“We’re in. Let’s do the term sheet.”
Friday morning. Happy days.
After more than two months of near-daily contact, I called Mark.
No answer.
I messaged him:
“We did it. They’re in.”
An hour passed.
I looked at my wife and said, “This isn’t right. This isn’t how people respond. He’s going to walk.”
She was aghast.
Four days later, after a weekend of being ghosted, he pulled out via email.
Everyone involved was stunned.
Coffee, eggs and money
It began in the private dining room at the Botanical Hotel in South Yarra – “we haven’t been able to land the finance for one of our clients – it’s over $50M, can you make that happen?”
Niche market. Asset-backed. Complex proposition. Solid fundamentals and a genuine legacy play. Yes, I can make that happen.
My contact put me in touch with their client Mark, and we bonded over shared interests, industry experience, and a desire to get things done.
Contracts went back and forth over a week, then we got into it.
The first thing to solve was the gap between the project sponsor (Mark) and the sophistication of the capital stack he needed to interface with.
Whilst ‘build it and they will come’ works well for most industrial plays in Australia – and don’t we love commercial property as wealth hubs – ‘just let me build it’ doesn’t stack when you want someone to go on risk for $50M+ in a niche play.
Having the land and debt free title is a great start, though if you’ve ever driven a manual car and missed a gear, that grinding sound of the mismatched cogs – that’s what happens when you don’t give an Investment Committee (IC) what they need to make a decision, or even before that, your internal contact what they need to bring it up with the IC.
Where the fund was managing over a billion dollars, and running along in 4th or 5th gear, Mark was in 1st; and you can’t go from 1st to 4th!
We had to get into 3rd, or at least 2nd gear, and that’s what I did with Mark and my internal contact at the relevant finance fund over two months.
How To Set Sail To The Promised Land
If you want to build a ship, don’t drum up the men to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea. – Antoine de Saint-Exupéry
I first heard that from a friend in 2015 when we did the Landmark Forum and Advanced program together; they are about creating reality through language, taking total responsibility for one’s life and enrolling people in new possibilities, which are the fundamentals of making big things happen.
When it comes to your business, family enterprise or version of legacy and impact, people need to believe in your dream – not only that it is possible – that you are capable of delivering them to the promised land;
Where are we going, how strong are the waves and winds? If people drown, who will take over? Have you built a boat before? That didn’t leak? Who in the team can fix a boat?
What about the people where we are going? Do they know you? Are they eagerly awaiting your arrival – have you traded with at least a few of the more well-known ones before?
Your proposition takes verifiable work, which the lawyers and accountants in the room refer to as ‘due diligence’ or simply DD.
This tension between verifiable DD and dreaming of possibility is where we can play with and argue about valuations – let’s face it they are made up – even the most basic equation of a company being worth two or three times earnings relies on a future where the leadership sticks around to make it happen.
Specifically, what did we validate in this deal?
Constrained and heavily regulated supply, massive and growing demand, a long time for competitors to get established, heavy NIMBYism (Not In My Back Yard) for new developments, all great stuff if you’re a new entrant that can deliver – contrasted with being ‘an alternative investment’ (meaning it’s not stocks, bonds or cash) so a limited potential audience of private equity / venture capital to back it, a cash intensive build and an asset that requires specialisation to implement and operate.
Then we got into the leadership team and the strategic partners in the market that would support whether the project was inundated with sales or sidelined, the different state and federal regulations related to the conduct of sales and considerations for asset renewal and long term maintenance and profits.
With that locked away, it was finding a truly independent expert that has led this particular industry, knows what it takes to deliver because they’ve successfully done it themselves, that would validate the proposition and that isn’t the project sponsor!
This was really interesting to me, because from the funder’s perspective, what wouldn’t someone say to get their dream built?
Open The Right Doors
A genuine shout-out to LinkedIn here, which I joined in 2007 – that’s two-thousand-and-seven.
It has definitely had waves of appeal, though I adore how powerful it is to interact with people like you, dear reader, and it’s a great way to find those previously mentioned independent experts.
For nearly twenty years I’ve had the privilege to connect with significant leaders across every kind of industry in many places of the world, and at least 80% of my network has been met in person through attending business meetings or conferences.
I also don’t pitch people when we connect, and value who they are and seek to learn about them over time.
In turn, generally when I ask for help, because I’m not trying to foist a sale on them, they help – it’s human nature.
This is how I get to independent industry experts, or anyone really, within 2 phone calls, and if capital is a big requirement of your version of legacy, investors want to know three things;
- How much do you want?
- What are you going to do with it?
- When do I get it back.
If you can explain that and it holds up to scrutiny, you’re halfway there.
The other half is knowing the investor’s mandate, because most people get it backwards – if their mandate doesn’t match what you’re pitching, the whole thing is irrelevant.
I was pleased to successfully match my client in this instance with the first fund I contacted.
Why did I lose a $58M deal?
In simplest terms, the project sponsor got ‘an offer they couldn’t refuse’ to walk away, rather than taking on the challenge of managing significant debt and a 2-3 year journey to realise the project’s potential.
From day 1, we’d been discussing what their version of a good life, generational wealth and legacy meant to them, and every time we had a Zoom meeting I could see hand drawn pictures from the kids on the wall – the offer they got took care of all three, and that’s enough.
We’re only here for this one precious life; some of my clients are creating or transforming empires, some are focused on a single transaction; all are valid.
It’s about defining what your version of legacy looks like.
Then making it happen.
If there’s a significant opportunity on your horizon, but you don’t have the bandwidth, connections, experience or capital to realise it alone, that’s the conversation I’m here for.
