out there thinking how great we are. You know, when you get a tailwind, we believe it’s ourselves. Instead of thinking about the fact that, Hey, maybe we got a little bit of a tailwind here. Let’s be wise, let’s be smart. I’ll also bring up a point that you said on our pre-call that what’s your blood type again.

Barry Habib:

So listen, I’m a very positive person. Everybody says, bear, you are so proud because I do. I think here’s one common thread, one common thread that we know factually amongst successful people is this it’s optimism. I would tell you that it is one of the most important character traits. If you find yourself lacking optimism, then it’s a skill. You need to focus on it. I start my day every morning with prayer and gratitude. I literally say out loud, all of the things that I am grateful for, because it’s sets you in a different place in your mind, every single day. And people joke with me as a barrier, always so positive. I said, well, guess what? There’s a true story. My blood type can’t make this up. It’s be positive. Okay. So, so I, I’m going to say to you now, it’s not always easy to be positive.

Barry Habib:

Believe me. That’s that’s, that would be unnatural. But for the most part, if you can remain grateful, if you can remain grounded in thinking about while we have problems, how many people are out there that would beg to have our set of problems. Right? Think about that. Think about all the things you’ve got going for you, all the good that you have, it just refocuses you and get you out of the negative mindset and then allows you to truly address what’s the cause of the setback and how can I overcome it and have the confidence and belief in yourself that have been here before I’ve gotten through it before I’m going to be able to overcome it again.

JP Maroney:

Good point. And it is about perspective. We were driving back from Miami the other day and actually in the evening. And there was something up ahead. We didn’t know what it was, but we came to a halt to sit and literally on 95, no movement. The finally it starts to creep a little bit, sit still creep a little bit. And about 20 minutes into this, I’m like, Oh my God, I got it. I’m about to jump over into the HOV lane, you know, crossover and just drive on that side. And we got closer, got closer. Finally, you see the flashing lights. And then we got up next to them and I’m grumbling to my wife the whole time arena. So we got up next to them and there were three or four cars just completely torn to pieces. One truck turned around backwards. The front was completely missing. I said, well, I guess there is somebody having a worse night than me, you know? And it’s all about perspective. So you had a question for him about it, about the deal process. I did. Can you give us some on our audience, some tips on how do you prepare for a deal and data book deal or a movie deal or, or any of your dealings in business?

Barry Habib:

Preparation is really important. I prepare, you know, I prepare, you know, if you want to grow, you have to measure, right. So, so do you know your numbers? Do you know your statistics? Are you being, are you looking at what your history is, what your trajectory is in anything that you do? So if you’re preparing to sell a company, you know, what you want to do is you want to think about that. Well, in advance, you know, where are you going? What are you anticipating when would be the right time? If you’re looking to put together any type of a deal, it’s really important in, in any negotiation to not look for win, win, but look for something that is good communication so that you can express and understand not only what your objectives are and make sure you stay true to your objectives, but what would be beneficial for your respected adversary on the opposite side of the deal.

Barry Habib:

So it’s very important in any negotiation to understand that you need to be prepared with what your objectives are. And you also, so if you should almost do this before you make a phone call to somebody, most people make a phone call and they just wing it. How much more effective would you be before you made an important call like that? If you had a list of things that you wanted to accomplish on that phone call, just take the extra three or four or five or 10 minutes to do that prior to getting on the phone or on the zoom today or whatever it is, or meeting how much more effective would you be just by what that one little thing. And then when you’re in a situation where, when you’re in a negotiation, please understand that in negotiation, neediness is a killer. It’s okay to want, but it’s not okay to need.

Barry Habib:

Neediness traps. You neediness is, is, is all the things that will hurt you in any kind of deal in any kind of negotiation. The strongest negotiator is always the one that could get up and walk away from the table, always. So the second you start to show need, your adversary will smell it. In addition to that, they will trust you less, not more dropping price causes people to trust you less, not more. Why don’t you give me that lowest price to begin with? What else? Where’s the bottom. Now, now it opens up a bottomless pit. If you, if that was your best price before, and now you came down to here, why can’t you come down to here? So you need to be very careful about dropping price without getting something in return for that to show that you’re truly in a negotiation, there’s so much to putting deals together effectively. Anybody can put a deal together, but how effective are you in putting that deal? Just remember that, as I mentioned, neediness is really the killer understand going in that if you want to be a great negotiator, you have to be willing to walk away from the deal that you’re negotiating before you put it together.

JP Maroney:

That’s huge. I agree. A hundred percent. I know you’ve got a question over there. I can tell by the way, you’re moving around, but if you’re watching or listening to this episode of the deal flow show, you can get access to our archives, our previous episodes, and also follow in, subscribe us, uh, to us to get future episodes by going to the deal flow show.com.

Barry Habib:

Got it guys to that end. Let me just give you one. I’m going to give you a little treat here. Okay? So I’m going to let you in on a secret, we all have people that are in any type of deal or negotiation or sale are being unresponsive. Heck it could be a contractor on your home. Okay? I’m going to give you a secret here and you’re gonna want to write this down. Trust me. It will be life changing for you. So if you want to get people who are unresponsive to respond to you, I’m going to give you a three sentence script. Trust me, this will be a magic trick. I’ve taught this to people. People have told me this has been life changing for them. So what I’m about to do for you is give you a magic trick that will totally help you and change your, if somebody is being unresponsive and you want them to be responsive, this is a simple three sentences.

Barry Habib:

Do not change it. Do not alter it. Say it exactly as I’m about to tell you I’ve left several messages for you and still have not heard back. That’s the first sentence I’ve left several messages for you and still have not heard back. Second sentence. If interest is cooled, I completely understand. And it won’t hurt my feelings. Third sentence. Just let me know either way. So I know how to proceed. Believe me. When I tell you this is a magic trick, when you do it now, not only does this work for customers for contractors, business, it’ll work in relationships too. I’m telling you it will. Okay. So here we go. One more time. I’ve left several messages for you and still have not heard back. If interest is cool, I completely understand. And it won’t hurt my feelings. Just let me know either way. So I know how to proceed. You can put that in an email. You can put that into text. You can leave it in a voicemail and watch your phone ring. Watch your response, come back because I guarantee you, the unresponsible respond to that. Why? Because there is no need.

JP Maroney:

And I don’t know if you train any kind of jujitsu or anything in Brazilian jujitsu. There’s a thing where you push, pull. And as soon as you’re pushed, they brakes for that. And then you pull and it takes them off. And you’re talking about you’re pulling back. They lean in you, then you push back in. I love it. Nice move. Now, ask your question. Well, I actually he’s, he’s had so many great points, but tell us about the red flags you see during this process. If you see red flags, what are they and tell us about that in any of your deals.

Barry Habib:

So again, you know, in a process, um, integrity is the most important thing because really what the bottom line of it is, is it’s just trust. Um, when everything’s great, everybody’s great. You really tell somebody’s character. When you see adversity, watch how they respond. Because if you’re going to enter into a deal, what you really want is you want a teammate. You don’t want somebody. When things get a little shaky to turn against you, to try and take from you. You want somebody who’s going to be committed and with you. So watch for the red flags. When you reach certain levels of adversity, are they staying in this? Are they trying to gain? You take advantage of you. Integrity is everything in a deal and trust is the most important thing. So, uh, watch neediness as well. See neediness. We talked about us displaying neediness, which is what kills deals.

Barry Habib:

But if somebody else becomes needy, take that as a red flag, because when someone’s displaying neediness, it’s a sign of desperation. And when people are desperate, they will do anything to accomplish the goal. And I don’t mean that in a good way, which means they’ll say anything to you in order to get what they want, whether they will fulfill that or not. And our brain already knows this. This is why. If we try and sell an act needy, the customer’s back off because they say, what are you so desperate for? So when you say something that they don’t necessarily believe you because you sound desperate and therefore they believe that you’re just telling them whatever it’s going to take to close the deal. A great salesperson tells the customer everything bad about the deal. Look, if you want a life, we all want to be magnetic, right?

Barry Habib:

We all want to magnetism is so critical. You know, you look at some people and you say, man, that person is so magnetic. I wish I had more of that. Magnet. Someone to tell you the secrets magnetism, the secret of magnetism is do two things. One is you have to be more educated and how help them learn something. If you can help them learn something and show them and people make their decision very quickly. First five or 10 minutes, you get on the phone, you’ve got to show your knowledge, but you can’t give what you don’t have. So what you need to do is you need to put in the hard work. That’s the good news. The good news is success takes hard work, and you should be happy about that because otherwise everybody would do it. And people would steal your business. The fact that you have the heart, you have the desire.

Barry Habib:

And obviously if you’re watching this, you already have that because you could be doing something else. But what are you doing? You watching this because you’d like to learn something to help you grow, to help you get better. So you already have that in you, it’s in your DNA. Otherwise you wouldn’t be watching this. Use that to your advantage. Be a sponge, learn as much as you can push yourself, be the very best version of yourself. And if you do that, then you have something to offer. And by the way, I want to talk about competence in a minute. But first, the other aspect of it is tell that customer, everything bad about the transaction. I know it sounds crazy, but what you want to do is you don’t want to look at that person as a customer. That’s got a dollar sign as a target on their back.

Barry Habib:

You want to think of them as if they were your mom, your dad, your kid, your best friend. And instead of being on opposite ends of the table, you want them right here next to you, looking at the deal together and say, here’s what I watch out for. Here’s why you should, what you should be careful of. Maybe this isn’t good for you to do it this way. A change to the whole deck, that overcomes price that overcomes everything. And doesn’t just work in business in relationships too. You want to be trusted. Tell him everything bad, be vulnerable. It takes a lot of confidence to do that. You know, in South America, they’ve got these spider monkeys that are really, really difficult to capture, but Hunter’s became very ingenious. And what they did was these nocturnal animals. They only come in at night. They take these heavy boxes that are ventilated with the monkeys, favorite food.

Barry Habib:

There’s no way in except for a small slit in the side of the box, monkeys are smart. They feel around, they find a way and they get their hand. Did they get the food? And then they can’t get their fist out because they’re holding onto the food and their clenched fist. Can’t fit through the slit. The hunters just come and pick them up. Now the monkey can be free and have everything they want. If they just let go and make it up, the freedom they want. But because they won’t let go, they trap themselves. And in life we have to think about is how many times do we trap ourselves? Because we’re afraid to let go. We’re afraid of losing. And that prevents us from winning. You know, I learned how to juggle am I there’s such thing as a juggling instructor. Okay. First thing they taught me to do is let the balls drop.

Barry Habib:

I’m like, why the heck would I want to let the balls drop? And they said, Barry, because if you try and catch everyone, you will never have confidence enough. And you’ll never be able to be relaxed enough to juggle effectively. And it’s like that in life. We’re not going to get every deal except that, that you could want to get every deal, but you’re not going to. And I mentioned competence before. Competence is a critical element. Isn’t confidence. So great. When you say not cockiness, but confidence. It doesn’t that draw you to someone. Who’s got competence. It’s very attractive and you become more competent. Be the very best version of yourself right now. That’s the great thing about it. What are you doing every day to make you the best version of yourself? The last conversation you have with a client was that the best conversation that you’ve had is the next one going to be better.

Barry Habib:

Are you constantly striving? The conversation you had with your kids is that, that best interaction that you’ve had yet, are you dealing with your significant other in the best way, where you’re proud of yourself and you know that this is the best version of yourself. You’re giving the best version of yourself to the world. If you’re doing that, that gives you unbelievable confidence that, Hey, no, I’m not like I was 10 years ago. I was good. 20 years old has got three of the I’m the best I am right now. And that inner confidence will draw so many people to you. Whether you’re trying to sell a business, we’re trying to sell a size of steak, knives, whatever you’re trying to do, or trying to win over somebody’s heart. That kind of confidence is extraordinarily powerful and magnetic.

JP Maroney:

I guarantee you I’ve been there. You’ve been there. You’ve been there. Everyone listening to this audience has walked into and we’ll walk into a selling environment or a deal where they really do need the deal. And so how do you prepare mentally for that? What are, what are some of the things you can do in that preparation process to make sure that you’re walking in with that level of confidence that I could walk away, but that gun, I know I need this deal. How do you present that, that front in an authentic way?

Barry Habib:

So I remind myself that I want the deal, but I don’t need the deal. You know what I need any air food, water, shelter, maybe some love, okay. So that’s what I need. I don’t need that transaction because the sun’s going to come up tomorrow and there’ll be another one that’ll be out there. Maybe it’d be harder. Maybe it’d be less exciting, but they will be better ones as well. Very rarely do we get this deal, that the best deal of our life, that we’re in the midst of, okay. We have many, many, many, many deals who knows what the best deal of our life is thinking about five years ago, eight years ago, when you thought was the best deal of your life, probably as dwarf now, by things that have occurred for all of us, right? So you don’t need it. You want it, and it’s okay to want it.

Barry Habib:

So the most important thing that you have to remember is that if you have that mindset, then what you’re really able to do is take the approach of what is best for that client. What is best for that loved person that you’re trying to talk to you for your kid, your significant other, the heart. You’re trying to win. Think about it from their perspective and think about what’s important to them and how you can help them. How can I best serve them? What can I do that would be adding value to them? And by doing that, then it becomes a lot easier for them to root for us as well and want to make that happen for us too. So it’s that type of a mindset, but it all starts with not being needy. Cause if I’m just concerned about what I need and what’s going to do for me, I’m gonna have a much more difficult time trying to put something together with that person who’s across the table, in whatever context it is.

Barry Habib:

But if I’m thinking about how I can make a positive difference and impact for that individual across the table and how I’m addressing their concerns and how I’m vulnerable and how I’m not afraid to put their wellbeing in front of my commission. Well, that’s a different world. And not only do you get that deal, but you get that deal forever because they’re gonna keep coming back to you. And then on top of that, they’re going to give you every single person that they know that will come to you. That’s longterm thinking. The problem is most of us think short term. So if we get out of the short term mindset and start to think longterm, the rewards are incredible. Good answer.

Paul Nicolini:

You mentioned, you just mentioned longterm and certainly people have certain goals short term or longterm. Tell us about some of your goals and maybe some that you haven’t achieved yet this far and maybe a where you’re looking down the road.

Barry Habib:

So I just had some, some really amazing longterm goals just culminate, you know, that takes it’s years in the making that just culminated. So, you know, it’s always important to enjoy them, but it’s always important to continue to think ahead. So I’ve got a book that’s going to be released this month, just closed on some very, very major transactions with our business, uh, and, and inside of our business and new businesses that I’ve launched. So they’ve all kind of come together. But my goal now longterm is to take the new arrangements that we have and to build them into grow them both during internal growth, during acquisition and creativity, you know, creativity is something we don’t talk enough about. We all have this amazing creativity. Now I grew up extraordinarily poor. So my dad was 57. My mom was 40. When we were born, they were immigrants, uh, barely spoke, but really didn’t speak the language.

