00:02 Lincoln Welcome to Funds That Won, where we dive into some of the world's most renowned investment funds. We'll interview investment managers across the alternative landscape and learn how they built their million and even billion dollar asset management empires. We'll explore teams, structures, strategies, and best practices in launching and running alternative investment funds. What's up guys, today I had a conversation with Christoph, who over the past couple of years went out and bought several businesses. He purchased several, he sold several, and now he's in the process of starting a private equity firm. He shares his insights on buying businesses, what he does with management, and his strategy, and how he thinks about raising capital and the whole process. He talks about where private equity fits into a portfolio and how he's pitching his offering to his LPs. Before I let you in on the conversation with Kristof, I wanted to tell you three main reasons why I think Kristof is going to be successful. All right. Number one, he's validated proof of concept with his own money. So he's taken his own dollars, gone out and invested it into businesses. received a return, and now he's going out to raise money from other LPs. A lot of your investors, they want to see proof of concept from you before you start your fund. And he's already done that with several businesses. Ultimately, investors just want to know that you're not experimenting with their money. They want to see that you've had a proven out process of generating return. All right, number two is that he's confident in what he knows and he is humble about what he doesn't. There are multiple levels of technicalities in this industry and all the different facets from legal compliance to raising money. And there's a lot of different requirements when you're raising a $10 million fund versus a $100 million fund. And there's a lot of different requirements when you're a $100 million fund and a billion dollar firm. And Kristof recognizes this and he's brought in the team members and partners to understand and make sure that he isn't taking any misstep throughout this entire process. And then lastly, he is going to keep buying businesses, whether he raises the fund or not. Now I'm confident, you know, Christoph is going to be successful in this business, but his career, his occupation, his lifestyle now is buying businesses. It's no longer, you know, a nine to five or anything. He is buying businesses from sunup to sundown all day, every day. And he's going to keep doing it with his own money, regardless of the fund or not. When you are that committed, your chances of success are just exponentially greater. All right, it was a really fascinating conversation today, getting into the nuts and bolts of buying businesses, and I think you guys are really going to enjoy it. Hey guys, thanks for listening. As you know, we don't run ads on this channel, so if you could really help me out, if this podcast has added any value to you or your business, please subscribe, rate, and review. I would appreciate that greatly. Thank you. Where are you calling in from here?

02:55 Krystof So today I'm calling from close to Prague in Czech Republic. We do all the business in the US, but Post-COVID, I'm kind of like traveling back and forth and the Zoom opened a new world for us, I guess. So I'm kind of all over the place. Global citizen, I need to say.

03:12 Lincoln Yeah. Hey, that's great, man. I love it. Well, look, Christoph, why don't you start off by telling us a little bit about your background, your career and how you got into investing and ultimately working on private equity.

