Join host Steven Pesavento in a deep dive with Peter Goldstein, a seasoned entrepreneur, as they explore the journey from humble beginnings to successful exits, and the evolving landscape of capital markets.
Key Takeaways
Resources Mentioned
Interested in connecting with other like-minded individuals? Then join our VonFinch Private Capital Network. Learn more at http://www.vonfinch.com/invest.
About our Guest:
Peter Goldstein, a serial entrepreneur and capital markets expert, began his journey in business at a young age, driven by a passion for growth and learning. Starting with a food distribution business in his twenties, Peter later ventured into helping middle-market companies navigate IPOs and capitalization strategies. With over three decades of entrepreneurial experience, Peter continues to thrive in guiding businesses towards sustainable growth and investment success.
Establish your relationship with VonFinch now for exclusive invite-only opportunities. Schedule an introductory call now at http://www.vonfinch.com/call.
00;00;00;00 - 00;00;23;05
Steven Pesavento
If I went and looked at a market that I do not invest in, I don't have that same level of knowledge. I don't have that experience, that expertise. But in the markets where I buy real estate and we operate, I know down to the property level, the neighborhood, what's happening. And so it's very easy to be able to identify, well, this is an opportunity if I can buy it at this price and it's not an opportunity at that price.
00;00;23;11 - 00;00;45;18
Steven Pesavento
And so you really have to either align yourself with the people who have that knowledge and invest with them and, and trust in their judgment, or you yourself have to develop that expertise and experience to be able to get the advantage and be in a much better place as an investor. I'm Steven Betts event doing. Welcome to the Name Your Number podcast presented by the investor mindset.
00;00;45;21 - 00;01;09;02
Steven Pesavento
As someone who comes from a challenging childhood, I've spent my life seeking financial security, personal growth, and ultimately, freedom. The freedom to not wake up worried about the next paycheck, but rather with the confidence of knowing that my passive income pays my bills without the need to think about it. When you name your number that you'll earn passively, that creates your ultimate quality of life.
00;01;09;07 - 00;01;32;02
Steven Pesavento
Then I believe you've achieved real freedom. Welcome to my show. It's time to name your number. If I went and looked at a market that I do not invest in, I don't have that same level of knowledge. I don't have that experience, that expertise. But in the markets where I buy real estate and we operate, I know down to the property level, the neighborhood, what's happening.
00;01;32;02 - 00;01;56;26
Steven Pesavento
And so it's very easy to be able to identify, well, this is an opportunity if I can buy it at this price and it's not an opportunity at that price. And so you really have to either align yourself with the people who have that knowledge and invest with them and, and trust in their judgment, or you yourself have to develop that expertise and experience to be able to get the advantage and be in a much better place as an investor.
00;01;56;29 - 00;02;05;28
Steven Pesavento
Welcome back to the Investor Mindset Podcast. I'm your host, Stephen Vento, and today in the studio we've got Peter. Goldstein. How are you doing today, Peter.
00;02;06;01 - 00;02;09;18
Peter Goldstein
Hey, Steve. And just great. Great to be here. And thanks for having me.
00;02;09;20 - 00;02;32;18
Steven Pesavento
Yeah, I'm super excited to talk to you because you're a longtime entrepreneur. You started when you were really young. You've had assets along the way. Your current business is focused on helping middle market companies IPO and reach those capital markets. So I'm sure we'll get into some of that. But where I'm really interested to start with is a guy like you who's had a lot of success, who's been an entrepreneur.
00;02;32;20 - 00;02;40;15
Steven Pesavento
If you start by looking back when you know what events or influences from your childhood shaped who you are today.
00;02;40;17 - 00;02;59;13
Peter Goldstein
Yeah, that's feels like it's going back a long ways and a lot of experiences, you know, successes, failures, hardships all along the way helped me shape, you know, myself as a businessman I am today. I think I was that classic entrepreneurial mindset as, as a kid. You know, I grew up in the suburbs in New York, so we had the Four seasons.
00;02;59;13 - 00;03;16;18
Peter Goldstein
So, you know, I was on lawns in the spring and summer and raking leaves in the fall and shoveling snow and the paper route. So it was really, you know, from early on, I and I, my family was not entrepreneurial per se. It just seemed to be in my DNA and my framework and something I love to hustle.
00;03;16;20 - 00;03;35;22
Peter Goldstein
And of course, I love the output, you know, and the rewards from being able to make money. so I always knew I would end up in business for myself. I didn't know exactly what that would be. Stephen. So it was really been you know, at 61 now, quite a journey, for which there are many milestones and highlights along the way.
00;03;36;08 - 00;03;59;17
Peter Goldstein
I am to, you know, happy to dip into any one of those with you. I think the most meaningful kind of line of demarcation came in my 20s, at 24, when I started my first company, in New York City. But leading up to that was kind of that desire, that internal kind of drive to want to be in some form of business, of my own.
00;03;59;19 - 00;04;16;08
Steven Pesavento
I mean, was it a stable home? Was it money was easy and consistent, or was it something where you felt like, oh, entrepreneurship is going to get me out of this, or entrepreneurship is going to get me another level of freedom? Or what was it that really attracted you to it when you were young?
