Starting a Fund Makes You Play Bigger

Hey, welcome back to Investment Fund Secrets. I'm Bridger Pennington. Today we're going to talk about why a fund allows you to play bigger. All right guys, welcome back. So today I want to talk about why funds are so freaking cool. And a lot of you guys listening already know this, but it's when you bring up a fund at a dinner party, at a family event, at a business meeting, people's eyes perk up and their ears kind of come to you and people start listening to you when you start talking about running a fund, managing a fund, starting a fund. Because funds allow you to do way more than you could have done before. They open up a whole new world of possibilities. I was reading 2 books actually recently. One of them was called Play Bigger, and from the title you can tell it's talking about playing bigger. 3 guys from Silicon Valley, fantastic guys. One of them started PayPal, the other guy helped start, I think, Stripe, and another guy, he's invested in a ton of these different companies and talks about Companies that decide to play bigger. Fantastic book if you want to read it. One of my favorite business books of all time talks about finding your niche and becoming a category king. We talked about that in a few episodes ago. In your fund, find a niche and become the category king of that niche. Don't try to just do a broad fund. We're gonna do, uh, you know, tech VC investing. Like everybody does that, you know. You really think you're gonna beat Sequoia with tech VC investing? Like no. Go find a small sector, go invest in— maybe you can still do tech, but focus it on, um, women entrepreneurs in Argentina, right? That's way different than— you're not— now you're not fighting with Sequoia as much because you're in Argentina, you're focusing on women entrepreneurs that are doing— maybe they're doing less than $30,000 in revenue, right? You could do micro investing, right? You can find a niche. Now that's just an example, but finding a niche where you can exploit that and become a category king. Now I love— I just read another book by Stephen Schwarzman, one of the co-founders of Blackstone. Fantastic book called What It Takes: Lessons in the Pursuit of Excellence. One of my favorite quotes that he keeps saying over and over throughout the book and his attitude towards life was this: it's as hard to start and run a small business as it is to start a big one. You will suffer the same toll financially and psychologically as you bring it into existence. It's hard to raise the money and to find the right people. So if you're gonna dedicate your life to a business, which is the only way it'll ever work, you should choose one with potential to be huge. He shares a story at the beginning of his book. He grew up in a small town in Pennsylvania and his parents ran a small kind of department store clothing store. They'd sell different fabrics and Stephen growing up was like, let's take this national. Why don't we be like the next Sears or Macy's and have stores everywhere? And his dad was like, oh, I don't want to do that. I don't want to play that big. And he says, well, let's just do Pennsylvania then. I can imagine, you know, 15 stores across Pennsylvania would be incredible. He goes, no. He goes, what about Philadelphia? Just one city. And he says, dad says, no, I'm fine with— I have a great life and I have my house and a family and I'm doing okay. And Stephen just couldn't wrap his head around this of why not expand? Why not play bigger? And that's a personal choice, right? Do you want to play bigger? Are you okay With what you're doing right now, or do you want to play on a different level? That's a choice we all have to make inside of our businesses and what we're doing. But Stephen, he argues that it takes about the same amount of work. So why not go big and really have a life and generational changing wealth potentially come to your family and your kids and your grandchildren instead of just playing with your current little small venture? Why not play bigger? And you can start buying a new car for your dad or help your grandma or help your nieces and nephews who are struggling or help just people and help your favorite charity or church, right? When you play bigger, it allows you to give and bless more people around you. That's what he argues, and I argue that as well, of playing bigger. And you can tell Stephen Schwarzman, I mean, when he started Blackstone, right? Their first fund, they launched, imagine launching a fund, their first fund had a, they had a goal of raising $1 billion. Nobody had ever done that before them on their first fund of raising that much money. And he said, if we're gonna set a goal, we gotta go all out. And they went for it. Anyways, fantastic book if you wanna read it, tells his story. Kind of a fun read too, tells just kind of his life story and lessons and principles along the way. Not as much about running a fund per se, but cool book, cool life and business book. But that's the point, right, of, Playing bigger and what a fund allows you to do. A lot of people, and I was actually on Matty A on Millionaire Mindcast, I was interviewed on that podcast a little bit ago. It should publish, I think actually probably the time this podcast comes out, it'll probably be published as well. We both talked about on there of he does a lot of real estate deals. He says it takes the same amount of work to do a $200,000 flip and a $20 million flip. Why not do the $20 million flip? Because people get scared and they want to work out. They just don't know how to play that big. And he argues on his, on his podcast as well to just