Barry Habib:

I’m first generation in my family here in the United States. And my dad passed away when I was young. My mom worked in a sweat shop, which is where they make dresses and it’s just tough conditions. So I know what it’s like to be there. And when, when I was growing up, you know, one of the reasons why I wrote the book is you don’t. My mom would, would talk to me about stories about how people that would come to America would hear that America is such a rich country, there’s money in the streets. And that’s why I wrote the book called money in the streets. Well, when we take a look at years later, before my mom passed, I remember sitting down with her and saying, mom, you know, you were right. There really is money in the streets because I learned how to identify opportunities.

Barry Habib:

I learned how to do good with them and build them into something. And when we take a look now at goals that we have going forward, creativity is so important. We all have it. Mine was fostered because I didn’t have any toys. So I like invent games, do that at a young age. But when you come up against obstacles, we talked about adaptability. Creativity will help you. And in building your business, many of us stay stagnant and we don’t utilize the creativity that we have to push ourselves when we’re successful. When you’re successful, we tend to just, you know, put it on cruise control. That’s the time to use that platform and that leverage of being successful to then push it to the next level. That’s how you stay ahead of your competition. Find where the points of friction are constantly push yourself to take a good situation, a great situation, and take it a step higher, make it even greater, never be satisfied and always try to improve through creativity.

JP Maroney:

Very cool. Before, uh, we get finished chair. I want you to talk just briefly about the book and be, have a cover or a sample or something. You can show us what it looks like.

Barry Habib:

Well, right on Amazon it’s money in the streets. You can go there. Amazon Barnes and noble, it’s going to be released October 27th. And, uh, and the book is one that as I mentioned to you, so by the way, Tony Robbins, who doesn’t, doesn’t typically give endorsements. Tony wrote this glowing endorsement on the book because he really believes will help people. Uh, Randy Zuckerberg, who is Mark Zuckerberg, sister, she created and invented Facebook live. She wrote the forward and the most beautiful forward, and the book will truly help you. If you’re going through a tough time, it’ll help you get through it. If you’re going through a great time and help you it. But what it really will do is teach you lots of lessons that will help you identify first opportunities and then how to maximize them. And then most importantly, how to do good with them because in life there’s a lot of successful people that are very unhappy.

Barry Habib:

And while we’re talking to you about success and many of you are successful, and I hope you’re happy all of you, but you have to remember that while at least in my humble opinion, in order to be successful and happy, you need not just achievement success, but you need fulfillment and fulfillment usually comes from helping others. So if you can, along the way, help lift others, inspire others, do good for others. That’s what gives you the fulfillment, which brings happiness along with successful achievement of goals. If you have the marriage of those two and you’re going to be, you’re going to be pretty happy and you can’t help, but being successful because one builds on the other.

JP Maroney:

If, uh, other people see this, they think about opportunities that might be a fit. What kind of people would you like to connect with from our show, people that have been guest on the show, um, what kind of people would you like to have reaching out to you as a result of seeing this or hearing this

Barry Habib:

People that want to help others, people that understand that life’s about giving and not receiving people that work very, very hard to continuously improve that believe in themselves that want to put the hard work yet people that are into it that are motivated, that are spiritual, that are grateful and have humility. That’s the type of people I love connecting with because those individuals, what I call it is I say they get it. Not everybody gets it, but when you find someone who gets it, stay close to them, because those are the relationships that will be most enjoyable and most meaningful for you. So like both of you, gentlemen, you guys get it,

JP Maroney:

Barry hubby, um, as we finish up, what is the best way for people to reach out to you, email, phone website, whatever your choice.

Barry Habib:

So a MBS highway.com is, is the typical one, but you could email me. My email’s real easy. It’s barry@barryhabib.com. So easy, so simple. Um, that’s, that’s probably the best way to reach out to me.

JP Maroney:

Excellent. It’s good to have you on Barry Habib, MBS highway on behalf of mr. Paul Nicholina I think we covered it today. This is good stuff, inspiring a different angle, a different angle. And, and I’ll tell you what I look at when you go to the deal table, having that arsenal of tools. And it’s not always those sharp edges. I liked some of the stuff that you talked about today and guarantee you, some of our audience learned from that. Listen, if you are watching or hearing this episode of the deal flow show, you can get access to our previous episodes, subscribe and follow us by going to the deal flow show.com. If you think you’d be a great guest, reach out to us through the website. If you know somebody who’d be a great guest, you can suggest them to us in social media, LinkedIn, et cetera. And, uh, also if you’re like Barry over there going, I need somebody you’re back in touch with us and let us know who would be a great guest on the show. We look forward to being a part of your dealmaking process in the future. I’m JP Maroney, mr. Paul Nicoline, take care. Everyone. We’ll see again. In another episode of the deal flow show, all right,

October 12, 2020

Episode – 11

Brad Truesdell CEO of Tomahawk Robotics and Former Navy SEAL on Raising Capital




Description:
Brad Truesdell is Founder & CEO of Tomahawk Robotics. Tomahawk Robotics is a leading innovator for robotic control solutions. They are committed to driving enterprise adoption of robotics by reducing cost, optimizing system performance and improving ease of use through intuitive, user-centric design.

Brad talks about his experiences raising capital for Tomahawk Robotics and building the company from the ground up. He provides a unique take on the capital raising process and draws from his experience as a Navy SEAL and how those skills translated over to running his business.

What you’ll learn from this episode:
– Unique perspective on starting a high tech start up
– Challenges associated with raising capital in the robotics space
– Mindset of a successful entrepreneur and Navy SEAL

Connect with Brad:
LinkedIn

Full Transcript:

JP Maroney:

Welcome to another edition of the deal flow show. I’m JP Maroney, your host, along with my cohost for this episode of mr. Paul Nicoline, you seem to be on a lot of episodes. I am mr. Paul Nicoline here from Harbor city capital, and today we have special guests and actually you’re our first in studio guest. So it’s great. And in amongst all this covert, as well as having a lot of people from out of town, it’s a pleasure to have you in the studio with us, mr. Brad, Truesdale from Tomahawk robotics. And, um, my little bit of history that I have from Tomahawk robotics comes from our producer for the deal flow show. Uh, Mr. Daniel Penaranda who went to work for you guys while he was still in college?

Brad Truesdell:

That’s correct. Yes. Uh, yeah, he’s one of, uh, uh, within one of the first 10 employees that we had at the company.

JP Maroney:

Well, I heard lots of good things about the business and I’m very fascinated by where y’all are going both with the technology as well as the initiatives and the thing, the areas of business. So I can’t wait to get into that. If you’re watching or listening to this episode of the deal flow show, you can get more episodes and, um, get subscribe or follow us for future episodes@thedealflowshow.com. So I know you have not always been with Tomahawk robotics, so I’d like to back up just a little bit and talk about how you got involved in the business world, what you started doing, where you started out, and then maybe lead up and talk a little bit more about Tomahawk after that.

Brad Truesdell:

Sure. So my back story is a native of Florida, uh, where we’re located today and, uh, grew up down here and then went off to college and then following college into the Navy and, uh, spent 1998 to 2007. So about nine years in the Navy. Uh, during that time I was a seal and, and this is what kind of, you know, leading into Tomahawk robotics had the opportunity to use, uh, some of the first, uh, robotic systems that were employed by small units, uh, both air and ground. And so had that opportunity, um, you know, during my time in the military. And then following that, um, left the military in 2007, falling in injury, uh, went to business school and then subsequently to that, uh, worked at Harris corporation, uh, here in Melbourne, Florida, and then, uh, worked there from, um, 2009 to, um, 2017 and then started Tomahawk robotics in 2018.

JP Maroney: 

I found, I remembered that you had former Navy seal. I probably wouldn’t have been saying the things that I said when you came in the door to the

Brad Truesdell:

Actually with, uh, with working at Harris, didn’t you meet a professor at Harvard? Is that how that evolved? Yeah, so, um, one of my professors, a gentleman by the name of Steve Kaufman was sat on the board of Harris at the time. Uh, he was a former CEO of arrow electronics, and, you know, fortunately for me, we struck up a nice relationship during my time at business school. And, uh, you know, he’s very encouraging of, um, you know, trying out a role at Harris. Um, and he was very nice in helping me facilitate a great entry point. Um, and you know, Steve is, um, uh, certainly knowledgeable about the industry. You know, I went to business school a little bit later in life than most people because of my military service. And also I just frankly, wanted to give back, um, you know, what the same motivations that pushed me into wanting to join the military in the first place, uh, you know, patriotism wanting to do something important, impactful for our society, um, made me want to go back to work for the aerospace and defense industry. And Steve, you know, helped me, uh, along that path. And so, uh, you know, it turned out to be a great thing, you know, joining Harris, learning a lot about, uh, the industry and frankly, how to run a business. Um, you know, I learned things there that I wouldn’t have learned, you know, doing a many other jobs and as you know, subsequently prepared me well for Tomahawk robots.

JP Maroney:

Terrific. When did you get the entrepreneurial itch?

Brad Truesdell:

Well, um, originally I think, you know, two things I’d probably go to that point. So number one, my parents owned a business themselves, and so I got to see that, you know, their own, um, you know, the highs and lows that they dealt with when they started their own business. Right. And they started a relatively, uh, um, you know, late in life. Um, and, uh, you know, uh, you know, let’s say middle of their careers, probably a better descriptor for it. Um, and you know, they build up a good business and a good living for themselves and, uh, you know, after school and during the summers, I worked for them. And so I got to see that, um, you know, both the, again, the goods and bads of that. Um, but I got to see how impactful that, you know, good management, a good culture could be on, you know, their coworkers or their employees lives.

Brad Truesdell:

And that’s something certainly that I, uh, took away from that experience. Um, so that, you know, that certainly that, you know, kind of formative experience that I lived through, but also I think that, um, you know, as you progress through your, your own careers, right, you learn things as I talked about, you know, both during my military time, my education and at Harris, and at some point, you know, you want to take a swing yourself, right. And I think that’s, you know, I got to that point in life and I was ready to, you know, I felt prepared and I felt like I could do something, um, more impactful on my own.

JP Maroney:

When you go from having the resources of a Harris behind you to running a small team on your own seal team, so to speak in an entrepreneurial effort, how did you make the transition to that? Knowing that, you know, you don’t have the big backing behind you, it’s up to you, you got to eat what you kill and things like that.

Brad Truesdell:

So I think that, um, you know, so there’s a resource element and then I’ll, I’ll call that the, you know, the mindset and the ability to trust yourself and operate on your own. So that certainly came from the confidence I gained during the military, that I would have that ability, right. Confidence in yourself to, you know, make smart decisions or make mostly smart decisions. Certainly we get some wrong all the time. Right. But, uh, I think I, you know, created that confidence because of, you know, frankly the, uh, the fire and experience I had to deal with, you know, during, uh, you know, the time I served in the military. Right. So that was very formative on me. And then to the point of resources, um, yeah, it was certainly tough starting out, you know, and it’s funny, uh, and we’ll get into this more, you know, we’re about to commission our new building, right.

Brad Truesdell:

And it’s a significant improvement over where we started the, you know, the first office, um, you know, my partner and I are, and, uh, you know, Matt, some of the gentlemen I started the business with, it was literally as big as this table. Right. You can lean over and slap the other guy if you want it to. Um, and we’ve grown since that time into, you know, we’ll be moving into about an 8,500 square foot building. And I think that, um, you know, making that transition was at times tough, but it taught you such good lessons about being, uh, resourceful. How did you know how to do more with less, um, you know, how to work through all the books, you know, again, having good educational experiences and good business experience has helped me do that, but forcing me to do those things, you know, it’s certainly made me a better business manager and frankly, um, uh, more adept, I think just general, you know, dealing with the highs and lows of running a business as well.

JP Maroney:

I’d like to know, tell us a little bit more about Tomahawk, robotics, exactly what the services are, the, what you provide to companies

Brad Truesdell:

So forth. Sure. Um, you know, I’ll tell you what we do and I’ll give you an analogy to kind of, you know, maybe baseline this for a broader set of, uh, an audience. So what we do is we make software that makes robots easier to use safer and more effective. So think about what windows did, you know, 30 years ago in the PC industry stacking on software to make laptops or PCs at that time, much more capable and make it a tool from, you know, that, you know, the entry level employee could use, you know, mid level manager engineering team, or the CEO could use that whole spectrum is what we’re doing for robotic systems today. And we focus not on, uh, robots in let’s say a manufacturing environment, but rather robots that people will have to interact with on a regular basis. Things that they typically call field robotics. So things used outside dull, dirty, or dangerous jobs, oil and gas mining, and certainly the defense industry as well.

JP Maroney:

That led into my next question then who, who’s your customer? Who’s your client?

Brad Truesdell:

So fortunately the good news is we have a few. Um, and, uh, as of, um, I guess about a quarter ago, we actually have customers on three continents, uh, Australia, North America, and Europe, um, and our customers range from, uh, here in the U S national labs, defense agencies, you know, both in Europe and Australia, as I talked about, uh, but also large enterprises, um, you know, people who build robots, um, examples of that would be, uh, companies like Baker Hughes, you know, from a large oil and gas perspective. Uh, but also, you know, again, people who build robotic systems, okay.

JP Maroney:

I want to get into the deal flow process and talk a little bit about how, because you all play a very long game in terms of business development. So it was very much a long game. We’ll get into that in just a moment. If you’re watching this episode or listening, this is the deal flow show. You can get more episodes, subscribe, and follow us for additional future episodes@thedealflowshow.com. So again, the deal flow show and the whole idea of our content is we obviously want to introduce people to great companies, great leaders, operators, but we also are going to share back a lot of this content in a book called dealmakers deal breakers. So I want to talk about the deal makers for you. When you go into a new environment where you’re going to be working potentially with a new strategic partner or a potential client, what’s your process of preparation for the deal flow for the deal process or the deal making process? How do you, my guess is some of that, and I’d like to even get deeper into the background with military, but I’m guessing a lot of what you did there in preparation for a mission maybe you’ve carried over, but how do you apply it specifically to the deal making process?

Brad Truesdell:

Yeah, so I, I think, um, with the context of Tomahawk robotics in place, I think there’s really two main, um, two main elements that I go, I start with from an assessment perspective. So number one would be, you know, do we have technology alignment, right? Is there, you know, is there a, you know, appropriate technology, um, you know, intersect between our company. So as a for instance, uh, we just signed a partnering agreement, uh, within the last 30 days with Samsung electronics. Right. Great opportunity for us, you know, huge, you know, one of the top makers of cell phones in the world, you know, by volume, right? So in that, for instance, they have a product, um, you know, it’s called a Samsung galaxy S 20, where we put our software on and you can use that to run robots from, okay, so technology alignment, they have an end user device, we have software and we put it on that phone to run robots.

Brad Truesdell:

Right. So that’s number one. And number two would be, um, and I’ll use a bit of a military term here, but the human terrain, you know, who who’s on the other side of the table. Right. And this is certainly I’m sure no surprise to you that I’ve gone to this part of the discussion. Um, do we have somebody who has, or shares similar motivations, um, you know, do they see the vision of the combined technology in a similar way to us? So those are, you know, the, my first two, um, you know, ways to assess things. Um, and certainly, you know, beyond that, after we kind of moved through, can I make a deal? Does it make sense from a technology perspective next, what are the deal terms, right. Um, you know, is this a situation where both companies will benefit and it’s easy and understandable? You know, those are the kinds of things that I certainly, you know, kind of work

JP Maroney:

My way through. How do you bring the people together? Cause you know, we talked about Daniel joining your company. It was very early first in the first 10, first 10 employees. So how do you pinpoint, I was talking in fact, I kind of did a little bit of a training slash article the other day, talking about surrounding yourself with people that fill the gaps, but what is your kind of approach to sourcing the right people for the deal process?

