EduCounting

Episode 112: Part 2 – No Longer the Fireman: Scott Wolfrum

The importance of persistence with Scott Wolfrum

SHOW NOTES

Today, we’re back for the 2nd part of our talk with financial advisor and equity fund manager Scott Wolfrum.

 

This episode, we talk about how Scott got to the point of starting his own private equity firm, the importance of persistence, and how success doesn’t come overnight…

 

Scott Wolfrum runs a successful private equity fund that manages tens of millions of dollars.

 

But he wasn’t always this successful, and the road to starting his own fund didn’t come without dedication and a lot of hard work.

 

This episode, Scott tells us the story of how he got here, what it’s like managing a fund, and the most important characteristics you need to be successful…

 

“I would much rather go through life chasing the lion than being too scared to chase the lion.”Scott Wolfrum

 

“We believe in our team, I know there’s going to be pitfalls in business but if you have the right person in the right seat I’m ok with that.” – Scott Wolfrum

 
Time Stamps:

00:39 – How Scott worked out what to do next after leaving his job in wealth management.

01:49 – The value of putting your own capital at risk before advising others on what to do with theirs.

07:11 – What a ‘loss carryforward’ is and how it can reduce your future tax obligations.

09:49 – Reverse finance internships and why people are paying to work.

11:13 – How and why Scott started his own private equity firm.

14:46 – How big Scott’s fund is and how successful it’s been.

18:08 – The skills you need to run a fund and Scott’s vision for future funds.

21:59 – What qualifies a good rate of return when investing in private companies.

24:19 – How many firms Scott has in his fund and why he jumps at every opportunity he sees.

27:08 – The ‘Entrepreneurs Operating System’ (EOS) and how different personalities work well together.

30:50 – What A-level talent is and the importance of finding the right role for each person.

35:09 – The importance of mentors and the people that have helped Scott on his journey.

 

Connect with Ben Jones:

 

TRANSCRIPT

BEN: We learned some great stuff about Scott’s background in part one. As we start part two, Scott just got kicked off his lily pad and he’s asked the questions about what do I do now? Let’s take a listen to part two and learn more about Scott’s fund, some of his trials and tribulations as well as his success when he figures out what he’s going to do next. You’re sitting there going, what can I do maybe? And what do you do?

SCOTT: So at the time, and so I made a couple false starts at what do I do. So 2011, you know, I started my own RIA at the time in 2011…

BEN: Which is a registered investment advisor. So it’s just more financial planning, wealth, advising, go ahead.

SCOTT: But it was on a network where I really truly didn’t have control. So I felt like it was a lateral move. Even though you do your due diligence, you do your homework, and everything looks and smells great and then you get there and you’re like, well, but I still feel like I’m working for the corporate mothership. This was under Wells Fargo Advisor Network. So as a 1099, independent contractor, I own my own company, but I’m not an employee, but you kind of still were, right?

BEN: Because they had rules, right? They had to do it this way, had to use this. Got it.

SCOTT: Just way more. They want to broker in a box. And I was not ever a broker in the box. I mean, that’s just…

BEN: You never kind of constrained to a specific area and this is how you do it and don’t kind of…

SCOTT: And also, it’s probably a pertinent point for you guys to follow as I started to put my own capital and other private businesses in maybe 2005.

BEN: Any of them that you can mentioned a little bit? Not necessarily the names, but what do they do?

SCOTT: Well, so I have a life science company that I started putting money in.

BEN: What does that mean exactly? You know, it seems like such a broad, like life science could be anything.

SCOTT: It’s a sample preparation technology company based out of Purdue.

BEN: Oh, now it’s much clearer. It’s a simple print.

SCOTT: Sample preparation, and now you’re going to get out of my sandbox pretty fast. You’re going to understand Wolfie doesn’t really know a whole lot about that. So sample preparation technology is really what happens before it goes into a mass spec.

BEN: So it’s taking a sample of something and then analyzing it.

TONY: Wait. Mass spectrometer, I thought sample preparation was what Costco on Saturdays.

BEN: You get through it. You have a little bit of hummus.

SCOTT: I think that’s maybe what I bought into originally.

TONY: Let the pita bread and artichoke dip? I get 10 pounds of this for six bucks?

BEN: So it’s highly tech related to the science industry.

SCOTT: In the science industry. And that, candidly, that business was a nightmare for quite a while. It’s doing very well today, but it’s 15 years later, long time.

BEN: Wow. And you’re still in it?