00;04;16;14 - 00;04;39;22
Peter Goldstein
You know, it's interesting. So I would say middle class, probably lower, middle class and, and, you know, work with family. My mother was a Holocaust survivor. And so I think that there is it instilled in me, a certain mindset and, being able to really not just, you know, thrive, but to overcome hardship and to continually grow and do better.
00;04;40;10 - 00;05;09;03
Peter Goldstein
and so while she demonstrated for me work ethic and the value of a dollar, you know, our family, I would say really wasn't instilling, you know, going down an entrepreneurial pathway for any of the kids. and we're all professionals. We both, really? Well, it was really more what I saw was the opportunity to grow and excel and to learn and to apply myself to do something different.
00;05;09;06 - 00;05;31;25
Peter Goldstein
And one of the beauties of being an entrepreneur, now, over, you know, 35 some odd years is the ability to have a goal, to work towards it, to be able to achieve that. And money isn't the only marker of success. I think there was more from a young age and still is a desire to learn, the desire to grow, and a desire to produce results.
00;05;32;26 - 00;05;52;06
Steven Pesavento
Yeah. I think it's so, it's so important to understand where we come from so we can understand how we got there, because I think a lot of people start from different places, they have different motivations, they've got a different purpose of what they're trying to solve for. But in the end, that path can be inspiring to see, you know, what you've been able to do.
00;05;52;06 - 00;06;10;21
Steven Pesavento
Because, you know, at 24, you start a business. Tell me a little bit about what that was like, because, you know, at 23, 24, I've also started businesses and, bootstrapped it and all of the pains and tribulations that go with that. But there's so much that also comes from it. So tell us a little bit about that.
00;06;10;22 - 00;06;29;23
Peter Goldstein
Yeah, I think, you know, maybe it will be interesting to share some of our experiences, you know, at 23, 24. You're still developing, right? Your your brain is still in for final stages of performance live. And we think we know a lot at that stage. Certainly overconfidence and ego and drive play a lot into that decision making around that age.
00;06;29;25 - 00;06;47;05
Peter Goldstein
And I had started a career in the restaurant industry, prior to going out on my own. And I was working for a very prominent, restaurant in New York City called the Rainbow Room. And I have reached probably the one of the highest levels I could at that age of being a director of operations and one of the, you know, New York's finest properties.
00;06;47;08 - 00;06;49;25
Peter Goldstein
What was clear was that wasn't what I wanted to do.
00;06;49;26 - 00;06;58;01
Steven Pesavento
When I was a kid. I wanted to be a chef. And then I realized, wow, that is, that is a tough that is a tough career, you know?
00;06;58;02 - 00;07;23;15
Peter Goldstein
Yes. Yeah. And what's that old saying? You know, if you can't stand the heat, get out of the kitchen. Well, yeah, it was silly. Clearly, it seems like it wasn't for you and it wasn't for me. That. But that springboard me into, the first business that I started knowing that there was an opportunity and that demand for the products way that I'm going into a food related distribution company in New York City and on my 24th birthday, actually went to City Hall on Center Street.
00;07;23;21 - 00;07;44;12
Peter Goldstein
63rd Street, got my first business license and the commonality 35 some odd years later, and all the business I've been involved in, what I look for is a product market fit. So is there a demand for the for the product? And at that point, there was a company that had just recently gone out of business, and no one yet had stepped in to fulfill the need that was there.
00;07;44;19 - 00;08;19;22
Peter Goldstein
And so I don't, you know, at 24, you don't realize the risks that are inherent in leaving a paycheck and starting and going out on your own. No money, no real formal business plan, right? You know, it was all bootstrap, and it was based upon the mindset. okay. I'll put together one account at a time, one client at a time, one step at a time, and fail and build what I knew was, you know, one of the strongest markets in the world for the restaurant industry, and took that, you know, every day, week by week, and really built something meaningful to the point where I had my first exit
00;08;19;22 - 00;08;22;03
Peter Goldstein
at 30 years old.
00;08;22;06 - 00;08;45;18
Steven Pesavento
Yeah, I, I have to imagine. I have to imagine it felt good to have that exit. But I also imagine that, you know, you build something from 24, you find this product market fit, you see what others don't see, and you go after a business that you have a connection to, but you don't really know what you're doing when you get into it.
00;08;45;18 - 00;09;02;21
Steven Pesavento
But you learn so much along the way. I have to imagine that it was both exciting to sell the business, but also that there was some other feelings. Kind of tell me what that was like, having that big victory in the exit, but also, you know, letting go of what you built.
00;09;02;23 - 00;09;22;07
Peter Goldstein
Yeah, it was a it was a strong exercise in giving up attachment, to an outcome. And, and I equate it to having my first kid. I'm a father now. I have two adult children. but that was kind of like my first baby. And I remember when I had sold it and and there was an earnout component and a meaningful performance based.
00;09;22;07 - 00;09;39;02
Peter Goldstein
And the people that took it over didn't run the business the way that I had with the very high touch, high service. You know what I wore, it was perishable industry. So, you know, it was a very demanding, sector. And so they didn't perform as well. and thereby my performance and my payout didn't go as well.
