FULL TRANSCRIPT

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Slava (00:00)

In this episode of Smart Humans, we talk with Travis Jamison, who's the founder and CEO of CapitalPad. He talks to us what it's like to use his unique background to then start 12 businesses and then convert that into a platform called CapitalPad, where others can invest with him into these small and medium sized businesses. He talks to us what it's like to find these businesses, how you evaluate these businesses, and then how do you get involved. And then of course he shares with us his opinions for the market, his...

profile on what he likes to do and of course his predictions for three years out.

Slava (01:02)

Hello and welcome to the latest episode of Smart Humans. Super excited for today's guest. Somebody who knows something about a topic we haven't covered very much, which is investing into small and medium sized businesses. We have Travis Jamison, the founder and CEO of CapitalPad. Welcome.

Travis (01:19)

No, thanks for having me. Honored to be considered a smart human.

Slava (01:23)

Absolutely. So let's just get started with the beginning, which is how did you even get into alternative investments and how do you get eventually onto this journey? Where did start?

Travis (01:34)

probably like a lot of people, a founder. So I've probably started about around a dozen companies at this point, everything from e-commerce marketing agencies, some SaaS companies, investing platforms, communities, like just absolutely everything. And then over time kind of sold a few of them, but some management teams in place for others and then slowly but surely start allocating capital to things. And, know, kind of went for the types of assets. knew the best. It's kind of how led there.

Slava (02:02)

What was the first company?

Travis (02:03)

The first company I ever started, it was a health supplement actually. That was a long, time ago. Maybe like 16 years ago, something like that.

Slava (02:10)

What year was that you think, if you can remember?

Nice, so 16 years ago is like 2007, 2008.

Travis (02:22)

Yeah. Yeah. Great. Great time to be doing companies, right? Yeah. Well, but to be, it didn't matter to me because it's not like I was eligible to prevent your capital or even know how to do that at the time. It was all just bootstrapping literally like bartending and playing poker to fund my first businesses. very, very small stakes things here.

Slava (02:26)

right around the market crash.

What did you do right before, so you were bartending, was that your actual job before you started your first company?

Travis (02:50)

Yeah. So, I dropped out of school to kind of start my first one and, you know, bartending and poker was kind of the, the way to fund that. So I've never actually had a real job. I mean, I've been like, you know, personal trainer and stuff like that, but not like a real, real job. Never had one. Which makes my companies kind of interesting because I don't have these, like these foundations that everyone else has worked off of. So it's kind of starting fresh from each one. And I think in a lot of ways that's worked really well. Sometimes maybe a little bit of strong, like

existing structure would have helped. But overall, I think it's pretty fresh.

Slava (03:21)

So wait, so far I've heard personal trainer, bartender, poker player. So that turns into starting a dozen companies. Give me some more background there. How does that all happen? What's in your, are your parents entrepreneurs? Are they the opposite? Where do you think that DNA comes from to go from that to all these companies?

Travis (03:27)

Hmm

Not, not really. I think, I think I'm just honestly, one of the lucky ones. Like some people have the entrepreneur gene and some people don't. Now it wouldn't have happened on its own if I hadn't been, you know, read certain books that were introduced to me or like met certain people who like led me down the path. If I had just left by myself, this never would have happened. But I think I kind of had that gene. And so when you, you know, get helped along the way, then it, it just spurs it.

Slava (04:08)

Nice, what would be one or two of those books?

Travis (04:10)

it's so cliche at this point, but honestly, the four hour work week, was the first thing that changed it all for me. I've seen like, cause it's like a blueprint really for how to start the type of business that I was looking for at the time. so I actually did it. So I, I created my first business. It was kind of on autopilot. went and lived on an Island in Thailand for a year. I went and yeah. And there was, there was a marketing agency kind of got started at the same time as that, because I got really good at SEO early on.

Slava (04:30)

This is the health supplement.

Travis (04:40)

But yeah, I did that. I like lived on an island in Thailand for a year. I ended up popping around the world for about a decade actually. now of course, over that decade, I wasn't just, I learned a little, excuse me. learned like the Island life that we were all looking for. It wasn't really the life I wanted longterm. but the, kind of life of freedom that that book, talks about did work quite well for me for a long time. Now I'm back in the U S I have a house. I'm like a normal dude now, but, it was great at the time.

Slava (05:10)

You're not on an island.

Travis (05:11)

Not on an island. I'm in Asheville, North Carolina. I'm in the mountains and like my house, like nothing, nothing crazy.

Slava (05:15)

So 12 companies, are they all very similar, totally different? How does one start 12 companies?

Travis (05:22)

all totally different actually. if there was, like a grain of like similarities in the early ones, it was probably be, algorithmic based. So I kind of get like search algorithms, whether that's a Google search algorithm or an Amazon search algorithm or something like that. And so you can make products around that. I kind of like, so when I first got into SEO, it kind of replaced my poker, love because I'm like, I just like,

hacking systems and like beating stuff and like SEO and like beating the Google algorithm was more fun than, you know, trying to beat the poker algorithms will say.