SCOTT: Still in it.

TONY: A lot of these deals are probably highly liquid. Liquidity is the ease of turning it from like company ownership into dollars. Vice versa. Stocks and bonds are considered liquid. Cash is obviously liquid. Sometimes you make investments, and it’s like, there’s no way to get out.

SCOTT: And I would tell you that part of your learning curve in life is until you put your own money in something you don’t understand. Unfortunately, I’m slow learner so I’ve lost a lot learning along the way all well.

TONY: If you had to guess what percentage of like wealth management people advisors who are selling you know, stocks, bonds investments, actually put their own money in and understand what the risk if they’re explaining to people what to do with their money, but haven’t done it themselves really, to the extent that they really understand?

SCOTT: It’s a heck of a question. I would tell you, I don’t think and I would given I ran an office of advisor so I have at least a reasonable sample size of advisors understanding what it means. But number one, the big money center banks and big broker dealers today don’t want their advisors doing it. Because it’s all about then you got disclosure issues. So they want the broker in the box.

BEN: That just says hey, here’s the investment. Do this, do this, do this.

SCOTT: And we don’t want you to truly understand what it is.

TONY: What’s your risk tolerance profile? Okay buy this.

SCOTT: Exactly. That’s 100% right. And so you know, and that to me is managing money for the masses. And so I never was that guy. I mean, even though we were running a lot of money for fairly significant people, I wanted to understand the business. And so to me, I needed to learn and the only way I could learn was to get in the game. And so I got in the game, and I’m like, I got to figure this out.

BEN: Interesting question I was sitting there thinking about. Do you think you overreached on the life sciences? You didn’t know what the heck you’re getting into.

SCOTT: For sure. Had no clue. You want to know how much I didn’t know? I didn’t know about the operating agreement, I didn’t know about the product, I didn’t know about their profit margin, I didn’t understand their inventory, I didn’t understand their costs, I didn’t understand their go to market strategy. I didn’t know anything.

BEN: Can I say, I know this is gonna sound really bad but can I say sometimes you just got to jump in and just get kicked in the head like four or five times before you actually understand and know what you need to know. Tony, you’ve got to know too. How many companies have you been and you tell me stories all the time and I’m like, oh, my God, that guy should just be punched?

TONY: Well, the funny part is to the investors like if you come like, you’re a software guy and you hear about life science stuff. Oh, this is some new implantable device your body absorb, it’s really cool. Oh, man, I want to invest in that. You don’t know anything about that but it sounds cool. The same doctors that would be like, there’s no way that’s gonna work. How about yourself? Where can I, oh, man, I want in on that. It’s almost like stuff that you don’t really know enough about, really enticing. It’s like, that’s gonna be great because you don’t know enough to know whether it’s good or bad, you just hear the excitement of the guy that’s pitching it to you, guy or gal, the founders are excited. It sounds reasonable. But you don’t know anything about it. It’s easier to convince yourself to do that than something you know a lot about because you know, what doesn’t work.

BEN: And I guess the point here is, you know, a lot of people have done a lot of stupid things and still been very successful.

SCOTT: It works sometimes. Yeah, still works. That company believe it or not, $22 million loss carry forward. Anybody know what that means? We got a whole bunch of cash that got lost. However, we’ve been profitable, five years running and not paying any taxes.

BEN: So $22 million loss means that over the years, they lost over $22 million. So that’s like a bad thing. But when they take that, and they start making money, they can use up. Like, if they make $22 million dollars in profits, there’s no money call, there are no taxes for the first $22 million.

TONY: So that’s where people go, oh, they made $22 million and didn’t pay taxes. Well, the problem is they had to lose twice in the first four, to get to that point, which is horrible.

SCOTT: Guess you had at some of that $22 million.

BEN: But this is where we talked about upstairs, the persistence, you had to stick with it. You had to believe in it, throw extra money and you’re going am I throwing this down a hole?

SCOTT: We recapped it in 2010.

BEN: Recapped, what’s that mean?

SCOTT: Meaning we had to put more capital in. Fancy word, get your checkbook out.

BEN: A fancy word for oh my gosh, this is gonna be tough.

TONY: Well, here’s another fancy word for if you don’t want to put your check, if you don’t want to write a check, then what your share was is not going to be as much as it was after it.

BEN: So you got your checkbook out and…

SCOTT: Got involved in the company way bigger this time.

BEN: Case wise or cash and time?