03:25 Krystof So I will try to keep the story short. So after high school, I basically went into business like on the first day. I think I get my graduation and then next day I started business or stuff like that. So I started like in a financial advisory like in the company. It was kind of multi-level marketing here in Czech Republic. So that was kind of introduction to finance and everything. Then I left SCARE because I didn't like what I saw. And then in terms of like how the business was running and the service that was that was provided, but it started the journey, right? And then I kind of doubled with other investments and then I started in the real estate. So I kind of, throughout my career, I'm saying I was an investor from my high school, basically, in the financial markets, then the real estate, then back to financial markets for a while. And during that time also starting and unfortunately closing a couple of businesses that were great ideas, but just in my head, nobody else's, right? So kind of like trials and errors and trying my best. And like 10 years ago, I really fell in love in doing business in the U.S. and expanding horizons and stuff like that. So I tried to get into U.S. business again, have done a bunch of stuff. And then at some point, I was looking for turning assisted, like a small homes to assisted living facilities in the US. And then I have done the research going to the US, going through different locations. And then I get back to my home country to check. And I was thinking like, why I'm still trying to start businesses from scratch when I'm not good at it. And I don't know how it arrived, but it was kind of download or whatever. And I was like, can I buy a business? Is that even possible? So I started to research that and I came up with a couple of answers on Google. I went to networking groups, but kind of like a buy car or fund launch for buying businesses. And then, yeah, I was able to buy three to this day. Two of them were like minority acquisitions. Sold two. And that kind of started the journey. And at some point I was like, I like the buying a minority, but at some point I was like running through issues with the business partners and different takes. And I was like, okay, now I'm looking to buy a hundred percent. I have my business partner, but we are kind of aligned why we bought the business in the first place, right? So it's different than going to the company that already operates and convince people that they should do. something else that they have done, right? So that was kind of another milestone. And yeah, I found business partner in one of those MNA networks. 18 months or so ago. And we made offers on a couple of deals, bought marketing agents in December last year. And now we have a LOI kind of signing a day for another. And during that time, I was thinking about how to scale like a larger and we can talk about that story a little bit. Yeah, but that brought me to, okay, what about even like raising capital and leverage from that perspective and be able to buy more companies and because there's a big retirement crisis in the small business in the US, help a bunch of more people, right? Yeah.

07:11 Lincoln So how did you purchase your first couple of businesses? Did you just use your own money? Did you use creative financing like seller financing? Or did you get small business acquisition loans? What was your process for going out and taking down these first couple of businesses?

07:29 Krystof Yeah, so the first two were more like adding other value, like my capital, so to speak, with a little bit of capital and seller financing and creative structures that get me into those minority kind of positions, which was great, great experience. And the one that we bought, the marketing agency that we bought in December was a little bit of equity and SBA alone in the US, which I know there is a bunch of new changes right now. It's a great opportunity, but obviously there is a limit to how big companies you can buy and how much you can do. So we kind of already are thinking a little bit ahead, like what we need to do right now to be able to scale once we potentially take advantage of all of these loans and the limits and stuff like that.

08:20 Lincoln Yeah, so walk me through your strategy a little bit here. So you're buying businesses. Are you planning on rolling them up and then exiting to a larger shop? Are there synergies? What sort of value add are you implementing in these companies? Can you talk to us about some of those points?

08:38 Krystof Yeah, sure. So first of all, we are focusing on the statistically, I believe they're like 1 or 2% of best businesses in the US and it's not the Apple and stuff like that, right? It's a small business that was in a business over 10 years and it's over $1 million of revenue. Like they're already unique and very small portion of the US business statistically, which kind of blow my mind. But it's true. And then if you are able to buy them, they are sold, which not many businesses on that level are sold. So it's really unique businesses that we are going into. But this is a small business that still is not wanted by bigger private equity companies and companies, right? And there is like a buyer's market in a lot of cases. We started the marketing because my business partner is in marketing for 20, 30 years. So that was like a natural fit. And we are looking for other business services just from the premise of any other business that we buy will need marketing, sales, finance, which I can provide like a high level CFO stuff, right? HR and other admin stuff. So you were like, Hey, let's build, let's build a kind of like own ecosystem to support other businesses. So we started with the marketing We are thinking about doing two, three other marketing acquisitions and then already looking for other businesses that we can buy. And so that's kind of the plan. So the plan is to create like a different industry verticals, marketing, sales, HR and stuff like that. And obviously there are synergies, there is cross-selling, there is huge arbitrage opportunity, because the businesses that we are buying, like $1 to $5 million of revenue, they're not wanted from the big money. But the big money has huge problems of their deal flows, because if they are looking for companies that they can make a sense of buying for a hundred million dollars, there is not that many of them, right? So on one hand, you have the huge problem of deal flow for bigger private equity companies, competitors that are hungry to buy companies and they have like $20 trillion or so of purchasing power. And on the other hand, you have the small businesses that 10,000 people retire every day. And I think like almost 10% of them own small business and they are not able to retire because there's not a lot of buyers. So that's another like a thing that we do. So we are trying to solve or solving the problem on the small market with those retirement business owners. And hopefully as we are getting bigger and create bigger companies, which is the start of our journey. But at the end, hopefully we will be able to kind of prepare the ideal targets for bigger private companies, private equity companies, I mean, or competitors in those specific segments. So that's one of those things. We have an option to go public if we want, if that's a potential other exit strategy. Or I think potentially we can have a fund focusing on other larger companies so we can potentially exit to potentially other funds or our own funds. So that's kind of the strategy. In terms of what we do after that, We called our buying group or our fund guardians of legacy because we focus on the business owners that care about brand, legacy, employees, and clients, right? Like everything. They don't just want to get the biggest check. They want money. That's completely fine, but they have different priorities. We take a huge responsibility of taking care of those decades that they put in and kind of take it to the next level. So that's our focus as well. But so we don't look to fire everybody and pretend that we know better because we don't, right? So there is a transition period. And then obviously like the finance things that are like cash flow things that are really easy to implement that most businesses don't look at. And also just the small business, if people want to retire, there's a lot of the times there's a kind of glass ceiling for the company, how far it can go because they are comfortable, right? They don't want to manage 30 people if they are managing five right now, but we won't. And those five people in the company, they want to grow as well. So I hope we are kind of adding unique combination of still being in the small business, right, but also opening a couple of opening like a carry opportunities for those key employees that are in those companies that we buy.