Slava (05:58)

So at school, were you good at like math and stuff?

Travis (06:01)

Yeah. Yeah. Yeah. I was pretty good at everything. I, but I am ADD and which means, which means like classroom settings, I just kind of get this board, like I'm fine. You know, I graduated with honors. It was fine, but like, I'm just kind of bored with stuff. but like the flip side of ADD people don't talk about is you have this ability to hyper-focus on things that you find quite interesting. And I'm so lucky, like pretty much all the, entrepreneurial endeavors have.

falling into that. Like I'm just getting, I can hyper-focus on stuff and get really deep into it just work for, you know, 10, 12 hours at a time without blinking.

Slava (06:39)

For others that might not understand, what does that mean you took your knowledge about poker to then focus that on algorithm based businesses? What does an algorithm based business mean to you and how would you explain that?

Travis (06:50)

so I didn't like my first supplement it, you know, a health product. It, the only way we got people there was from Google. you know, SEO is quite different than, but if you learn how to, how the algorithms work, then you can optimize your businesses for that. so take Vincent, for example, you know, if we invest you for, ranking for investing newsletter, well, that's going to be at the top and that's, you're going to get the customers that way. So.

It was just kind of like a game to beat those types of things that worked really well for my personality.

Slava (07:22)

Got it. Any other high level suggestions? I know you probably do an entire podcast or book on just that, but any other suggestion or two for folks thinking about how do you backwards engineer the algorithm hacking?

Travis (07:34)

Hmm. It's not, it's not the same now as it was then. probably, I mean, if I was young and starting off, it'd probably be on like the Tik Toks or something like that. Like those algorithms, which I'm, I'm not as knowledgeable on that anymore because I don't care to be, but you know, the, the, young guys will probably get more from something like that than a regular SEO at this point. Although I think SEO still crushes it. I mean, it still does really, really well for me, but it's a different game at this point.

Slava (08:02)

Got it, so then you went from creating all these businesses to now more investing into businesses, is that right?

Travis (08:07)

a hundred percent. Yeah. So the, sold probably half of my companies and then the other half of kind of have management teams in place. some of which, I do absolutely nothing with some of which I have like, you know, our call a week with, you know, the really talented managers running stuff. And so it naturally progressed to me just allocating capital to places.

Slava (08:27)

Now in terms of your own personal net worth, how much of it is tied up in these businesses?

Travis (08:34)

probably, I don't know, a third, maybe a little more than a third is tied up in the companies.  quite a lot of my cashflow is tied up in this company. obviously, but.

Slava (08:46)

Got it, and then in terms of like the other all category asset classes, how much do you think you're putting into those versus into the public markets like typical stocks and bonds? You know how people talk about like 60, 40 or whatever. So what percentage of viewers do you think is equity? What percentage is bonds? And what do you think is all these alts?

Travis (09:05)

I'm, I maybe have 20 % in stocks. have zero bonds, other outside of T-bills. I mean, I have a ton of T-bills, but those don't count. So it's pretty much all some sort of alternative investment. Yeah.

Slava (09:20)

Nice, so what's underneath that besides these small businesses? So are you crypto, are you art collectibles, real estate, private credit?

Travis (09:28)

It's, really changed over time. I was quite active in the venture space for several years. And then in 2018, I thought it stopped making sense as much. And so I stopped then, and in retrospect, I think that was a pretty good time to stop. Like, I don't know if you've deployed capital from a VC fund in 2020, like you're toast. That fund is toast. so I just felt like the, the valuations got too high. There were too many businesses that should have been funded getting funded. just turned into funny money.

so kind of stop there, but obviously venture is insanely illiquid. So I still have quite a large venture portfolio that I'll probably still have for another decade. even now, did that, did a bunch of real estate syndication stuff and, in retrospect, I, I just don't understand real estate. I think it's great for a lot of people. It's just not really my thing. I didn't get my ass handed to me too much. cause you know, with these ventures, right? Spikes, lot of the, a lot of the commercial guys got destroyed.

I'm not much into the collectibles and like that style of thing only because I think it's fine for some people. I've seen people crush it with it, but it seems like the asset value is only based on like, what someone else will give you like on a later date instead of some like economic benefit underneath, you know, like a collectible car. Awesome. You can't replicate it, but I don't know how to value that. And so

through those things. I've done a lot of like private equity stuff, which I'm pretty comfortable with. Just kind of real businesses kind of called out to me the most.

Slava (11:03)

And when you say private equity, mean investing into some other funds that invest into private equity stuff or doing it? Got it.

