00:31:16 · James Bohannon
[00:31:16] S1: Yeah. I... It's a great question. So I think there needs to be an element. There's like this weird... It's very much like dating. Where is like if someone is out there, like, so desperate and you see it in their eyes and they're trying to meet everybody and you're like, alright, this person like clearly like can't raise any money and it's like gonna be bad. But if someone is like, it appears like, oh, this person is like confident and professional and has a good base of contacts already, there's just gonna be sort of more demand around it. Now I say that kind of glibly sort of half kidding, but there is a lot of similarities to that. I think finding someone that is... Has a really strong, like, that aligns with the thesis of what they wanna do and then is having select conversations and very thoughtful conversations with families. And then that name is sort of passed around amongst the family office community. Like that's the best way is to meet and engage with a family or two and have those families introduce you to a couple more families and just keep adding it one by one and tell your story, get someone excited about whatever thesis, offer to share notes on what you're seeing out there in the market, stay tastefully persistent, right? So persistent and aggressive because I think the LP wants to see that, But in a tasteful way that makes you want to root for that person, not in like an obnoxious way like 12 emails, why you responding type of thing. Ari Emanuel just came out with a book. He's some great references on how to be tastefully persistent and even being self deprecating, etcetera. But I think, look, referral is always the best. I think asking for the referral is a good move. And then I think when there appears to be some buzz around an ISP, it's like, and I see it all the time. Like right now, there's probably like, there's like three or four that are coming out of it. They're like up and comers that like people are talking about, which is awesome. The other thing that's interesting is like 2007, I mentioned, maybe like 2010 is like kind of the early, like the first class of these ISPs, the Garnet Station guys were early. I always talk about them. I'm a huge fan of them. They now have a big $6,000,000,000 organization. But once upon a time they were independent sponsors and they were early in that.
00:33:41 · James Bohannon
The whole like Harvard class, I know like 20 of these guys all sort of came out at the same time, built these amazing businesses. They have all like there's different pockets of diasporas of talent and capital and clusters and networks where everyone's sort of in these deals. And if you can get one of those clusters, if you can get in one of those clusters, either you worked at the same firm or they're sort of backing you or you intern for them or like there's some sort of connection to that, I think that's very powerful as well. It's really like there's like a network effect. Like if there's no connectivity to someone, it's a little hard because it's a marriage. And again, it's like it is kinda like dating. It's like if you need someone on a... I mean, I'm not gonna use the dating app reference because dating apps clearly work. But like if there's some, I mean, it's harder than dating candidly because you're dealing with like giving someone $10,000,000 for potentially seven years. Like having some connectivity or able to back check or I know who this person used to work with and I know who they came from and oh, it's a recognizable firm they worked for and my buddy invested over here. Getting to pencil that together is so crucial. And references in this industry are everything. And I think the really great ISP programs, like an EastRock, for example, always talk about references, references, references. And we are in the talent spotting game. And our... The greatest asset class is talent. I love that line. It is so true. And so the more you can sort of build that goodwill out there in the market, like, look, this person is aggressive, they're talented, they're honorable, they're ethical, they're going places. And if you can somehow put the, like, make the LP feel that you're gonna be successful whether they're in or whether or not. And that's where, again, it's kinda like dating. Like, I'm gonna, like, I'm awesome, and I'm gonna do great. Like, I don't need you. I'd love you for you... To you to be along the ride, but I don't need you. I'm gonna win no matter. Like, I'm going to win. Like, it's gonna be hard. There's gonna be ups and downs. Maybe it takes longer. But in the end, I will figure out a way to win because I'm betting my entire life and my kids and my house and my mortgage on this.
00:36:06 · James Bohannon
Like, I will not be stopped and I will break down doors to make sure this works. And I'm putting all my money in it. I'd love you to be a part of the journey with me. But if you don't want to be, I totally get that. And I'd love to sort of keep you posted on how it goes. Life is long, maybe we do something down the road. And if it's not you, I'm sure I'll find, you know, another great partner who like envisions like that attitude, I think is crucial. So it's almost like, there's no, there's no shortcut, there's no sort of trick to doing it. It's kind of like everything. It's one relationship at a time, which sort of gets you another relationship, which gets you another relationship and going from there. So, yeah, that's it.
