Billy Libby of Upper90: Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit

An Interview With Jason Hartman

Have multiple ways to win. The odds of building a unicorn and being able to exit are extremely low. That’s why it’s really important for people to have multiple ways to win. First, take some money off along the way. Second, think about how to set up your capital table so that if you have a hundred million dollar exit, you own enough of your business so there’s still a great outcome for you. And that’s where I think credit and equity play a critical role at the early stages. If you only use equity and you own a small percentage of your business, you’re cornered into the only outcome as “go big or go home,” i.e. become a unicorn or go public.

As a part of our series about “Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit, I had the pleasure of interviewing Billy Libby, the Co-Founder and CEO of Upper90.

Billy Libby is the Co-Founder & CEO of Upper90, a top-decile private credit fund manager with $1.2B AUM and over ~$1.4B of additional co-investment capacity syndicated since inception. Upper90’s hybrid credit strategy helps founders scale with less dilution by providing tailored credit facilities to accelerate growth alongside equity investments for alignment with founders. Industry leaders in eCommerce, Fintech, and Supply Chain Finance, like Thrasio, Crusoe Energy, Clutch, Settle, FilmRise, Mundi, and Octane, have each secured an initial credit facility from Upper90. Prior to founding Upper90 in 2018 with partner Jason Finger, founder of Seamless-GrubHub, Billy was the Head of Quantitative Execution and Systematic Market Making Sales in the Americas for Goldman Sachs.

Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?

When I graduated from Wharton in 2003, going into venture capital or a startup was barely an idea at the time. Most people pursued one of three things — banking, consulting or law. When I interviewed at Goldman Sachs, they were the one firm that said “we see a lot more of you than you see of us” and if you’re the right cultural fit, they would find the position where I could add the most value. Based on my interest in technology from my internship at Telebanc, Goldman put me into electronic trading where we built algorithms and exchanges. Going into this new area of the securities division where there were not many experts allowed me to take on additional responsibility early in my career and learn from innovative clients like Virtu, De Shaw, Citadel, IMC, Peak 6, etc. Looking back, electronic trading was in the early days of fintech as you needed to leverage data and technology to do a large number of small events efficiently.

While finance is critical to any business, this skill set isn’t properly valued by technology companies. When I met my business partner who co-founded Upper90 with me, Jason Finger (who founded Seamless/GrubHub), he said what was missing in the startup world was access to less dilutive credit. At the time, VC equity was the primary source of growth capital. Based on my experience in quantitative trading on public markets and Jason’s as a successful startup founder, we were able to combine ideas from both the finance and tech sides — which are usually very separate — to start Upper90.

We always believed that if you have access to high quality deals, then there’s capital available. We built Upper90’s investor base around individuals running quant funds and technology companies. Most people have deep but vertical networks and in my experience you need to bring together different backgrounds to create new opportunities. The real change is happening in the tech world. The quant side of our group examined the data where they asked why some companies were not using a balance of equity and credit when there was collateral or predictable revenue (which is a great scenario for choosing credit or debt).

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

When I first started at Goldman, I failed my series 63 exam. I quickly learned that if I was to advance to the next level when a percentage of analysts each year do not, l I had to take everything seriously at work. This wasn’t a funny mistake per se, but it was something that stuck with me and kept me focused on the right priorities. I also benefited from being in an organization out of school that provided feedback and structure. Without that, I don’t think I would have done as well in a startup at this point in my career.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

My dad always says, “People don’t change, they just grow older.” And I agree. The people I’ve admired the most throughout my career have been able to remain who they are at the core and not have to take themselves too seriously. They haven’t changed who they are to find success.

A quote that has stood out to me more recently is from Sam Y, a SoulCycle instructor, who says “tough times don’t last, tough people do.” Work is hard and the world is trending in a positive direction with the help of technology in my opinion.

Ok super. Thank you for all of that. Let’s now shift to the main part of our discussion. Can you tell us a story about how you were able to build a business from scratch, scale and sell it to a bigger firm?

After my experience in Goldman’s electronic trading group and realizing the power of data in helping make sound investment decisions, I used this knowledge to co-found Upper90 — a fund that marries credit and equity. We work closely with founders of e-commerce and fintech companies with positive unit economics and give them capital that helps them preserve more control over their ownership without sacrificing growth. How we do this is by isolating healthy parts of a business (i.e equipment, receivables, royalties, inventory, and acquisitions at attractive multiples) for which equity isn’t the only/best source of capital.

A good example of how this works is our investment in Filmrise, a digital content acquisition platform. They license the online rights to older TV libraries. Because they utilized credit early to finance these royalty streams with Upper90, the Filmrise founders still maintain the majority ownership of the company. Today the company is one of the largest independent providers of content to streaming channels.

Based on your experience, can you share with our readers the “Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit”? Please give a story or example for each.