13:21 Lincoln Hey, guys, if you are interested in working with myself or our team, we actually select a few clients a quarter to work with. You can find an application on our website. I would love to see If you are looking to start a fund in any way, shape or form and need some help, shoot us a note. We'd love to take a look. So what's the term period on these businesses? Are you planning on, is this a 10-year target exit? Is this a five-year target exit? Is it open or is it predetermined? What does that look like?

13:55 Krystof Yeah, great question. So when I was doing like even like a consulting for businesses, I always told people like run your business as you want to keep it forever, but can sell it tomorrow, right? And that's what most business owners, small business owners don't do. So that's kind of the basic premise. So as I was talking about building ecosystem and different business services that then we can implement to any other business that we buy, we are right now starting to look at the manufacturing because there's a lot of, again, issues. We already have a marketing company that has great experience of servicing manufacturing companies, right? So there's the strategy of keeping it forever or take it public when it's big enough or like rolling it forward to other funds. But obviously there is just another opportunity that I guess we are buying 5-10 businesses in this section, like 1-5 million dollar revenue and we buy 10 of them and we will be in like 10 to $50 million of revenue and how much profit, I don't know, like 20-30% of the profit, right? Like the value is so high that it will be tough to not sell at that point, right? So keeping it flexible, keeping it flexible, but we try to make sure that the transition is as fast as possible. And then the management that is staying like professional management can run it relatively quickly so that the sellable asset relatively quickly, like in the first two years, potentially, that would be like a short period. But if we decide we want to keep it forever and just go with it, we can. So that's the basic thing.

15:47 Lincoln Yeah. And now you're, let's see. And so now you want to utilize a fund to go out and expedite these acquisitions. Is that right?

15:57 Krystof Yeah.

15:58 Lincoln So walk us through a little bit about uh, you know, how you plan on utilizing that and raising money and going out and taking this thing to market.