open up your mindset to play bigger. And you think, Bridger, well, I can't do a $20 million deal. I'll give you a few pros as well with running a fund when you scale. So pro number 1 is you leave competition. How many people— I'm just gonna do real estate for now— how many people can get a brother-in-law and a grandma together and buy a $200,000 property? Like a lot, right? A lot of people can do that deal. How many people can put together $20 million and buy a $20 million deal? Not as many, right? And the bidders, the amount of bidders goes down. Right now, right, I'm from Utah. You go to an auction, there's like 40 people there bidding on properties, and they're getting— they're overbidding the, like, the current price. Like, somebody had a friend put out a property, he got 5 bids the first day, and they were $10,000 to $15,000 over the asking price. That's how crazy the market was right now for— and his property, I think, was $150 grand, was around that price range. Everybody's playing there. You put out a property in Utah that's $25 million, maybe you're getting 2 or 3 bidders, right? A lot less competition, so you can find better deals. Now, number 2 is with that, you think, well, these other big funds will come in and squanch me. So my dad's funds, they have 20— they just hit $20 billion, just, just crazy. Their funds right now only do apartment, like let's say their multifamily fund, they have other funds, but let's say their multifamily fund only does apartment complexes 200 units or more, right? That's what they tell everybody, right? We typically do, and they sometimes will do lower or more, but we typically do 200 units or more. So if you're a guy that maybe you buy 100-unit apartment complexes, that's your niche. That's awesome, right? They've gone so high and so far that they can't afford to do small deals like that, and you can find this middle market space. That's how you get in the game. And people say, oh, I can't compete against Blackstone or KKR or Sequoia. You're not competing with them. They are playing on a higher level because they got to deploy a lot of capital. They're not going to touch these smaller or mid-cap range investments where you can really exploit the market. Because a lot of those companies that do well in the mid-cap range eventually grow out of that range and go to other places. Then you can replace them. And there aren't as much competition in those levels. Now, that's the second reason. Third, when you start a fund, it attracts amazing people to you. Just bringing up the word, like, we're starting a fund, saying that, people's eyes, like I said at the beginning, people's eyes perk up and people want to join you and be partners with you because you have vision. That's actually another huge quote in Stephen Schwarzman's book and a lot of other books, like Jack Welch's book talks about you can't talk about vision enough with your employees. Fantastic story of Billy and our CEO, From Virgin Atlantic, what's his name? I'm spacing on his name, the guy, that Virgin guy. Richard Branson. Sir Richard Branson. They had bought an island that they were gonna make a bunch of casinos, a huge resort on, they're developing this whole thing. They get to the island for the first time and there's a few workers on the beach and they're just waiting, they're waiting for a boat to come in to deliver supplies and stuff and as they're going, Richard Branson steps off and he goes over and talks to the 2 guys on the beach. And everyone there is with him like, what's he doing? He's like, okay, he'll come over in a second. And it's 2, 3, now 5 minutes, now 8 minutes, 10 minutes go by and finally somebody walks over like, hey, we gotta go, we're on a tight schedule today, we gotta see all the properties, we gotta see how we're doing. And he goes, oh, sorry, I just gotta finish up. I'm just telling them how important their jobs are. And he said, I, uh, and then they left and he explained later what he was talking about. And he said, those 2 guys are waiting for all of our excavators to come and get landed on the beach. And those excavators are gonna start excavating the island and then we're gonna start being able to build buildings. And I had to walk them through the vision of this island because if those guys on the beach don't understand the vision, they're gonna be lazy or make a mistake or not care much about what we're doing. And we need those excavators. And we need to— that's the first step of this whole project. And Richard Branson made it a point to make sure these 2 guys on the beach, they were just regular guys, regular workers, knew how important their job was for the entire project to work. And he spent 10 minutes of his time walking them through that. That is explaining vision to your people, to your employees, to your companies, to your partners. That's what Stephen Schwarzman talks about. That's what Jack Welch talks about in his book. About explaining vision and growing and scaling bigger, and that's what a fund does. Fund when you say the word fund, it initially gives people vision even without you talking about other things at the vision. But saying we're going to launch a fund and do XYZ, it attracts incredible partners and people to you. As you can tell, I'm sold on the fund. I've ran a fund for two years. I love it. We're we're growing and we're taking it to the next level. But love you all. I will see you on the next episode. Hope this hope this enjoy. If you wanna connect with me, go find me on Instagram, @bridger_pennington. Shoot me a DM, I'd love to answer those, answer your questions. Anyways, let me know what you got. See ya, bye.