00;09;39;02 - 00;10;02;01
Peter Goldstein
So the exit was not as meaningful from a financial perspective. So I learned a lot from that, vantage point, more importantly, was realizing that you can't control everything that happens, especially when you do a merger and acquisition or you're combining cultures, you know, you're combining different business opportunities. And so there was a lot of emotional component. There was a lot of financial component.
00;10;02;03 - 00;10;23;28
Peter Goldstein
And then there's a stage of, okay, I just spent six years of my life, you know, countless hours per week, sleepless nights, you know, building, growing step by step, brick by brick, and my identity is no longer attached to that. I was a fun period, you know, that was when celebrity chefs were coming on. I was servicing all the better and finer restaurants.
00;10;23;28 - 00;10;42;01
Peter Goldstein
So I was single. I was living in New York City. you know, it was a very fun period of fun stage of life. And then all of a sudden that's no longer there. And then comes the moments of who do I want now? An opportunity with a clean slate to recreate, redesign and look at the next steps of the journey.
00;10;42;01 - 00;10;44;03
Peter Goldstein
As an entrepreneur.
00;10;44;06 - 00;11;16;01
Steven Pesavento
Yeah. How did you approach that transition? Because I feel like what I've seen in my personal experience is, you know, I've I've built businesses, I've I've exited businesses, I've, I've built it again. I've transitioned, I've pivoted, I've and things are working along the way. But they keep growing. And there's a point in time where, you know, your identity gets so caught up in what it is that you do and what it is that, that, that your business does and that becomes who you are.
00;11;16;01 - 00;11;25;17
Steven Pesavento
And so as you're transitioning out of that, what what was it that you clung to to find your way to that next opportunity?
00;11;25;20 - 00;11;46;28
Peter Goldstein
Yeah, I love that question, Steve. And and actually I took 3 or 4 months. You know, it's kind of the, the, the helicopter approach. Right. Just lift up a little bit, you know, look out from the balcony or look up from, you know, 10,000ft view and really examine where do I want to go? What's my purpose? What served me and what didn't serve me, before I jumped into kind of what's next?
00;11;46;28 - 00;12;05;15
Peter Goldstein
And I think that's a really valuable exercise. Whether you've made a transition to or even in your current business to, you know, like you mentioned earlier, quarterly, you take time to go travel. I think it's really important to take time and to really take perspective on where you are, especially in this world. You know, things are moving faster, right?
00;12;05;15 - 00;12;29;10
Peter Goldstein
Data, information technology, AI, we're overloaded. So the decision making processes are are really if you look at it, you know, driven by past experience, a lot of times that's trauma, right. Or things that have gone wrong. And maybe then we gravitate to wanting to do something differently. I, I see the common link for me has from that point on has been a purpose working within a community.
00;12;29;10 - 00;12;48;06
Peter Goldstein
And that's the entrepreneurial community where I feel like I can have value. And the reason that I focused on the small to, to mid-size, you know, kind of cab companies and, and that entrepreneurial culture is that I feel I can make more of an impact. I relate to entrepreneurs. I am one, you know, it's in my DNA, right?
00;12;48;06 - 00;13;05;28
Peter Goldstein
It's in my 24 seven blood. and I love that. And then I love having the ability to see what I do be impactful, which is why I didn't want to go down a corporate route or go down towards larger enterprises. Not that we couldn't make an impact there, but it takes a longer period of time. It's like the idea of turning the cruise ship, right?
00;13;06;01 - 00;13;28;19
Peter Goldstein
I can I can make and term, you know, small profit much quicker be before adapt to nimble and make that impact working with the entrepreneurs. So that's been a common thread from that point which I was 30 to now, you know, 61. So the past 31 years has been really more designed around how can I work with and add value to different stages of emerging growth.
00;13;28;19 - 00;13;30;20
Peter Goldstein
Entrepreneurial companies?
00;13;30;23 - 00;13;53;00
Steven Pesavento
Yeah, I think I think that's like a really exciting place to be because as an entrepreneur yourself, you understand, you know, the trials of being a founder, the trials of running a business, undercapitalized, you know, understaffed people bootstrapping people, trying to figure out how they can get to that place, that end goal that they want to, or at least enjoy the path that they're they're growing on.
00;13;53;00 - 00;14;17;12
Steven Pesavento
And having that wisdom and experience is super important. And so, you know, today you're running a very different business than you started. And I know along the path you kind of grew into that. but today you're, you're supporting businesses that are looking to get capitalized and in today's market, investing in capitalizing businesses in 2024 is very different than it was just a few years ago.
00;14;17;12 - 00;14;38;25
Steven Pesavento
And it will be very different than it is a few years from now. And so what are some of the key takeaways that you're seeing in the market today that are influencing the decisions you make, both as an investor, but the decisions that you're recommending, those operators and those CEOs that you work with make when it comes to capitalizing their business.
00;14;38;25 - 00;14;46;27
Steven Pesavento
Because I think those two, people always look at them from one or the other. But when we bring them together, it's a really powerful lens to be able to understand.
