Ep 6. Starting An Investment Firm: Chicago Booth MBA Shares Motivations for Launching His Firm and Lessons He Has Learned Six Years In
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In this episode, you will hear from a guest who, unlike his classmates who took corporate roles, decided to jump straight into entrepreneurship by starting an investment firm just months after graduating from Chicago Booth. Six years later, the firm continues to be successful. Listen as he shares the motivations, lessons, and advice he would give to other MBAs interested in pursuing entrepreneurship in the investment space.
Transcript
Victoria Hefty (00:01):
Hi, I'm Victoria Hefty, and welcome to the Post MBA Pivot Podcast, where I share stories of professionals who took unexpected, interesting or unique paths after graduating from business school. Today you will hear from a guest who, unlike his classmates who took corporate roles, decided to jump straight into entrepreneurship by starting an investment firm with a partner just months after graduating from business school. Years later, the firm continues to be successful. Listen as he shares the motivations, lessons and advice he would give to other MBAs interested in pursuing entrepreneurship in the investment space. As always, I like to dive right in and get the story going.
Victoria Hefty (00:45):
What was the background or motivation for going to business school?
Post MBA Guest (00:51):
So there's a couple of points there to touch on. So I had ambitions early on coming out of undergrad to continue my educational pursuit, just didn't know what that looked like. I majored in undergrad, accounting in undergrad, and realized quickly I didn't want to go the auditor tax route or big four. So the world started to open up to me as far as optionality. However, I realized to really excel in my career, it was a need to further my education. So luckily I had a mentor who was able to give me some really great advice about tier one business schools, the purpose, why to go, when to go. So that was some of the background. Then lastly, I had aspirations to be a top leader at a Fortune 500 company. And as I looked at the various backgrounds, time and time again it was the same 15, 20 business schools that were named. So wanted to understand more about that world and why that was, so that's what really led me to business school.
Victoria Hefty (01:58):
And so when you were at business school, were you one of those people who sort of knew what the first post MBA role was that you wanted to do, traditional banking, consulting, marketing, et cetera? Or were you like, I'm going to play this out and see what actually interests me? Or was there a third option?
Post MBA Guest (02:18):
So my thought going into business school was largely focused on the entrepreneurial route, and I felt like I could go back to the corporation I was at the time. It was great company, great brand, and thought that would be a great experience post MBA. So as that is the quote unquote BATNA, I was really focused in on how do I maximize my opportunity during business school? So while I was there, did not do any resume drops, no job fairs or resume submissions. I was really focused on the entrepreneurial route and that was the path that I chose.
Victoria Hefty (02:58):
And so post business school, did you jump right into entrepreneurship or did you take a corporate role?
Post MBA Guest (03:05):
No. So post MBA, my business partner and I started an investment firm. So that was the post MBA experience. So probably October-ish of that year, we officially launched. But soon after business school, we hit the ground running.
Victoria Hefty (03:20):
And so I would love to know sort of a moment that you had when you launched this, where you kind of felt like either your business school journey had been worth it, or you kind of felt like you were doing exactly what you were supposed to be doing, whether it's right after the launch or during the launch itself?
Post MBA Guest (03:38):
The business school was worth it. Showed up and still shows up today in just different ways. So it could have been relationships, network, calling on very seasoned alums in the space. It was professors, it was the administration. And then sometimes there was actually things in the classroom. So certain items in my supply chain class, economics, competitive strategy and negotiations. I would say that was probably one of the ones that have been most helpful. I had a focus on behavioral economics and organizational behavior. So negotiations and managing organizations have really shown up day to day, and I would say more so today than it did when we started the firm.
Victoria Hefty (04:24):
So how many years have you been running this investment firm?
Post MBA Guest (04:28):
Six years now.
Victoria Hefty (04:29):
In that six years, what would you say are two or three moments that you feel best represents either a challenge that you overcame or something that led you to where you are here, still with this investment firm that you launched? Because a lot of people don't make it to this point.