16:10 Krystof Yeah. So when we started, I was thinking like, when we start buying businesses, I realized like how, what problems we solve for the sellers. Right. And we already discussed that a lot. Also, I know that the bigger private equity companies, um, competitors, larger, larger marketing companies, for example, They have a deal for issues because there are not that many, uh, many, many companies that they can buy, right. Just from the statistical standpoint. So there's the gap first gap that we are closing and that's the, that's the opportunity. But I was also thinking about what challenges we can solve for investors. And we kind of put it even in the, in the pitch deck, right? Like I always go back to Ray Dalio that is saying like, what is the Holy grail of investing, right? Like you need to find investments. that are uncorrelated, right? And he said 15 to 20, like that's pretty hard to do. Like 15 to 20 things that are uncorrelated, like most things are tied to the stock market or it's the real estate market or the bond market or economy, inflation and stuff like that, right? So we even started to include it in the pitch deck that we prepare. We don't want you to compare us to real estate and stocks and bonds. You have to have it. That's a great thing. Have it, right? But you should diversify. You should have other stuff that are uncorrelated to that. And very little people have exposure to private equity in general. But if they have it, they have publicly traded private equity companies, right? But it is still tied to the stock market, right? The same as a real estate trust, right? So then most people don't have it. If they have funds, like private equity funds, like what we are talking here, like they have those bigger private equity companies, bigger private equity funds, right? So they are focusing on those hundred million plus valued companies. Still, small business is 50% of employment, economy, all around the world, right? US, Europe, everywhere. And if you have… So you want to start?

18:22 Lincoln Oh, go ahead.

18:23 Krystof Yeah. So if you have exposure to small business, it's probably one that you set up, but it's not investment, right? You are probably running it, right? So that's kind of like, I think, the solution that we are providing to investors with this opportunity that they can have one uncorrelated asset that is not related to these things that we discussed. Because I was thinking like if we are doing the fund and raising capital, like we need to solve issues to like problems to investors, right? And then have a thesis that also solves problems to the marketplace, which we already discussed. So that's kind of the basic stuff that I think it's important to discuss. So I am not saying it's better than real estate, right? It's just completely different. And people don't have exposure to that. So that's one part. The second part is if you want to solve the retirement issue that I think I heard that it's $11 trillion will change hands in the next 10 to 15 years in small businesses owned by baby boomers, right? Like we cannot do it with just our own capital, right? We cannot move the needle, right? So if you want to help more, We need to be able to buy more companies and it either could be more smaller companies or then grow to a little bit larger companies. That's the answer that I don't have right now, where we want to do 20 deals a year with a small 1 to 5 million, or we will go to 20 million, let's say in that. So that's where we are right now. And what's the best, better vehicle than the fund, right? Because right now, pre-fund, we have this opportunity like other deal. And we are thinking, we are potentially raising it as a deal by deal basis. But I have done it in real estate, right? Like you need to have investors and opportunity at the same time. That's basically the doing investment cash flow issue, right? Like you have the opportunity, but you cannot take advantage of that because you don't have a capital, right? So I think it's a great solution. I'm glad that I was searching for answers on Google and find you guys to have somebody that can walk us through that. Because it was the same question, like, can we have a fund to buy businesses? Let me see, right? And I googled it and I found basically your Bridger and Fund Launch, right? And then we decided to do Black Card and go with you guys. And it was an amazing journey and it was relatively fast, I guess, from where we are right now, pre-launch, but working on the legal documents and everything. and just being able to talk with you right now and be relatively condensed. I cannot do it a lot, so I'm trying my best. I'm usually going all around the world with what I'm talking about, but still kind of communicate better like what we are doing. And it helped us even with the acquisition side, right? Because we are talking to the sellers and saying, this is the issue that we are here to solve, right? So even the deal flow is better because we communicated better. It's just great. And we're just looking forward to scale from here and maybe have another discussion together and say, we have $10 million under management and been able to buy 10 companies. That would be great.

21:49 Lincoln That's right. Hey, it sounds like it's just around the corner for you guys. Hey guys, so if you want to learn more about investment funds, how they work, how they're structured, if you want to become a fund manager, how I became a fund manager, visit our YouTube channel for more free value. The link is in the show notes. Thank you. Well, that's awesome. Maybe let's end with just a few, you know, quick questions here. You know, what advice would you have for somebody who's just starting off, you know, either in their investments career or, you know, thinking about either, you know, just buying businesses or, you know, building a fund, like just what's, what's advice from Christoph?