Brad Truesdell:

Yeah, so I think, um, you know, certainly from the other side of the table, you know, the people that we work with, I think you, what I typically look for is, you know, we do some do deal diligence ahead, identify, um, you know, people we want to work with our company targets that are appropriate for us, right. May contact, um, and then kind of assess them through, you know, a getting to know you phase. Right. And I think that getting to know you phase typically for us is, Hey, we’re working together. You know, as a, for instance, with Samsung, we were buying product for them before we signed a partnership agreement, you know, uh, and you know, smooth, you know, kind of a smooth relationship there. They were supportive of us, you know, good terms from, you know, buying products, supporting the products, you know, all those things that you’d want to have in place before leading up to an actual partnering agreement. And that, for instance, right. So what you hear from me is, um, you know, kind of the, uh, you know, let’s call it a trial run, right. You know, you have that, you know, get to know your face, that’s predicated upon, you know, doing good business together. And I know that’s a little bit different because we’re talking business to business versus maybe a kind of an investment, you know, um, take on things, but that’s how we worked through it.

JP Maroney:

Well, we don’t, and I want to talk about that, the investment side of things in a minute, but we haven’t actually had a lot of issuers or a capital raise or founders in here. And I definitely want to get that take on it because as you have lived the CEO of a growing company like this, a lot of your work is making sure, making sure you got money to do what you need to do in the business. Right?

Brad Truesdell:

Yeah. So the idea of a Tomahawk robotics, how did it evolve? Was it, was it something that when you were in the military, it started to tick in your mind that this is something that’s needed and you could take it to fruition. You could take it to the, to the public now, can you talk about that? Yeah. So I think, um, like many early stage technologies, often they, they, you know, when they first kind of debut there, they’re challenging to use, right. There’s a lot of difficulties let’s, you know, impediments to effective use. Right. And certainly, um, robotics that I experienced were, you know, reflected that. And so, um, you know, I think that, you know, gave me the idea of, you know, the, you know, um, this technology is going to have a profound impact on the way people do business people, you know, serve in the military, how they keep themselves safe.

Brad Truesdell:

Right. So I think, you know, I saw that in certainly, you know, thousands of other people saw that, right. So there’s nothing unique there, but I really was focused on, and this is, you know, because of, you know, where I served and, you know, the units I served in, um, you know, ultimately, you know, my hope and my goal with this company is to give people technology so that, uh, you know, reduces risk to human life. Right. And so for me, that those were the motivations that kind of, um, you know, propelled me to found Tomahawk robotics. I think that, you know, those, you know, the, kind of the, the challenges of use in a, in a, you know, in a tough environment like Iraq or, um, you, the, the ultimate goal of, you know, allowing people to do their job more safely is what I was going for now.

Brad Truesdell:

I think that, you know, that needs to be combined with, you know, those motivations are certainly good, but combining those with, you know, the business side of things, and frankly, the industry exposure that I got, you know, subsequent to my time in the military was very important. Right. Um, who are the buyers? How do they buy, what are their really technology problems? You know, how can you insert a technology? Like I just talked about into the industry with, um, with, with as little friction as possible, right? How do you make a product that actually people can buy and use, uh, you know, easily, and that does actually make their, their end products or their, or their mission better, depending upon the user.

JP Maroney:

Had you ever had any experience raising capital before Tom hunt? No.

Brad Truesdell:

And it, it was certainly, it was a learning experience.

JP Maroney:

It’s easy, right? Yeah. I mean, all you gotta do is go out there and just ask people to write a check. That’s right. We’ll get into that just a minute. This is the deal flow show. I’m JP Maroney, along with our cohost Paul Nicoline, we have a special guest on with us, Brad Truesdale from Tomahawk robotics. If you’re watching or listening to this episode, you can get access to our archives as well as future episodes and follow us and subscribe@thedealflowshowdotcomthedealflowshow.com. So let’s talk about it, the, the necessary evil of raising money, I guess, in growing a business and, um, you know, good products, good companies, good ideas, as long as you’re telling the story, right. Do attract capital. So it doesn’t have to be hard or complicated, but it is a process, right. Can you walk us back to the beginning of how you raise the first seed money? Cause we are going to have folks watching these episodes that are in their first venture first time raising whether it’s friends and family, or a first round of capital all the way up to we’ve got sponsors and deal makers, broker dealers that are watching. So walk us through that early process that y’all took to get the money in the bank.

Brad Truesdell:

Yeah. So we, uh, and just, we’ve gone through two capital raises thus far, and I’ll talk about the first one, I’ll focus primarily on that and you know, how things, uh, went there. So we, uh, bootstrap the company initially, um, you know, we wanted to validate the ideas, Hey, can we actually attract customers and all those kinds of things. Right. Um, you know, not a novel concept for sure, but we wanted to show a little bit of traction and, and frankly give, give our investors confidence that we could, you know, deliver on the products that we said we could. Right. So for the first, um, Oh, roughly nine months, the company’s life, that’s where we focused on. And by the time we started raising capital, we had a half dozen customers. Um, and then from that point forward, what I focused on was, um, capital providers here in the Southeast, you know, Florida, primarily in Florida in the Atlanta area, uh, you know, Georgia, you know, and, and the reason for that was, um, you know, certainly there’s a significant population down here, but it’s not as dense as a, for instance, as an Atlanta, right.

Brad Truesdell:

So those are the, really the two geographies that I on. Um, and in that, you know, I, I went to, um, you know, small equity providers, you know, venture capitalists, um, you know, again, regional type venture capitalist here in the Southeast and wealthy individuals. Um, you know, today we have a mix of both, uh, as part of our cap table and, you know, just, um, what I did was, you know, kind of share my story, the background, you know, the expertise that, you know, both myself and my partner had when we started this company again, Matt Sommer, um, by himself, by the way, he’s named on nearly 40 patents. So a very, uh, accomplished technologist and engineer in his own. Right. Um, you know, but even then it was, it was, it was challenging. Um, you know, what we’re doing is, um, fairly specialized number one, and number two, um, you know, the first money in is always, always the toughest.

Brad Truesdell:

Right. And I think that, um, you know, we had to work through that process, educate people about where we were focused, the markets that we’re in, you know, or are generally, you know, I think to some, you said JP was the, uh, um, you know, we’re selling business to business or business to government that is a long sales cycle. Right. And many investors saw that and they were nervous about it and rightly so. Right. So, you know, how much money would you need, uh, how long would the sales cycle take to actually show, you know, uh, positive traction. Right. And so that was one of the, again, one of the reasons why I did want to have some customers at the table already, um, but you know, this is a very different business than, um, you know, let’s say doing something in consumer space where there’s a, you know, much more rapid cycle time.

Brad Truesdell:

Um, you know, but on the flip side of that, uh, we did have some people who saw what we’re doing, you know, believed in, you know, the capabilities of myself and the co founder, Matt summer again, and, um, you know, had confidence in what we could do. And I think, um, you know, when we raised capital in 2018, we pulled in about two and a half million in total, and it allowed us to, you know, take our product from what I would call a very nascent, um, poor, limited feature set state into a much more capable state, um, you know, over the, you know, the following, you know, 12 or 18 months. And we’ve continued to build upon that, you know, certainly, um, as we, you know, again, raised a second round of capital and continue our growth today. Excellent. The, is the second round ongoing now, uh, we completed that in, um, Oh, just the tail end of 2019.

Brad Truesdell:

And the intent there was, um, at the time we had we’d scaled from, you know, when I raised capital, we were at about while we were three people. And then, um, you know, we scaled up to about 15 people. Um, and now we’re just pushing 30 and that’s that second traunch of capital was intended to allow us to hire some additional talent in, uh, so we could meet some contractual commitments that we had on the table. Um, and unfortunately that all turned out well. And, um, you know, today I think the good news is, is that, you know, our capital burn is extremely, uh, small, um, you know, uh, you know, generally we’re running about $70,000 in burn per month. Uh, and certainly there’s variation. And, you know, the month before or last month was about $20,000. So, you know, running the business relatively conservatively and scaling up as, you know, kind of business opportunities avail themselves.

Brad Truesdell:

And frankly also, you know, because of the economic conditions, the uncertainty associated with COVID, we’re probably, um, have more cash in the bank then, you know, is probably typical for a company of our, you know, where we are in, in kind of the maturation process. How has COVID affected you if at all, has COVID heart, the, yeah, absolutely. So one of the things, you know, I talked about business, the business and business government, a lot of those sales are, you know, face-to-face demonstrations, trade shows, you know, getting on planes, going to see somebody, you know, and frankly giving them confidence in what you have is, is something that’s real. Um, and you know, those, the inability to do that in many, in many instances has certainly slowed, um, you know, slowed the, you know, the, our pipeline, right? It’s, it’s, it hasn’t, let’s say it hasn’t caused a drop in our pipeline pipeline, but slowed it. So this year we’ll, you know, we’ll triple revenue again this year, which is, you know, which is fabulous. However, I think we could have done more if COVID had not hit for the reasons I just told you.

JP Maroney:

Yeah. What’s the future then. So obviously you’ve got the burn under, under, um, a conservative number is you said, but what is the future like in terms of capital raising for the business, if you can share that.

Brad Truesdell:

Yeah, sure. No problem. I, I think that, um, you know, the good news is the, you know, the market for robotics is growing significantly. This is absolutely a growth market. And we have a lot of opportunities ahead of us. And I would say this, that, um, I view fundraising and I, you know, I will likely, uh, execute an additional fundraising 20, 21 to scale up to again, meet a few business opportunities that we have in front of us. And the intent there is that, um, with having, you know, frankly, as you guys know, having some dry, dry powder gives you opportunities to do things maybe a little bit quicker, uh, and, or, um, you know, grow the business in a way that you could not do necessarily organically, right? So we’ll weigh those things out, but there’s a likely, a strong likelihood that I’ll do a raise in 2021

JP Maroney:

Is the, again, I’m not sure what all you can speak to, but as the exit B acquired go public, what continued to just grow organically, maybe acquisitions? What, what is the, the landscape for you?

Brad Truesdell:

So I, I think that, um, a couple of things here is that the majority of, um, exits in the robotic space have been two strategics of one variety or another. Um, as a, for instance, there’s a company called six river systems that recently was sold to Shopify. Um, they’re in the, uh, robotics, you know, for warehouses. Um, and the guys did great and sold to, you know, a growing company, a strategic in the case of Shopify. Uh, and they did extremely well for themselves in their early investors. Um, and there’s been other companies like that endeavor, uh, was sold in the last 12 or 15 months to FLIR. Uh, again, another situation where, um, you know, a good turn of events for the early investors. I think that those examples and others like them, um, show that number one, there is a relatively strong appetite among strategics for, um, you know, robotic technologies out there.

Brad Truesdell:

Um, you know, but that being said, I think, you know, um, as long as we, you know, frankly develop a great product, continue to deliver for our customers, we will have plenty of opportunities in that regard. Um, so I think certainly strategics is an option for us. And I think number two would be, um, you know, is there a path, you know, potentially to an IPO I’d like to think so. And, um, you know, I think, you know, I’m rather, um, I think, you know, rather open to any of those paths, as long as it comes back to the things I talked about, um, you know, wanting to create a technology that ultimately makes people doing Dole, dirty out outdoor jobs, uh, allow them to do it more safely. Right. So that’s, that’s kind of, you know, my, you know, my, uh, North star for how I make those decisions.

JP Maroney:

Very interesting. Let’s go, can we go back to your background as a seal? Sure. Um, any of those, I mean, there’s some obvious ones that come to mind for me, but from your gut, the skills and the experience of managing a team, putting things together, things that you’ve carried over to the deal making process for yourself.

Brad Truesdell:

Yeah. I would say this, that, um, I think that, you know, my time in the military, um, in the seal teams, you know, my time overseas, uh, being exposed to, you know, uh, a wide range of challenging situations, both from, you know, um, you know, fellow fellow service members, um, you know, partners that we worked with, you know, whether they be Iraqis or, um, you know, or other coalition partners, you really have to understand the differences people bring to the table and the skill sets that they have, you know, respective to those individuals. Um, and I think seeing that and having a, an appreciation for that and understanding how to mix them in the right way to get to the ultimate goal that you, you know, that you’re seeking. Right. And, you know, certainly I made it a slew of mistakes along that, along that path.

Brad Truesdell:

But seeing that, you know, seeing that and, uh, you know, appreciation, uh, for different individuals, understanding their strengths and how to put them together. I think that’s something that I really brought away from, you know, that type of team environment. Um, so I think that’s one part of it. And I’d say the second part is, um, frankly, a very, you know, strong, um, you know, what I’ll call a mission focus or very success orientation, right. You know, oftentimes we share the same goals, but we have different routes or different preferences on how to get there, right. And working through people or with people on how to get to that goal and, you know, trying to align people and understanding people will shift from that alignment over time. And the patients that goes along with that, I think those are the kinds of things. So what you hear me saying is, um, you know, putting the right team together based upon the skill sets that you have available, um, understanding the different perspectives that people have along that path. And ultimately, you know, staying focused on the, you know, where you want to get to, right. The ultimate goal for the collective

JP Maroney:

Mike Tyson has a quote that he’s quoted well, everybody has a great plan until they get punched in the face. Right? So I want to talk about that in just a moment, if you’re watching or listening to this episode of the deal flow show, you can get access to our archives as well as future episodes, by going to the deal flow, show.com the deal flow show.com. Let’s talk about the setbacks, because as you mentioned, you said, we’d like to make great decisions. And I believe in a business like yours, where you’re playing that long game, I want to say that it was, um, maybe the, who was the GE CEO for so many years or gee, Oh, come on. Tell me guys anyway, he said, um, great. CEO’s, you know, they have the ability to see around Jack Jack. I believe it was, I believe it was Jack that said your CEOs have the ability to see around the corner. And so when you’re playing this long game, you’re trying to obviously navigate all of those possible pitfalls and minefields, if you could make the analogy, but when you do hit the wall, when you do make a mistake or when market forces are at play and beyond your control, you have to reset how do you, as a CEO walk through that mentally, as well as tactically.

Brad Truesdell:

Yeah. So I’ll, um, you know, I’ll use a unfortunate example. We can all relate to write with COVID right. So, you know, how did we deal with that? You know, what are the actions that we took immediately and then, you know, subsequent to that. And so I think that there’s, you know, number one is how do we make sure that, you know, in my, for instance, how do you know the workforce is stable, they’re healthy and they continue to work, you know, at pace. Um, and you know, so, you know, making sure that they have the resources to work from home and that, for instance, um, but also, you know, taking some financial steps to make sure, Hey, we tightened down on things and get some more cash, um, you know, set aside, you know, so we can elongate, uh, you know, our cash per right.

