The secret to consistent 5-10x returns
Hint: don't raise a $100m fund and do THIS instead
I took this photo just before the training session ended. My 9-year old son took his helmet off, looked me in the eye, … “I’m Ready,” he said. Those 2 words told me that he was ready to play in the biggest game of his young life.
In this photo, he is on a skating and shooting treadmill for Hockey training.
It takes a tough parent to put your kid through this torture:
The coaches crank up the speed until the kid can’t keep up, in a matter of 20 - 30 seconds, his legs fail under him and he goes down. Falling hard, only the harness keeps your son from busting his body on the ground.
So everytime your kid gets on the treadmill … he is guaranteed to fail. But he will also improve.
You may not be able to stomach your kid hitting the floor over and over and over. But for me …. I’m used to it.
See, more often than not, when my son faces HIS demons it gives me courage to face MY OWN.
And the Demon I have faced this week is no less than changing my entire business model …
As you’ll see in a moment, I’ve made one of the biggest changes to my business here at Pitch Anything Playbook – I’m no longer selling information products and coaching programs teaching other people how to raise capital, close deals, and generate their own $100m+ exits.
Don’t get me wrong. It’s been a rewarding experience helping other people get “private jet” rich…
But when you help someone sell their company and they walk away with $95m after you did a lot of the hard work – because if you didn’t, the deal never would have happened in the first place…
You have to ask yourself the obvious question: “If I’m so good at this, why the hell am I doing it for OTHER people instead of doing it for myself?”
That’s why I’m focusing all of my time, energy, and effort into investing my own money into my own deals that I have custom built to run on my proven playbook for targeting consistent 5-10x returns.
My investment thesis is simple: Find a well-run operating company that I can attach revenue, reporting, and capital-raising infrastructure to…
And then, help them move up a “weight class” so they can go after a 10x opportunity.
Don’t get me wrong. If the goal is to squeeze out a 5-10x return in less-than 5-years, there is real work that has to be done to realize that exit value.
But if you know all the cheat codes that private equity firms use to consistently generate these types of returns… all you have to do is the “PE 3-step”: First, drive revenue; Second, raise money and finally; implement financial controls (aka “do the work”).
I happen to know what all those cheat codes are, and have a proven track record of implementing them.
But here’s the problem: I am not a cashed up PE firm with $100-250m+ in liquid capital I can use to go around buying high-profile companies I like.
Theoretically, yes, it does sound like it would be super convenient to have $100m ready to deploy whenever.
But here’s the thing most people don’t understand about fund economics… and why I have never raised a large fund:
Once that $100m comes in, the clock starts ticking, and I have to start delivering a return. This puts huge pressure on the yield.
For example, let’s say we’ve got a deal that can take in $20m, and we think it’s a solid 5x in 5 years opportunity. But we still have $80m in the fund, and that money isn’t sitting around for free; it still expects a high return.
As the GP of the fund, this means I’m either going to have to accept lower returns – which the investors won’t like – or I’m going to have to put way too much pressure on the asset to perform in ways it’s not designed to.
That’s why when you have these large pools of capital, you have to make a tough choice. Instead of targeting a 5-10x return, you can…
Move UP the risk curve and target 100x+ returns. This is what venture capital does.
Move DOWN the risk curve and target 8%-12% annual returns, in a market where you can quickly deploy all of the capital you have under management. This is what real estate funds and hedge funds do.
But if you want to do true middle market private equity – the “buy to sell” model that targets consistent 5-10x returns – syndication programs are what make that math work.
What is an investment syndication?
It’s a way for investors to pool their capital together – on a deal-by-deal basis – so they can invest in bigger projects than they could on their own.
When I worked with my first “mentor”, Jonathan, who I wrote about in all my books, I spent 8-years running syndication programs for real estate deals. I also have a lot of experience participating in single-deal syndications, both as an advisor and investor.
The reason I like syndications is that if anyone gets cold feet – or wants to try to re-trade me on price – we will release those people out of the deal and keep going with our plan.
Here’s an example…
Let’s say I found a company I wanted to acquire a controlling interest in, but I don’t have the “dry-powder “to do the entire $5-$15m in myself.
Maybe I don’t physically have that much liquid capital…
Maybe it's too large of a position for me to take based on my asset allocation model…
Or maybe I simply don’t want to be the only investor on the Board of Directors.
But what if I could put a smaller amount in deal – lets say $100k - $500k – and I was confident I could go raise the rest of the money in a reasonable period of time?
In this case, what I could do is take the money I have to issue an LOI and lock-up the deal… do all the underwriting, due diligence, and packaging to take it to market… and then invite my network to invest alongside me.
So what does a master dealmaker like Oren Klaff do when he needs to quickly get his hands on $5-$15m of capital in a short period of time?