Travis (11:08)

Yeah. Yeah. Been in funds, been in some of the like the GP stakes funds, which I love where you get a little bit of the ownership company, management companies of the private equity funds. So you get like the benefits of the other underlying like fees and stuff like that. But also get the benefit of like the portfolio upside and good cashflow along the way.

Slava (11:25)

got it. What were your thoughts on crypto? You didn't mention anything on

Travis (11:30)

yeah. So, I mean, honest, I crushed it with crypto. was there really early and then in the 2020 bull market, I don't know whenever it was something like that. defy and all that. I, I just crushed it. some, a lot of it personally, a lot of it through funds, but I think the big differentiator is I, I never really believed it that much. I just like sniffed out the opportunity and said, this is it. And, actually publicly like in a blog post, like called like, this is the top.

Like I have my insurance salesman friend is asking me how to buy. My mom's asked me if she should buy Dogecoin. I'm like, no, no, this is, this is the top. I, I bailed and I still have some like long-term Bitcoin, but I'm a, I'm not a diehard. like, eh, maybe. but it also, it's not as interesting to me as it used to be. and so that, that early time, especially like the DeFi, was like, yeah, we all know it's a little bit of, well, actually it's a lot of bullshit, but there's like a

a grain of truth, like maybe it's the future of finance. And I just don't believe that as much anymore. Like even though we knew we were just playing like elaborate Ponzies basically, it was a great time. My dopamine receptors got absolutely fried though, but it was, was a really great time. I look at it fondly.

Slava (12:46)

So, but you're still holding some BTC long or you...

Travis (12:49)

Yeah. Yeah. I just kind of put it in the bucket of like, well, we'll just do that and just never sell it. you know, I put it in the, the just in case thing.

Slava (12:59)

Sounds great. You mentioned T-bills and then you jumped past it saying, I have a lot, let's ignore that. Tell me more about that.

Travis (13:07)

well, when I think of people like maintaining their wealth long-term, like the, two biggest mistakes is one leverage, but that one's kind of more obvious, but like lack of liquidity is the one I think that screws most people. and so I always want an abundance of liquidity, especially cause I'm investing a lot of illiquid things. Cause I think they deliver better returns and I'm fine with that, but at the same time, I always want to keep enough liquidity. So I keep a healthy amount of T-bills and just T-bill ETFs and stuff like that to make it easy.

Slava (13:34)

Yeah, I was going to ask you, how are you accessing those those specifically? How are you deploying cash into that?

Travis (13:39)

Like literally my favorite way is just the S gov ETF. I think it takes like, it was like a seven basis point, spread or fee on top of that. and they handled all for you instant liquidity. You don't have to do anything else. It just works for me.

Slava (13:56)

So S as in Sam, Gov, and you're just doing that through your brokerage accounts. And that's returning what like in general on...

Travis (13:58)

Yeah, yeah. Yeah, just throw it in there.

It w whatever, whatever the, mean, it's a blend of 30 to 90 day T bills, like whatever that rate is minus their little tiny fee is it. it's great. By the way, I don't, I don't even fully understand bond ETFs on the longterm. Those are, those are really weird, but the short term, like, you know, interest rates can change those short term things. They're not changes, fluctuation. It's just, you get your yield paid out.

Slava (14:15)

Got it.

Perfect. Changing topics. So what do you think, this is a very high level question, take it wherever you'd like. What do you think of the current economy, the market, what's going on? You're actually my first guest since the election, so you get to riff on that. But it's an open-ended kind of, what do you think of where we're at?

Travis (14:55)

I am insanely unsure. I don't think I could make a call either way. think, all right, two calls I might make one. think our long-term, debt funding rates are going to go way up. like you've seen over just the last week or so, the, the yield on the 10 year bond went way up, which, and I think it's going to go right through there. And I'm not the guy thinking of this, like Druckenmiller and Paul Tudor Jones, like

These, these two guys have really called it. And I think they're spot on that, you know, the world's not going to fund us infinitely without a higher rate. And I think that will kind of cap what a lot of, well, now what Trump will be able to do, with that, we also saw like on a smaller scale, the UK, you know, they, they try to get away with some fiscal shenanigans and the market basically said, no, like, you're not going to able to afford the debt if you do. And I think that's going to happen.

to the U S the, the other thing is, especially like right after, you know, it clear that Trump was winning. had like the market just exploded. Right. And I think a lot of that has been pricing in any way. And now that he actually won the market exploded even more. My only fear would be that it's kind of borrowing from future returns. the, good analogy that I heard, I think Morgan Housel was that if you look at like the stock market, like Japan's stock market, and you look at her trend line going, you know, back to like on the 60s or something like that.

To now the trend line is basically the same of like going up, but in the eighties, it just pulled forward all those future returns. So, much. So we have like, what, three decades of no returns in the Japanese stock market. I worry that maybe some of that is happening now. We're pulling forward, not like 30 years worth of pulling forward a few years of like future returns into the immediate. And so I don't know what would come from that, but with that said, I'm not really changing how I invest based on this. This is just kind of what I feel.