SCOTT: Both. Understanding who did the operator go to market, what’s our p&l look like, cost of goods sold all of that. I’m all in.

TONY: Is this more micro or macro?

SCOTT: Down into micro side of my degree. Because I had to understand because you’re like, I’m lighting money on fire. I don’t know any other way to do it.

BEN: And the thing I was gonna say is, this is pain in education. Because now you’re throwing money at it, and you’re gonna have to actually be in it. But you automatically could see it in your eyes. Nobody could probably see it but it’s just like, the stuff that I didn’t know, I sure as heck knew now, what I should have been asking for. And it’s amazing how much that changes when you have to get out the checkbook. And they get involved.

SCOTT: Operating agreements are big, you know, there’s lots of stuff.

BEN: Now you’re spending time away from your wife, your kids, if you had it, whatever and you’re stressed out, and you just got to get on it. But that’s really interesting.

TONY: I read this interesting article the other day, you know, I get up in the morning and I read Twitter and there’s really awesome stuff happens on Twitter, like I’ve learned a bunch. There’s also big time suck over there. One of the things I heard was like somebody was asking about reverse financed internship. These are companies where you have to pay $15 an hour for example, to be an intern there. But that’s what he’s talking about. They’re like I put money in and I gotta go work there. I gotta put money in, I gotta go work there to learn something.

BEN: So that I can pay to lose my $20 million.

SCOTT: I wish I know about life science. Like, still to this day, zero.

BEN: Hey, I’m gonna sit here and argue with you, because you don’t necessarily need to know about life science but you need to know how to ask the right questions in business.

SCOTT: We made money. I mean, I think might be five years straight sitting on a million, $7 million, $8 million in the bank today.

BEN: No way. That’s awesome!

SCOTT: Yeah. So we got I mean, it’s not a killing company but we’re profitable and we’re making it back. It’s been a journey.

TONY: You know, what the most painful, the most expensive and most painful lessons you learn are the ones you remember. If you don’t remember history, you’re doomed to repeat it. That’s expensive and painful. You’re gonna remember, right?

BEN: So now you’re like, you’ve been successful, you’ve done the wealth management thing, you’re starting to dabble in other items. And, you know, we met you because you’ve got a private equity firm and what kind of happened between the life sciences to get you to…

SCOTT: Well, so I won’t bore you with all the pieces and parts, but a lot of it was, I felt like a fund in an investment portfolio. So if somebody has an investment portfolio of a million dollars, or $2 million, or $5 million or $500 million, it doesn’t matter. They should be looking for opportunities to help their internal rate of return out.

BEN: Right. So what we’re talking about is, hey, we got investments, maybe we can earn 6%, 7%, 8%, 9%, 10%. But in order to push it a little higher, you got to be a little bit more committed a little bit longer term, and so you’re sitting there thinking about this, and what did you come up with?

SCOTT: So the whole thesis was built on one at a time, private placement memorandum investing. And because I just walked you through one example, I have lots of those before it got to the fund. But I did a lot of them.

BEN: But a private placement is saying, hey, you give me some money and I’ll go ahead and invest in a company privately. So not buying a stock on a stock market, invest privately, and we’re going to help this company do really good things.

SCOTT: And everybody should know that all companies start private, that are publicly traded. I don’t care if you’re Amazon or Microsoft. They all start private.

TONY: You’re right, though it’s like, and most of these things didn’t happened overnight to be huge successes overnight. They’re like took 10, 20 years to get through.

SCOTT: Tons of elbow grease, and some good luck. And you know, the right people in the seats, and there’s just a whole lot that has to be right. Ie afaan needs to be diversified. You need to have your money in lots of stuff.

BEN: You’re not just in construction, or just in beverages or just in manufacturing technology.

SCOTT: Whatever. You can’t be. Because you never know. You just don’t know, execution risk is very high in a small business. You don’t have a ton of execution risk of Microsoft or Abbott lab.

BEN: Which means if you don’t execute or don’t do something, the whole company will fall apart. But in a small company you got four people, if one of them didn’t do their job, you could lose a whole company.

SCOTT: That’s right. I mean, literally gone. Yes. So zeroes. So you’re saying okay, well, if we’re trying to make 20% on our money, well, we’re gonna have some not stuff not work. We’re gonna have some that’s gonna be okay and some be maybe a little better and okay, and maybe something really good. And that’s kind of what we’ve been building.

