Using Values to Value an Investment with Leif Hartwig

As we continue to grow, we found that our community. So imagine a community like LinkedIn that only has ultra high net worth individuals on it.

Welcome to the Next Level Income show where it's our goal to take your income, your investments and your life to the next level. I'm your host, Chris Larson. If you haven't yet, get a copy of our book for free at our website, nextlevelincome.com. that's www.nextlevelincome.com. just click on the book link and I'll even send you a copy if you put your address in. On today's show, we have Leif Hartwig. Leif is the CEO of Wealth vp, a company that helps match private investors with quality founders. He draws on over 30 years of experience in the software startups and financial services industry. Leif has also served as the chairman of the board for the American Heart association in Tucson, Arizona and is a board member for the Tucson Medical Foundation. Leif, great to see you again. Welcome to the show.

Hey, thanks for having me, Chris.

Yeah, my pleasure. You know, I'm really looking forward to this conversation. Today. We, we're talking a little bit before the show and you have, you have a terrific background. I mean not just in business, but also athletics with, with rugby. And we talked a little bit about our affinity towards the Grand Canyon which I'm planning to do the, the R3 hike here in October. So. Yeah, but I'd love for the audience to get to know you a little bit better if you wouldn't mind sharing a little bit about, you know, what, what, what brought you up to this point today?

Well, have a couple daughters that are the love of my life. And, and so, you know, from a family background, you know, I, if you asked me what were you best at in the world, it was probably being a dad. And so, so that's great. I spent most of my career, almost all of it in financial services. So just a real quick sequential. I was an investment Advisor for probably 17 years and senior VP for a company that as they evolved into new companies, it's now RP Wealth Management. And I was one of their top guys in the country, top five guys in the country. So, but I, I found out I wasn't going to ever be biggest client and I had the entrepreneurial bug always. And so I, I stepped out and started a business coaching company. We did very well with that and international with some of the largest insurance companies out there. Then, then when 2008 came around, that was a really tough time. But I recognize that software was really one of those things that was going to grow and, and you know, back in the, you know, after 2010 we were still just getting into email, believe it or not. Right. So I started a, a, a company where we're looking at an exit right now, but a unified collaboration suite of tools. So instead of buying all the desperate pieces that you cobble together, a company could just go to one place and get them all. So great idea. There we had a, a billionaire took over that it's in good hands. And so I am, I, I said, you know, now what am I going to do? Got my money tied up in this company and I, you know, not only did I want to continue to work but you know, just said what am I going to do? And so I started helping companies and matching them with investors like that are on your program. You know, pretty high net worth people. And we did really well with the first one from zero to $20 million in the first nine months. We thought that was pretty cool.

Yeah.

And then raise money. I live in the Scottsdale, Phoenix, trying to raise money in the summertime here. It was like nobody's here, they can get out, you know, the heat Then so I started scratching my head a little bit and said what's going on in this marketplace? Great companies, we can't seem to match them. And after some research we found out it's a two and a half trillion dollar marketplace that's all word of mouth and networking. Last year alone there is over 5 million startups in the US alone.

That's incredible.

Right? And there's 80,000 ultra high net worth individuals, millions of others that want to connect but there was no way to do. So I said hey, this is bigger than doing a couple three companies a year. Let's digitize this marketplace in a way that we can introduce quality companies that are ready to invest, you know, and most of them are, you know, over 90% are and then match them with investors that have the means to help these companies grow. Because you know, an accredited investor doesn't mean they can get to, you know, a point of raising all their money. And, and the founders are most of them, but they don't know how to do it right. So, so that's how we developed wealth vp, my new company.

Wonderful.

Yeah.

And we were talking a little bit before the show here and I loved, I love the story and it's when, when I was in college and we didn't have dating websites. So I have some friends, you know, they're divorced and they're I'm like this is crazy. You know there's like these, these dating websites and you made a comment that you said you actually researched these dating websites as you were launching wealth vp and you actually mentioned Bumble specifically.

Yeah, I did. You know, it's so interesting. We were, our platform match is great companies with great investors.

Yeah.

And, but, and there's a lot of two marketplace companies like Airbnb, like what you own, it's a matching, we've got Amazon. But what seemed to fit the most as is being a single guy at the time. I said, you know what, these sites kind of have the format we like that you can put a company and have all searchable fields. Are they raising equity or debt and are they in fintech or medtech or crypto or whatever? They're in. And, and have they had the founders had exits before or you know, and read about the company and set up data rooms and all this stuff and then, then on the investor side, you know, what are they investing in and what amounts do they invest in. And so when you put that on a platform you can do math. But our interesting talk before, you know the, the, the program here was I said okay, let's take a look at how do you set these things up. So I'm a research guy, so I research and I did research Bumble and the data showed, so I don't want to offend any women out there, but the data shows that the women were more important to design the platform around. And us guys know that.