Brad Truesdell:

So tighten up, you know, some of the tighten up our belts, you know, um, you know, take care of our people, make sure that they’re healthy so we can run the business. I think there’s also, you know, the mindset, you know, kind of shifting a little bit, and this is whether it’s, you know, um, with, you know, capital raising or with, um, you know, respective deals with a, you know, uh, with customers is that there are, you know, for every 10 deals, you know, one will come through on time and all that kind of stuff. Right. So you have to be prepared, you cannot single thread at every single thread, everything, right? So that means, you know, having a primary, secondary, and backup plan all the time and continuing to build up those options for you so that, you know, you move, you know, one thing through the funnel.

Brad Truesdell:

Fabulous. Alright, now let’s move on to the next thing and so on and so forth. Right. And that, that has led to, you know, our ability to grow the company from a revenue perspective. It has allowed us to successfully raise equity, as I talked about before, uh, on time. Um, and, you know, frankly do all the things you’d expect from a business and a well run business, right? You pay your employees, you pay your creditors, she pay, um, you know, everybody that you, you know, all the, all your payables. Right. And we’ve done that on time, uh, and taking care of our people as a result. So very much a, you know, mindset of primary, secondary, and tertiary, and be ready for contingencies.

JP Maroney:

Yeah. Is, um, and again, always try to preface it with you. Don’t have to tell a certain things, but is it all equity for the financing or do you have a stack and is, does debt figure into this longterm, or like, for example, when you have special projects where you said you had had to stack up your team to be able to fulfill some of these projects or these types of things that you can use debt or lines of credit or things like that, as opposed to just financing with equity, to continue to maintain your valuation and, and dilution with your company.

Brad Truesdell:

So the answer is yes. I mean, I think in, in JP, you certainly know this, the, um, you know, the earliest stage companies are appropriate for equity because of the uncertainty of cash flows. Right? Sure. Um, and I think, you know, now we are moving beyond that where, you know, our cash flows are, you know, much more regular number one, and frankly, you know, they can sustain a debt load. So we’re moving into that where, um, you know, things like a line of credit or a term, you know, from a debt perspective may be appropriate. Um, you know, but proceeding this point in time, um, you know, the, certainly the majority of, uh, you know, outside capital has been here.

JP Maroney:

Sure. It’s just too predictable or early those in those early stages. Absolutely.

Brad Truesdell:

And, and, you know, our, our, our, um, you know, our collateral, uh, or lack of collateral is, I mean, basically it’s labor and laptops for us. Right. We don’t have any meaningful collateral at this point. Yeah.

JP Maroney: 

Yeah. Those folding tables. That’s right. That’s right. Uh, what kind of people would you like to connect with from our audience, our other guests?

Brad Truesdell:

Well, I think that, and I appreciate the question would be, um, number one, um, we are serving a unique market. Uh, that’s atypical for many early stage companies. Right. You hear me talking about enterprise, you hear me talking about defense, um, and that’s, you know, investors who are comfortable with that. Number one, and number two, uh, investors who are comfortable with the technology and, you know, it’s frankly deep technology, right? It’s robotics, it’s software for those robotic systems. Um, so it’s, you know, it’s very atypical than I think many people will get involved with. Right. Um, but if people are willing to take the, you know, take the time to understand what we’re doing, they can see the impact on it. Number one, and number two, see how sticky it is with customers. You know, we’ve gone from five figures to six figures to seven figures with customers, and it’s because we’re delivering great products and, you know, we’re off to a good start.

Brad Truesdell:

Are you all doing anything in agriculture? We are not today. Okay. What about the space industry too? So, um, so, you know, being here on the space coast, right. Uh, so the way that I would describe, um, our work with, you know, government agencies today, and certainly the space industry will absolutely. And is using automated, you know, uh, autonomous systems today or robots today, um, to date, you know, so as a, for instance, how many Mars rovers go to Mars? Right? It’s a handful, right. It’s not many. And ultimately our business is predicated upon, uh, selling more and more licenses of our software, right? So when we sell to the government is really for those, you know, um, high volume opportunities that allow us to, you know, again, scale, you know, the, the volume of product that we sell, vice, you know, a specialized development for a single application, like a Mars Rover.

Brad Truesdell:

That’s, that’s why we have not done anything with the space industry thus far. Terrific. Um, would you like to share something about yourself that otherwise the business community or your, or our audience would not know? Yeah, I’d say that, um, you know, one of the things that, um, I’m very proud of with our business is, you know, I talked about my service in the military, I think, you know, alongside that is, you know, certainly we put together a great technical team. Um, but I think I’ve made a very, um, you know, thoughtful, uh, effort to hire veterans. And, you know, and this is about a third of our company is a veteran of one sorter or another right. Marine Corps, you know, army air force or Navy, um, no space for us as of yet. Um, and so I am, you know, I’m very pleased about that.

Brad Truesdell:

And I think that’s something that, you know, I am, you know, I want to continue to do, you know, uh, because it, um, you know, I think we all are collectively understanding of, you know, the last 20 years has been hard on that community. And we want to make sure that as people transition out, they have good professional opportunities. And I’m very pleased about that for that community. But in general, I mean, I think, you know, what we’ve done at Tomahawk robotics is create high paying technology jobs that allow people to lead a good life, um, you know, and you know, a good solid middle class income. And I’m very proud of that.

JP Maroney:

A potential future for Steve Carell at Tomahawk robotics, right. It was new show space force. Alright. So how would folks get in touch with you? What would be the best or easiest way that if audience members want to reach out, you can give email address, phone number, web whatever’s work.

Brad Truesdell:

Yeah. So Tomahawk, robotics.com. Um, all one word Tomahawk, robotics.com, uh, and then Brad dot truesdale@tomahawkrobotics.com is my email. So reach out to me if there’s any interest in discussing what we talked about further.

JP Maroney:

Excellent. Maybe it’s just on some other shows as well. That’d be good. Some exposure for the company. Excellent. Once again, this is the deal flow show, and if you’re listening or watching this episode, you can get access to future episodes as well as our archives@thedealflowshow.com. Once again, Brad Truesdale from Tamaki robotics. Glad to have you on the show on behalf of my cohost here and mr. Paul Nicoline, AKA Paulie walnuts to say that I’m JP Maroney from Harbor city capital and the deal flow show team, and a special shout out. And we’re going to get him up here for a picture in a minute, mr. Daniel, [inaudible] who a you hired while he was still in college as a, as an intern, and then migrated as one of your full time employees until we stole him from you. So guys, we’ll see you again in a future episode of the deal flow show. Take care. Bye bye. For more episodes, visit the deal flow show.com and subscribe.

October 7, 2020

Billy Glass

Billy Glass

Episode #10 : Raising Over $300 Million for Real Estate Hospitality Projects

William P. “Billy” Glass has been involved in the Commercial Real Estate business for more than 32 years.Mr. Glass began his career with Hank Dickerson & Company, a Dallas based commercial real estate brokerage and Development Company, where he received extensive training in all facets of the commercial real estate industry and quickly became one of the firm’s sales leaders. It was while working at Hank Dickerson & Company that Mr. Glass was first exposed to the utilization and structure of Real Estate Partnerships. In the fall of 1983, Mr. Glass started his own commercial real estate company, raising capital for income-producing, commercial real estate projects as well as land development. He completed 60 real estate related joint ventures and raised in excess of $30,000,000 before selling the firm in 1989 to a publicly traded company based in Atlanta, Georgia.In 1990, Mr. Glass began working as an external wholesaler and consultant, raising equity and debt capital for business enterprises and commercial real estate developments located throughout the United States. Between 1990 and 2006 Mr. Glass raised in excess of $250,000,000 through the broker dealer community via Regulation D, Private Placement Offerings.In 2006, Gentry Mills Consulting, LLC, originally formed in 1996, was renamed Gentry Mills Capital, LLC. Gentry Mills Capital is a real estate investment firm whose purpose is to seek out, package and provide quality commercial real estate investment opportunities to investors represented by investment professionals in the financial services industry.Mr. Glass serves on the Board of Directors for Special Olympics of Texas as well as Champions for Life Prison Ministries. Mr. Glass attended Baylor University and is a licensed Real Estate Broker. He and his wife, Laura, reside in Southlake, Texas and have 3 grown children.

October 7, 2020

Episode – 10

Billy Glass Talks On Raising Over $300 Million for Real Estate Hospitality Projects


Description:
Billy Glass is an Ex-NFL Player, Founder, and CEO of Gentry Mills Capital. He has been involved in the real estate business for over 30 years. Gentry Mills Capital is a real estate investment firm whose purpose is to seek out, package and provide quality commercial real estate investment opportunities to investors represented by investment professionals in the financial services industry. 

What you’ll learn from this episode:
– Raising capital through the retail brokerage channel
– Key advice on his longevity in the business
– How the hospitality industry is coping with COVID-19

Connect with Billy:
LinkedIn

Full Transcript:

JP Maroney:

Hello and welcome to another edition of the deal flow show. I’m JP Maroney, your host, along with my cohost for this and many episodes, mr. Paul Nicoline, regional director here at Harbor city capital on today’s episode, we’ve got a very special guest. His name is bill glass from Gentry mills capital. And you’ve got a background with this guy. I’m going to let you maybe do lead us off on some questions. And I’m excited about getting to know you and especially getting to know your family and, and the son that came on there at the end and said that we had enough ugly on the screen already, or we didn’t meet anyone else. But I think he was talking to me. We don’t know that exactly, but all right, so let’s jump into the questions and get to know, let our guests get to know Billy A. Little bit better. 

Paul Nicolini:

You know, Billy, we can start right in with telling us about Gentry mills capital. 

Billy Glass:

Sure. I mean, Gentry was capital was something I formed back in 1997, uh, as a consulting entity. Um, when I was sort of basically working as a wholesaler for other work for other people for many years. And I put together this company, Gentry mills capital, um, and it was 96 or 97 Becky. I can’t remember, but it was, I think it was 97 and we formed it to consult with people because I was fully licensed at that time. And we had to have something for outside business activities. We changed the name in 2006 to Jeffrey Mills capital when we went into the full time deal business and putting together our own offerings. And so that’s a little bit of background about for 

JP Maroney:

Paul May know this, but I’ve got curiosity questions. Cause I read here background NFL. I want to get into that in just a few minutes and talk about maybe even some of the parallels, but how did you actually get started in the capital markets? Can you talk a little bit about that?

Billy Glass:

Sure. I mean, uh, I, I went to Baylor university and I played for a couple of years, Cincinnati after I got out of, um, being a Baylor and playing football at Baylor. And I went to work directly for a man by the name of Hank Dickerson in here in Dallas and uh, gosh, 1981. And you know, at that time there were 13 large real estate firms in Dallas are sending company who I was very fortunate to get to go to work for Dan Henry S. Miller. And so mr. Dickerson taught me the real estate brokerage business. And while we were involved in that and I was learning in the real estate brokerage business, I became really close to Mr. Dickerson. And he taught me about partnership, putting together partnerships and, you know, I would pick a property so you didn’t go shove this buyer and that buyer and, and, uh, you know, as the market sort of got worse, he said, you know, that’s a great property nobody’s interested right now, but we should buy it. I said, that’s a great idea, mr. Dickerson. And so we started a decent lookout, we’ll put together the Texas partnership with Texas joint venture. Those were the old general partnerships. And so we started putting joint ventures together and he taught me how to do that. I became very interested in actually left business in the 1983 and started my own company to put together a joint ventures called BGI commercial real estate. And I put together 50 land syndications and sold those to a public company that I was really on raising capital and syndication business in the securities industry. So that’s how we started. 

Paul Nicolini:

And so what kind of investments are, are involved there underneath the Gentry mills capital?

Billy Glass:

We’ve really sort of focused on hospitality, although we have a wide range, real estate background and office and industrial and triple net lease warehouses. Um, but we’ve really focused since 1986 on hospitality, terminals capital. We really there’s a lot of things about hospitality that we really like, and that is that we can change the rates on our rooms, on our, what we’re selling. If you will, you know, as many times a day as we would, like, I mean, we can bring the rate up or down to capture business. If the market is soft, we can lower the rate and capture more business. You have a very tight market. We’re fortunate because we work with Hilton and Marriott and we get a lot of advice from them every day on what we should do with in our room rates. And obviously they’re interested ranking franchise fees and, uh, the better, the more they can increase our revenue, the higher their franchise fees are. And so it’s, it’s, um, it’s a great marriage, uh, what really works well for us?

Paul Nicolini:

You mentioned Hilton hotels. Um, how did you, how did you get involved with Hilton? And then also as a two part question, how do you acquire your hotels?

Billy Glass:

Well, the way we originally got involved with Hilton was that we, we basically had some partners that we had worked with in the previous life, in the hospitality industry. We had provided some capital to, even when I was working for another firm. And that was the old American literary American Liberty hospitality, um, a farm in Houston. And we started working with American Liberty hospitality and they have a long standing history with built and for operation. Um, uh, Nick Massad, their president, uh, I went to the Hilton college foster healthy they’re the university of Houston, uh, and a very big donor, uh, to that school of hospitality. And, uh, we stood our dirt first deal on the West side of Houston, which is 192 Filton, um, hotel. Um, and, um, we, we built that, that property right before another hurricane that was coming to that area, built it. Um, we had minimal damage, uh, and, uh, we had a great success story with that property, but that’s how we got involved with Hilton and, uh, you know, and through, and develop a relationship with the development. That’s the way we source our properties. We work with developers, um, many developers that we work with in the past, come to us and say, we have this project or that project and that project, our Marriott project, our high place project. And, um, uh, and so that’s basically how we w we built our relationship with the different plans. 

JP Maroney:

You you’re the sponsor in the deal. And then are you taking Carrie? Is that how you’ve built your business model or

Billy Glass:

At the beginning, when we were working with like Nick and some of the other developers we work with, we took a carrot and first in the program, uh, and then a lot of the, in several occasions, we’ve just gone into the property ourselves just directly. We bought the land and built the property from the ground up. And we were the, the franchisee 

JP Maroney:

That guy on the ground, in the NFL, a history there. Can you talk a little bit about just kind of give us a encapsulated view of that career and maybe a couple of highlights if you don’t mind. And then I have a followup question to that. 

Billy Glass:

Sure. Well, my career is very short. Um, I grew up, uh, in the NFL because my father played the tape and Browns and Detroit lions. He ended his career. He played for 11 years in the league and he ended his career in Cleveland. And so as a boy, I was in an NFL locker room and that was always my goal to be a player at some point, you know, if I could possibly do it. And so my goal was from a very young age, I was to play in the NFL. And so, uh, I did that. I was drafted in 1980, uh, 80, I suppose, 1980 and played in 81, 82 or 80 and 81. And that was my last year got hurt. But, uh, my dad calls my career a cup of tea. So, uh, you know, very short, I went up there and got, I made the team player, played for the full season and part of another season. And then, then I got, um, you know, got, got back to Dallas and went to work for mr. Dickerson in real estate.