00:36:52 · Mikk
[00:36:52] S0: Nice. Nice. Now a step forward when it comes to diligence and agreeing on terms. Something you've said before, actually I'm taking a step back. There are many of those independent sponsors. I've met them, I talked to them, great guys, many of them like you explained here and they have a deal. They've been working on this for the past, I mean, twelve, eighteen months. They have a kid at home, maybe even kids at home. They've been traveling the world. And now they find this finally, this family office who's like they want to raise, let's say, $1,015,000,000. And now this one family office says, yes, like we want to just commit the whole round. So you've said something interesting that even in this moment the individual should do diligence on family office, but so many times this individual is not willing to do that because for all those reasons what we discussed before there's just so much so much going on in their life, so much pressure. You really want to get into the game, get the deal done. So what what would you do in this situation? Or what's what's the right or or what is the way to go from here?
00:38:06 · James Bohannon
[00:38:06] S1: Yeah. I mean, again, it's like it's again like the like the if you're so desperate where you need you'll like to take anyone, you will take anyone because you just need the money. But if you have a lot of choices, you'll be way more thoughtful. And you're saying, alright, 10,000,000 from them or 10,000,000 from them or 10,000,000 from them. Like, let me learn about them a little more. And it's sort of the same dynamics, which is interesting to think about and talk about. And I think no matter what, even if you are desperate for the 10 and you only have one person that's good for the 10, like it is important to understand that group more and understand how they operate and where the capital is really coming from. Is it is it really... Who does it really belong to? Is it re... Like, are they registered? Are they... Is it just other families that are in the deal? Are they promoting someone else in the deal? How's the team compensated on that? That's something that people never ask, which is so important to me, or so important to me, like maybe because I'm in the seat. It's like how is the decision maker in this deal, first of all, is it a family member or is it an investment principal at the family office? And what is that investment principal's incentive on writing me that check? Do they need to crystallize carry in three years because this guy wants to get his 10% carry of the sort of net return that I'm delivering back to them? Or is he a family member? Let's say he's a son-in-law and yet he truly does want to just compound over the long term. And does he care about the tax? Like does he truly care about the tax implications? Kind of what are his goals and how are they different from the principal? And how long has that guy been there? Is he going to be there for a long time? Is he 28 years old and he's kind of running a ETA search process of his own and just kind of like, I'm not going to see him in the Wirewoods at two years as well because that can happen. And how big is their team? Like understanding more about the capital source is very important and following the dollars all the way back to the checking account, right? Because the whole financial game is just so funny. It's like a dollar's here, dollars here. Everyone is managing it for someone else. And then understanding how the family is involved.
00:40:28 · James Bohannon
Like, is this a family that gets a quarterly update? Is this a family that doesn't really care? Is this a family that really cares about the lower middle market? And their true joy is backing young talent because they built a big private equity business and this is their legacy. That would obviously be amazing, right? Like someone who's like, obviously, they want to make a good return and this is finance. They want to do great, but they also get a lot of joy in backing other sponsors and helping them build the business and being a supportive LP and showing up when times are tough. Understanding those dynamics are huge. And then like the family dynamics, the owners of the capital, like, look, let's say that guy is 97 years old and he loves... He's very involved and, you know, he wants to back a lot of sponsors, but like his his less admirable, you know, son is like a Bitcoin bro in Miami who wants to, who wants to go YOLO on some on some new meme coins, and he's just waiting waiting for his, you know, lovable Midwest father to pass before just stopping all commitments and sort of changing strategies. Like understanding the succession plan is really important as well And the mechanics of that. Think, look, I think respectfully, you can't understand all of that, but I think there is a way in the process to say, if I'm an independent sponsor, I'm gonna say, look, we're going into a partnership together and I wanna, you know, I'm putting all my cards on the table. You know how much money I have and what this deal is, what this GP commit is a percentage of my network. I'm sharing everything about my world to you. I would love to understand a little bit more about how you guys sort of operate and some of those questions. Think those are good questions to ask. Yeah. Love it. Great topic.