You know, hey, that doesn't sound like offensive. That sounds, that sounds like one reality. But also that's a cop. Right?

Right is a compliment. And so, so what, what I found is, is that investors wanted certain things to look at and they didn't want another angel list and they didn't want to pay commissions and they didn't want to give away carries and they, you know, they, they just wanted great high quality companies. And so since we only charge a fee for service, we're not a broker dealer. That was pretty cool. So, so we met all requirements but then we said, well we really can't vet them because we don't want to be a broker dealer. So we came up with three qualifications and it was really cool. How did the companies qualify to get in that upper 5% of all startups out there? And that's pretty simple. It's number one, they're in revenue. Right. They've got a real product and most of them have an idea or are in development at a Pre seed type level.

Okay.

The, the second characteristic is investors don't want to put their money and see this company go out of business in a few months.

Right, right.

So they want Runway and the, the standard in the industry, you know that I've learned over the years is a minimum 18 months of their burn rate of their monthly burn rate per, per Performa and that so that's a requirement typically a million dollars minimum. But, but most people, it's more than that know with their burn rate. And lastly, and this and every investor knows is the most important part about investing in a private company is management.

Management. Absolutely. Yeah.

So we see a, either a founder or some of their executives having an exit. Now if they don't, that's okay. But they had to come from the industry high level in which they've launched the product which means they seen a niche, they've seen something that others aren't taken care of. So those three characteristics we believe put put companies in the upper 5% and unfortunately I'm a little Darwinian because we've all lost money in companies that didn't have these charistics. And so great investing because I was, I taught investments at the postgraduate level at the University of Arizona and great investing isn't getting the highest rate of return, it's the highest rate of return with the minimal amount of risk.

I love that.

So companies all have risk. However, you know we've tried to minimize that with our selection process.

Yeah, yeah. Sharpe ratio. Right. How do you increase your risk adjusted returns and do that?

I love that. Yeah. If you would have invested with me, you would have known your Sharpe ratio, your alpha, your beta, your where are you on the efficient frontier. So yeah, I was, I, I, I really tried to help people with the risk reduction part through portfolio management. Absolutely.

No, it's fantastic. And that really, that drove the title of my book when I, when I learned about multifamily and did that. So it's, it's familiar to, to a lot of listeners and certainly is something that, that, that appeals to me. So Leif, we were, you know, we were talking before the show and one of the things I loved is recording. We're coordinating an upcoming meeting here and we, we were talking about the importance especially for entrepreneurs and you know like sales professionals, people that are out there, you know, really, really pouring a lot of heart, soul and, and their time into their businesses. And you know you mentioned being a business coach for, for years. The first, if you don't mind sharing the first thing that you had your Clients do to help them, you know, really maintain efficiency and in their life and their business.

Yeah, you know, there's a. The old saying is we don't live to work, we work to live. And so as all business people, whether you're on the investment side of the platform or the fun side, that people would come to my program, the wealth and balance show because we had a history of increasing revenues by like 300% in just a couple years. But the caveat was we wanted people to balance their lives. Right. And interestingly enough, the men and women that balance their life and took more time off, actually more money. So that, that was a. A value statement. And so when, when people would come to the program, I'd. I'd say, you know, if, if I were to ask a friend of yours, are you successful? They'd say oh yeah, he or she's real successful. But if I were to ask you, you would say yes, but you know, not what I thought it would be like. And so my coaching program, we helped eliminate the but and we asked them to put their values first and balance their lives. And so I thought, I come to find out that most of them paid, you know, the multi thousand dollars to come to the coaching program. They justified it with the money, but they were there for the balance.

I love that. Yeah, and it's, you know, it's one of those things, you know, having, having an athletic background and you, I love how you took it full circle being in your, your wrestler or. I'm sorry, you're rugby at University of Arizona, if I recall correctly.

Yeah, I did. Yeah. I played rugby there and then as you said, I. And you're going to do this. I don't think people know the R squared thing, but I, I hiked in my 60s, one rim to the other and back again on the Grand Canyon. Eighteen and a half hours and you know, 10,000ft of elevation and all that. It's. You're going to have fun with that out. Glad to give you my training schedule, but yeah, I, I've always been involved in athletics and like the competition and, and so.

So yeah, I might. Yeah. Now I got a target to beat Leaf 18 and a half hours. So I gotta. Not well, but that was.

