What We Look For — a note on investments and people
Near the end of last year, I had the pleasure of speaking on a panel at the Super Summit event hosted by the Wilson Family Office network in Miami. This was my second time speaking at one of their investment conferences, both times Richard Wilson and his team have done an excellent job with these events.
This panel was dubbed “Shark Tank: What it Takes to Win Over Investors”, and while not quite as dramatic as the seen on TV version we did spend most of our time fielding questions about how “sharks” think in evaluating new opportunities and finding an ideal investment.
As a Private Investment Group, at Volta Global we do share many similar characteristics to family offices (for more on the differences, see here), namely: we invest our own proprietary capital, we invest for the long-term, we can invest in any asset class and any part of the world, we have no pressure to invest at any particular point in the cycle, and we can actively choose partners who we genuinely want to do business with.
That description works well from a high level, but says very little about specifics of how we evaluate investment opportunities and the factors that guide our investment decisions.
So, what follows here is my attempt, albeit a very belated one, to provide a more elaborate and granular take on what we look for in all areas of our investments, including internally in our talent.
Early Stage Investments
We are active investors in new ventures, ranging from “startup” companies already with several million dollars of annual revenue, to those with no revenue (a temporary situation for those businesses, we hope). At this early stage, we tend to write checks ranging in size from $500k on the small end, up to around $2–3 million per investment.
We don’t pretend to be experts in any one particular industry or field, so we are industry agnostic, and we don’t pretend that we’re likely to have an edge on sourcing the next big thing in Silicon Valley or NYC, so we stay geographically agnostic as well. Our focus is solely on finding and quickly filtering to the handful of most compelling opportunities from the hundreds we see, and often that means looking in areas that other people might not be as actively looking.
Therefore, it helps to try and distill our “ideal” early stage opportunity down into a checklist, which would be new ventures that:
- come via a referral from one of our existing portfolio companies or a fellow investor (helps “vet” the entrepreneur and opportunity before we even have to take a first look),
- have demonstrable signs of connecting to the customer and being a 5–10x improvement in customers’ lives in some way (this can be in the form of revenue, usage metrics, testimonials of pilot customers, etc.),
- are run by entrepreneurs that can dream big, but more importantly remain realistic and aware of the risks, challenges, and pitfalls that every early-stage venture goes through,
- are priced at a reasonable valuation based on both near-term revenue growth and medium-term cash flow potential (projections anywhere beyond 3 years are typically meaningless, and even those shorter than that are highly questionable at this stage),
- AND have a clear path to developing a sustainable competitive advantage at some point in the first 3–5 years of operation.
That last point is one that many angel and early-stage VC investors seemingly tend to overlook, thinking “competitive advantage” is only an important concept to apply for later stage established businesses, or publicly traded stocks. Its not. Wait until the next downturn in the VC funding cycle takes place and take a look at which startups survive the drought.
So far, our approach at this stage has taken us down the path of owning small portions of a number of exciting businesses across many diverse industries that we hope continue to grow and increase in value, ranging from eSports, and cybersecurity, to good ol’ fashioned spirits.
Later Stage — Control Investments and Growth Equity
As our investment focus moves to the later stages, we are looking for control investments (acquiring >50%) or buying a significant minority equity stake (i.e. >30%) in a growing, established business.
Once again we are industry, and geographically, agnostic, believing that compelling opportunities can present themselves in many different sectors and parts of the world, but here we are focused on a particular size of company — those companies producing $2–10 million of EBITDA being our “sweet spot” (what many investment professionals refer to as “lower middle market”).
We like businesses that we can understand quickly, and that have a history (it can be a fairly short history) of consistent earnings power. We prefer businesses that have demonstrated an ability to earn positive returns on equity capital while simultaneously utilizing very little leverage. We again place a high emphasis on businesses with a sustainable competitive advantage and good industry economics which we expect can persist at least into the near future. And lastly, we prefer opportunities where management is already in place and willing / interested in continuing to run the business for many years to come.