JP Maroney:

The journey though, because even as short as the current amount is being, obviously you set a goal, you went after it, you achieved that goal. Um, no fault of your own. I’m assuming you got hurt. Uh, but the question is, do you see for yourself or what you’ve seen in the league over the years, parallels that have maybe taught you lessons or prepared you in any way for the deal making process, that and business building that you’ve now gone through as a professional career? 

Billy Glass:

I don’t think there’s any doubt. I mean, my, you know, the coaches that I played for, you know, taught me things that were incredible. Like, you know, we, we were coming up, we play and if we had the chance to play in the NFL, it’d be great, like a little bit of money, but not nothing like the money that they’re making a day. And my dad played, you know, he always had a job in the off season, as I told you, JP, my dad was a minister and he still isn’t minister. And so he did that. It’d the all seasons. He went to seminary. And then, and then, uh, you know, did his ministry work, built his ministry, a worker to 50 years? And so, you know, that in itself taught me a lot about hard work and, uh, my coaches grant tasks that Baylor would always tell me, you know, you find out that you are when adversity strikes. 

And so, you know, my career has been built on just, uh, uh, long term learning, uh, experiences, you know, building relationships over a long period of time telling him the truth and trying to be a purveyor of truth and not, you know, just, um, uh, to involve with the deal and the hype of the deal. Uh, and just trying to do the best job we possibly can for everybody involved the advisors that we work with in invest alongside of us, and then, you know, the fundamentals, the blocking and tackling, and we really pride ourselves on how we report. We report every quarter, but through this coded period, this period that we’ve had right now, we’ve been reporting weekly, uh, to all of our partners and the chicken, then the prize of what’s happening with each property. So, yeah, I think there’s a great deal of parallel JP, uh, in the fact that, you know, uh, you learn your craft over a long period of time, and it’s a great deal of fundamentals, and we’re constantly learning from the experiences that we’ve gone through and what we have, what are the things that are always coming up? 

We always know that there’s a new learning experience. It’s coming up in the real estate business right now. We’re going through something that’s incredible. [inaudible], COVID-19 rich who could underwrite, you know, such a thing as this. And I could never imagine a black Swan event like this, but here we are in the middle of it, the midst of it. And we’re getting to learn a lot. Again, 

JP Maroney:

I like your term. We’re getting to learn a lot. I call those learning experiences myself as well. Um, as you said, this is unprecedented, an unprecedented historic worldwide global impact. Um, you mentioned that your coaches, your coach at Baylor, talking about you find out who you are when you’re faced with adversity. Uh, obviously this is a big deal. The hospitality industry among a few others have taken it really on the chin. Um, but my guess is, and I want to get your input on this. My guess is there’s a, maybe a mixed feeling about this because there’s what you’re into and right now, and then there’s, what’s most likely going to follow over the next two or three or four years. Can you comment at all about how COVID has affected your deal flow or deal making process now, and where you see this going in the real estate industry, especially in the hospitality industry over the next few years, as we see this play out?

Billy Glass:

Well, we we’ve been really, um, impressed with the wonderful attitude of our lenders, how well they’ve worked with us and how, um, uh, really they’re great attitude and working with us, uh, as we negotiate, um, forbearance agreements, uh, we think that this is, we really are excited about it because I’ve lived through the grammar rub and tax reform act in 86, you know, the downturn in 91, the downturn in 2000 and in 2019 96, then we had another one in a horrible one, depression that people talk about the 2006 and seven, which was horrible. Um, and then of course, you know what we’re going through right now. Um, so we saying that there’s going to be a great opportunity because of what’s going on in, in the code with festival what’s happening in all facets of real estate. We think at some point in time, that attitude, the gracious attitude that we experienced with lenders going to have turned a little bit rougher, because if we don’t properties, don’t have the dollars to pay payments.

Ultimately after all the government stimulus ones out there, the banks are going to have to take back some of these properties. So we great source of acquisition will be through the banks. We also think there’ll be a lot of, uh, possible acquisitions through, um, the REITs, uh, some of his various owners of real estate that are gonna have to offload, you know, a great number of properties, not only hospitality properties, but, you know, we know that retail has gone through a tremendous change before COVID, uh, because of the general public, uh, deciding to shop online and not to go to the malls into the typical flip traffic, uh, storefront, retail, uh, shops. And they typically, um, join too. And so there’s, there’s been great change, but I think COVID is just going to exacerbate all that and move it forward and close office. We know there’s a lot of talk that office will not be used in the same way that there’s going to be no need for a central business district office.

We don’t know if we’re totally, you think that there will be a lower a lowering of, uh, a demand for that, but we just don’t know to what extent I find myself in this situation, that experience when people ask me these questions, but just the fact, I really don’t know because that’s the truthful answer. I don’t know what the ultimate outcome is going to be, but we do know that an all those different times that I’ve talked about, there has been a great opportunity to acquire real estate. And so that’s what we’re preparing ourselves for right now, 

Paul Nicolini:

Billy let’s look back for a minute. You’ve raised a great deal of money on the last 15 to 20 years through the broker dealer communities. Um, and that would be utilizing the reg D and the private placements, private placement offerings. Can you give us what you’ve learned from that experience? 

Billy Glass:

Yeah. I just think that, I mean, that was the chorus Bali. I mean, thanks for the opportunity to, to, to answer that question. I mean, I think the biggest thing we’ve done is that we’ve built our relationships with different broker dealers. Uh, I think it’s built on a basis of just good, honest business dealings with the principles of the broker dealer firms. They know that we’re going to tell them exactly what’s going on with the property and report the exact truth, not ever hide the ball and tell them what’s going on with each property. And we’ve had a great experience. We’ve done about 31 different offerings. We’ve had 11 go fully cycle. We’re getting ready to have three more go full cycle. We have two more offerings that are going to come out in the next month. So we’ll be at 33 total offerings with about 14 that are gone full cycle since 2006. So that’s not a great number of offerings, but it represents about 200. And when we’re done, it will be around $300 million of a total amount of cash raised and about a billion dollars in real estate, that report. 

Paul Nicolini:

Um, and I do want to go back to that your latest offering. Cause I know we spoke about that the other day, but how do you manage your relationship with the reps that you currently doing business with?

Billy Glass:

One of the ways that we manage that relationship is like, you know, the fundamentals of reporting. We are constantly every week, we have a report that comes out on Wednesday night and we just went to that weekly format just because when Sankey advisors and their clients and to be communicated with. And so we just try to update, we take some basic fundamental information, um, right. Two of the things that we show every week are the occupancy of our properties. And we show the trailing weeks and months of occupancy so they can see the growth pattern. And then we show travel because travel obviously very much affects the hospitality industry. So we share the TSA numbers or turnstile numbers from the administration during transportation traits and safety administration that we all go through the security checkpoints. And this is just basically shows the numbers, the number, the gross number of travelers going through those GSA checkpoints and we’ve shown that growth. So we show that on a daily basis. And so those advisors know they’re going to get that report every Wednesday night, and it’s going to also show them anything that’s pertinent, it’s germane to their property and the third license that they’re invested with one though. And that goes back to the advisors, but also to, 

Paul Nicolini:

I was going to say that, um, knowing you for, for many years and showing up at conferences together at a few along the way, do you now, because of COVID, is it now more, um, uh, virtual presentations that you do? 

Billy Glass:

It really is all, I mean, you know, we had a dinner meeting last night, which was, I guess the first dinner meeting that we’ve done since March. Um, and so it was a group of people that were with one advisor and they were comfortable getting together. And so we went and had had dinner with them, but that’s the first meeting that we’ve had. Obviously we practice social, discuss this distancing, warm, asking things of that nature, but try to be the safe as possible, but most of what we do now, our zoom meetings, uh, and then of course, communication, email communication letter by letter, just basically written communication. 

JP Maroney:

If you’re listening or watching the deal flow show, you can get more episodes@thedealflowshow.com and you can also subscribe and follow us for future episodes as we release them. Um, you know, Paul is, I was sitting here thinking you were asking the question about the relationships with reps and, um, he was talking about the dinner meetings and such the digital landscape in general. How has that affected or evolved your capital raising? Is it still for you? I know COVID has affected things and we just discuss that. But in general, as things have become more and more computerized and digital, how have y’all evolved to keep up with those technologies? 

Billy Glass:

Well, we had to step up our game and, and, you know, really get familiar with all the different digital group digital vehicles to use, to communicate with advisors and with their clients. And, you know, we were, we thought that we knew how to use all the different tools pretty well, but we’ve become, uh, much more proficient with the different formats, the different media formats that you could use to communicate with folks. And we all know who they are, what they are and what they use. And so like bringing central zoom, uh, those different meeting formats, uh, our, our, our vehicles are mediums. We use those a great deal, and they’re very, very, very helpful.

JP Maroney:

I want to shift gears just a little bit and talk less about your specific company or deals and talk about the underlying principles or skills or strategies you’ve been involved in the deal making process for many years now. How do you prepare for the game? If you go back to the NFL, is that a metaphor? Again, obviously there’s a lot of mental preparation, physical preparation, watching tape, all those things that happened before that, but in the deal making process, what are you doing to prepare for the next deal that you’re engaging with your team and with your counterparts that you’re engaging with on a, on a pro  

Billy Glass:

It’s just as very detail oriented. I mean, we have an underwriting process. I have a partner named Scott Palmer. Who’s been my partner for many years and he’s out on the marketplace looking at hundreds of deals for us to find one. Uh, and we, you know, both that, those deals when he gets them to the point where they’re, you know, to the final Tim, we take those final 10 and we we’ve, we vet them individually. Uh, he gives me what he thinks about the broccoli’s and I review the properties and we talk about the different deal points, but, you know, with, for us, JP, it’s always about value. Okay, what are we buying the property for? What’s our basis in the property? And we think that that’s just a fundamental thing that you can’t ever get away from the real estate business. What did you pay for the property? 

Because what you pay for a property is going to determine how profitable that asset or that investment’s going to be for the limited partners at the end of the day. And so we’re, we’re a very much keyed into those fundamentals, what it cost you, what’s the replacement cost of this property. If we had to build it today, what would it cost? Are we better off to buy this existing asset at this basis? Or should we go and try to build a similar asset? And, you know, so those are the things, what, you know, what’s my debt gonna cost me, you know, how much leverage do I put on this property? Cause obviously broker dealer can use very sensitive leverage. And so we saw our weeds and because they are, we are. And so we were very cautious about that. What’s obviously we’re sensing that themes. I mean, how you can have a great low basis in the property, in this totally so many feeds on it, that it makes zero sense financially. So we’re very, uh, synced to that as well. And, uh, you know, we’ve had a longterm relationship with broker dealers, max, because we listened to what the broker dealers tell us about what they’re willing to pay and what they’re not willing to pay and what their advisors can accept and what they can acceptance. So we listened to those things. 

JP Maroney:

If you go into a deal and the numbers are right, are there any other deal, stoppers, deal killers for you? 

Billy Glass:

There are, there are a lot of them, uh, you know, I think that, um, you know, a management company that’s in a property and existing hotel that, uh, you can’t, uh, you have, uh, a longterm management contract that’s in place. That’s, uh, it’s a deal stopper force. Um, you know, obviously it’s got to pass a whole lot of hurdles. You know, the location of the property is, um, we try to be close to what we call room night generators on our hospitality properties, close to convention centers, hospitals, colleges, things that generate room nights that will make that property, uh, our calls that property to have some success. We don’t want to just be another property at the corner of an intersection on a freeway. Uh, so we, we want to have a great flag. Inferior flag is another one. I mean, obviously if you don’t have a good slag and that for us, it’s Marriott or Hilton or high, um, so we’re very cautious about the slag deal. Stop retaking. Those are just a few, 

Paul Nicolini:

I did want to ask. What, what, what about a deal that got away? Can you, can you talk about that? Was there a deal that got away from you that you just regret now? 

Billy Glass:

I think there’s always, there’s always deals that we underwrote too hard and probably should’ve been a little, a little, uh, more, uh, forgiving on, uh, I can think of one in Jacksonville, uh, uh, that, uh, DoubleTree that we missed on. And it was, it ended up being a cheerfully successful project and a Jacksonville before. And, um, I don’t want to say much more cause y’all probably all know the property, but great property. Probably. We missed all that when there’s lots of properties that we missed on, um, right after the downturn in 2006, a lot of properties and markets that we missed on that. I wish that I’d have been more aggressive, but, you know, I don’t have any marks on my tractor either. So I, you know, um, I guess, you know, you thank God for ins or prayers. I mean, maybe I didn’t get that one, but maybe that was a good thing because we don’t have any thank goodness on our track record that we put together over the last, you know, years in 2006, we don’t have any properties that have been a loss for our investors. 

JP Maroney:

You, so the particular types of investors, you mentioned the dinner show, the, you know, pitch last night that you had dinner with an advisor’s clients. What is the mix, if you don’t mind sharing, what is the mix for y’all of retail versus institutional versus family, office money, et cetera? 

Billy Glass:

That’s a, that’s a great question, JP, you know, we’re, we’re made, we basically nine 90% of our money comes from broker dealer, the broker dealer, financial services community, either our brokers advisors that work for different broker dealers, uh, you know, bounce that 10% would come from high net worth individuals. 

JP Maroney:

I know your son was on earlier and potentially was going to be on with us. You’re this is obviously a family business still. Um, what’s the future? How do you, how do you as a leader and I’m asking this selfishly, you know, um, you got a couple of years on me, but selfishly, how do you direct a business and then, um, bring your family in and involve them in such a way, but also the company in and implant the values, but also allow them to evolve with new technologies, new ways of doing business. How do you make all of that mix work?

Billy Glass:

Great question. Uh, the question that we get from every third party due diligence, a advisement comes in here. We have to do obviously third party due diligence for all of our different broker dealers. And they always ask us about succession and, uh, again, but that’s, it’s important to the broker dealers it’s become very important to us. Um, but you know, in order for us to move forward into the future, uh, you know, we need to bring young people in, uh, that have a vested interest in the company that want to see succeed. And so I’ve started training my son, he’s been here with us for five years, uh, that he’s been working in the business. My wife works in the business. I have another son that works part time in the business. Um, so, and then of course I have a lot of very seasoned professionals that work with us, Becky. 

Well, she’s been with me from the very beginning. She’s here with me. We worked together for over 30 years. Uh, Scott Palmer, my acquisition partner is, uh, HPP. He’s older than I am. And, uh, you know, so he’s working to find the success of first and we’ll take his disposition and acquisition. Um, and so we’re constantly looking for new young people to bring into the business. You know, young people have a different view of that technology than, than I do. I mean, it’s, my son just naturally works on the computer just so much. Obviously you use it in college and, you know, and all the positions he held before he came here and they are just, they just take too much quick, more quickly than, than I would. Uh, and I think that the kids they’re Joshua’s children, they’re my grandchildren. They’ll be much more fluid than he is unsure, but, you know, it’s just something that we’re constantly working on, thinking about the future, thinking about, you know, when I stepped down or when Becky steps down or when Scott steps down silver spot and we, we have, uh, you know, people that we have in position now, and that we’re looking to hire in the future to take those individuals.

Paul Nicolini:

Billy, tell us a little something about yourself, professional organizations or charities that you may belong to.