Well, believe me, you're not my age, so I did that at 65 years old.

Thank you for qualifying that. Yeah.

And then, then last year I ran across it ran. You know, somebody with a fast walk could have beat me, but I did that 7 hours and 45 minutes, so.

Oh, that's awesome. Yeah.

So that you've got two targets now.

All right, well, yeah, I'll just, I'll settle for finishing. And I got, you know, we got, got a few more years where I can go back after the record maybe. But no, the reason I bring that up, first off, I always loved hiring athletes. You know, when I was, when I'm bringing people on and you know, my, my kind of, my director of operations now, he's, he's also a triathlete. He's Ironman triathlete. And being, being an athlete teaches you a lot of things. And one of the things, and I was just having this discussion with a gentleman, he's worth, he's worth nine figures. And he, he's, we're working out together. And he said, well, how much do you work out? I said, I work out maybe five times a week. And he's like, he's like, wow. He's like, I work out twice a day, I'm just not getting results. And I said, you're doing too much. I said, said, I think you're doing too much. And I said I would cut back on what you're doing. Work out once a day, you know, take a couple rest days and work out harder. And I think the same thing, like you just mentioned it, Leaf, which is, it's not always about the quantity. It's not how many hours you work, it's the energy you put into the hours that you work. And life is an energy game. You need to recharge. You need to recharge by refueling your body with food. You need to recharge your soul with things that, that make you happy. And that includes, you know, time with your family and those sorts of things. So I love, I love that. And the reason I bring that up is because you, you know, you articulated and taught these values to your coaching clients. So, Leif, how do you use values in determining, you know, what companies make sense or how does it apply to the framework with respect to wealth? Vp? Are you ready to gain new tools, close more deals and network with the highest level real estate investors in the business? Join me at Mfincon 2023 in Charlotte, North Carolina, June 12th through the 14th. I'm excited to be speaking again this year alongside Dr. Robert Cialdini, Mark King of Taco Bell, Joe Fairless, and over 75 other real estate experts. Sharpen your knowledge on capital raising strategies, asset management, alternative asset classes, underwriting, and so much more. This event will include everything you need to define your goals, improve your mindset, and find the Right. Connections to succeed. The networking opportunities at mfincon are not to be missed. If you're serious about apartment syndication investing, real estate investing in general or just commercial real estate, mfincon is for you. And you can use our special promo code, next level all caps to get $200 off your ticket. Learn more and reserve your seat by clicking the link below. That's M f I n C-O-N.com www.mfincon.com hope to see you there.

Yeah, that is a great question. I'd like to take just a step backwards on that because prior to forming the company, I met a business coach that was referred to me by a first investor. And what he said was we're not going to talk about just the why. And all Silicon Valley kids know it's the why before the how that my generation does. And so he said, we're going to help you form this company, but let's do it on your value system. And when you form it on value, it, it not only affects you, your company, but all of those people you're onboarding. And what do we mean by values? You know, in this crazy political world up we wonder if anybody has values anymore that, that it's, I think it's courageous for people to talk about what's most important to them. So family, faith, character, values, integrity, hard work, all of those things that most of us hold dear. And so we spent a few seconds doing that and then the outlook was as we developed the product and the product continued to evolve, every pivot we made was a value decision. So for instance, we found that our investors weren't coming on the platform a lot of, and we thought we might Only invest in 2, 3 companies a year so they don't need to do it all the time. But we needed, we needed them to come on the platform. So we said, what do you want? And one of my advisors said, why don't you try a virtual pitch event? And we did that. And in a week we had 30 high net worth investors on with our companies and there was investments being made. So we said, yes, all good software emulates the real world, right? So Dropbox, he lost, you know, files at a, at a bus stop. And so he said, I got to do this. And so we said, oh, we get it. Let's, let's have best of both worlds, the new world with software and digitizing, this huge multi trillion dollar middle marketplace. But let's also add phenomenal service with kind of like a concierge service for investors. Let's yeah, let's add, you know, matching not only with companies, but high net worth investors don't know each other and so let's put together a community, let's do, you know. So we really listened and then we also said, you know, for all of us is so important. You and I talked about how much you, you schedule your calendar out with your family first and I love that. It's a coaching concept. I did too. So when we look at, at, at what these, these values are, we needed to say, you know, our, our girls or our investor, what do they want and what do they need and how can we help them? And time was so important. So if they were to do this in themselves, they'd have to build a whole infrastructure, you know, with a secretary, assistant, I can't say secretary, assist assistant, executive assistant and a financial person, a deal maker. It's a quarter million plus just for the section we charge, you know, a fraction of that. But the thing is it's faster, it's better, it's less time consuming. And so this world, that how people have been finding these private investments been doing for 50, maybe 100 years. But I like to say they're playing eight track tapes and we're in a Spotify world.