BEN: So you went out. Can we talk about some of the numbers and your fund or not? Okay. So you go out and you raise, which means you talk to people and say, hey, do you believe in what I can do, and I’ve got a great team, and can you put some money in and we’re gonna put that money to work, right?

SCOTT: I tell them I drove a beer truck.

BEN: They turn around and walk away. Wait, wait a second. I like this idea. You got some gumption, you got some mocks. Let’s go.

TONY: Wait, I’m investing in a beer truck? Because you got my interest right. Hey, wait, is it a wine truck? I want to buy it, I got to get it. Great idea. Wine trucks.

BEN: So I think I saw that what it’s a $20 million fund? Almost $30. All right. But that’s the amount of money that went in. And I’m not gonna say anything unless you say it but that’s not what the $30 million is worth today, right? Because…

SCOTT: Okay, so we’re talking about cost and you’re more correct at $20. It’s more worth about 30.

BEN: Okay. But I thought one of your bigger ones was worth substantially more.

SCOTT: It is. We just haven’t closed our books. So you’re right, it is worth quite a bit more than that our books aren’t closed as of March 31st yet.

BEN: And I think a lot of people sit there and go, you know, hey, I’m pretty smart about this and I did some good stuff, but you kind of get lucky too. And the harder you work, the luckier you get and you’ve got some really good assets or companies that you have in there that are doing some really incredible things already. And you’re kind of getting the recipe, is that kind of a good way to put it?

SCOTT: I would hope so. You have me back on your show and five years and I’ll tell you if I have the recipe or not, but I you know, once you start, you know you’re going to refine it. You know, you’re pattern matching. What works, what doesn’t work, how do you learn to do different. Yeah.

BEN: But that’s where you started like, because you’re getting kicked in the head with all this stupid stuff and narc up here. I must have been a lot better, looks like messed up. But then you like got to and you’re like, hey, I can do this, I’m starting to have some success. You get the $20 million fund worth more than $30 million. And now you may be raising money in the future for like another fund because you’re having some success, right?

SCOTT: Yeah, I think what we’re doing and I think what we’re building is a void in the marketplace. Because I think that there’s a whole bunch of businesses that are exciting that people are working really hard at, and they’ve started to show some revenue. So we’re not talking about startup or angel, which Tony knows a lot about. Because I’ve lost a lot of money over there, too. So anyway, I think what we’re seeing is that there is a market of, you know, the city, we live in an Indi that, you know, I think we see tons of deals, tons. $1 to $5 million bucks is what we want to put to work. And I think with the right management teams, where you can bet on good people that you know, or trust and if you know, a common theme you see in me already is that I’m not great on execution and management teams.

BEN: But you’re a fantastic person like Tony, which we call a what, the Big V. The visionary guy. You guys get together, you can talk for hours about nothing.

SCOTT: And then we try to figure out what idea was any good.

TONY: 20 ideas a day, 19 and a half deal.

SCOTT: So my vision is I don’t know if there’s any good but this is the vision. I don’t know whether it’s right. But I think the vision is, is that this model we’re building is good for a lot of markets. I think there’s market hungry in Columbus, Ohio, market hungry in Kentucky, all over Midwest. And, you know, if we do it right, and we execute, execution’s huge and we deliver to our shareholders what I want to deliver to them.

BEN: And so you’re really talking about, hey, we’re in an area that’s overlooked by the bigger guys, because, you know, it takes just as much work to write a $5 million check as it does to write $100 million check. So if you can go a little bit lower, and look at these things that have maybe a good, I don’t want to say logo, but a good presence, you know, they’ve been around for a while, can we talk about the one with the garage door? You know, it’s maybe not the sexiest thing, which means like, it’s not tech, it’s like Amazon or whatever but it’s been around, it does this great service. It’s not a $50 million company but you might be able to do something really interesting.

SCOTT: Yeah. I mean, I think all of those things. I mean, if we wouldn’t invest if we didn’t see growth. You can’t do that. And if we didn’t think we are I don’t care what it is. You just can’t so but if we think we see it, and we think we can go get it, right and then let’s see. That’s the whole thing.

BEN: And part of it is you had the background of managing people’s money, you had the background of getting kicked in the head. When people talk to you…

SCOTT: And running my own p&l at the office, you know, so when we were running. We were running over a billion dollars when I was done and we were running a fairly significant p&l at the wealth management I was running. And profitability was tracking right where I wanted it to track and that was predictable once you really got the formula. So that’s been an something that translates now, I don’t care what it is. Chemical company, garage door company, technology company, it just doesn’t matter. Culturally too. You know, I’m trying to make sure we do that everywhere we go. Just like I did with my people. It’s that if we take care of the people and they actually can look you in the eye and have a glass of wine and say, hey, that guy’s an okay guy.