Billy Glass: 

Thanks, Paul. I mean, my dad and my father worked in prison. [inaudible], uh, uh, inmates, [inaudible] inmates that are in prison and give them a reason to stay out of prison. And so that’s one of the things that we did and I have my first born down syndrome. And so [inaudible], I stepped off the board and, uh, and so, but I’ve had to have a [inaudible] great job, uh, working, not only working with the young people, Olympic Olympic [inaudible] people participate in organized events. We organize, they support more than, than there’s. They support the family. So circle of friends. So it becomes your once your circle of friends, watch your children compete with the huge support with the parents of those kids. [inaudible]. So you’ll see on our website, those are two organizations that we support, I guess, for the last 38. Now, I guess for the last, since my son will be 38 now, and my father is 50 years old. So we have supported those two ministries for a long time. 

JP Maroney:

Over the years of watching other deal makers in the process could be people you’ve sat next to on your side of the table or people on the other side of the table, or you’ve been involved with, what do you believe are the characteristics of truly exceptional deal-makers? 

Billy Glass:

Well, I think that they’ve done depart from what I talked to you about earlier about those work ethic, that you can see a man or a woman’s life. I mean their, their work ethic, uh, because it’s reflected in the people that they have around. And so, you know, we think that when I find somebody that’s honest, it’s hard working. Um, I can name a few people in our industry that I just really respect. Uh, they’re fine. Examples of that. And some that have already passed, um, that I worked with, I had the good fortune to work with. Uh, but I worked with a lot of people in the company. Bill Duvall comes to mind as the chairman of Lincoln property company that I think is just exemplary. Um, persons. I would like to pattern my life, great guy, great deal maker, a tremendously successful company. Uh, so there’s, I’ve been very fortunate to, for a man like Hank Bickersons work around the circle of men and women in the industry that were great deal makers and great business people.

JP Maroney:

You’re listening to the deal flow show or watching, and you can get more episodes@thedealflowshow.com you can watch or listen to past episodes and subscribe or follow us for future episodes. I’m JP Maroney. This is my cohost Paul Nicoline. We’ve got Billy Glass on with us today from Gentry mills capital and, um, you know, the, the common thread. And especially with guys that have been around the business for a while, is your word, is your bond? Do what you say, say what you’re going to do show up, but I liked something you were talking about. You said you’ve never had a real big Mark on any of the deals you’ve done, where you had to go back to the investors and say, you lost money on that deal. So that’s, that’s a positive, but when you face hurdles or setbacks or obstacles, how do you deal with that? The mental side of that game, 

Billy Glass:

It, you just have to, you have to just face what’s happened. Um, and then, and this report, I mean, tell people what’s happened, explained to them what’s happened. And then, and, uh, I just don’t shy from the facts. I mean, I’ve just learned that over a long period of time, my wife tells me that, you know, she seen that growth in me through the years, you know, that, uh, um, sometimes I’d want to tell people what they wanted to hear, which is not necessarily the exact hard truths. And, uh, in, of course, as you get older, you realize that the truth is the best is the best thing that you can say. And so you just get shocked from the facts. And so I just, I just come out with what’s happened, what our plan of attack is. I always try to always come up with a plan of attack because I don’t think that there is, I don’t think the theme is acceptable. And so I always come out, I try to engineer our way through to the problem, and that takes time and it takes patience. It takes experience. It takes the counsel of other great folks in your organization to try to engineer a way through a problem. And then that’s sort of what we, that’s what we do.

Paul Nicolini:

Billy, what kind of people would you like to connect with from our audience or our guests 

Billy Glass:

Appreciate that, Paul. I mean, I just like to visit with other broker dealers that, uh, like what I’ve said, um, that are interested in looking at a copy. That’s a small company with a great track record, uh, utilize, uh, we, we have a lot of our properties that didn’t hit proforma, but they didn’t lose money for investors. Okay. And, you know, that’s, we’re proud of that. Uh, we didn’t just do that through the good markets. Uh, the first feeling you, I told you about the Hilton garden in Houston, Texas, that was built in 2006. And if I’m not mistaken, 2007 was the beginning of the great depression or what people have called the great depression after the real great depression that happened earlier in the century. But, uh, you know, that was, uh, we ended up selling that property for 6.7, tap achieving a 6.7% annualized rate of return. 

We hold it for five years. And, uh, that was our worst return that we’ve had in our history. Um, you know, that’s not to say that we won’t have some properties that are affected by the coronavirus that won’t do poorly as well. And I’m not saying that we are going to be able to maintain that track record, but right now we re, as I said before, we’ve sort of engineered a way to get through the situation and still generate a return, a good return for the park. So I would say that a broker dealer advising horray, that’s interested in, in what we do or I mean, that kind of a philosophy that we’d love this with those types of individuals. Now I have a project that I wanted to talk to you about that if you want me to do policy a situation on an existing property that we have, we had the opportunity because of the virus by the note of the discount and so visit about that.

We can at some point in time, would you like to say a few words about it now? Well, yeah, it’s just approximately we have a Washington DC, it’s a Hyatt place hotel, 200 round Hyatt place hotel. Uh, we, uh, refinanced that probably bought it in 2017. Um, we bought it in what we felt was a great price in the properties located in the Noma district of Washington, DC, which is North of Massachusetts Avenue. So Noma is an acronym Stanford North of Massachusetts Avenue. If you’ve ever gone to union station in Washington, DC, get out of union station, looks out and you’re looking directly with capital. Uh, in the Capitol building is one mile South of the station are high places, one mile North of union station. So it’s, you could walk around the back of union station, go out the North side of union st

Our property would be one mile North. That whole district North of union station was called Noma. Uh, and so we bought that property. We refinanced it in, uh, 2000 and, um, refinanced it. We bought it in 2017, refinance it in 2019 with a lender. And, uh, that was in, uh, I guess that was in October of 2019. And we were rocking along, got a great rate, then rock and the Noma struck in March and they made the decision that lender arbitrarily made the decision to sell our note into the bark. Um, we were working with him trying to get her a forbearance agreement negotiating with them. They dragged their feet who couldn’t get the agreement negotiated. They ultimately solar in the, or a broker in Chicago called Eastville. And then we all know who we got a package wherever you buy it. It was a high bidder. 

We bought it at a $9 billion discount. So we bought a 15 million, $750,000 loan for $42 million. And, uh, we, um, it’s gonna greatly benefit existing investors. And then of course, anybody else that wants to invest in that note, it’s gonna make a really, really nice return, a rate of return that I don’t typically quote, but it’s a higher than me return we’ve ever made in our portfolio. It’s North of 20%. We feel very, there’s no guarantee teach for that. Obviously you can get out of a resurgence of the coronavirus and we could have a slowing of the market, but we feel like if everything continues, we get a vaccine in good therapeutics and the markets open up a little bit. We were going to make a really nice sprayed return. 

JP Maroney:

Fantastic. How can folks get in touch with you if they would like to reach out to you?

Billy Glass:

I’m just thinking, call me here at our office in Dallas at (972) 759-8725, or you can talk with me or my Becky welts or vice-president, um, uh, just give us a call. We’ll be happy to get back in touch with you and visit with you. You can go to our website, www.jp mills, capital.com. Uh, and we’d love to just do us a holler and we get together and he loves this. 

JP Maroney:

Excellent. I’m sure some of our audience will get in touch with you on behalf of Paul Nicoline, myself, JP Maroney, our team here at Harbor city capital and the deal flow show team. I’d like to thank you again for taking the time to come on the show, share your wisdom, share your information. And we look forward to getting to know you better. I know Paul’s got a great background with you and has said some great things look forward to meeting you, maybe when I’m back at my stomping grounds in Texas. Um, but thank you again for coming on Billy. I appreciate it. 

Billy Glass:

Thank you, JP. Thank you, Paul.

JP Maroney:

Once again, if you’re watching our listing, this is the deal flow show. You can get more episodes@thedealflowshow.com or you can subscribe to future episodes on JP Maroney. Paul Nicoline. We’ll see you again in another episode, very, very soon

October 7, 2020

Josh Lawler

Josh Lawler

Episode #9 : Digital Assets, Blockchain, and More!

Josh Lawler’s practice focuses on securities law, mergers & acquisitions and technology transactions. His M&A clients include public and private companies, private equity groups, fundless sponsors, family offices and high net worth individuals. Josh often collaborates with international teams, working across languages and sovereign borders. Many of his clients are domiciled outside of the United States. Many of Josh’s clients rely on him as a trusted advisor, recognizing his expansive understanding of business dynamics above and beyond legal issues. Josh leads the firm’s New Technology Group, working with blockchain, AR/VR, Robotics, AI, biotechnology, software, distributed autonomous organizations and other bleeding edge technology. Josh has a demonstrated ability to quickly grasp functionality and dynamics of new systems, providing analysis of the underlying systems that drive legal structures. Josh is a foremost expert in the field of blockchain and other distributed ledger technology. His passion for the subject drives his understanding of the underlying technology and architecture, business models, tokenomics, use cases, consensus algorithms and legal and regulatory requirements (and failings) that drive the global blockchain ecosystem. Josh is a premier counselor in respect of commercial transactions, M&A and finance in the cannabis and psychedelics space. Drawing on a bioscience education, Josh applies an understanding of scientific, commercial and regulatory matters to craft innovative solutions to issues present in no other industry. Prior to joining Zuber Lawler, Josh practiced as a corporate securities and M&A attorney at Skadden, Arps, Slate, Meagher & Flom LLP. Josh graduated from Duke University where he double majored in Bio-Psychology and History with a concentration in Genetics. Josh earned his law degree from Northwestern University School of Law where he graduated cum laude.

October 7, 2020

Episode – 09

Josh Lawler Securities Attorney on Digital Assets, Blockchain, and More!


Description:
Josh Lawler is a Partner of Zuber Lawler. Josh’s practice focuses on securities law, mergers & acquisitions and technology transactions. His M&A clients include public and private companies, private equity groups, fundless sponsors, family offices and high net worth individuals.
Josh is a premier counselor in respect of commercial transactions, M&A and finance in the cannabis and psychedelics space. Drawing on a bioscience education, Josh applies an understanding of scientific, commercial and regulatory matters to craft innovative solutions to issues present in no other industry.

What you’ll learn from this episode:
– Digital Assets and Blockchain
– Learn about the genuine compliance of good deals
– How to be a value add to any deal

Connect with Josh:
LinkedIn

Full Transcript:

JP Maroney:

Well, hello and welcome to another edition of the deal flow show on JP Maroney, your host, along with my cohost, mr. Paul Nicoline here from Harbor city capital. And, uh, looking forward to this interview, we’ve got Josh Lawler coming to us from the other coast. So we’re here in Florida in our studios. Josh is on the West coast, joining us from Zuber Lawler is a partner there. And we’re excited because I was looking down cheating a little bit, looking ahead at some of the things that we’re going to be discussing today. And blockchain is one of them. I don’t think we’ve had on all of this season. That’s really diving into that topic. I think he’s one of the foremost experts on it. I think that’s what I’m reading. So yeah, I’m excited about that. So yeah, let’s jump in. Why don’t you just give us a quick background of how you got started in the capital market space and then we’re going to dive into some of these other topics.

Josh Lawler:

Sure, absolutely. Um, so, you know, talking about being a, not knowing enough to know better, uh, when I was at a second year attorney, which is I just now almost 24 years ago, um, I went to Skadden Arps and I spent six years working at Skadden Arps and mergers and acquisitions and finance. Uh, and you know, in that time really touched upon capital markets, uh, constantly. Uh, and then when we went and founded zebra Lawler, um, took a little while for us to build up the infrastructure to do it. But now that we have done that maybe the last 10 years or so, uh, we’ve been assisting clients in the capital markets also.

JP Maroney:

Very cool. So tell us a little bit about some of the work that y’all do, what, what your specialty is and really the value that you bring to the table.

Josh Lawler:

Absolutely. So, you know, our firm and I are really working in what we think our future edge cases. Uh, so as you were mentioning, uh, we really focused a great deal on digital assets and securities token offerings as, as they’re called. Uh, we also are extremely active in the cannabis space. Uh, we’ve worked with the United States companies that have gone public in Canada and then cross listed down to OTC, uh, down here. So a lot of relationships with the Canadian stock exchange, as well as the OTC folks, we’re a preferred provider, uh, and we’re really pushing more into the traditional public securities work, uh, in terms of, you know, exchange act compliance, which is going to be one of the things that’s critical in the digital asset space. So we’re really focusing on that, a great deal as well as just initial issue or transactions,

JP Maroney:

Obviously blockchain. And we’ll get into that as a sort of a democratized way of dealing with a lot of different things, but especially with data and, and the flow of information and currency and that sort of things. But, um, we had another guest on the show. We were talking about how much raggae has democratized, uh, capital raising and sort of that good old boys network, um, that, you know, we’ve had some great guys, the broker dealer and RIA community on the deal flow show, but it’s shaken things up a good bit. Um, how much of y’alls work you mentioned going into the traditional public markets, but how much of you all’s work is around that more of a reggae or crowdfunding type of capital raise?

Josh Lawler:

Sure. Um, so I’m going to distinguish between the two deregulation nature to write a being, you know, a viable, real size deal capital market offering the crowdfunding thus far has been limited to 1,000,070 thousand. And quite honestly, I don’t get into that very frequently and don’t know too much about it. Um, tier two reggae though, from a digital asset perspective is kind of the Holy grail. Um, so we do a lot in the space. Um, the ability to do an offering where you can have your asset, uh, immediately tradable thereafter by, you know, unaccredited investors is, um, really kind of critical when you’re talking about a digital asset that has, uh, a use case beyond being just a security. So, um, and forgive me if I dive into a little bit of technical here with the digital assets that people are used to calling cryptocurrency, some people might call them utility tokens, not huge fan of that term, but the idea is that these are assets where the fact that it’s a security is the tail wining, the dog, it’s an accident of us regulation that they’re regulated.

Now, it’s good that they’re regulated. I’m not saying that it’s not good because, you know, as we saw in 2017, when there’s no regulation involved, there’s serious inequality of information. And a lot of people who aren’t central to the industry and do things like mortgaging their house to buy a $20,000 Bitcoin. And that’s, you know, that’s not a good thing. Uh, so regulation is good. However, digital assets and especially the ones that have utility component don’t really lend themselves to an S one registration framework. Uh, and they also, by their very nature, the utility typically requires a wide spread of the digital assets. It doesn’t work if you’re only talking about accredited investors or a few investors. So, you know, there’s a conundrum, if you will, for the issuer of, do I stay out of the United States entirely, which is usually the choice actually, uh, or do I try to, you know, get these things out in a way that isn’t going to violate U S law recognizing that may take a couple of years and then there’s regulation a and tier two reggae specifically, where if you can get your document qualified by the sec, um, you know, theoretically at least you should be able to do a fairly widespread public offering treating things as they are securities, which is usually my preference anyways.

So the thing about that is it’s only been done couple of times, uh, and the first folks who did it block stack spins, according to them over a million dollars, getting through the reggae qualification process. Um, whereas, you know, ordinarily that ought to be somewhere between a hundred and 200,000, including your marketing and everything, you know, soup to nuts. Um, so, you know, it’s not what I would call a smooth path at this point, but it’s a good, it’s a path. I think that’s going to be very valuable in the future.