Yeah.

So the world has changed and we can really adapt. And, and so, so the value system, when we go back to the time is great. And then, then we said okay, as we mentioned earlier, what kind of investments and they've got to be quality. Okay. So the value that way. And most entrepreneurs believe they know what's best and sometimes their idea is the best. But the market's going to tell you what it wants, right?

Yeah.

Okay. And so that's what we did. But going back to the beginning of this, you know, dialogue, it was, it's all about values and, and making sure you understand your, your audience and delivering what they want in a way that they may have never thought about before.

Yeah, no, I love that. So let's, let's dive into wealth vp the actual platform itself, who, who it's really built for from an investor perspective and what they can expect on that.

Okay. So in technical terms, we're a SAS fintech. Okay. And interestingly enough, at least here in, in my town in the Phoenix area, fifth largest city in the country, 90% of the investors I talked to never knew what SAS was. Software as a service.

I was floored.

So, so what that means is Software as a service, people are paying either a monthly or an annual fee to be on our platform and so with that in mind, so the industry, how they typically do this is they have a placement person, they pay a large fee whether they get, you know, invested in or not. And then investors go to conferences, they go to Tiger 21. They do all of these different things that are out there. So software as a service, as an investment, you know, we're in an investment round. So I talk about this all day and that is that SaaS companies are on top line revenues, not a multiple of ebitda. Okay. So for instance, if you have a company that has earnings and there's a lot of goods sold, you might get five times those earnings. So yeah, $10 million revenues, $2 million of earning, your company's may be worth five times, right?

Yeah.

So $10 million, a software company is worth 10 times top line revenue. So that same $10 million, the is now worth $100 million and a unicorn, that's a billion dollar company, private company, there was 50 of those 2015, there's 1200 today. That's how much the markets have grown.

Wow. Incredible. Yeah, yeah.

Okay, so, so the idea is that when we load this platform we have to say that's another value. Right. Because people are not paying all these other fees and things. But so what we look for with investors. Let's start with the major, you know, group of your audience here that we believe they have to be to make a minimum a hundred thousand dollar investment. Now some of them make less, but have that ability because if you're raising a million dollars at, at $10,000, which is typically what these little companies do, it's impossible. 100, they have to get a hundred people and talk to a thousand.

Okay, right.

So they are ultra high net worth individuals on our platform, $25 million of more of money under management and then it goes up from there. And so, and we have people on our platform at that minimum and we have billion dollar investors on our platform as well. And.

Excellent.

And then the requirement is that from a personal standpoint it seems like we just attract good people. But if the caustic people on the platform or if they're people that, you know that, that just are not likable, that we don't care how much money they have, we're going to build a community of really great folks. So that's so, so I'd like to talk about, we've talked about the companies, you know, with the, with they have to do on there and then, then we on the platform we do so much more than just onboard them. So. But was I with the, the, the people that we have and by the way that's global. So our investors are global and we think that we'll get more interest overseas because they don't even have networks to find these companies like some of the families offices do here.

When they probably don't have my guess, US investors.

US Companies. I'm sorry so global and then only US companies and we've got our value system there is that we like to do more impact investments. Women founded, minorities, veterans, environmental, ESG types of things on that site as well.

Yeah, excellent. So if, if an investor comes on the platform, what, what can they expect to get in addition to access to these investments? Leave.

Okay so first of all they're personally onboarded so we have someone that will walk them through and help them post their profile. They can either post their real name or most investors don't want to be known. So, so they can have a username and post that once they're on the platform. Our basic offering was until we used our value orientation is they can get on and start searching. So then say you know, I'm looking for a fintech company and I want a series A or series seed or whatever that and I have a minimum investment I can do $250,000. And so they, they go and they filter all these things out. They might say I want a woman founded business. They might say you know, I want to help support veterans or whatever those things are. So the basic platform allows them to filter and look for what they want but it's so much more. So they will be contacted at least once a month or as often as they want. Sometimes people they see get a hold of me quarterly but others want more. And our concierge service will match them with new companies that have come on and say what are you looking for? And it could be hey we don't have this particular vertical in there. So they'll go out and look for that. We've also added real estate because they said hey we want tax advantages. Do you have any 1031 exchanges or do you have any opportunity zones? And so we've just added a real estate portion that the tax savings alone, you know the price of admission to our, our platform. But then it goes beyond that that as and, and we're as, as we continue to grow. We found that our community. So imagine a community like LinkedIn that only has ultra high net worth individuals on it.

