Lessons Learned from Investing in 22 Companies (Pt.1) | Ep 608
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What is the main topic discussed in this episode?
I think that's why in a lot of ways, general entrepreneurship is about being a jack of all trades, master of none, which is that you have to know enough to be dangerous. You have to know enough to recognize what the true constraint is at a macro level and recognize what has to happen to deconstrain it.
What criteria does Alex Hormozi use for investing in companies?
Welcome to the game where we talk about how to sell more stuff to more people in more ways and build businesses worth owning. I'm trying to build a billion dollar thing with acquisition.com. I always wished Bezos, Musk and Buffett had documented their journey. So I'm doing it for the rest of us. Please share and enjoy. Over the last three years, I've invested in 22 companies, either as a majority owner where I took over control of the business or a minority owner where I just assisted in the growth of the business. And each of these businesses are doing over a million dollars a year in profit. So not top line, but bottom line.
What qualities do investors look for in potential companies?
And I want to share with you the lessons that I've learned in investing and growing those companies and some of the mistakes I've made so that you can make better decisions in investing and growing in your business or investing and growing in other people's. And if you have any interest in becoming a portfolio company, I'm going to give you a checklist in the next part that will help you make your application as good as possible so that you have the highest likelihood of actually making that happen. And at the very least, you'll probably learn a lot from the checklist itself that you could apply to your own business even if you weren't interested in that. And so either way, wait to the end and I'll walk you through it.
So the entire theory behind acquisition.com was that we take something old and something new, and there's a lot of magic between the two of those things.
How does the 'who-what-how' framework provide value in investments?
And so for us, something old is investing and something new is social media. And so it was my theory, and it continues to be my thesis that I'm proving out, is that you can generate high quality deal flow, proprietary deal flow, meaning just for us, from social media. And so... you know, a lot of people have built businesses around, you know, building an audience and then they sell stuff to that audience. I had a theory that I could build a very large audience of specifically business owners and actually only work with a tiny, tiny percentage and still have it make economic sense to the whole. And the benefit of that is it would allow me to build a brand based on a lot more goodwill than anyone else could because i would be giving to 99.999 but still able to make it make economic sense and so one of the big misnomers out there is that like alex is some sort of like giving saint it's not that at all like this is just a business strategy that's different and so rather than trying to sell to everyone it's really just can i make deals with a couple of really good companies that they find out about me through my content
And so just to give you a bit of context, right now we get about 2000 companies per month that inbound apply to work with us. And some people might find that as disheartening if you want to do a partnership, but I'll walk you through kind of like through the funnel. So basically, you know, right off the bat, half of the people don't qualify because as of current, we only work with U.S. and Canada. We also work with international companies who are willing to convert to the U.S. So if you're willing to have a U.S.
What is the significance of leadership in successful investments?
corp kind of be the hold co for your foreign corp, that works too. But half the businesses are not in that bucket. The next disqualifier is just size. A lot of the companies that apply are $0 to $1 million a year in top line.
Why is cash flow crucial for business growth?
And that doesn't really work for us. And so our minimum minimum is $1 million. And so someone's like, I'm at $900,000. Do I qualify? The answer is no, because that's the minimum. It's already low. But we're willing to look at it because sometimes there's some really promising entrepreneurs and founders that have companies.
How do focused founders contribute to investment success?
It's a million dollars in profit.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:17
2
What criteria does Alex Hormozi use for investing in companies?
0:17–0:47
3
What qualities do investors look for in potential companies?
0:47–1:24
4
How does the 'who-what-how' framework provide value in investments?
1:24–2:50
5
What is the significance of leadership in successful investments?
2:50–3:03
6
Why is cash flow crucial for business growth?
3:03–3:19
7
How do focused founders contribute to investment success?
3:19–3:40
8
What does 'taking two steps back to take ten steps forward' mean in business?
3:40–47:50