What is your background in finance, and tell us about your journey to where you are today?

My first job out of college was in asset management for Macerich, which was basically a small consulting team for our C-suite. I was blessed that the company’s founder, Mace Siegel, became a Yoda-like mentor in my life. He would stress that while you have to know the financials, someone has to actually bring the forecasted growth to fruition. So he challenged me to create the value depicted in our underwriting, even throwing me into sales during the Great Recession.

I probably took the value creation mantra to an extreme and quit my job to co-found a software company in sports, which was later backed by the LA Dodgers. Nothing gives you perspective in finance like becoming an entrepreneur, where you’re tap-dancing for dollars in order to survive. But once that company was stable, I started angel investing and then found a niche in venture capital for family offices and corporations, who can be uniquely strategic investors because of their existing assets. Tailoring to their respective strengths, we focused on startups in verticals like sports, aquaculture, proptech, consumer and climate.

But in time, it became evident that their portfolio companies often needed dedicated attention to reach their potential and would benefit from my periodic involvement as an operator. So in the midst of it all, I've been a CMO multiple times, with one company being acquired and another going public on Nasdaq — the latter of which pulled me into the world of microcaps, which are small, publicly traded companies and an area where I personally invest most actively.

As Warren Buffett has said, “I am a better investor because I am a businessman and a better businessman because I am an investor.” That’s certainly been the case for me.

What can you tell us about the growth equity firm that you recently joined?

It’s called Mauloa, which means “endless” in Hawaiian. We make minority investments exclusively into cash-flow-positive companies, many of which are family-owned and even multigenerational. For example, our most recent investment is called O’Connor Plumbing and is now run by the founder’s two sons, Kevin and Tommy, but it was started over 70 years ago.

Another one of our portfolio companies is Mr. Christmas, a remarkable holiday decor business that is celebrating its 90th anniversary this December. A key differentiator for Mauloa and consistent with our moniker is that we leave business owners in control of their own destiny instead of forcing them to sell if and when the investment leads to rapid growth.

Formerly known as Sachs Capital, Mauloa was founded by Andrew Sachs, who began his career in private equity at Morgan Stanley but later wound up investing in smaller companies around the Washington, D.C., area, alongside his dear friend, Joshua Freeman. After Joshua’s tragic passing, Andrew forged ahead with their thesis of backing profitable companies led by great management teams. He raised Fund I in 2007, Fund II in 2015 and is now on his third fund, as size and geographic reach has expanded to keep up with demand.

What does Mauloa’s structure look like?

Preferably the first and only outside capital, Mauloa typically invests between $15 million and $30 million in exchange for a minority stake in the business. However, we can go much larger if the right deal presents itself. The funds are commonly used for owner liquidity, partner buyout, growth equity, acquisitions, refinancing or working capital.

Not only does existing ownership maintain control of the company, but we don’t predetermine a future exit timeline. This varies greatly from most growth equity firms, which usually aim to liquidate their positions within a few years. Conversely, Mauloa is content to hold them indefinitely while helping grow cash flow alongside our partners — the business owners.

Is this a trend — growth equity firms investing in family-owned businesses?

Yes, especially if they are cash-flowing well. But this isn’t a new concept. Berkshire Hathaway, for example, has been acquiring such companies for decades.

With high interest rates and muted economic optimism, different types of investors have seemingly begun to view family-owned businesses through a different lens. But something that stands out for Mauloa, other than its unique approach, is its founder, Andrew, who has been doing this for over two decades. He’s learned a lot through the years, and few investors place as much emphasis on the human side of the equation, always trying to select and protect the right company cultures.

What do you see as an emerging trend in family businesses in 2024?

One of the biggest trends in family businesses is baby boomers and how they’ll handle retirement. There are over 2.3 million boomer-led businesses that employ at least 25 million people in the U.S., which are inevitably going to be impacted by an ownership transition of some kind. We find that Mauloa’s approach can allow them to “have their cake and eat it, too,” since business owners can de-risk through some liquidity but permit families to maintain control, with the added bonus of our ongoing help in growing the companies.

Source: Crain Currency