Now if, if you would. Lisa, define. Yeah if you would real quick. So ultra high net worth. I've heard 20 million, 30 million. Where, where do you draw that line?

Typically, okay, we draw it 5 million. But if you were to look up under Wikipedia. Yeah, Wikipedia says it's $30 million on up for ultra high net worth. He said. So here's an interesting fact that there's only about a thousand venture capital companies. Let's say that they do 10 deals a year, okay? 10,000 deals that they do. There was 5 million new startups last year. They only fund 1% of all startups in this middle market. And who does the rest? Yeah, it's all of your investors that are listening to this today. They do the 99.

So you guys draw the line at.

I'm sorry, at 25 million? Yeah, we draw the line at 25 million. Yes. Right. So there's 80,000. There's 80 times more ultra high net worth individual family offices than there are venture capital companies. And the things that we like about this investment market is they care, okay? And I don't want to demean venture capital companies, but they get thousands of solicitations every month and they get kind of full of themselves, you know, in this process. Also, the data is showing that these investors now want to go direct. Because if a venture capital company, as you and most of your investors know, has a 2 and 20 means they take a 20% backside of the deal, a carry 2% per year. So imagine that funds around 10 years. It's a 40% haircut, okay? So we're allowing people to go direct to these companies.

Very cool, very cool.

So that's on the matching. But the other thing that we've done is we have developed and it's growing. We're putting together what I like to call angel groups, so sub communities. So let's say that we found most investors have like, they want real estate or they want pack or they want crypto or cannabis or whatever that is, so they can join a group of their peers and form syndicates in these things. And it not only helps the investors as they get more qualified deal flow in their marketplace, but imagine the companies instead of going, trying to do an elephant hunt, right? They can go a whole herd. And so it's a video and you.

Got your tribe that you can go and then you're driving.

Yeah, that's probably a better analogy because I love elephants. I don't want to see those things.

Yeah, yeah, Wonderful. So as we wrap up here, I was, you know, statistics, and I forget if we were talking about this the first time we spoke here a few weeks ago, but you Know, originally when I first quoted the statistic a few years back, it was about a $60 trillion number. Now we're looking at closer to 90 trillion in wealth that's going to be transferred from the baby boomers to the millennials. And I think that platforms like yours, Leif, are what are needed to help facilitate the ability for the next generation to make these in a way that they're used to doing. Do you also offer education on your platform? What do you do for somebody that's doing that?

Yeah. And, and these are value things that we've uncovered that they want. About 95% of all the offices or ultra high net worth individuals lose all their money between the third and fourth generation.

Yeah.

So the legacy is not there. And so let me concentrate on investors. But we have educational seminars for the computer companies and have tracks of what you need to do and pitch deck improvement and all that. But once a month we invite all the investors on the platform for a coaching or an informational. And we have people like Nicholas that's written a book on next gen transfers over in the UK that is presenting. We've got, we've got Sean Barbarous that has a company, MTM360 that helps educate. In fact, I did an educational video that explains private markets for their kids.

Perfect.

Okay. And one of the answers just wants to give his kids some money and start doing some investing so that they understand the process. But also estate planning obviously and, and life insurance and all things that, that these folks need to know because they typically made their money not in financial services. And so they're really smart men and women, but they just don't know, you know how to do this. Right?

Yeah.

So yeah, we have this altruistic approach to all of our subscribers to help them out life as well.

No, I love that. So Leif, as we wrap up here, what is the best way for investors for potential founders or companies that want to learn more about wealth vp, get in touch with you the group, see how they can take advantage of this platform.

Yeah. So you can get a hold of us at wealth vp. Dear Paul, the first name of our company is Wealth Venture Partners. So we wanted to be your partner and we're in venture and of course we work with wealthy people. So wealthvp.com but also you have a direct line to me anytime you want to. And that's just Leif L E I f you know my Norwegian name@wealth vp.com. so those are the easiest ways to get a hold of us.

Perfect. And we'll put all that in the show notes here. It's been a pleasure having you on. Always great to talk to you and look forward to sharing what you're doing with more investors as well as more companies out there.

Chris, I'm honored to be on the program. Thank you very much for having me.

Thank you. Hey Chris, here again. I hope you found this episode valuable. Now I have one more thing to gift you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Just check out nextlevelincome.com coaching to get a free copy of my book, audiobook and much more. I'll send you a copy of my book and cover all the shipping costs as a thank you for listening to the podcast. Also, please like share and take just 90 seconds to give us a rating on Apple Podcasts.