BEN: So you got the technical skills, which is how to run a business, right? You know how to read a balance sheet and income statement, all that stuff. Then you got the soft skills, which people can trust in you, you can build the team. Plus, you’re also building up like the network of the banks as well. So that the banks are now, you’re kind of fronting this whole thing on your own right? You get people to put in money into the fund, you get money from the bank to say, hey, I’ve got just making this up a million dollars from the fund I can throw in, can you guys throw in $3 million, here’s the company. And so now you bring all these skills together, right? And you’re just doing it over the years and now with the network and everything’s going on, people going, how do you get so lucky with all this stuff all the way through, right?

SCOTT: Those people want to take the beatings I’ve taken, they wouldn’t say, that was lucky. You know, I don’t think they want to sit over. There’s a lot of beatings in there. Yeah.

BEN: So you got this fund, you got a new fund that’s coming out. I know, Tony, what you had a fun to write with Angel and you were looking at getting another one going. right?

TONY: Yeah, it tends to be the game if you’re successful with one, the next one that’s pretty easy to raise.

BEN: And what’s successful, by the way, you know, is that just you’re getting a nice return on your money?

TONY: Yeah, that’s a good point. I mean, what’s the target is a 20% IRR bigger isn’t…

BEN: An IRR means 20% compounded on each year. Yeah, right. So internal rate of return.

TONY: You got more risk. so you need a bigger return to justify that. But if you’re going after a bigger return, you may not get it.

SCOTT: It’s 20 to 30 is where we’re shooting. I don’t know where you go.

TONY: Yeah, I think that’s when you get into the riskier like for us on the you know, the angel seed stage, we’re looking to get in the mid 20s at the low end of an IRR. So you got to have that one or two big ones in your portfolio that make up for the zeros because there’s five or six zeros, like in a startup, there’s going to be zeros. So yeah, you look at that and a lot of them are like, you know, if you’re getting venture funds, and all of a sudden, you know, they talk about multiples MOI, multiple on investing cash. So like, try to get a 3x. So you put money in your 3x back. That sounds great. If it happened in a year, that’s awesome. If that happens in 12 years, it’s still good. It’s like, the amount of time is really important. It’s significant. But yeah, that’s that kind of stuff. And, you know, for us, we’re like, hey, don’t take all your money and put it into our fund, crypto, or our fund or one stock. You could get lucky but it’s got a percentage, just like going to put all your money on one number on roulette.

SCOTT: Yeah, it always cracks me up. You know how you hear all this crazy stuff about America and you say, well, Bill Gates is buying all Americans farm land. I hear all that all the time. I’m like, well, oh, he’s not buying all of them. What he’s doing. oh, by the way, he’s got a lot of money. And he needs to diversify what he’s doing. I don’t know him from atom but you know, he’s going to I mean, if I were him, I’d buy some farmland.

TONY: Well, some of that stuff’s got some tax advantages, because our friends in Congress have made some rules that most people don’t know about.

SCOTT: Right. And think he doesn’t figure that out.

BEN: But if you got $100 billion and diversify 5% of it, that’s a lot.

SCOTT: He doesn’t have to figure it out himself. He pays somebody out for him which is basically when you’re in a fund you’re putting money in and there’s some fees paid to those people who are smarter about it or more experienced, you’re going to have more navigate that, yeah.

BEN: So it’s pretty cool though. Because can I ask how many companies are in the fund now? 12. If you think back, let’s I don’t know, what do you think, 10, 15 years? Do you think back, man one day I would love to have a private equity firm of five firms. That kind of blows your mind.

SCOTT: It totally blows my mind, honestly. You know, because I mean, sometimes you dare to dream and you think I can’t do that, you know, and 1000 people tell you you can’t do that and that candidly, sometimes honks you off to the point, well, maybe I can’t Yeah, I’m just gonna prove you wrong. Yeah, the 22 year old kid from Merrill Lynch with two suits and a Honda Civic and you make it at Merrill Lynch.

BEN: He likes to change his tire and his underwear.

SCOTT: But did you show up for the interview in your underwear or do you put the suit?

SCOTT: Tony, Tony you can ask that question.

BEN: But that’s like great, because, you know, a lot of times I think we all sit there and go yeah, have you ever done anything in my life?