Post MBA Guest (04:48):
So there was some advice we received early on about, this is a relentless pursuit. There've been a couple of key moments where the perseverance was the reason we were able to make it. So in our world, the sell cycle quote unquote is probably six to eight months. There were a transaction that we worked on that took over three years. So that was a relentless pursuit. And the result has been phenomenal thus far, but there were very triumphant moments during that process where either sellers walked away, or the financing didn't show up as we thought it would, or diligence findings came up. But all in all, we were able to stay focused on the end result and it's proven out to be a great thing thus far.
Victoria Hefty (05:37):
And so what sort of advice do you give people if they're debating, whether they should just jump in like you, or maybe perhaps do a couple more corporate or non-profit roles before they jump into this space?
Post MBA Guest (05:51):
So there's a couple of, I would say attributes that one has to have before thinking about jumping in. So being naive was one that I didn't know what I know today. So if I knew, would I do the same thing? I'm not sure. And not to say because it was a bad decision, but six years of learning lessons is thrilled. So the other one is risk. So my parents were entrepreneurs, owned a business. My aunts, uncles were entrepreneurs. And I've seen cycles, whereas they may have owned real estate, maybe they've owned consulting businesses, maybe businesses in the automotive sector. And I think for me, I was okay with, what's the worst that can happen? Had an MBA from a top institution. I had corporate America background. I had great relationships. What was the worst that was really going to happen was my mantra early on. So I think that was a big piece of it as well.
Post MBA Guest (06:52):
And lastly, I'd probably say, if at all possible, have a business partner. I would say that's been a tremendous, tremendous mutual benefit for both of us. I think both of us would be successful, whether I know both of us would be successful regardless, however one plus one definitely equals more than three in this case. So we compliment each other well, bring different skill sets, relationships, industry experience, and in my opinion, that's been the recipe for success. I mean, timing, and luck and all those things go into it. But I think having the right business partner is probably number one.
Victoria Hefty (07:28):
I always see a lot of people say, be careful about the person you partner with or look for this traits. I'm curious for you, what are one or two traits that either you see in your business partner or you see in other successful investment firms that if someone is interested, they should look out for or should maybe hone in on?
Post MBA Guest (07:50):
Number one probably be ethics and values. So I know if I'm not there, if he's anywhere in the world and he makes decisions on behalf of the firm, now we may not agree on maybe the approach or even the decision, but I know it would be ethical, I know it would be within my values. So in the world of capitalism, I think that's really, really important, because it's very easy to cut corners, it's very easy to be in situations that become gray. And having someone who I can trust in that regard has been key. The second thing from a skillset standpoint. So as I mentioned, I studied accounting. He was a history major and professional saxophone player.
Post MBA Guest (08:33):
So it's really a tale of two worlds. We both had a desire to have this pursuit of what we thought was greatness and success. And that was something also early on we touch on. And still today we touch on it, what is actually successful for us? Because chasing a number isn't the goal for us, so it has to be something more than that. And being aligned, not just on, hey, let's make money, but also, let's have great customers, great clients, invest in great businesses, support strong management teams and operate our business with this type of ethos, it's been pretty successful thus far.
Victoria Hefty (09:17):
Well, I do want to take a step back because I don't think I actually asked this question, what sparked the interest in actually thinking of starting an investment firm? Because that's, to me is a whole different league of entrepreneurship. What was sort of that inspiration for even thinking of doing something like this?
Post MBA Guest (09:34):
So I was introduced to a book called Why Should White Guys Have All the Fun by Reginald Lewis. As I mentioned, my parents owned a business, but then I saw an individual who I can relate to buy a billion dollar business. And that was the game changer. And from then on, it was, well, what is this industry? How do you get into it? And I didn't know of it as the institutional world, I knew of it as the ability to acquire companies in a certain manner. And that really sparked it, because I had seen what my parents done, and I think if they would know what I know, they may have done things differently, as far as capital markets, structure, fundraising, banks, what to buy, how to buy, when to buy, all those things. So that really sparked my interest in the space.
Victoria Hefty (10:23):
Was there something even now that you can remember in the book that really stuck with you, or was it just more of the whole just introduction to a world or way of thinking, a manner of thinking that you hadn't really thought about before?