Slava (16:47)

And that's why you're on and it's a little early for predictions, but it's always good to start. So what is your 2025 outlook look like right now in terms of, know, what's the stock market going to do? What are what's the Fed going to do? Where are your thoughts on, you know, some of this verticals, etc?

Travis (17:06)

The market. I have, I have no idea. I'm just not in that predicting game. like, don't know why someone like me would be able to predict this stuff. what the fed's going to do. again, I have no idea. This is just for fun. This is what I like to think about. Cause I find it entertaining. I figured the fed will have to continue to cut rates. which even though the, like the, like the fed fund rate will be low, but the longer term bond yields will be high.

And so they're going to essentially start inflating away the debt. think that's the only way to do it. Otherwise it's going to be, you know, we can't, we can't service it otherwise.

Slava (17:44)

Do you think that there's talk of the Fed going down another 200 basis points in 25? Do you think it actually goes down that far?

Travis (17:51)

Yeah, no idea. Yeah. I mean, you know, they like there would be pressure from the president to do that. Like the market would love that. The stability of the dollar would really love that. Our debt would really hate that. I think it, what is it like every hundred basis points is like 90 billion a year or something like that. Did I get that statistic right? Some like debt payment or interest payments. And so like, that's a lot. That's a whole lot.

Slava (17:53)

Gotcha. All right.

If I gave you three choices, red, green, yellow for the stock market, which one would it be for 25? Red being we're going down year over year, let's call it five or 10%. Yellow being it's a chop of plus minus 3%. And green being up, you know, 5 % plus.

Travis (18:41)

I, again, I don't know anything. I would, I'm just going to guess like yellow because again, I I would just say like the AI trade, the Trump trade, all this stuff probably pulled forward some of the gains. It's like, you seem to be in a great position overall. I don't see anything hiding, but we never do. but it like we just pulled it forward so much. And so like, where can it go from here? Like what giant productivity gains are like?

financial shenanigans that can be pulled. like, I don't know.

Slava (19:13)

Sounds great. So you're actually here representing CapitalPad, which is an awesome platform to invest into small and medium sized businesses. Obviously you have more than a little bit of experience and that's what you've been doing for a long time after your days of being a trainer, poker player, bartender, et cetera. So not everybody has heard of CapitalPad. So can you just spend a moment to tell us what is CapitalPad?

Travis (19:36)

Can I tell you how I got this CapitalPad? So I, again, so I was in small businesses and I still am. And so I realized early on the, like the returns of small businesses are, I think the best that are out there for the most part, other than hitting like an angel investment where you grab an Uber. Like other than that, like there, there are no better returns. These things trade like three X earnings. every country club you go to out there, ask around, they all own like

Slava (19:39)

Sure.

Travis (20:04)

dumpster services and like asphalt paving and stuff like that. These like boring businesses. and so I knew that was the case, but obviously if you own a small business, you have to, most people have to run it. It's really hard to diversify. You can't just invest in these things. And so slowly over the years, I was trying to figure out ways to do that. was buying minority stakes in small businesses, all the things, and finally kind of discovered like the MNA world for these small businesses, where specifically like search funds and independent sponsors.

They're going in acquiring these, you know, dumpster companies, asphalt companies, that type of thing. and then they need investors when they come in. And so you're, you're getting the upside of the small business. These like, you know, 30 plus percent, a year yields. but you're not having to run them. And in fact, you have preferred shares. have almost a better situation. and so that's kind of figured out how to invest in these small businesses with that. and then through that I discovered the, two problems.

for investors. mean, there's problems for the other side too, but one it's really hard to get access to these deals. It's a very like opaque market. Like it's just, there's just not a place for them all. And the other like the minimums could be quite high. So, you know, the minimum sometimes be like 200,000, 250,000, and you can only write so many of those checks. And so ended up making CapitalPad after enough people asked to co-invest with me on these things. And so CapitalPad brings all the deals in one spot. So people can actually see these small business acquisitions to invest in.

And then we pull all the investors together so investors can write much smaller checks, know, as small as $10,000 for most deals.

Slava (21:36)

And is this, you have to be accredited or retail?

Travis (21:38)

100 % accredited, 100%.

Slava (21:41)

Got it. And how long have you been around?

Travis (21:44)

we've kind of been like private for a really long time. Kind of when we started going public a few months ago. a lot of the deals just happened privately because people were wanting access to that. And so we started building the infrastructure. We've done several of the deals. It's just the platform itself is just a few months old.

Slava (21:59)

So if you were going to describe CapitalPad to somebody, what would you say?