TONY: So many times if you think you can’t, you’re right. Don’t constrain yourself. I mean, worst case scenario, you get kicked in the head and you learn something.

SCOTT: I think here’s my philosophy of life and I think you guys probably are going to agree with this is that I would much rather go through life chasing the lion than being scared of chasing the lion and  I would rather try to chased the lion into the ditch on a snowy day than to just be too scared to go after it or watching from a distance. I don’t want fear of missing out to me to effect, no chance for me. They have no chance. And so I, you know now that could have wrecked me 1000 times along the way, you know, but I would much rather live richly, but richly to me is not about that money, just living life, being real. And being real is I don’t care who you are, you got to have to get kicked in the head a fair amount.

BEN: Because like, from my perspective, you guys know, going through some tough stuff. But I just the other day asked myself, would I have preferred not to have gotten to this point, and I can’t believe I’m about ready to say this but I said no, because that means that I would have been sitting on the sidelines, and I just can’t do that. It’s just not me. So I’ve got a little tough road to hoe just kind of like you did but you got to jump in.

SCOTT: You want to go down swinging. You got to.

BEN: So what do we see from you, Scott then coming forward? Another fund 20, 50 companies?

SCOTT: I don’t know, I would tell you. I’m in a fortunate seat right now where there’s not a ton of stuff on fire in this like, first time I’m not a fireman in a while. So I have to kind of gain a little perspective again, because I’ve been in the fire, putting out fires and trying to make everything work.

BEN: But I think you’re getting better getting the right people in the right seat. RPRS baby.

SCOTT: Amen to that too, because that’s been huge. And if I look around, and the reason why I have more peace, is because I have better people.

BEN: In the right spot. Not just better people but better people doing right stuff.

SCOTT: And so that’s huge. I mean, which is you guys talk EOS in here, but we follow EOS all over the place.

BEN: And the EOS is the entrepreneurs operating system. It’s a philosophy that’s used by Gino Wickman, which essentially says, hey, let’s all speak the same language. Let’s say we’re going to do, let’s do it, let’s put it out every three months, every week, every whatever. And so it’s just a philosophy of how to, in my opinion, get things done.

SCOTT: But it also identifies problems and operational problems all over a company.

BEN: And lets the visionary be the visionary too.

SCOTT: Which is freeing, right? It allows integrators to be integrators and visionaries to be integrators and you know, financial people….

BEN: This appears to be visionaries. He said, this needs to be integrated as well.

SCOTT: Oh no, I can’t stand that. But I met financial people to be financial people. Everybody sits in their seat, and says, this is how I’m wired and how I’m made. And if you just let me do my job, I’m going to do it really well.

TONY: That’s funny. You say that. Because with the software company, single source, my partner and I would just drive each other nuts, because he’s a total integrator and he wanted me to be more like him. I’m a total visionary, I want him to be more like me. We drove each other nuts. And we figured out was okay to be separate. We just went through the roof with everything. I mean, it was cranked.

BEN: Yeah, I mean, that’s the whole rocket fuel, right? Rocket fuel is when you put two things together, and it just explodes in a very, you know, direct, very contained direction and you do just great things together. And I think, you know, part of it. I mean, I like Sam, because he’s a little bit more like me, but I see a lot of the value, you know, that you bring to and just to say, you know, Scott, just go do your thing, man. Once you do your thing, you’re going to be 10 times more valuable.

SCOTT: I think that’s the best part about Sam is Sam. He’s like you. I mean, he’s so structured. And he’s so procedural. And he’s super smart. And he’s got the same value system. You know, he treats people incredibly well that are around him but he also doesn’t put up with crap. And you don’t have time for crap. With 12 companies, you don’t have time, you have to correct the problems when you have problems.

BEN: I think that’s a little bit just to give you a little bit of kudos. That’s a little bit Tony, I’m speaking for you, but you can say nay, a little bit of the reason why we’re kind of drawn to you is just because hey, you guys kind of figured out who you are. And he also said, hey, we’re going to do big things, and we kind of want to be successful. And that’s kind of cool.

SCOTT: Well, obviously we appreciate both you guys I mean, our friendship with you guys, both as you guys are obviously talented people and well, I mean, I started reading some of these private equity guys that they wanted to invest in an A level talent, what does that mean and starting to define what is A level talent and I you know, and we started looking at what we’ve done, and who we’ve changed teams with and we have A level talent in a lot of our companies and that’s a huge saying that got done over the last three, four or five years just we went from operators that didn’t know what they were doing and thing.