Absolutely. This is some of the most important advice we share with the founders we work with:

1. Find great partners. Focus on certainty of capital, flexibility, alignment (i.e. will they also do smaller equity amounts?) and cost when selecting a credit partner especially. Think of how investors will act when things don’t go as planned; can you work with them to get through to the other side?
2. Be patient. It takes time to build a business. There’s no such thing as getting rich quick / overnight success unfortunately. Avoid focusing on stage two or three of your business before you’ve executed stage one. Work with people who care about this phase of your business vs trying to buy a call option on the next one.
3. Have diversity of thought. I think it’s really important to have diversity of thought when you’re building a business. Having people on board with different experiences and have real skin in the game is key. I see a lot of startups that have a great advisory board and impressive investors in place, but none of those people have any material dollars at risk and walk away when things aren’t going up to the right. Lastly, diversification, pick partners that can help you solve different problems with capital and experience. For example, think about involving both equity investors (for sales, marketing, and hiring) and credit investors (for capital markets, finance, tax etc.) from the beginning.
4. Lean into your best idea. Too many people feel better through over-diversification. When it comes to the focus of your business or portfolio, it’s important to remember that your best idea may be better than the next ten. Great companies also say no quickly which is hard to do for everyone.
5. Have multiple ways to win. The odds of building a unicorn and being able to exit are extremely low. That’s why it’s really important for people to have multiple ways to win. First, take some money off along the way. Second, think about how to set up your capital table so that if you have a hundred million dollar exit, you own enough of your business so there’s still a great outcome for you. And that’s where I think credit and equity play a critical role at the early stages. If you only use equity and you own a small percentage of your business, you’re cornered into the only outcome as “go big or go home,” i.e. become a unicorn or go public.

In your experience, is there a difference in approach for building a service-based business versus a product-based business when you have the intent to eventually sell the business? Can you explain?

A lot of it depends on the type of culture you want to create and what is most important to your company. In a service-based business, sales might be the driving factor as opposed to a product-based business in which engineering might be the driving factor. However, in both cases, sales is critical as well as getting to market, garnering feedback from customers and not overengineering.

If you are a start up, you should aim to have a lot of small to midsize customers that need your product today, as opposed to one single enterprise customer that is going to drain your technology resources and give you slow feedback.

How does one go about the process of finding a buyer?

There are traditional paths, such as hiring a banker but this is why it is critical to have different types of investors in your capital base (i.e. lead equity and lead credit) because they will open up more doors and give you more options to exit.

When you’re doing an exit, often it happens through mergers and acquisitions — and when there are common investors across different companies, the odds of success increase materially.

How can one decide if it is better to build a business in order to exit, or if it is better to stick around for the long term and let the company bring in residual income, or if it is better to go public?

All of these are great options, but the key is having a path to profitability and not being under capitalized along the way to maintain that optionality. Going public is a low probability of becoming a unicorn. The most important thing is how to build a sustainable business where you can decide the path to go and the ownership management retains to stay incentivized.

By doing these things where you focus on what an efficient balance sheet looks like then you can decide in a position of strength if you want to continue to run your company for profit, sell it to a larger player, or go public.

Can you share a few ways that are used to determine a good selling price for the business?

Multiple of profit is more common today before it was a multiple of revenue. If public market multiples are reducing from the peak a few years ago then private markets will see a lag but similar pain. In picking a selling price, also be long term greedy (that was a lesson from Goldman). And don’t optimize for the highest price, but for the greatest chance of the company thriving. 50% of zero is still zero.

How can our readers follow you on social media?

You can follow me on Linked In here.

Thank you so much for joining us. This was very inspirational.

About The Interviewer: Jason Hartman is the Founder and CEO of Empowered Investor. Jason has been involved in several thousand real estate transactions and has owned income properties in 11 states and 17 cities. Empowered Investor helps people achieve The American Dream of financial freedom by purchasing income property in prudent markets nationwide. Jason’s Complete Solution for Real Estate Investors™ is a comprehensive system providing real estate investors with education, research, resources and technology to deal with all areas of their income property investment needs. Through Jason’s podcasts, educational events, referrals, mentoring and software to track your investments, investors can easily locate, finance and purchase properties in these exceptional markets with confidence and peace of mind.

Starting with very little, Jason, while still in college at the age of 19, embarked on a career in real estate. While brokering properties for clients, he was investing in his own portfolio along the way. Through creativity, persistence and hard work, he earned a number of prestigious industry awards and became a young multi-millionaire. Jason purchased a California real estate brokerage firm that was later acquired by Coldwell Banker. He combined his dedication and business talents to become a successful entrepreneur, public speaker, author, and media personality. Over the years he developed his Complete Solution for Real Estate Investors™ where his innovative firm educates and assists investors in acquiring prudent investments nationwide for their portfolio. Jason’s sought after educational events, speaking engagements, and his popular “Creating Wealth Podcast” inspire and empower hundreds of thousands of people in 189 countries worldwide.

While running his successful real estate and media businesses, Jason also believes that giving back to the community plays an important role in building strong personal relationships. He established The Jason Hartman Foundation in 2005 to provide financial literacy education to young adults providing the all-important real world skills not taught in school which are the key to the financial stability and success of future generations. We’re in a global monetary crisis caused by decades of misguided policies and the cycle of financial dependence has to be broken, literacy and self-reliance are a good start. Visit JasonHartman.com for free materials and resources.