Travis (22:03)

it's just a way to, it's, the only way to passively invest in small businesses. I honestly believe that. and even when I hear that a little red flag goes off in my ear, cause when I think invest in small businesses, I think like, you're going to help like write almost like a venture check to help fund the growth of these things. And I think that's for small businesses, generally not a great way to do things. I wouldn't invest in those. The difference in these is like, these are established businesses. Like a deal that I personally did a little bit ago, it was a

A dry cleaning company. It's got like seven locations. It's been around for 60 years. This thing's bulletproof. They're not raising money to grow or fund operations. They're raising money because someone's acquiring this company and they're going to run it. And then I'm to be a passive owner on that. So that's kind of the big difference. It's just changing ownership and they need investors to help fund that change of ownership versus paying for the expenses to try and grow bigger.

Slava (23:01)

And is that a deal that you did a little while ago?

Travis (23:03)

Yeah, that's a real deal. I've done two dry cleaners at this point. Yeah.

Slava (23:07)

So can you just walk us through some of the mechanics there? Let's say it was my $10,000. How would my $10,000 get involved with you and how would that flow through and returns, cetera?

Travis (23:17)

Yeah. All right. So forth, a deal like that, the, the average, think the actual purchase price was right at $5 million. It's doing probably like 1.6 million a year in EBITDA. Maybe it's like 1.7 even. And so it's essentially a three X multiple, right? Now with the $5 million, they're getting a roughly $4 million SBA loan. And the SBA loan, you know, those are personally guaranteed, but not by investors. Investors never go over 20 % ownership.

So we never have to give the personal guarantee, but the sponsor who is buying it, they're do that. there's a probably like a 500,000 seller note on usually 10 % seller note. And that just means the seller is offering some of the debt from themselves. usually at pretty good terms, that's just like standard market stuff. And then they have to raise, you know, half a million dollars from investors. so.

Slava (24:07)

Sorry, seller note means that they're gonna get some of that money later.

Travis (24:11)

Yeah. So, a 10 % seller notes, kind of like the market standard here. It just says, if I'm selling my company, whoever I sell it to, I'm going to let them pay off 10 % of it over, you know, many years, sometimes 10 years, sometimes three years. I could kind of just varies on the terms. and they'll give me just a little bit of interest, but it's, it's even in today's market, it's like 5 % interest, which is, really low. You can get that in T-villas.

Slava (24:31)

So if I'm selling for five million, I'm actually getting four and a half today and then I'll get half a million over a period of time.

Travis (24:38)

Yeah. Yeah. That's the, that's the standard. yeah. It also keeps skin in the game a little bit and there, there are different ones. I'm looking at a deal right now where I think it's 95 % seller financed. yeah.

Slava (24:48)

wow. Sorry, just to stay focused on this dry cleaner. So how did you find this buyer?

Travis (24:52)

Okay.

had to be in the space really, this is the problem. You can't just casually enter the space and like, okay, I want to invest in one of these. It took me, I'm like entrenched in the small business area and it took me years to build a network big enough to get this. and there's not an easy answer. That's the problem. And so I just happened to get it because people know me in the space and I helped them once they do acquire these things.

Slava (25:21)

Okay, so you've found the buyer, the buyer already had the deal they wanted to do or you found the deal as well? Okay. Got it, so the buyer's ready to go. They want to buy it for five million. How much is the buyer putting in?

Travis (25:25)

No, no, they find the deal. We only look at it post-deal.

The buyers, it varies in this case, I think just a couple hundred thousand dollars. That's all they have. They're putting in sweat equity. Yeah.

Slava (25:44)

The buyer. Got it. So they were able to get a $4 million loan to help buy the $5 million business. And then so you and your group will put in how much money into that deal?

Travis (25:56)

A few hundred thousand. I don't remember what that one actually penciled out to exactly to be.

Slava (26:01)

Okay, so let's say I put in 10 grand in that deal. So what would happen with my 10 grand? How do I see liquidity? What are the returns? Things like that.

Travis (26:08)

Yep. So it varies with each deal with, with this deal, they're going to essentially start doing, quarterly payments. So once they acquire it, they'll, they'll withhold all the payments for, a few years, not a few years, maybe a couple quarters. And so like six months later, you start getting quarterly distributions, basically profit share. And so we do this, the terms for investors are generally a one X liquidation preference and eight or 8 % preferred return. And then a.

step up conversion multiple. And I can explain all of those if they don't make sense. Yeah. All right. So the, the liquidation preference simply simply says, if you're an investor, you get a special, special type of shares, preferred shares, you get a hundred percent of your money back before the person who bought the business gets to see a penny other than like a salary for running it. Like it's different, but no profits go to them until you get all your money back. Plus an eight, excuse me, plus an 8 % a year preferred return.

Slava (26:43)

Yeah, yeah, please.