Post MBA Guest (10:35):
It was probably the latter. For me, it was just the idea that someone had done it. And it wasn't on a scale of, okay, he bought the largest international company and across the U.S. It didn't matter ethnicity, gender. He was just the number one in that category. And the way he went about his journey, which was just documented, he stayed true to his values, stayed true to who he was, did not waiver on that, and still was very, very successful in the 80s, in a time where the finance market definitely wasn't as diverse as it is today. So what he was accomplishing back then, he's a trailblazer for, I think a tremendous amount of folks, at least in the financial services and other parts of the economy.
Victoria Hefty (11:26):
Did this happen before your MBA and you thought the MBA would help sort of fill in some gaps, or was this during? I'm curious how sort of the timing works out.
Post MBA Guest (11:35):
It was after I had already applied.
Victoria Hefty (11:38):
Ah.
Post MBA Guest (11:39):
So after I applied, so my story was already written. I didn't change my narrative in my interviews. So that wasn't ever really discussed. During my interview process I stuck to, hey, this is my background. This is what I want to do. This is why. But I knew ultimately that's what I wanted to do. Once I learned about it, also had same mentor who introduced me to the book was also starting an investment firm at that time. So I worked for him at night for months before business school, and that's how I started getting into the space. Then went to Chicago business school, was able to work at another investment firm while I was in business school. So I was doing that full time, doing the MBA full-time, and then was able to launch the firm. So once I was aware of it, I was just trying to soak up as much knowledge as possible.
Victoria Hefty (12:28):
Exactly. I can imagine. And so I know it's pre MBA, but what sparked your interest in accounting? So I think what I'm trying to get at is, I've learned to not make assumptions about these sometimes random moments that lead to you sort of picking a career trajectory. So with both parents being entrepreneurs, where did your interest in numbers come from? Was that just like you thought it was a good field? Or were you genuinely interested in it? Or how did that come about?
Post MBA Guest (12:58):
So I was always really strong in math, math and science. When I entered undergrad, I was I think pre pharmacy with a chemistry focus, and that was because I enjoyed AP chemistry, but not really the sciences to that degree. My brother was in the business school at another institution. My father had studied engineering. So I was like, all right, well, I don't want to be like him, I don't know why, but it's true. I was like, all right, I don't want to do engineering, he did it. My brother was doing finance. So I was like, all right, I'm not doing finance if my brother's doing it. So the school set something up where I was able to meet with the heads of all the departments in the business school. Everyone pitched me on why their major, why their focus.
Post MBA Guest (13:44):
And accounting had decent salary, it was super stable. And this was during the last recession. So it was at a time where hearing stability made a lot of sense. So it was, okay, there's always a need for accountants. It doesn't matter what the economy's like. Pays decent. And we have a five-year program where you can get a master's degree. So it sounded pretty interesting. Well, one thing they told us was it's the language of business. And I felt like once I had a firm understanding of accounting, it will give me just a strong basis of very technical, but also had this abstract component of it as well. So I thought it suited me pretty well. I wasn't really into the creative marketing, management seemed pretty bland, and accounting just had, I think a level of technical skills required that really interested me.
Victoria Hefty (14:41):
So fast forward, you have this investment firm. When you launched it, was there ever a moment of, we can call it imposter syndrome, where you're like, I know I want to this, but there's something real that happens when you announce it and you sort of jump in like you did? So how did you either handle any fear or imposter syndrome that you may have had?
Post MBA Guest (15:03):
I was in a situation of sink or swim. The imposter syndrome maybe showed up afterwards in different ways. But at the time it was just the grind. And early on it's sink or swim. So I don't think when I announced it that really meant anything to anybody. I don't think there was a defining moment at the beginning where I felt like that. There were definitely times where I realized I was more naive than I had originally thought, because situations had come up that never had experience, and I mean, obviously today still. But what I realized is having the great people, mentors, counsel, accountants, whomever to provide support, that's been key since the beginning.