00;14;46;29 - 00;15;11;16
Peter Goldstein
I agree, it's the combination of both and and as you said, you know, I work in the capital markets 2021 even was the most robust IPO market we've seen in 27 years. Roll the tape forward 2223. Now at 24, it's one of the worst IPO markets we've seen in over 30 years. So that cycle was pretty significant right.
00;15;11;16 - 00;15;36;11
Peter Goldstein
Like the cliff just basically dropped off of the IPO market. And so now it's then I actually found my business to be much more challenging in a rewarding way. Because when money is moving and the markets are robust, it's much easier for companies to attract capital. And so just the shift in the last few years has gone back to where my focus always is, is on the fundamentals.
00;15;36;14 - 00;16;07;12
Peter Goldstein
Can you demonstrate product market fit? Can you demonstrate that you have made sound assumptions to be able to grow your business, scale your business right, execute on your plan and provide a return to the investors in the stakeholders of the company. And that is more and more evident in today's market. You know, there's more capital on the sidelines now, Steven, than we've probably ever seen in our in our lives and our careers, even our lives combined.
00;16;07;15 - 00;16;29;14
Peter Goldstein
And so what are they looking for? They're looking for the ability to demonstrate return on capital, you know, fundamentals, you know, growth. And that doesn't mean that you have to be profitable. Now, what I see is the confidence to be able to demonstrate accurately with a track record, right of performance, clear assumptions, you know, definable and that executable plan.
00;16;29;16 - 00;16;49;26
Peter Goldstein
So whether you're early stage, mid stage, you know, which is where I focus on latter stage to me, look at the next two years. Look at where you've come from in the last 12, 18, 24 months. And make sure that you can support and to be able to communicate and demonstrate to the investment community and to the stakeholders.
00;16;49;26 - 00;17;14;21
Peter Goldstein
Right. So it's not just the capital, your employees, you know your customers, you know your board, your advisors, you know, all the way through that each aspect of that can demonstrate value. And if the value is there doesn't have to be always financial value. Right? There's intangibles as well as intangibles, quantifiable and quantifiable. All of those things come into play today more so than I think they ever have.
00;17;14;23 - 00;17;40;26
Steven Pesavento
Yeah. So it's super important that you can share that vision, that you can show where you're going and what you're doing when it comes to capitalizing the business. And what I'm also hearing is that when you're looking to invest in a business, you're looking for those things. You're looking to understand why is now the time? Why are you the person to be take to, to be driving that ship towards taking advantage of that opportunity?
00;17;40;28 - 00;17;45;17
Steven Pesavento
And and why should I, join you on that journey as an investor?
00;17;45;19 - 00;18;11;01
Peter Goldstein
Well said, well said. I also work a little bit backwards. I look for the deficiencies and the holes and see how they're going to be plugged because. Because no business is perfect. Right. And especially in the small to to men, you know, emerging markets and just like where we're working, when we list a company, we're looking 18, 24 months out and we determine what all the criteria that we need to meet will be in the future.
00;18;11;03 - 00;18;44;28
Peter Goldstein
And we work back to today. And identifying those deficiencies, I think, can be really valuable. Whether you're looking to do an exit, whether you're looking to attract capital, or whether you do something to scale, which is to be really authentic about where are your weaknesses and then what are you doing to identify those and have a solution? You don't need to have it all in place today, but you want to have the ability to identify, look at those solutions and have a diverse and robust set of advisors and stakeholders that can help you in realizing the gap between where you are now and where you want to grow into as an entrepreneur.
00;18;45;01 - 00;19;15;24
Steven Pesavento
So, so as an investor, if I if I have, let's say I have a pile of money, I'm looking to take advantage of things in the market. what's the opportunity of getting involved today versus, say, waiting? Waiting six months, waiting a year, waiting two years, waiting three years, obviously, we don't know what the future holds. We're not looking to, make a guarantee prediction, but we have to kind of intuit where things are going to go in order to make smart decisions today.
00;19;15;24 - 00;19;31;11
Steven Pesavento
And, you know, obviously, you're specifically focused investing personally and then helping other people, you know, get capitalize in the public markets. So what's your take on that? How should people be thinking about that if they are looking to be a public market investor?
00;19;31;16 - 00;19;58;13
Peter Goldstein
Well, you, you, you use a really key word which is Intuit, right? And I and I think that investor sentiment right now is probably about, you know, picking companies in the stock market is not a perfect science. That much has been really clear over time, right? You know, the the success rate of this kind of, you know, lock versus actual, you know, data supported, you know, investing in the stock market is turned out to be very, very blurry at best.
00;19;58;15 - 00;20;20;15
Peter Goldstein
So, you know, then the informed intuition is where I like to look. And that is if you have a sense of a business that you understand that you like, that you have an affinity towards, that you can resonate with management, their mission, their purpose, their track record, you know, where they're going with the business and support that with the data.
00;20;20;17 - 00;20;43;16
Peter Goldstein
And the data could come in in a number of different ways, depending on what the key metrics are of the business and what it is. You know, your investment horizon is in that particular, you know, situation or you're looking for, you know, you're looking for a dividend, you know, or you're looking for growth in equity. So I don't think there's any one answer that would satisfy, you know, my perspective as an investor or even the, you know, your audience.