22:35 Krystof Find somebody that has already done it. Don't try to figure it out yourself. You can do it, but it just takes so much time. So even when I had nothing, I find a way how to pay for speed, to figure out credit card or whatever. I'm not saying you do it, but I was like, if they know what I want to know, I need to learn. So that just helped me to go through issues or challenges that I had not going as fast as I anticipated I would, right? But even that's how I learned M&A. Now that's how we are doing fund and just having somebody that I can have a call with, right? And ask and have a coaching call and ask what we should do, what we should do about it. And I believe And it's interesting. I usually have done just a little bit, like a small amount of education when I started. But once we bought the first company, once we will have a fund launch, it's even more needed, right? It's not the end. It's like, you need more help because there will be other issues that I don't know about. Like an investor will ask something or we will buy this business and we will run to this issue, right? So I even spend like more money to have access to people that have done done much more after the success, right? Like a little bit before the success, so you pay for speed, but then having somebody to ask the questions and go to the next level, right? So that was the biggest difference for me. And add value, right? Like add value. So don't do it necessarily just for yourself first, like find a way how to solve problems, how to create value for investors, business owners, whatever you do. I believe in business karma. So you do a lot of stuff good for a long time and you build up this karma that something good will happen, right? Like you will find a good business to buy or you will find the investor that will want to invest in your fund, right? But you need to do good stuff before to kind of be worth having a lock, right, so to speak. So I don't know whether it makes sense, but that's just what I believe. No, that totally makes sense. Yeah.

24:52 Lincoln That's great. Do you have any habits that you feel like have attributed to your success that you do either daily or weekly or things that you would pass on to other people?

25:07 Krystof Yeah, so again, it relates to what we discussed right now, but I'm a huge fan of Tony Robbins. I'm also part of his team supporting events, working with his coach, and now the coach is going into the company that he bought. to do stuff, right? For our people, we just have a meeting today about it. So, constantly working on that. Yeah, and the habits is interesting. Like, I have different ways how to do habits. So, I always like to bring new habits, right? Like daily routine and then start to get bored a little bit with it and I need to invent a wheel and find something else, right? So, I want to have these but it cannot, for me, it cannot be repetitive. That's why I like buying businesses because it's not one business that I will have forever, right? I wouldn't be able to build a marketing company for 30 years. I would be bored like second year in it, right? So it even fits my personnel, I guess, right? To have a new stuff that we can work on, new deals and stuff like that. And the same thing, it's with the habits, right? But learning, having access to people that can give me advice and pay for speed and then never settle. And if I go off, and I start eating badly, at some point I will realize it and be like, hey, that's not who I am, right? Let's change habits, let's figure out a way. So habits is kind of interesting for me, it's always changing. So I don't know whether it's habit, maybe it's a habit of changing habits. It's one thing that I want to work with.

26:51 Lincoln Hey, well, thank you so much for coming on and chatting with us. It's great to hear your story. If people are trying to connect with you, where's the best place to do that?

27:02 Krystof Yeah, so the best place would be on LinkedIn. My name is kind of unique, so I don't think there's more people listed that are located in the US, which I'm kind of as well. So on LinkedIn, you can find me and it's the best place. Or I have like a myname.com website as well, but it's a little outdated. So yeah, LinkedIn. But thanks for this. This was great. Thanks for inviting me.

27:27 Lincoln Hey, it's great having you. We'll talk to you soon. Thank you very much. Thank you.

27:31 Krystof Yeah, thank you. Bye bye.

27:32 Lincoln All information shared are the sole thoughts and opinions of the author. Do not take any information as legal or financial advice. You should seek a certified accountant and a professional legal team for taking any further action. We are not selling or soliciting a security in any way, shape or form. This content is for educational purposes only and is not to be construed as financial or legal advice. Clients of FundLaunch or Black Card Capital Partners may maintain positions and securities discussed on this podcast.