In capital markets, your reputation for putting quality LOIs in the market and closing on time is critical if you want to get invited into the best opportunities and negotiate the best terms.
That’s why it’s crucial to have confidence in your capital partners when you’re out shopping for deals.
So where do I find my best capital partners? Here are the two main options I have:
Raise capital from a fund who “leads” the deal and brings 2-3 other investors with them. On paper, it sounds like it would be easier to raise a ~$5-15m round from a small handful of investors. But as we get closer to closing, if I only have a single source of capital, they will almost look for ways to re-trade me at the last minute (or otherwise just grind me on terms because they think I have no other options).
Syndicate the deal to a larger pool of small-to-medium sized check writers: Most people raising capital scoff at the idea of working with dozens of small check writers. But just like having a diversified portfolio, having a large group of small check writers actually lets you raise capital FASTER, and with LESS RISK of not being able to close on time.
That’s why I’m literally kicking the big funds out of my deals, and inviting 400 small – but important – check writers to be part of my investment syndication I call the IPO Factory. (click here if you want to find out how you can join the program and get one of those 400 spots).
With a syndication program, we stay in control of the deal and lower our risk of getting hosed by a large check writer
I have no interest in “fund”-style games which include locking up your money in some blind pool for 5-10 years and charging the typical “2 and 20” rip …
Instead, for a reasonable annual membership fee, my team and I will do all of the work a cashed-up private equity firm normally does, and I will personally pitch you ~4-5 deals per year that you can choose to invest in (or not invest in).
This means you get to see the deal BEFORE you invest… choose how much you want to invest… get your name directly on the Cap Table…
And pay no sales loads, management fees, or carried interest.
It’s kind of like a “Costco” model for private equity management.
In my opinion, this arrangement solves a LOT of problems – and misaligned incentives – that can happen with a fund structure.
I can minimize dilution by raising only what we need, when we need it. One of the reasons I HATE working with PE/VC funds is they’re always trying to stuff way more money into my deals than I need. I might only need $5-15m, but they need to get $25m checks out to meet their fund targets.
Investors get to choose what deals they want to be in, and which ones they don’t. Because this isn’t a call fund – and there are no capital calls – I’ll bring our members ~4-5 deals per year that I’m putting my own personal money into, and give you a chance to invest alongside me.
I can focus on the things I’m good at. I’m good at doing deals, raising capital, and driving revenue… not back office fund management.
PLUS! By not having to deal with a fund, this means investors can put smaller positions and manage their diversification more easily… and because it’s not such a big check, I don’t have to be bothered with constant calls from investors with too much money in the deal.
No one has to guess how much their potential returns are because there is no convoluted waterfall structure with weird side letters and provisions that allow the fund manager to justify all sorts of fees.
Easier to manage liquidity. I absolutely do not want to have to screw around with distributions, K1s, or any of that nonsense that comes with funds. By letting you invest directly on a deal-by-deal basis, you are in control of your shares and can manage your own liquidity needs.
Want to join me in my next IPO Factory opportunity?
I’m building a $200m+ high-tech precision-manufacturing facility in Texas to go after a $6bn home goods market with virtually ZERO competition.
I’ve got ~$1m of my own capital in this deal, raised another $5m in equity capital, and have a line of sight on another $15m in equity and ~$100m-$150m of debt.
The last piece of the puzzle is 400 small – but important – investors to meet the listing requirements for the Nasdaq/NYSE… and I’ll show you how you can get one of those 400 spots.
If you’d like to be one of those 400 investors, I’d like to invite you to a private investor-only event I’m hosting on Nov 9th-10th at the West Coast Finance Center here in Carlsbad, California…
Manufacturing Tech 2023: Investing in High Tech Manufacturing in America
For investors seeking 3-5x returns on capital who are frustrated by the current market full of exotic, high-risk technologies that may take decades to pay off, Manufacturing Tech 2023 is the first event focused on domestic US-based manufacturing companies that can effectively compete from within our borders to dominate billion dollar industries in both the US and abroad.
At this event, you’ll have a chance to meet – and learn from – a group of handpicked analysts, CEOs, and investors who specialize in funding, operating and scaling Manufacturing companies that have a realistic 3-5X return target.
This event – and investment opportunity – is open to both accredited and non-accredited investors.
If you’re interested in attending the event, all you need to do is click here to email my event services team.
Once you do, they’ll ask you a couple of quick questions to make sure you’re a good fit to become
If you are, they’ll send you more details on the event.
If you can either attend online or in person. However, we will be limited in person attendance to 100 people.
P.S. If you’re interested in coming to the Manufacturing Tech 2023 event – and you want to invest in my upcoming deal – you will need to become a member of my investor syndication program called IPO Factory.
To get started, all you need to do is click here and send an email to my member services team.
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