00;20;43;16 - 00;21;06;24
Peter Goldstein
I think it's very specific. And then I could go into the blend of you know, your investment approach. Right? So you've got, you know, high risk, you know, more Midwest and low risk, and some land around all those I tend to go towards higher risk, higher return investments, but I do them in a, in a way that they're securitized, the best that they can be.
00;21;06;24 - 00;21;27;01
Peter Goldstein
So I'm getting higher risk and higher return, but that's my risk profile. So risk profile comes into play here very significantly. I don't really believe per se in market timing. I do believe right now that there are more opportunities, as a contrarian, to invest and bring your money to market with all the money is on the sidelines.
00;21;27;03 - 00;21;48;11
Peter Goldstein
You have access now to unique, to this opportunities that I think are undervalued, and are looking for capital which is difficult to bring out of the sidelines right now, meaning that there is potentially higher returns to those investors were early movers, while the rest of the money is sitting and waiting for kind of that herd mentality.
00;21;48;14 - 00;22;11;17
Peter Goldstein
Right. You know, once things open up in the markets, you know, there's going to be a rush. And if you look at the difference of valuations, just take tech where it was in 2021 the peak of the market. Same companies now are valued 2030 even 40% lower. Great opportunities if you know where to look and you're willing to be, you know, kind of risk oriented in putting your money to work.
00;22;11;20 - 00;22;35;14
Steven Pesavento
Yeah, I couldn't agree more. I think that there is a unique opportunity, but in order to take advantage of it, you have to be very clear on what is your risk profile, what is your objective, what's the goal and and how do you mitigate that risk and how do you mitigate it through having strong understanding, having strong advisors, mentors, people like yourself, having having the experience in the market.
00;22;35;18 - 00;22;56;29
Steven Pesavento
Now, personally, I'm not a public market investor. So, despite understanding quite a bit about it, I have no expertise in that space. You know, all of my expertise is as a private investor, either in private equity and primarily in private real estate. And so even in that space, just as a comparison, I'd love to hear one from yours in the public market.
00;22;57;01 - 00;23;16;15
Steven Pesavento
But in the real estate sector, what we've noticed is that the institutions are sitting on a ton of cash and capital, so anything that fits their buying criteria is getting bid way up outside of the mark of where we would typically buy. Therefore, the risk is too high for the reward and the amount of work that needs to go into it.
00;23;16;22 - 00;23;40;15
Steven Pesavento
And so we shifted down market and we were able to find deals like we were buying three, 4 or 5 years ago with deep discounts, lots of upside lower risk. But but it it balance is nicely because we're looking where everyone else is in isn't looking and so what what have you seen as a comparison in the public markets or in kind of the sectors that you focus on?
00;23;40;21 - 00;24;00;22
Peter Goldstein
Very similar. Stephen. It's kind of contrarian, you know, looking where others aren't and willing to deploy capital. If you look at the IPO market, majority of companies, you know, over the last two years have been underperforming. You know, there is. Right. So, you know, we're we're seeing the opportunity to buy in the open market. very, very attractive.
00;24;00;22 - 00;24;24;01
Peter Goldstein
And what's getting done are kind of the jumbo, the unicorns and the and the very much the lower kind of microcap, you know, segments. And in the last quarter, there were more IPOs done than the two years prior combined, with positive yield, you know, about a 12%, 13% performance, and, and life science sector being excluded from that.
00;24;24;11 - 00;24;42;25
Peter Goldstein
and technology's driving a lot of that. But I think the answer lies a lot also in the market knowledge and what I would call market intelligence. I don't know enough about your sector to want to want to feel comfortable and vice versa. So you want to align yourself with people that have courage and market intelligence and do your homework.
00;24;42;28 - 00;25;04;28
Peter Goldstein
You know, if you just look at, the basic fundamentals of really understanding what you're investing in, why you're investing in and what the risk factors are and getting that market intelligence applied, you have a much higher chance for probability of a better return than just going into an investment without really having done all that market, you know, research.
00;25;05;01 - 00;25;25;14
Steven Pesavento
Yeah. It's like once you have that insider knowledge and once you have that insider knowledge and you have the ability to understand in depth that specific niche, it really does give you an advantage. It makes you feel so much more comfortable. I know for me personally, if I went and looked at a market that I do not invest in, I don't have that same level of knowledge.
00;25;25;14 - 00;25;44;02
Steven Pesavento
I don't have that experience, that expertise. But in the markets where I buy real estate and we operate, I know down to the property level, the neighborhood, what's happening. And so it's very easy to be able to identify, well, this is an opportunity if I can buy it at this price and it's not an opportunity at that price.
00;25;44;08 - 00;26;01;06
Steven Pesavento
And so you really have to either align yourself with the people who have that knowledge and invest with them and, and trust in their judgment, or you yourself have to develop that expertise and experience to be able to get the advantage and be in a much better place as an investor.
00;26;01;09 - 00;26;03;02
Peter Goldstein
Agreed.