In those circumstances, we can be a very good partner and offer a good home for owners looking to divest a majority of their business. We bring patient, long-term capital, and a preference for keeping previous owners very incentivized in the continued growth and success of the business. And because we only invest our own capital rather than that of outside investors, we have no pressure to exit our investment over any certain time period or take on excessive financial or operational risks just to “juice” the returns of our investment at the expense of the underlying business.
In addition to the above, we also have a top-notch digital marketing and branding outfit in house at Volta, which allows us to bring “strategic” value to any business that can leverage these areas for growth (which, these days, is just about any business).
If you are a business owner with approximately $2–10 million in operating profits and you are looking for the right financial partner to make an investment or acquisition of your business, I would encourage you to drop us a note or give us a call (http://voltaglobal.com/contact/).
We are very actively looking for new opportunities in this area, and can promise confidentiality and a quick indication as to our level of interest, typically within just 10 minutes.
Our real estate investments have an objective not unlike what most diversified investors use the asset class for — a hedge against inflation, a steady and predictable rate of return in the form of yield, and a chance of capital appreciation over time.
Two ways our approach may differ somewhat: A) we strongly prefer real estate businesses with an underlying business attached to them and where that underlying business has value-add upside of its own, and B) we occasionally try to actively manage the “duration” of yield within with our real estate portfolio.
We do look for partners in some of our real estate activities, ranging from ground up development to the acquisition of existing properties. If you have an opportunity that may be a fit to partner on, please get in touch.
Liquid Markets & Partnerships
Prior to the founding of Volta, many of our investments were predominantly focused on publicly traded markets — more specifically, in managing a group of hedge funds with ~$3 billion in assets at the peak. So while our investment mandate is much broader now, we do still actively manage an internal portfolio of publicly traded assets, ranging from long and short strategies in stocks, bonds, and derivatives, to more exotic asset classes that are still publicly traded but provide moderate to high expected returns with very little to no correlation to the broader equity and fixed income markets.
We also realize that with a fairly small team, we may not be able to pursue every interesting strategy we want to employ, and will from time to time place capital with external asset managers that have deep experience in a very specialized, unique, and also uncorrelated asset class that we are not set up to handle internally.
If you are a fund manager, or represent a fund manager that fits the above criteria for a partnership, we would be happy to chat.
One of our biggest investments of all is the investment we make in recruiting and developing the best talent we can find.
Volta Global corporate currently consists of 17 professionals based here in beautiful Miami, Florida, with expertise ranging from investments, operations, marketing, and a host of other hidden talents. This group supports not only the investment functions of our business, but also the ongoing operations and growth of our portfolio of actively managed businesses that we own a majority of.
We have several core values we prioritize in finding and retaining talent:
- Excellence in what you do: we view our team as more analogous to a pro sports team than a family. The environment is still quite collaborative and collegial, but everyone is expected to excel and success is measured by exceeding, not merely meeting, expectations set out when new members join the team.
- Intellectual curiosity: we want people that are eager to learn about everything and anything they can, not merely people who want to stay “specialized” in one narrow field. Because our investment mandate is so broad, and our business operations so variant, we need people who want to learn something new every day and think far outside the box to solve hard problems.
- Honesty: we want team players that can be fully trusted and relied upon to do the right thing, not people that try to put their individual financial or career success above the good of the team. And we realize everyone makes mistakes, so we want people who quickly own up to their mistakes and can independently correct their behavior to not repeat the same mistakes again.
People that genuinely have those values in vast quantities tend to make for a happy, productive, and exciting place to work, which makes coming to the office every day something we look forward to doing.
New ventures, small to medium sized businesses, talented people (we are hiring, by the way — see our current openings here), and potential partners — if any of our approach described above resonates with you, or you have your own thoughts to share with us, we welcome the chance to meet new people, please don’t hesitate to reach us here.