Travis (27:08)

that compounds on top of that. So you're seeing all your money back plus 8 % a year before they see a penny. So they're very incentivized to pay you off. They want you to get out of here because you're kind of expensive capital. Like the debt capital could be cheaper most of the time. So they want to pay you off. And that's also a benefit for me because I want to see all my money back within like three years. That's my goal for a lot of these things, whatever I invest, I want it back within three years so I can redeploy it elsewhere. And again, that's not always the case, but a lot of them it is. and then.

So after that, we get a step up and the step up is the thing, even like financial professionals and private equity guys in the space don't really, comprehend most of the time. let's say just an example, there's a million dollar business and I put in a hundred thousand, you would expect I would get 10 % of it. Right. but with a step up, maybe this case, it was a two, 2.0 step up. get once it converts from my preferred shares, the common shares.

I now have 20 % of the company ownership. so I'm essentially getting more bang for my buck than if I bought it all on cash. once they pay off the preferred return, refer to turn and return all the investor capital.

Slava (28:12)

What's the trigger for conversion?

does that mean that with my $10,000, once I get my 10,000 plus $800?

Travis (28:25)

yes. Well, if it's in year one, but it compounds every year.

Slava (28:31)

Got it, got it, meaning you're owed 8 % on your 10,000 each year. So it would be 800 and then 8 % on 10,800 and then 8 % on top of that.

Travis (28:42)

Yep. Yeah. So again, they want to pay you back so that they can stop that.

Slava (28:48)

Got it, so potentially over the course of three years, if it took three years to get paid off, I would make like plus minus between 2,500 and $3,000 on that 10 grand. Got it, and then once I got that money, then I would be converted into this 2X, for example. So now instead of having 1 % of the company, I just made that up, I would have 2 % of the company.

Travis (29:09)

Yeah. Yep. And now you're just a passive shareholder, just like anybody else.

Slava (29:15)

And they're just distributing that forever as part of let's call it dividends.

Travis (29:19)

Yes. and, and that is an important point you just made. some of these deals, they just want to buy the company and run it forever. And so they'll have investors there forever. And you can just ride along for decades if you want, a lot of those deals that want to hold it forever, they'll offer to buy out investors like maybe like year five, maybe your seven just kind of pens. They'll give the offer to not the requirement. and then a lot of other deals are planning to resell. So they see opportunity.

They're going to come in, they're going to try and prove it, grow revenue, like do whatever magic they want to do, and then resell it a few years down the road at like, you know, a higher price. and then they'll, they'll just sell it for everybody and you get your profits and walk away. And even if they don't sell it at a higher price, they've been paying down debt, they've been paying out distribution. So it becomes like a win-win for everybody.

Slava (30:07)

What's the average tenure as an investor, me, in one of these deals? Is it one year, 10 years? How long am I typically in one of these companies?

Travis (30:17)

There's not an average. It's there's so many different types of deals. So the dry cleaning one, they're actually doing a roll up of different dry cleaners. And so they're going to try and buy a lot of them, put them under one brand and then try and exit it all by your five. That's the target. some of these don't have a target exit date. The ones that I like the most actually are the ones where they come in and say, I am completely okay running this forever, but I'm also okay if the market gives me a stupid.

Like, you know, multiple, I'll take it and I'll sell it and I'll run. and we all went out. Like those are the ones where they're like kind of agnostic about when to exit. I don't like being like having a strict timeline and when to exit. Cause what if the market shit at the time, you don't want to sell them.

Slava (31:01)

Got it. This is a softball, but why don't I just do this myself? Or why don't the listeners just do themselves? Why should they go through CapitalPad and Travis?

Travis (31:09)

Well, thanks for the softball because they probably can't. You probably cannot find these deals. And if you can, the minimums will be quite high. That is, that is basically the problem. And of course we're vetting these things too. So I have all the small business experience, my partner's former private equity principal. So he has that side of like the finance experience and working with our lawyers and stuff like that. Like we're building all these protections. like working with the purchase agreements, the operating agreements, stuff like that. Actually rarely the purchase agreements. A lot of times the operating agreements and stuff like that.

so we're just like, I don't know, we're doing the work and we get paid, we get a 20 % carry for that. So we take 20 % of the profits, but I think it's still a good deal because otherwise people can't, get access to these. And, know, for for the deals that I invest in, like I'm looking at a 30%, plus IRR out of any of these. So the returns are there. And I have a big theory because anytime I hear someone say, I make a 30 % IRR.

I will warning bells go off in my head. Like that sounds like a scam. That's not, that can't be real. Right. I think in most asset classes, it's not, because large institutional money can come in, like say venture capital. Like my thesis is that the VC returns have gone down because billions of money has entered the space. You know, you have like Andreessen opening up the spigots and getting like billions of dollars from endowments. And that just lowers the returns for everybody. Like the endowments can't, can't.

enter this space. That's the thing. It's too small. There's no way to deploy it all. And so it keeps the returns really high.

Slava (32:45)

You mentioned 20 % carry. Are there any other fees that I would have to pay with my $10,000 as part of my $10,000?