JP Maroney:

I love it. Yeah. I have a question with big with Bitcoin or the tradable assets, but there was a time where it wasn’t that it wasn’t the digital asset. There wasn’t a, there was a time that you could not trade those correct. In the beginning. And where are we now today in that process,

Josh Lawler:

Paul is all messed up. The scuffling answer. I can give you the, the, the problem. Uh, the main problem I think, is that everybody considers all of these things effectively the same thing, and they’re really not, uh, you know, what a digital asset is. It’s an asset that’s more realized digitally. And from that perspective, you know, it’s like saying a paper asset, well, what is a piece of paper? You know, it’s to share of IBM stock, it’s a high yield note, it’s a piece of toilet paper. It’s, you know, whatever it is, they’re all over the place and digital assets are no different. So, you know, that, that loosely breaks down into things that really behave like commodities, things that behave like financial products or securities, and some things that behave differently behave as consumer items behave as, uh, you know, there’s something called a non fungible token that is backing up, uh, validating art, uh, and products and things of that nature. So it’s really all over the board. Um, but our regulators, for the most part haven’t caught on to that. So where we are now, Bitcoin has been considered a commodity. You can trade Bitcoin pretty easily. There’s a few others that are like that. There’s some that are playing in gray areas and there’s some that are just completely outside the United States and afraid to go here

JP Maroney:

When you’re talking about. And, and I, I think it’s be a good idea for you to give an example of a digital asset, or you mentioned you don’t like utility token, but some sort of an asset that has a utility component to it where it’s not just an investment in a potential appreciation. Correct. That was the big, that was the big catch with the ICOs, the wild West that we had to two or three years ago, um, and the ICO market. And then now where we have evolved to today, could you kind of define that or give some examples of use cases with the sort of a durable, usable digital asset? I guess if that, if I could say

Josh Lawler:

Sure. So here’s the thing that’s got everybody spun on. A lot of the use cases require that the digital asset gain in value. So what’s happening here in, Bitcoin’s a good example of this, even though that’s not a use case tokens, a medium of exchange, but in order for all this stuff to work, there’s something called a consensus algorithm, which is, you know, all the different distributed nodes run, you know, have the same copy of the ledger and run the same calculation and spend compute resources, you know, Ram electricity, all that kind of good stuff in order to make the system work and validate the transactions actually are the transactions that are supposed to happen. And those folks need to be incentivized to do that. There’s gotta be a business reason for them to do that. And what that reason is typically is that they receive additional tokens for doing so, and those additional tokens are useless to them unless they can convert them into a Fiat currency because you can’t pay your taxes and big point, at least not yet.

Um, in order to do that, you need a third party source of liquidity, which is an exchange. And once you’re on an exchange, you’ve got speculators, you’ve got, you know, supply and demand dynamics, which are designed to drive the value of these things up in value. So in a lot of cases, in most cases that you hear about, um, the fact of the matter is that even though it’s, shouldn’t be considered a security, it kind of is because it falls into this category of things that can be speculated on. And if it doesn’t, then it tends to fall into the commodity world, which for that is I think a little bit more appropriate. And I I’ll give you an example of a good one. This is one of our clients. So I’ll mention, uh, which is a token called Bigchain. Uh, they’ve got a [inaudible] blockchain and there’s use case, uh, is a platform really for IOT and, uh, tracking of different IOT devices, tracking of, um, authenticity of some items, things of that nature.

And they’ve got something of a two token structure and I won’t get too into it cause it’s very technical, but one token is the token that people have bought for quite some time. Um, which you know, is, is under vet. It’s a top 50 token, I think. And then the CSO can, if you have it, that actually emits something else, uh, which is a V for token, which is actually, what’s used to run their blockchain. So that’s how they set things up. And the, you know, the fact is it’s, it’s kind of like having an oil, dirt and having oil in terms of that. And, you know, you can speculate it on either one of those and, you know, forgive me if it didn’t come up perfectly, clearly it is kinda complicated, but hopefully you get the idea.

JP Maroney:

Can I, could it also be like oil, but you’re also pulling gas or something else off of that, that product. Cause you’re what you’re saying is there’s a, there’s a token that’s sort of the investment side of it. And then there’s a token. That’s more of the use. Correct. Is that what you

Josh Lawler:

Mean? Yeah. In that particular paradigm.

JP Maroney:

Oh, and by the way, um, I’m going to play advocate for us guys who may or may not have all the acronyms down IOT is internet of things. I’m sorry. No, that’s okay. That’s okay. But I just want to make sure people understand, because what’s exciting in that world of IOT, you’ve got this massive distributed network and blockchain, um, is made, you know, a match made in heaven for that. So it’s really exciting. I’d also like you to distinguish between blockchain and cryptocurrency, because I think a lot of people just sort of package it all into the same ball of playdough.

Josh Lawler: 

Yeah, no, absolutely. It’s a great question. Um, so you know, the, the hierarchy I use, you know, the, the top level is digital asset that includes absolutely everything. Um, and digital ledger technology is kind of the top term in terms of the system that these things run on and some of them are blockchains. And then there’s other things that are, um, blockchain being the most prevalent certain way, um, within kind of blockchain, you’ve got different use cases. And one of the use cases is a medium of exchange. And this is Bitcoin. This is what Bitcoin first came out to do was to actually serve as something that people could use in transactions turns out it’s not great at that. But nonetheless, that is a cryptocurrency. Bitcoin is a cryptocurrency period. End of story. There are a number of tokens that also serve as mediums of exchange in particular systems.

And those are definitely cryptocurrency. Um, and then there’s a lot of gray space where people use the term and, you know, it’s hard to say exactly, but some people will think of it as anything that speculate on that’s on an exchange. That’s one way to look at it. Certainly. Um, I don’t think it’s the best way to look at it. Um, I personally prefer to call financial products, just digital assets or digital securities. Um, it makes life easier, uh, in my world in terms of, you know, figuring out what should and shouldn’t be regulated in different ways. Um, and then, you know, I’d be silly if I didn’t mention the digital dollar project and certain other stable coins, which are digital assets that are pegged to real world assets. Um, so there’s a few of those, the digital dollars, not out yet, but there is something called tether.

There’s a USBC. And supposedly there are dollars balled for each one of these tokens that are out there so that they maintain stable. Um, and the stable coin as we call them is critical to adoption of all the stuff for infrastructure, because you can’t have a level of volatility in cryptocurrency and expect that that’s going to be something that’s going to be used for commerce. It’s just way too risky. Um, so enter the stable, stable coin. And, um, if you’d heard about the Facebook Libra project that came out, that Congress conducted the hearings on all that, that was a stable coin that was pegged to a basket of different currencies. Um, and you know, if you think through the implications of that, it’s actually kind of staggering, uh, in terms of what that can do. So it’s not surprising the government had issues.

JP Maroney:

What are the guard rails for your stable coin? In other words, in fact, it’s ironic, but I literally looked up two days ago. Most are least volatile cryptocurrencies, 2020. That was my Google search like two days ago. So I want to ask you, and I want to say Bitcoin was, and I think these were 2019 numbers, but Bitcoin was like three and a half, 3.8% variance. Um, I don’t know if that sounds about right, but what is an acceptable variance for a stable coin?

Josh Lawler:

Uh, well, if the target is not, of course, um, and that’s variance against the, what it’s pegged to. So, you know, the dollar is going to vary against other currencies and, you know, your stable point is pegged to the dollar that should also now you don’t get that perfectly because what happens is depending on what the economy’s doing and what the cryptocurrency trading world is doing, people may want to get out of cryptocurrency into something that is active currency. So on a particular exchange, the token that, you know, should be a dollar, might be a dollar and 2 cents. It might be a dollar and 5 cents. And the reverse is true. Also suddenly everybody who’s holding that wants to flow into Bitcoin or Ethereum or something else of that nature, then, you know, tether, uh, or USBC might go down to 99 cents or, um, and, you know, that’s, that’s from an exchange perspective, from a use case perspective, if you know, I were to pay you for, you know, a cup of coffee or a coffee cup, it says deal flow on it. Um, you know, and you might have that as $2 and two together is what it is and I send you two together. Great. Then, you know, the tethers is perfectly. Um, so there’s, there’s a lot of context, uh, in all of these things. Also,

Paul Nicolini:

I’m going to switch a little bit and say an, ask a question, Josh, you you’ve had, um, over, I think, a billion dollars in aggregate value through M and a transactions for clients, I think in an earlier phone call that we just

Josh Lawler:

Yeah. And in total AF absolutely. Yeah.

Paul Nicolini:

Yeah. And so does one of those standout and tell us a little bit about that and what, what, what entailed,

Josh Lawler: 

You know, the, the exciting thing these days, it’s the cannabis stuff. And I’d say, you know, probably a hair under a 500 million of transactions we did last year was cannabis related. Um, you know, of those picking one that stands out is actually a difficult because in this environment, they all have their, their nooks and crannies. Um, you know, one of the ones that were particularly fond of, uh, was figuring out how, you know, more of a mainstream fund that didn’t want to be disclosed as investing in cannabis could invest in cannabis, recognizing that there are disclosure requirements in the state of California that say everybody up and down the chain right down to your LPs and your LPs shareholders need to be disclosed. Uh, as, as owners were financial interest holders, unless they fit into particular categories of exclusion, things like blind trusts, olders of less than 5% of public company, financial institutions.

So we we’ve had deals where, uh, because that, that interpretation hasn’t been enforced yet and still a lot of gray area, we’ll set things up where, you know, you can have a deal, it’s a hundred million dollar deal. And, you know, it’s set up in a way that we think will work to avoid disclosure. And then we’ve got to have almost another deal set up where it turns out we’re wrong. We unwind it to avoid the disclosure or have some kind of a, you know, option call scenario or put scenario to kind of work with the regulation in that way. Um, so, you know, as you can imagine, when you’re breaking new ground like that, uh, the negotiations can get very interesting,

JP Maroney:

Like a dog with a bone on this whole blockchain and cryptocurrencies. I’m going to go right back to it in just a moment. But before we do, if you’re watching or listening to this episode of the deal flow show, you can get access to our archives, listen to our past episodes, as well as follow and subscribe to us to get future episodes of the show by going to the deal flow, show.com the deal flow show.com, Josh Lawler. Um, we’re going to jump right back to this question, but I’m going to tie the two together. I promise. So the cannabis space historically has had a challenge in banking, their cash. It’s a known fact, right? Um, because of the federal regulations that, that kind of, uh, I guess, contrast with state laws and how they’re handling the industry. So how, how much has been done. And I haven’t even talked to anybody in this space in probably eight, 10 months.

So there may have been a lot of development, but how much has been done if any, utilizing ledger type assets, digital assets in this way to create an ecosystem, to allow businesses within that industry to sort of trade within themselves. I know years ago I was a part of a barter network. And rather than, you know, I’ve got a cup and you’ve got a computer, can we trade or whatever, and you may or may not have what each other, once they created a alternative currency, right? You had like a little bank account for your D your barter dollars. So is something been done in the crypto space or in the blockchain to provide an alternative Le ledger asset that can sort of create a currency for the people in the cannabis space

Josh Lawler:

It’s been tried, it’s been proposed a number of times. Um, I’ve got one or two clients who would like to do it. Um, the, the problem you run into is sooner or later, you need inputs. Now what’s on the system. And when you’re dealing in something like cannabis, which is the legal federally, you know, there’s issues in terms of what a bank will take, because they’re concerned with, you know, satisfying their money laundering and know your customer requirements, um, there’s concerns about how do you pay taxes. Um, you know, literally there were some of these cannabis companies paying taxes in cash because they had no choice cause they couldn’t get banked. Um, so you know, that, that kind of was what it is. So, you know, if you, if you follow it through, um, it’s, it’s easy to set up something, it doesn’t even have to be blockchain oriented.

Um, sugar barter network was, was not at that time, but it’s easier to set up something with an internal currency. It’s very hard to then make that currency, uh, able to be transacted into the yacht. Now what some folks have done is figured, okay, well, we can’t do that. We’ll transact from, from that to Bitcoin. And then from big point, we’ll get it to an exchange from the exchange. We’ll get it through, but that’s again, resulted in a real, uh, explosions, the wrong word, a lot of attention focused on anti-money laundry or your customer regulations and things of that nature, which banks have been living with for a long time, of course, but they’ve really gotten very careful as they should about when they need to file suspicious activity reports and things of that nature. Um, there’s been kind of an expansion of requirements to register as a money service business or money transmitter to types of businesses that maybe didn’t think that they had to do that. Um, so the, the short version is, yeah, it’s been tried. It’s not that easy. Uh, that’s kind of where that is

JP Maroney:

When you’re coming to the deal table. And I’m going to take you back as far as you want to go back in your legal career could be capital markets, but you’re starting to put this together. You’re bringing in a, you know, maybe you’ve been hired for a particular merger acquisition or whatever, but you’re at the table. What are some of the things that you look for in your process? How do you go through your deal evaluation process, sort of your checks and, you know, crossing the T’s and dotting the I’s.

Josh Lawler:

So first thing bar none is, is context. What is the business purpose for the transaction? Um, if you don’t know that you’ve got nothing, uh, so you, you need to understand the business from an operational perspective and from a cashflow perspective, at least fairly well. Uh, you can’t get around that decent in some that’s easy and in some it’s very hard, um, once you’ve got that set, um, you know, the next thing is I look for number one is tax structure and in an M and a transaction, it’s not quite as key in a finance transaction. Um, and, uh, then also, um, you know, just existential risks to the deal or are there third party consents that need to happen? There’s their government permitting process, those types of things. Once you got kind of that landscape down, then you can go into, you know, from, from the law perspective, it’s really identifying risk, uh, and quantifying to the extent you can and presenting choices to the client.

And that’s the whole, you know, representation and warranty process. Um, you, you know, you have to think about post-transaction, if you’re buy-side, what does the integration process look like if your sell side, you know, how few strings attached can you get before you get to take your, your consideration, is that consideration in stock? Is it public stock? How do you get liquid those types of things, which, you know, a lot of lawyers may look at those things and think, well, that’s, that’s business oriented. That’s like, you know, your, your client’s job or that’s the financial advisor’s job. You know, you can’t really effectively guide somebody through a transaction unless you know, those things. And once, you know, you know what, you’re trading off an exchange yet, what you do is you think you need to use really basic examples. You know, some deals, a buy side and the buyers trying to buy a distribution network.

And yeah, there’s a product that’s being distributed, but they don’t really care about that product. They don’t care about the intellectual property that goes along with that product. And they certainly don’t want to spend the legal fees and time validating the intellectual property on the product that they don’t care about in the first place, when really all that matters is the distribution channel. The reverse happens. Also sometimes the deal is entirely to pick up intellectual property or to be able to pick up a group of engineers and developers that happens a lot in the software space, in which case, you know, you don’t necessarily care what the sales work they’re going to be repurposed anyways. Um, but at the same time, if you tell most attorneys who are doing an M and a transaction, that there’s a situation where you don’t care what the sales were, you know, in working capital, doesn’t matter. Most of them, aren’t going to look at you like you’re from Mars. Um, but you know, that’s, that’s the difference between doing this stuff? Well, I’m doing it adequately, I suppose,

Paul Nicolini:

With that being said too, Josh, there’s so many moving parts in, in M and a transactions or deals, or what have you, what are some of the deal breakers for you?