00;26;03;04 - 00;26;28;18
Steven Pesavento
So when it comes to this idea of going public, I think it's a really interesting topic and I'd love to finish up kind of talking a little bit about this and maybe 1 or 2 other items, but but my understanding has always been that, you know, there's less and less, public companies than there ever has been in the past that there is there's a good reason for that.
00;26;28;18 - 00;26;47;21
Steven Pesavento
The regulations make it difficult to go public. It takes a lot of administrative effort and that you really can't go public unless you're at a certain size. And, you know, in the real estate sector, that's $1 billion for the real estate under management or more. And then the outside of real estate, I know, you know, it's a significant, size.
00;26;47;21 - 00;27;03;16
Steven Pesavento
So talk to me about why what what enables this shift or opportunity for smaller midsize companies to take advantage of the public markets? What's the upside and what's the downside of going in that direction?
00;27;03;29 - 00;27;21;18
Peter Goldstein
I love the question. I mean, this is kind of been my area of focus and of study. I wrote a book called The Entrepreneur's IPO just for this really purpose, that there's a myth on Wall Street and you just mentioned it. It's really that you have to be a unicorn in order to go public and access, you know, the capital markets.
00;27;21;20 - 00;27;43;19
Peter Goldstein
And that came about, Stephen, with, with the.com bust, you know, when, when.com was at its peak and all these small and early stage kind of high risk companies were going public at excessive valuations. Well that market crashed right. The balloon popped. And there became this sentiment around wall Street that if it's too small, it's too high risk. You shouldn't go public.
00;27;43;21 - 00;28;13;27
Peter Goldstein
And you know, I can just tell you that that's just not true. 20, 25 years later now, you know, there always has been a micro-cap and a small cap market. And so it's access and capital as an alternative to venture capital, you know, private equity, this would be institutional and or specialized institutional financing, family offices, kind of, you know, a unique aspect of capital that's driven towards liquidity.
00;28;14;03 - 00;28;34;12
Peter Goldstein
So those investors, their mandate is to be able to invest in the companies that have current liquidity, and that separates them from a lot of other pools of capital. So that is always going to be an opportunity for companies to see capital. And that is really true when you're in an early or mid-stage company that's transformational capital. You know, these are small groups I would say.
00;28;34;12 - 00;29;09;02
Peter Goldstein
So to give you an idea, Micro-Cap IPOs, $50 million valuation to 300 billion. Small cap, 300 billion, $2 billion. And that's a wide berth. Companies and those companies are able to access capital, which is the upside. The downside is it's expensive and it's volatile. And and now you're in the business in addition to your operating business, you have to run and operate all the requirements of meeting and satisfying being a public company, transparency, reporting, governance, you know, shareholders.
00;29;09;02 - 00;29;31;00
Peter Goldstein
So there is a significant challenge. And then of course, you're stuck with the market price of your stock good and or bad, which puts additional pressures on. So it's not an easy road. I've done it myself twice. I, I advise many, many companies. Some have worked better than others. and all transparency. It is not for everybody.
00;29;31;14 - 00;30;01;26
Peter Goldstein
there are significant benefits to having that liquidity and access ongoing capital on attracting employees for mergers and acquisitions. You know, I could go down a long list of benefits, and, and challenges just as well. So if you choose to go down that road, make sure you have the right team of advisors who are knowledgeable, to work with you through those pluses and cons and, you know, kind of pros and cons, I should say, plus minuses of being public and an early stage versus building a private venture capital.
00;30;01;26 - 00;30;07;24
Peter Goldstein
And there's a long list there of, kind of risk and reward and why you want to choose that option.
00;30;07;26 - 00;30;26;03
Steven Pesavento
What's like obviously every situation is different. Every size of companies is different. But what's a ballpark of what it cost the company to go public and then what it costs them to administer and live up to what's required. Being a public company.
00;30;26;05 - 00;30;58;13
Peter Goldstein
So the answer is, is also depending on the complexity of the business. Right. And and you know, there are ranges and I can give you I've been involved with and comprises I'm a big believer in, you know, keeping costs down, especially in the beginning for a small or an emerging growth company. We've done it for as little as 250 to $300,000 and spent probably as much as $1 million, you know, under the scope of, you know, taking a company through all the stages of audit, legal, you know, preparation, filing, governance, you know, there's a lot to it.
00;30;58;28 - 00;31;19;01
Peter Goldstein
with with a good team, you can come who has knowledge and is willing to work also for the longer term, you can compress a lot of those costs. And it's the same thing that once you're public, you know, I like to put about $1 million budget. It could be more it could be $2 million a year. So it really is, depending upon size, stage and complexity of the business.
00;31;19;03 - 00;31;27;03
Peter Goldstein
And then, of course, you know, the ability to manage those, you know, budgetary items, you know, ongoing and leading into the IPO.
00;31;27;05 - 00;31;33;29
Steven Pesavento
Is the cost of capital cheaper by going to the public markets in the long run, or is it cheaper by going to private?