Travis (32:52)

The total fund, so like all the investors together are pulled together to pay just for like the legal SPV fees. So like the vehicle that we pull everybody into that, but that's quite inexpensive. Yeah.

Slava (33:07)

Gotcha. And how many deals has CapitalPad done?

Travis (33:11)

Ten like eight something like that seven

Slava (33:16)

Got it. And what's the average size of a deal that you've done?

Travis (33:19)

The everywhere from I think 165 was our smallest up to like, you know, a million dollars is the one we're raising now.

Slava (33:27)

And people might have heard of PE funds and obviously there's the big ones, whether it's Blackstone, et cetera. What's the difference when you think about those or if I, the random investor, think about those versus going with you?

Travis (33:44)

There's a lot of similarities. You know, it's all private equity. This is very like micro private equity. I think the larger PE funds, I think a lot of the principals are insanely talented individuals. Like you talk to the average private equity principal and you'll just walk away impressed by the things they know. Maybe feel a little testosterone-y, but they're impressive people. They're playing a lot of like financial engineering games on average, I think.

where in this case, there's less financial engineering and more just like opportunity and work in small businesses. And I think there's more levers to pull. I think the, the, the prices are much cheaper. I mean, you we're buying these things at like three X multiples, private equity routinely pays, you know, eight X 10 X. I it depends. There's a lot of like variables here. We kind of get the point. They have to pull levers to really increase the value, increase the multiple where these, like I look at them.

All they have to do is keep it alive and I come out ahead, right? They just have to not kill it. And I probably do okay on most of these deals. and that's kind of how I think about it.

Slava (34:53)

Yeah, you brought up a great point here. What are my top two risks investing into this type of asset?

Travis (34:58)

mean, obviously, you just get into a bad deal. I'm trying to think of some specifics for you. I mean, I have like a whole.

Slava (35:03)

And a bad deal looks like what? You didn't do good financial diligence, all of a sudden the company implodes, the founder doesn't help. What's that mean, a bad deal?

Travis (35:13)

The, the things that we watch out for, cyclicality, is a big one. And I'm not, and that might mean like a builder, for example, has cyclical nature. And I'm not against cyclicality and like normal things, but if you add debt and cyclicality becomes a really big problem. customer concentration can be a big one. Like we've seen deals that, you know, try to come on.

to the platform and they're like, we have 30 % of the businesses as one customer. And it happens to be the current owners, like best friend. I'm like, no, we're not, we're not doing that. That's crazy. like that's, that's how you get up. So if, if it goes down, you can't make the debt payments, like, know, the businesses get wiped away. So you just, you watch out for like that type of thing. those are probably the biggest ones.

Slava (36:00)

Any, who would you consider your competition for this type of investment?

Travis (36:04)

There's a few funds out there that are doing it. There's not really direct competitor is the thing. It's a small space, which is, I think, good.

Slava (36:18)

Okay, and that's awesome. Anything else you want to mention about CapitalPad or investing into small medium-sized businesses?

Travis (36:25)

Hmm. To me personally, investing in these seems like the most sensible, like less speculative way to do things. even, even like public markets, you know, we have like the long-term track record, but a lot of that comes from just like multiple expansion and like, people bullish or bearish and like the whole market moves together? I think these are, based there. They're not really based at all on like sentiment. They're based on how much money does the company generate and then you just sell it based on that. And that's very refreshing to me.

Slava (36:52)

Sure, makes sense. So you obviously have learned a lot of things. You even mentioned books that you already like. What else makes Travis Travis? What do you like to watch? What do you like to listen to? What do you like to read? Tell us something about your daily routine. Tell us anything that we can learn from.

Travis (37:09)

cheese. I'm, I'm just one big giant routine. I'm a robot. My family likes to say, I mean, all this stuff, whether it's, health, diet, meditation, all those things. It just kind of like keeps me in sync. and if I'm, if I'm not doing basically all of those things, like quite strictly, like I kind of mentally, I just, I just don't perform as well. I don't feel as good. And if I don't perform well,

Slava (37:31)

Give me one or two specifics.

Travis (37:33)

God. mean, work. So I have a rule. work out every single day. It doesn't have to be hard. I just have to do something. I meditate every single day. take a nap every single day. I do a cold plunge every single day, which I'm embarrassed to say now it's so uncool to say you do cold plunging. So, that type of thing. I,

Slava (37:52)

So wait, time out, so give me those, so what's the amount of minutes that you're doing each one really fast? So workout average.

Travis (37:59)

anywhere from 15 minutes to one hour.

Slava (38:01)

Okay, so let's go 30 minutes there, cold plunge.

Travis (38:04)

Two minutes a day. Exactly 10 to 15 minutes a day.

Slava (38:05)

Meditate, meditate.