Josh Lawler:

Well, pushing it to the cannabis activity, anybody who hasn’t paid their taxes in three years, um, that that’s a big problem. Uh, and that, that happened a lot, uh, when they couldn’t get banked and they were cash businesses. Uh, so you know, that, that took a lot of folks out. It’s a big example, illegal activities, big example, um, on the, um, you know, a note of advice for anybody selling a company, um, shaky financials and big ad backs, uh, to, to, you know, calculate EBITDA, um, that type of thing, spooks buyers badly and should spook buyers. You know, if there’s a feeling like there’s, you know, not, you know, genuine compliance with due diligence, uh, then, you know, that’s, that’s really, uh, there’s no way around that. Um, you know, sometimes we’ll see third party consents as being difficult. Um, we’ve had transactions where, you know, a smaller company was trying to buy a, a carve out of a bigger company.

There were longterm leases involved, and the landlords didn’t want to give permission for the transfer because the smaller company was less credit worthy. Um, you know, how do you, how do you fight with that? Well, we ended up working up some extremely, um, let’s call them customized deals where, you know, our larger client ended up guaranteeing some of the smaller clients obligations for a couple of years. They really, we, we didn’t want to do that where you really didn’t want to do that, but it was the only way the deal was going to get done and that would have killed the deal. Otherwise,

JP Maroney:

One of my favorite books early in my entrepreneurial career was a book called direct from Dell, by Michael Dell, where he talked about the early days of Dell computer. I want to talk about a favorite quote and ask you a question in just a moment, but if you’re watching or listening to this episode of the deal flow show, you can get access to our archives previous episodes, as well as following subscribers to get access to our future episodes, by going to the deal flow show.com, Josh Lawler from Zuber Lawler, and, uh, out on the West coast, California sitting and got a beautiful view there in the background here, amidst this COVID environment. So, um, I had a quote from the book and I paraphrase, but he said basically that the more mistakes we made early in the days of Dell, the more mistakes we made, the more, um, setbacks we faced, the faster we grew.

And so I made it my mission, my vision to make as many mistakes as fast as possible, knowing that that would get us to where we were trying to go. There’s not an entrepreneur, a business builder, builder, a dealmaker, an attorney, anyone at the table today that is successful, that hasn’t had their fair share of setbacks or failures or challenges. What is your approach? Cause it becomes kind of a mental game, right? At that point, when a deal hits the wall or a project or something, what is your process for dealing with that resetting moving forward?

Josh Lawler:

Sure. So yeah, you know, the phrase group fast and break things is very popular on our coast. As far as the venture capital guys. That’s what I was kind of getting to before about risk. Um, our, our job as attorneys are one of them is to try to point out and quantify the risk. Um, and then, you know, it’s our clients, you know, assuming we’re not talking about illegal activity, it’s our client’s decision as to whether that’s an acceptable amount of risk or not. And you know, how big of a mistake do you want to fit yourself potentially on the line for, um, you know, companies that are our cash star arms, you know, they may make all kinds of mistakes. They make deals with the devil to get cash flow going. Uh, and that’s, you know, that’s just kinda the way that it is.

Um, so, you know, there’s something to that. Now, our firms started with two guys in a kitchen and no clients. Um, I, I was not one of those two guys. I told my friend Tom zebra, that he was out of his tree and stayed at Skadden Arps for awhile longer. Um, but, um, we started with two guys and no clients, and we went through the entire growth process. We’ve been there when, you know, it’s payrolls tomorrow and you don’t know where the money’s coming from and how are you going to figure that one out? Um, you know, we’ve, we’ve gone through the whole good help is hard to find thing we’ve gone through the, you must, you know, build the administrative infrastructure before you actually need it in order to grow a certain way. And yeah, that’s scary. So, you know, I, I can identify with what Michael Dell is saying. There, obviously he’s done a heck of a lot more than I have. Um, and you know, as a lawyer, uh, it makes a difference because our job is not to get in the way. Um, you know, we like to say at our firm that we find solutions, not problems, um, because you know, any issue, spotting lawyer, that’s not going to find a solution. As you know, that’s a person who’s likely to kill a deal that maybe doesn’t need to kill.

Paul Nicolini:

Uh, you and I met a few years ago at a conference in New York. And it sounds weird saying back in the days of the conferences, does it, it, how is it, how is that weird saying that how has COVID affected you and your business?

Josh Lawler:

I actually almost feel guilty sometimes if anything, it’s been, it’s been helpful for us. Um, you know, we basically had everybody go home with their workstations. We’re a law firm. People can do what they do for involvement now with yours, they can do what they do from anywhere, uh, which is, you know, kind of a nice thing. Um, and we haven’t had any productivity drop at all. Um, for the first couple of months, there was a little bit of a slowdown in deal flow, uh, because nobody knew exactly what was gonna happen. Um, I had one, one sell side, middle market client that we closed their, uh, their business sale, uh, on one of the first days of March. And they were just so unbelievably thrilled because they, they were staring at it and didn’t know if this thing was going to go through. And it was, you know, generational wealth, uh, for a family type of thing.

So, uh, they were, they were quite happy with it. Um, a lot of our practices international, um, you know, we’ve been a zoom culture or team’s culture for quite some time. Um, and you know, to some degree it’s made things easier because now everybody understands and knows how to use the technology. So, you know, yesterday morning I was on with Russia. It’s not unusual for us to be on with Israel or Europe or South America. Um, so, you know, communicating with our Phoenix office, no problem the litigators have in Hartford. Uh, no question, but fortunately I am not one of them, so I’m not gonna worry about that too much at the moment.

JP Maroney:

Interesting. So a lot of people that have come on the show or several people that have come on the show have talked about the same thing that it’s changed the dynamics of the deal process, certainly capital raising, but it’s also made it faster, easier, more efficient, where you have people doing road shows virtually now and knocking out 75 presentations in a month or so, where they, no way you could have hopscotched across the United States. And I guess you could have, but it would have been like everybody you dealt with in the past where it was just absolutely exhausting, a drain on resources financially, as well as physically. Um, so yeah, I, and I know I’ll probably, I don’t know if I want to, should say this, but I’ve said to people that in certain industries, let’s say that this whole COVID fiasco, whatever you want to call, it has been kind of the gift that keeps on giving in some ways, because, and I see your eyes, cause we’re, we’re careful not to say things that we get quoted on, but maybe we can get Jessie to cut that out.

But the fact is, is that in, in life and in business, you have to make the best of circumstances. And that’s what it really comes down to is either, either you stop and you die, or you adapt. And, you know, I we’ve heard that the quote that necessity is the mother of invention or innovation. I mean, that’s where we’re being forced to change the way we do business. I mean, we’ve got a table here that we would have easily accommodated you here, but we’re able to do this digitally. So we’re excited about that as well. Um, anything outside of, of the business world that you’re involved in causes you care about, um, projects, anything like that, that you’d like to share with our audience?

Josh Lawler:

Uh, well, you know, family’s first, uh, obviously, uh, it should be obvious and I’ve got a wonderful wife and two kids who I’ve told not to come into this room while we’re recording this, uh, you know, and the Collie. Uh, and I’m very fortunate that I work with my best friends also. So, you know, that’s, that’s wonderful. Um, you know, as far as outside interests that I would say are, you know, really for, for the good of the planet, um, unfortunate that my work dovetails with them. I am a huge evangelists for blockchain technology and application across all kinds of different things, because, you know, it really does democratize a lot of things, you know, in the capital raising world, it opens up possibilities to a lot of people who did not have that possibility before it’s done correctly and safely. Um, you know, it’s doing amazing things and, you know, undeveloped countries also, um, on the cannabis front, you know, it’s, it’s plant medicine.

Um, and you know, it’s taken me years to, to get, you know, enough understanding. But yeah, the fact of the matter is there are pharmaceuticals being derived from this type of stuff that helps people. Um, you know, it’s not just kind of recreational go out and get stoned. So I feel very fortunate, uh, that, um, you know, compelled really, uh, as part of my job to, to handle those types of things. Um, you know, beyond that, um, you know, there’s a limited number of hours in the day. Um, you know, what’s, what’s going on are, I don’t know if you guys are aware, our firm is minority owned entity. Uh, we spend a lot of time thinking about, you know, uh, diversity and inclusiveness. Um, and you know, it’s been for a long enough time now that, you know, obviously I’m a white guy, um, but you know, I care about our firm doing well because it sets an example, um, and kind of where we are now as a country with, you know, the protests and everything else. I think that’s important. Um, so that matters.

JP Maroney: 

Talk to me about the eyeballs, because anytime I talked to someone about reggae or in this case, whether it’s reggae tied to some sort of a digital ledger asset, as you talked about, where do you get the eyeballs, the investors, the people who, you know, mom and pop put their money, grandma pulls their money out of the sock or whatever that invest in these kinds of deals all the way up to, I know family offices and others that have put money into the space, but where do you get in front of the people? How do you collectively access this willing and able group of people out there that will put money into these deals?

Josh Lawler:

Sure. So, um, first off there’s two sides of this. There’s the investors, and there’s also the folks raising the funds. Um, and, and certainly from the raising of the funds perspective, uh, life gets a lot easier from, from the investor perspective. Um, you know, what we tend to think of, and I say, we as kind of the kind of watching, you know, ecosystem, if you were, or, you know, whatever you want to call it, um, you know, it’s going to be adopted when people don’t know they’re using blockchain technologies, like the internal combustion engine or the, or the Silicon shift, you know, you don’t have to understand how it works to use it. You don’t even have to know it’s there to use it. Uh, and you know, the industry right now is at a place where user interfaces are what matters now against that background, if you’ve got, you know, legislation that allows for portal, you know, for investors to, into particularly for an inquest credited investor portal, because we’re all used to that.

Um, you know, at that point, it’s the same thing it’s always been as far as, you know, attracting folks into it, where things get interesting is again, that, you know, that regulation a spot, um, that allows you to do, you know, a transaction with, you know, a, an unlimited number of unaccredited investors subject to saying that, you know, you’re going to handle certain regulatory obligations and, you know, report your numbers going forward and all that. Um, that’s going to make life a lot easier, you know, on the investor side. Um, I do have to throw out a word of caution. It’s not always a good thing to make that easier. There’s a lot of discussion about opening up, you know, different venture capital investments to, you know, the mom and pops will, you know, nine out of 10 of those fail. A venture capital fund model is, you know, have one big, big hit that makes up for the, you know, all the misses.

Um, so, you know, it’s not necessarily the best thing. I think that, you know, the role of the financial advisor is not going away. Uh, the role of the broker dealer is not going away. Um, certainly from a technology perspective, both of those things could happen. Um, but it’s, it’s a really bad idea for them to happen. Um, so, you know, hopefully costs are reduced. Um, I know on the, on the broker dealer side of securities transactions, the whole T plus three settlements and custody and transfer agents and boyfriend DTCC, um, that stuff is all extraneous now, um, or, uh, and that will make things less expensive, uh, and you know, hopefully a little bit easier and less arcane. So from that perspective, I think it’s a very big deal.

JP Maroney:

That’s wonderful. It really is. Um, you obviously work with a purpose, Josh, and that’s really good to say, what are some of the goals that you’re still reaching for now? Can you tell us about that?

Josh Lawler:

You know, our firm, as I mentioned, started with two guys in a kitchen and in 10 years, I think we want to be 200 people. Um, that’s, that’s kinda what we’re targeting at. Uh, and growth is hard. Uh, good growth is very hard. Um, so that’s, that’s kind of a major goal. Um, personally, uh, you know, I’ve already mentioned it. I want to do transactions that are good for business, but also good for people. I want to do a lot of them. Uh, that’s, that’s, that’s really the goal.

JP Maroney:

When we do the show, we sit around, in fact, you and Daniel, our producer had a call with one of our previous guest, a couple of partners, and affirm today talking about how we be able to assist them, connecting the dots, what there’s about $30 million, 30 something, million dollars worth of deal flow available in that one conversation today, they’re going to be people that are going to watch this, they’re going to their minds are going to be set off. They want to connect with you. What kind of people would you like to connect with from our network, from the deal flow show network, um, as well as our audience,

Josh Lawler:

The first thing that, you know, I want is people who are genuine and not, not trying to profit illegally. So it’s a good thing. Um, putting that aside, um, you know, sophisticated persons, persons who really know their businesses really well on the sell side persons doing repeat transactions, uh, on the buy side, or, you know, perhaps, you know, solid strategic reasons for acquisitions. You know, it just makes life easier as far as who to work with. Um, obviously I’m a service provider, so I like people pay the bill, but that’s, you know, it’s own its own thing beyond that. You know, it’s really fairly, fairly open. Um, you know, some of our best clients, you would not have thought when they walked in the door. Um, some of our worst clients look, you know, like everything is just fantastic and super flashy and, and everything else.

Josh Lawler:

Um, so, you know, the thing really is not to, not to pretty judge, I will say it helps to have people come in who value legal services. Um, you know, when, when you see what legal services costs for a lot of people, it looks like it’s very, very, very expensive. Um, we’d like to think, and I think we are value add that, you know, we’ll certainly save you more than that, our fee OSCE. Um, but you know, some people just don’t value the service and if you just don’t value the service, then you know, everybody likes to be appreciated. Right?

JP Maroney: 

Absolutely. Uh, what was it, the old joke, the guy that runs the help wanted ad looking for a wife with a boat said, please send picture of boat. So when, when, if people are on, on the show, listening to the show, we’re talking to people, what’s the best way for them to reach out to you. It could be phone number, website, email, whatever,

Josh Lawler:

Right? So email is the best way to reach out to me personally. And it’s just my first initial and last name. J Lawler LA w L E R a at Zuber Lawler, a Z like zebra, B, like boy, E R L a w L E r.com. Uh, we’ve got a website. People can look at, um, I’m on LinkedIn and Twitter, uh, also, uh, tweet too frequently, but some, um, but we’re, we’re pretty easy to find.

JP Maroney:

Well, Josh Lawler, glad to have you on the show. I know we covered a lot, but we’re going to come back in private conversation and talk about some of this. I know our CTO is Jay Benoit is setting off screen over here on the edge of his seat, because this is a lot of the same. He and I have talked about in terms of digital assets. He’s been involved in the cryptocurrency space, the blockchain space. Um, and, and we’ve talked about Harbor city being a part of that space with something related to data and the lead generation assets that we produce in our business models. So eager to come back and talk to you about that more in depth than a new, another conversation in the future. Um, for now, if you’re watching or listening to this episode of the bill flow show, you can get access to our archives as well as subscribe and follow us for future episodes. By going to the deal flow show.com on behalf of myself, mr. Paul Nicoline, my cohost here at Josh Lawler from Zimmer Lawler in California. We will see you again and another episode very, very

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