00;31;34;01 - 00;32;02;13
Peter Goldstein
It's a great question and it really depends on the performance of the company and how they do in the open market. cost of capital. The beginning is going to be very similar. if the stock creates well and does well in the open market, then you have access to significantly more capital, institutional capital, both in debt, you know, and in equity that the expensive part in the way of dilution to current than existing shareholders that come with the stock doesn't perform well and you're doing more equity financing, then of course, you're diluting, you know, the current shareholders.
00;32;02;15 - 00;32;19;07
Peter Goldstein
So there's no, you know, perfect answer to it. It is the way I'd like to position it for you and for listeners is that it's an alternative. And it's a viable alternative for those that want the liquidity and the access to capital at the right stage for their own particular and unique characteristics.
00;32;19;09 - 00;32;39;06
Steven Pesavento
Yeah, I think it's a fascinating world because it's one that I obviously don't play in, but it's one that you see as kind of that pinnacle moment of success when a company IPOs and it goes public. But from my perspective, that's when all the work starts. Like there's a great example of a friend and a mentor of mine.
00;32;39;06 - 00;33;02;12
Steven Pesavento
He ran one of the largest real estate funds in the world, and they went public after operating for 30 years. And he at that point, that was when he retired because he said, I don't want the headache of working for and participating in a public company. And they had obviously had a crazy amount of success in the private markets.
00;33;02;12 - 00;33;18;18
Steven Pesavento
But by going public, they created massive amounts of liquidity and a huge jump in the valuation of of the company in the portfolio because of going public. It was almost like A3X or four x multiple. By having now access to that public market.
00;33;18;20 - 00;33;37;04
Peter Goldstein
It's a trade off Stephen. Right. And and and it is you know, that's why you want to build a management team, that has experience and knowledge and, or recruit the right people to be on your team to help manage that other kind of new business that you're in or being public. And the requirements of that. And a lot of it's also very hard for certain founders.
00;33;37;28 - 00;34;00;29
Peter Goldstein
when they're used to running and making decisions under an entrepreneurial structure where they now have a board and they have governance. And so there there's pros and cons to looking at it that jump in valuation and that liquidity and access to capital are the three that I want to focus on always. And, you know, if you look at what tech companies have done, you know, even recently, they're giving out stock and stock options to attract and reward human talent.
00;34;01;01 - 00;34;21;07
Peter Goldstein
You know, this is a time in our in our world where it's really critical to be able to attract and retain the right people and giving them stock and and options with liquidity is one of the key factors, you know, for attracting and maintaining, quality cap, human capital on your team when.
00;34;21;10 - 00;34;45;28
Steven Pesavento
So let's shift gears here. When you invest personally, obviously you've built businesses, you run a company. It sounds like you have a lot of experience in the public markets, in the entrepreneurial sector. Talk to me about what you invest in personally. Are you investing primarily in the public markets? Are you taking positions in private equity? And, are you taking positions as an advisor and earning kind of that investment return?
00;34;46;18 - 00;34;54;16
Steven Pesavento
have you invested in real estate? Kind of talk to me a little bit about how you've built your portfolio and where you focused on for you so much?
00;34;54;16 - 00;35;16;20
Peter Goldstein
As we were talking earlier, I had hedged my portfolio approach. I split it into real estate, residential. And and this was before, you know, the Great Recession and then the financial crisis. and the other half was in the capital markets, and, I put all my, my personal money into those two different buckets to diversify.
00;35;16;22 - 00;35;36;08
Peter Goldstein
And it was all residential, jumbo real estate in South Florida. So if you think of, you know, ground zero during during that period of time. So I lost I lost everything there. it was tough period of my life where never in my lifetime did I think that I would have both events occur at the same time.
00;35;36;09 - 00;36;02;06
Peter Goldstein
So I had a very simple hedging strategy. and that did not work. so I'm here to tell you that, you know, I've rebuilt myself, and and losing everything, from a financial perspective, was one of the best teachers I've had in my life about my own personal, you know, position, about humility, about what's important, about my personal values, about my family values, about my values around money.
00;36;02;26 - 00;36;41;09
Peter Goldstein
and, and so I obviously, during the process of rebuilding, gone to some real estate, but I'm much more heavily weighted now in what I built as, as a very specialized investment thesis. And I have put together a, boutique investment fund around this that focuses on pre IPO, IPO and existing public companies. And my investment thesis is around and a, a debt convertible debt or convertible yield structure where I get a return on my capital 2,025% returns with equity tickers both in the way of common stock and warrants.
00;36;41;12 - 00;37;13;28
Peter Goldstein
So I've identified a market opportunity that comes out of the knowledge that I have to provide capital for high growth private and public companies with a very specific kind of investment thesis around bridge investing. So that could be bridge to an IPO. It could be bridge to an having a, some form of a special event or a special situation where we can identify a gap in capital that's very hard for companies to access, meaning they're not going to go to private equity or they're not going to go to venture, they're not going to go to an investment bank.
00;37;14;01 - 00;37;39;06
Peter Goldstein
And so that's kind of the space that I've identified. Last year, I had about 40% gross returns, for myself and the other investors, about 29% returns. So it's a niche. And that niche is inside of the knowledge of an investment strategy that we're doing with select companies and kind of select criteria. That's very disciplined. and I would say very narrow in its approach.