Now

Travis (38:11)

10 to 20 minutes a day using a product called sense eight, which I love. It's a sort of like vibrating thing you put on your chest and it like sense eight.

Slava (38:16)

Wait, what's it called? Sense8, nice. Cool, well that's awesome. So you have like an hour committed every day that pretty much you're gonna do these four things. Not in order, but that's gonna happen. Amazing, I love the discipline. And sharing, thank you so much. So last question, we're gonna put you on the spot like we do with everybody, which is asking you for your three years out prediction.

You know, what is an investment today in the private markets? It could be anything that's not publicly listed in any asset class, as well as one public market investment that you would suggest. So Travis, what are your picks for three years out?

Travis (38:53)

I want to preface was saying I'm the guy that has said repeatedly, I know nothing about the future and I don't really play that game. But if I was just for fun, probably like public stuff, commodities seem like if, if the thesis that I'm playing with of, long-term rates go higher and inflation has to go higher, but we can't fight it this time. Just commodities in general, like commodity trend following type of thing.

Slava (39:14)

Which commodity?

but I need to be able to follow your trade here. So which one would I be following?

Travis (39:24)

there's probably a commodity ETF. mean, they're all kind of the same, like oil, gold, lot of the, you know, the, major minerals and stuff like that that are using the things like they're all kind of do the same. They, they, they fulfill the same goal or like manage futures and stuff like that, but that's complicated.

Slava (39:40)

Okay, so you.

So you think commodities are going up in price?

Travis (39:46)

would say over the long term, that is a bet. And as Paul Tudor Jones said, like they're pretty under owned right now.

Slava (39:49)

Okay.

Perfect, any in the private markets?

Travis (39:55)

I don't think you can like predict that. I like, when we see these deals, it's like we see them and we have 90 days to close. And so I don't have one. It's just, I actually, I will, I will give one. shit. I'm making predictions. it's basically service space. Small businesses are the way, because if we do enter inflationary times, then you know, lot of inventory based stuff that that's when people get in trouble. It gets nasty.

but service-based businesses have that immediate pricing power without having to pay the inventory cost. Yeah.

Slava (40:29)

So what's an example or two of what that means as an example?

Travis (40:33)

Here's a great example. Have you tried to call a plumber or an HVAC person or like a roofer or anything like that recently? You can't get them to answer the phone. They have so much business and when they come, they're going to charge whatever they want to. And you're going to say, okay, thank you. Thank you. That's the example. Like those businesses are on fire. I have the thesis that over the last few, like few decades, everyone was like, I need to go to school, get a college degree and do white collar work. Right. And I think that kind of like.

Slava (40:40)

Sure. Sure.

Travis (41:03)

Now those people are having problems, but everyone forgot about the blue collar stuff and now they can just do whatever they want to, charge whatever they want to. And they're so in demand. There's so much.

Slava (41:12)

So just to translate that, you're saying if you can, you know, try to invest into a plumbing business, invest into a roofing business, invest into a house building business, an HVAC business, et cetera, et cetera.

Travis (41:24)

Yeah, house building businesses can be a little more cyclical.

Slava (41:27)

Maybe not the whole house, a contractor who helps with pieces.

Travis (41:31)

service like HVAC, for example, the HVAC companies that do residential are far more attractive than the ones that are doing commercial because residential like I don't know your heater AC breaks, you're going to fix it no matter what. Now that industry in particular has some really crazy valuations right now. So you'd be careful there. But that general theme of like home services, I think those were just crushing.

Slava (41:52)

Amazing. Well, for a guy who doesn't make predictions, those are really interesting predictions. Travis, thank you so much. We've covered a lot of ground here from starting, you know, a dozen companies with a health supplement company to start first. You know, I love the background being a trainer, bartender, and a poker player with all that before you even start doing the businesses. Four-hour workweek became part of your Bible, which is awesome. You turned ADD into a positive and superpower with your hyper focus.

Travis (41:55)

Ha ha ha.

Slava (42:17)

You're only about 20 % of the stocks. love liquidity through your T-bills and the rest you're riding high with all these investments. You told us that you need to make sure that leverage doesn't become a problem. And also you need to make sure you have liquidity, which is great. You taught us about how to get into these T-bills. Also, you're concerned about long-term debt, which is super interesting. You do think 2025 is going to be maybe yellow. The Fed is going to keep on lowering, but the interest rates are probably going to stay high, which will be an interesting combination.

It's interesting that in this market you could get a 3X multiple versus the larger 8X to 10X for the bigger PE funds. So there's definitely some opportunity there. Taught us how to go through a deal and now we learned a lot of terms and we have a lot of research to do. So thank you about all of that. And finally, you you told us about your routines, about how you spend an hour going into all those four things. People are gonna have to learn about Sensei so they can nap better. And then of course you gave us your predictions for three years out. Thank you, Travis.

Travis (43:09)

You take good notes. Thanks so much.

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