Want to talk about diversified portfolios? This week I closed on my second investment in small sized metal fabrication factories. I’ve spent the last 10 years in fintech and cashed out a decent amount of my stock to do this, but I wanted to find a real hedge against everything my peers buy into. There’s way too much fluff and slime when I looked for seed stage or even series A investing in tech. All the good companies are already accounted for if I don’t put my money with a vc who is taking 25% carry and preferential payouts. So I started going to local manufacturer association meetings, I shook hands and I told people “I’m looking to get involved in everything that deals with electronics components” You can do this too. It’s all guys in their late 50s+ or their kids and they want to talk to you. They love fresh blood and fresh ideas. By the second meeting, I met a few gm’s of factories who are looking to quit. I sent out an email letting people know I’m looking to buy after that meeting. In 3 months after I had factory 1 under contract and a gm who wanted to run the show. Everyone wants to talk to the guy who is promising vesting equity and performance based bonuses. Here’s the stats of factory 1 in the year I purchased: Down payment: $540k (I had partners) Purchase price: 1.9m Commercial interest: 5.6% Ebitda in the last year $930k Dividend: 115k The company does metal stamping for electronics housing. This week we closed on #2 Down payment: $765 Purchase price: 3.3m Commercial interest: 8.5% Ebidta in the last year: 1.8m We believe we can get a 200k dividend in the year The company does metallization of plastic shells and multi-metal emi shielding. If you see the synergies between the two companies you can see why we overpaid a bit. So far, I have only spent 14 days in factory 1 across the whole year. Across the three partners we have a lot of organizational management experience and hired smart leaders in daily roles. People are very willing to put in extra hours in this industry when you pay them in similar fashion to a tech startup. Our gm’s make $130/yr and get 50k in equity with potential 20% bonus stepped on goals. Did you know in metal fabrication most sales reps aren’t even paid on commission? Imagine when we told our first sales hire that he could make 8% of all sales. This industry is ripe for disruption and at the small scale you can really see a huge return. Over Christmas, I’m moving our payroll to Gusto and crm to hubspot. We might be the first in the association to do it. I’m still working my full time job. Tc 560k, 11 yoe People will argue year 1 of ownership did not beat the qqq or spy. I agree, but as the company grows we will. Also I’m not selling anything to you. I don’t want to be your fund manager and I’m not making a course. This is just to let people know about an alternative to the investing everyone else in our space is doing.
Ok, Congrats!
It seems like the move here will be to be the bridge between overpaid tech workers and this more traditional industry. Maybe allowing for bundling of investor funds to fund buyouts?
That’s family office sized p/e firms. I don’t have any fundraising knowledge but private equity is absolutely scooping up small shops across the country
You say you don't have any knowledge but your posts suggest you actually do have a lot of the best kind of knowledge, brother. You go on the ground and press flesh. You know what is actually going on what where the bargains are. We both know that those guys only use spreadsheets to see what is going on.
Your net worth?
i can tell this of a credible post by your choice of crm
I cannot believe how useful a lead magnet was for people searching “emi shielding company”
Congrats! Both on being able to cash out a couple of million dollars, and truly doing to the work to diversify. And thank you for sharing! Sounds real interesting, although I don’t know if many people have that kind of cash lying around. Especially with family responsibilities. I think you are right that in long term it looks like you will beat S&P 500
Across 6-7 guys you do though. There are smaller shops out there to get your feet wet. It’s definitely scary, but so is sending 50k on angel list to a syndicate
Very interesting, the only thing I will say is that this is not passive investing. It's a part time job.
Very true. I probably spend around 10 hours a week across all of this work and that spiked to 20 once we got under contract. I believe though I could rest on this if I didn’t have a real interest in learning more. One partner is absolutely absent besides signing agreements. Before this though I would spend hours every week evaluating seed and series an investments from the syndicates I was an investor in, so I never was absolutely passive with my money. And still I have underperformed spy for a while. This is what I believe to be my real chance to grow wealth though
You sound like someone who has found their purpose in life. The guys who post depressed "Is this all life is about, working and making money" post need to read this post Good job
What do you mean by going to local association meetings? With no background and no connections, you just showed up and said you have money to invest?
All manufacturers in the United States join different regional manufacturer associations. It’s part of your operating terms with the federal government. The us is very involved in seeing factories succeed so they help subsidize and form groups to let small business manufactures collaborate and ideally grow. Anyone can attend though. So I networked, attended a talk and told people I wanted to get into the space. It’s not a threat, it was “I want to buy since I know I can’t start one”
Bill.com pays 560K??
After bonus and stock, yeah
Very interesting.