BEN: It’s amazing how much better life goes when you got people do what they’re supposed to.

TONY: I’ve heard some stories that we don’t want to talk about.

SCOTT: Because honestly your audience should know that. I mean given them grace, they just weren’t in the right seat. Even though it was painful, if I really truly said what was wrong there? They were in the wrong seat.

SCOTT: I’ve seen it. It seems like a really tough and hard thing to do to come in and like, okay, this person may have to go, these two people need to swap seats, and it’s uncomfortable. And then, like, three months later, they’re like, man, this is phenomenal! I can’t believe we didn’t do this before. We get the combination, right. It’s like incredible what happens.

BEN: Think about what we just did that. One of the things we’re doing, I’m sitting there going, guys, don’t you see what needs to change?

SCOTT: I was sweating about the change, like, oh my god, we’re going to change I was going to hate it. Now he’s done it, everybody’s like, man, this is great. I feel liberated, I can finally get it back.

SCOTT: Think about that. Dude, you put in the right seat. That was awesome.

BEN: Some of those are just, I’m like, this is brutal. We got to get this.

SCOTT: I just keep changing the seats, oh, dude, somebody’s going to fire me.

BEN: You bet everywhere. But it’s true and there’s a lot of learning there. Right?

SCOTT: Well, I think the other part about though I mean, you know, we believe in our team too. I know there’s going to be pitfalls in business. But if you have the right person in the right seat, I’m okay with that. If people are doing the best they can do with the circumstances that are given. That’s not that you want to stick with those people. I mean, there’s a time to stick and there’s a time if they’re in the right seat. So there’s times in business where you just need to be patient because businesses cycle and things happen.

BEN: I’ve seen it with you know, upper management says that person’s got to go and they’re just like, you know what, I just got to respectfully say, you’re absolutely wrong. Because you got to go with it. But, you know, having the right people, I’ve seen the most amazing things. It’s all about people. I tell people, they go, you’ve done such a great job, Ben. And I’m like, whoa, timeout. It’s all the people. There’s no way I could have done any of this without those guys. And so, but you’re putting together quite a fund, you’re putting quite a success story.

SCOTT: I’m cautiously optimistic about it. I keep looking around and say is there something on fire I don’t know about.

BEN: And you got a lot of things in the hopper. You know, we’re talking, with Sam, you know, there’s like a lot of things going on. And so, I really hope, what, two years from now, a year from now, three years from now, we talk to you again, yeah, not too far out in the future six months from now.

SCOTT: I appreciate what you guys are doing here. And I hope it helps somebody.

BEN: We’re trying to get out to people that you know, success doesn’t come overnight, right? There’s a lot of persistence, you do get kicked in the head. Don’t get discouraged about it. A lot of people have gone through that way.

TONY: I think what you’re doing today doesn’t mean that’s what you’re going to be doing tomorrow. And some of that even goes to say, you know, illustrate the whole right person right seat. You might be doing some stuff and you don’t think it’s right. And it might not be. You might be in the wrong seat, force yourself down a path that you shouldn’t be in. Or the other part might just be about persistence. And you know, getting some good advice. I don’t know. Did you have anybody it was a good advisor to you?

SCOTT: Oh I’ve had a lot of great people around me thankfully. I mean, I almost call them people of peace because they give without expecting anything in return sometimes. And my father in law is amazing. For me, he’s a shareholder in our fund. But more importantly than that, which you know, number one, he wrote a check which is obviously good, but then wait, he’s got skin in the game. So to me, it was the opinion, not just somebody from the cheap seats saying I you know, you need to do this or that. He was in and so he knew the struggles we had and never once wavered. Never once wavered. Father in Law and bigger than you are. Yeah. Like six, eight. And a lawyer.

TONY: How do you even make a move or decision?

SCOTT: You know, it’s so I’m telling you, there’s a lot of game changing records out there that just would have been like game over and a lot of stuff that could have gone the wrong way. And I know but I’ve had a lot of people like David, his name’s David.

BEN: Had advisors, people guiding you, not asking for something back.