00;37;40;05 - 00;38;12;07
Steven Pesavento
yeah. What I think I want to underline about that is really you have a special set of skills, knowledge, experience and what you've done is set up a vehicle where you can apply that knowledge for yourself, but also bring along other people to help juice the overall returns. And access a much more diverse, wider pool. It's kind of like the same reason we accept private capital is because we could buy ten properties ourselves, or we could buy 100 properties together, and ironically, 100 properties together.
00;38;12;07 - 00;38;17;26
Steven Pesavento
Well managed is much more diversified and therefore creates a lower risk profile.
00;38;17;29 - 00;38;39;22
Peter Goldstein
Agreed. And then, you know, with that diversification, you know, you get a basket right for you. It's a basket of properties. For us it's a basket of companies. I spoke with one of my investors this morning and he was going to, you know, participate further for just that reason. So, you know, we we can vet the risk and diversify the portfolio approach in this sector, which, you know, is is very unique.
00;38;39;22 - 00;39;02;09
Peter Goldstein
It comes from, you know, many years of experience, and also having the ecosystem around me. So we have opportunities to work with investment bankers, with securities attorneys, you know, with the exchanges, right, with with the entire ecosystem for which we've been a member of for 20, 25 years. So inside of that, you know, kind of the old saying of in niches there are riches.
00;39;02;12 - 00;39;24;29
Peter Goldstein
Well, if you look at all of the large, even the, you know, the Magnificent Seven, right? They also are often small companies somewhere in their journey. And, and that's where, you know, I love to work and then to deploy capital. but it fits inside of, of being able to identify kind of that niche which is very, very unique, very small.
00;39;24;29 - 00;39;48;05
Peter Goldstein
The overall scope of the investment thesis of Wall Street, you know, and as an example, you know, there were, in, in after the kind of things fell down in 2021, there was about a 60% decrease in the number of companies, as you were saying, that that went public during that period. And it was probably at an 8% decrease in capital.
00;39;48;07 - 00;40;14;15
Peter Goldstein
Right. So then where's the money coming from? And that's when I launched the fund in 2022, because I was getting opportunities coming to me. And there really wasn't an I a good product market fit. It's not a good fit for hedge funds. It's really not a great fit for family offices. And then who is going that need? And it goes back to how I've seen most every company that I've been involved in, including my own as an investor and as an operator.
00;40;14;15 - 00;40;29;06
Peter Goldstein
Really Excel and scale is when you have a niche inside of the market that can start small, that doesn't have a lot of competition because of that. And then you can produce the returns, the growth, and then begin to scale from there.
00;40;29;08 - 00;40;39;12
Steven Pesavento
Yeah. There's so many juicy nuggets in here Peter. It's really great having you on. Why don't you share with the audience where they can get a copy of your book or follow you if they want to learn more?
00;40;39;15 - 00;41;10;00
Peter Goldstein
So feel free to to DM me on LinkedIn. you can get the book on Amazon.com. but for your listeners, Stephen, I'm going to give of, a digital copy for free so you can just DM me. or, you know, you can look me up on the RMS cap. That's RMS cap.com, which is the fund. you can email me there, and I'm happy to give more information, copy of the book and anybody else that I can add value to, along their journey in growing their entrepreneurial business and nurturing the capital markets and or investing in the capital markets.
00;41;10;05 - 00;41;12;10
Peter Goldstein
You my question. Do some.
00;41;12;12 - 00;41;26;16
Steven Pesavento
So interesting. There's so much value in here. The idea of understanding what's in it for the operator, the CEO when they take your money, what to look for as an investor and so much more. Thanks for joining us, Peter, and thanks for listening to this episode.
00;41;26;21 - 00;41;29;21
Peter Goldstein
Thanks for having me. I hope they have added value to our listeners.
00;41;29;23 - 00;41;52;26
Steven Pesavento
Today's episode is sponsored by Von Fish Capital. If you're interested in investing alongside me in the same type of real estate opportunities that I personally invest in, then head over to Von Finch Capital and join their private investor network. You can do so at Von finch.com/invest. Join me on that next deal. I look forward to seeing you on the inside.
00;41;52;28 - 00;42;14;06
Steven Pesavento
Thank you for listening. If you like what you heard make sure to rate, review, subscribe and share it with a friend. Head over to the Investor mindset.com to join the Insider Club, where we share tools and strategies from the top investors and entrepreneurs and take it to the next level. Hey, this is Stephen again. Just one more thing before you take off and that is the insiders newsletter.
00;42;14;08 - 00;42;33;00
Steven Pesavento
Would you enjoy getting a single email every week with some of my favorite things, including tips and strategies on how to get the most out of your life in your investments? Basically, what it is is some of the coolest things that I've discovered or I'm pondering when it comes to life, investing and business. Delivered in a short email every week to your inbox.
00;42;33;01 - 00;42;43;29
Steven Pesavento
So easy to sign up for. Easy to cancel. If you'd like to try it out. Type into your browser investor mindset.com/newsletter to get started and you'll get the very next one.