Post MBA Guest (15:50):
So it wasn't necessarily that I probably even felt like I had the imposter syndrome because our network allowed for us to be able to reach out to subject matter experts on most any topic. So it's not as if everybody will invest in our transactions in the firm, but it was more so sometimes the value I believe is knowledge, introductions, relationships, and being able to get 15 minutes on someone's calendar, that's invaluable a lot of times. So I think that was the most pretty helpful early on to us.
Victoria Hefty (16:27):
You mentioned that it wasn't until later. I would love, again to the ability that you can share, one moment where you did have, maybe because it was success or something happened, but you were put in a situation where you were like, okay, I'm not so sure about this, where you did have a moment of either fear or imposter syndrome.
Post MBA Guest (16:45):
In my mind, the knowledge was the key. And I knew that we knew how to acquire business. So that couldn't be taken away from me. And we were ethical. We had strong values. I think people generally like us. So it wasn't ever a time where it was like, all right, there's fear or doubt of not being as quote unquote successful. There were definitely times where it's more overwhelming. So you know that success is on the horizon and you know that's going to require just this incremental 10%, but what's about to come over the horizon definitely early on was like, oh boy, are we really ready for this? Or you acquire your first company and say, all right, well, you have to go and tell the employees here you are. There's no script for that. It doesn't matter how many times you've done it with someone else, when it's you and your business partner, the CEOs, the world's a lot different.
Post MBA Guest (17:48):
So those were probably moments where really just had to say, all right, I have no other option, I have to do it. There's two of us, so if he doesn't do it and I don't do it, it just doesn't get done. So I think early on, we just had a sense of confidence as well, that we were going to get this accomplished, it is going to be successful, and there was no other option. That failure was an option it still is an option for us. So I think that's been something we've stayed focused on.
Victoria Hefty (18:16):
I love that. So actually, I would love to know when you look back at your first deal that you made, what are two things that stand out about it, or two moments that when you think about that time that come up to mind, given that you've been doing now this for six years?
Post MBA Guest (18:31):
So couple of moments early on, there was two things. One, pre deal. So we've had great, great, great advisors since early on. And there were times during that deal where we actually did not know how we were going to get it done, just fundamentally there was ... It could have been 10, 15 things that were all just red flags, or high hurdles to get over, or seemed to be if you were outside looking in, there's just no way. Where's it going to come from? How are these guys going to pull it off? These conversations we would have with individuals who would say, basically what you view as a big problem really isn't. And how about just thinking about it from this perspective, and why this person actually is probably on the same page as you, you just don't realize today. Or, hey, this actually happens all the time, guys. It's normal.
Post MBA Guest (19:30):
So those moments early on where we were able to call folks who would give us 15, 20 minutes over the weekend, late in the evening, early in the morning, and just say words of advice and also supportive to what we were looking to accomplish. And then afterwards, I would say we became laser focused on how we could drive compounding returns, and that was through knowledge, relationships. And so the first deal really set the tone for the firm as far as industry, types of deals, because there's a narrative that takes place, and one likes to keep being able to connect the dots. So we like to say our story hasn't changed for six years, and now it's modified, but it's really, we've stayed true to who we are.
Victoria Hefty (20:27):
So if you had to say for anyone who is perhaps, I don't know if you encounter a lot of them, career switchers that now want to work for an investment firm, do you ever find yourself in that position of having to either hire or encounter people that are coming in from a different career background and sort of want to enter this world?
Post MBA Guest (20:47):
Yes, definitely. So today I'm involved on a couple of organizations. But networks are large, but also small, as you can imagine. So I mean, probably three or four times a quarter, I'm talking to individuals about either their journey, my journey, what a journey may look like. So that's something I still like to stay involved in is trying to be helpful to others. And that could be everything from they're looking at buying a company or they're looking to enter in the investment management world. And as far as career switchers, I have no issue with it. I think that there's definitely attributes and skill sets that can be translated from one thing to another. Like accounting is the basis of financial modeling. So once I realized, oh, these are just accounting statements with projections on top, that was very simple in my head.