SCOTT: Yeah, I have a lawyer. I don’t know if I should say her name but I give her first name anyway. But she’s amazing, amazing. And a lot of business that where I’ve gotten kicked is in and around operating agreement issues. And for those that don’t know what that is, and operating agreements is the document that governs how a company’s run and who can say what about how making the decisions. Pat’s been tremendous. And again, I’ve spent a lot of money on lawyers, lots and lots and lots of money on lawyers. And there are some lawyers that just charge you a fee, but they don’t care about what you’re trying to do. So she has been amazing at not just providing phenomenal advice, but for a reasonable price, and then more of a life counselor about you know, how, I mean, because everything you’re involved in is regulated and strict, you know, there’s so much stuff going on. And she’s just been incredible, something to cut through and give me an encouragement to.

TONY: Well, it’s funny, you talked about the operating agreements and investments and there’s, you know, like the legal term of you may do this, or you shall do this kind of different. And then is it a majority, a supermajority or unanimous decision and you don’t think about that much when there’s more than one person in the company. But like, you start getting into three, four, five, six, ten people involved. Also, those things become really big and political and you don’t realize when you’re signing the agreement. What that means down the road. So you need somebody who’s been through that they can kind of help guide you through. You probably need to do it this way.

BEN: It sounds like she’s one of those people. I know. I’ve dealt with her and I’ve always been real, she is sharp and quick, knows what we’re talking about moves right along and I like that.

SCOTT: Me to it, she didn’t waste your time, though. She doesn’t bs and you got to say, you know, your spouse, you know, it’s part of the deal. You know, my wife, my gosh, really your spouse part of the deal? Or the deal? Because if you haven’t noticed, they’re there when you’re getting your teeth kicked in. And for them to still be standing there. Still believing in you. There’s a big deal there, you know, I don’t care girl or boy, if your spouse you know, I mean, just when you get into a game and if your husband or wife or two and you have that. Yeah. That support network’s huge.

BEN: I’m like about that you’re looking at me or something? Nope. Can you talk about your I mean, my sister?

SCOTT: Let’s do a different episode. No, she keeps me well, my wife is a integrator. I’m the visionary, so…

BEN: Very different. I don’t mean in a bad way. It’s different

SCOTT: Well, at least you guys have. I mean, I know your wife too. And she has a good understanding of you. Probably too good. That’s not fair. Is it? Yeah. I mean, right. I mean, you know, you got to have an understanding of each other to appreciate each other. You know, you just do.

BEN: And they know when you’re like really down and can bring you back up and all that good stuff. You know, it’s a little crazy because we’ve been at this an hour and 16 minutes. And it’s like, this is the longest one we had but it’s been so easy and maybe we should just have you back another time like four or five months from now.

TONY: When he has his next big exit? Yeah, that you can tell us what you can tell us about the deal but kind of give us the anatomy, not the anatomy, post mortem of how that whole thing went from the get go what you saw the ups and downs of that deal. So tell us that story.

BEN: Because your last one was really cool. And I think you’re going to have another many more cool ones.

SCOTT: I think well, we got some ones brewing. They’re cooking pretty good. But there was some sog in that, too. I got it in there.

TONY: I mean, because our whole story is that it’s never a straight line from start to success. There’s always some potholes, some bumps, obstacles.

BEN: And maybe we need to talk about a few of those potholes and bumps next time.

SCOTT: Yeah, I mean, I was thinking about a deal that just exit fleet last year, December. And company was had a cool product and life sciences arena. And nobody wanted to buy it. And they had to pivot. And they pivoted to the same product, but made it for tiny kid like neonatal and small children. And finally got through it, it just took them a lot longer than it should have, but they got to a successful exit. So it was kind of a cool story of they’re almost out, and then it comes back and becomes a success. And the investors actually, you know, make money on it. So some of those stories of watching those things, kind of the twists and turns the ups and downs and then they actually trap because I could tell you a bunch of other ones that just went to zero, hit the wall and you don’t learn a whole lot from but like they’re not as exciting to story like…

BEN: But Apple almost went bankrupt. I don’t know if you knew that. And there’s a couple other big ones that we mentioned in previous podcasts, which was like no way. There’s no way they almost went bankrupt. And I love hearing those twists and turns.

SCOTT: Amazing. I mean, it’s amazing things are living breathing things.

BEN: Disney. Disney has gone pretty bad. Oh, battery low powering off. Okay, I guess Tony…

TONY: Peace out. Nice talk to you guys.

BEN: But while we say goodbye for now, and then let’s call you back, Scott. We really appreciate having you here. Thanks for being here. Yeah. And until next time, we’ll get this up and we’ll see what everybody says. So thanks.

SCOTT: Good. Thank you, you bet.

 

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