Post MBA Guest (21:40):
Like, okay, now it's different story of how do you create an Excel from a blank document? But just fundamentally, I knew how accounting statements are actually made, from the time you have a blank sheet of paper, and you starts with debits and credits for a whole business life cycle. So having that understanding translated to this world in a certain manner. And I think that even my business partner with history, he studied number of folks in the entrepreneur ... If you can imagine wealth creation in this country, largely it's come from a lot of entrepreneurs. And studying those entrepreneurs, there's certain things today that we've brought to our firm, certain strategies, certain perspectives, certain ways that folks have done things for hundreds of years that have worked.
Post MBA Guest (22:30):
So I think that the term career switcher, I feel like is one that just helps people weed out folks, because what does it really mean to be a career switcher? I think that there's a lot of ways to translate certain backgrounds and skillsets to most careers.
Victoria Hefty (22:48):
Yeah, definitely. So do you see more people coming to you from certain types of backgrounds that now want to pivot or translate their skills into investment management world?
Post MBA Guest (23:00):
I see today more entrepreneurs who have interest in buying companies. So these are individuals typically who are coming out of business school, three years out, five years out, just at certain points of their career where they're saying, I don't want to be in corporate America anymore. I know I have a certain skillset and knowledge, and I know that there's an ability to buy companies. How do I do it? So those conversations I'm having. So it's individuals who are looking to enter the world of entrepreneurship through acquisition.
Victoria Hefty (23:36):
I love that. So obviously I know you have full blown conversations, but as we tie this up, what are two pieces of advice that you give someone just to that? Because I could imagine that we have a lot of people who are post MBAs, have done sort of the three to five year route of different corporate roles and now want to buy a business. So they call you. What are a couple of things that you sort of consistently say to people who want to do that? Whether it's a resource, whether it's a piece of advice.
Post MBA Guest (24:02):
One is focus. So I think being focused on a certain industry, a certain sub-sector, a certain geography, a certain size, but be focused. And the second is be all in. This isn't, in my opinion at least, it's not a path where you can be 50/50. Or hey, if it doesn't work out in the next two or three years, I'll do something else. Or maybe I'll do it in six months. Or a lot of ifs and maybes. And I tell people, well, if you're not going to really do it, don't do it, because you're going to waste a lot of time and probably six figures of money if you go far enough along and you're not serious about it. So be all in, know what your risks are, but know what the rewards are too. And if you're the risk reward shakes out to it's beneficial, pursue it. I can introduce you to folks who have pursued it in host of ways. But be all in if this is the path that you choose to go down.
Victoria Hefty (25:05):
And so final question. As you think about you even sort of retelling this story and you look back on your MBA experience, and sort of it is a pivot in many ways, right? Because not a lot of people just jump right in and start their own investment firm. How has retelling this, what feelings, memories, emotions come to mind when you think back to your journey over the last six years?
Post MBA Guest (25:28):
I still remember the breakfast where I was told it would be a relentless pursuit. That's number one. And I would probably say that the second thing is tough conversations sometimes are the best conversations. And that can be, I guess opposing conversations, so buyer-seller or just some type of adverse situation. It could be internal conversations. But I'd say the tough conversations, having those, down the road they usually are rewarding. Lastly, I think the focus on ethics and values is not spoken enough about in business. And I'm not to say this is a world where you cannot go pursue capitalism wholeheartedly in full force. I mean, that's the pursuit here. It's maximizing profits, wealth, however you like to define it.
Post MBA Guest (26:24):
But there is a way to do that with ethics and staying true to oneself. I think that's the part where I've found to be rewarding, is the longer I've gone on this journey, the more I feel like I can be who I am. Early on it's like, well, maybe it does look like imposter syndrome because you almost feel like trying to fit a certain mold. Now it's, I realize that the more rewarding relationships are ones where I am who I am, the other person is who they are, it all works out to be great. So I would say those are some of the things that I think about.
Victoria Hefty (27:05):
Thank you for listening to this episode. If you are interested in crafting your next career move or reading the transcript of the conversation, please visit postmbapivot.com. Finally, if you enjoyed today's discussion, make sure to leave a review and subscribe to receive the next episode.
