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Jeremy Hill is the Founder and Managing Partner of JB Capital - a direct private lender providing responsive, creative capital solutions to privately held, middle market companies and small corporate borrowers. JB Capital makes non-control investments in select companies with strong business models, compelling value propositions, and experienced management teams. For over 15 years, JB Capital has provided capital, counsel, and direction to privately held companies and their shareholders. Jeremy discusses how finding the right private lending partner can significantly impact the future success of your business.
Jeremy Hill is the Founder and Managing Partner of JB Capital - a direct private lender providing responsive, creative capital solutions to privately held, middle-market companies and small corporate borrowers.
Today’s show is sponsored by banks.com – the world's most comprehensive and trusted branding and discovery platform for banks and banking related products & services. Banks.com is aligning consumer core values with trusted financial institutions bringing attention and awareness to leading financial brands.
To learn more, go to www.banks.com/partners or you can send an email to info@banks.com.
Jeremy Hill is the Founder and Managing Partner of JB Capital - a direct private lender providing responsive, creative capital solutions to privately held, middle-market companies and small corporate borrowers.
[00:00:44] Hello, everyone, Chris Snyder here, host of the Snyder Showdown, president at Juhll Agency and founder of Banks.com. On this show, we take a no B.S. approach to business success and failure told through the stories of the top executives who have lived them. Join us today as we get the unfiltered backstories behind successful entrepreneurs and successful brands. Our sponsor today is Banks.com, the world's most comprehensive and trusted branding and discovery platform for banks and banking related products. Banks.com is aligning consumer core values with trusted financial institutions, bringing attention and awareness to leading financial brands. To learn more, you can go to banks.com forward slash partners, or you can send an email to info@banks.com. OK, without further ado, our guest speaker today is Jeremy Hill. He is the founder and managing partner of JB Capital, a direct private lender providing responsive creative capital solutions to privately held mid-market companies and small corporate borrowers. JB Capital makes non-controlling investments in select companies with strong business models, compelling value propositions and experienced management teams for over 15 years. JB Capital has provided Capital Council and direction to privately held companies and their shareholders. Jeremy is here today to discuss how finding the right private lending partner can significantly impact the future success of your business. Welcome, Jeremy.
[00:02:26] Thanks, Chris. This guy sounds great tech. Can't wait to hear from him.
[00:02:29] That's why you are our guest today. So I can't wait to hear from him either. And by the way, we just started a new banking fintech financial services thread, and you would be the second guest on that thread. So let's grab that. Yeah, I'm super excited to have you on here today. So let's kick this off. Tell us a little bit about yourself, where you grew up and how you got to where you are today.
[00:02:58] Sure. Well, I was born in a small town at a young age and. No, just kidding. It's actually so I live in just outside Seattle in an area called Woodinville. But I grew up born and raised in Texas and a small town called Lubbock, Texas. It's famous for the song Happiness is Lubbock, Texas, in my rear view mirror. And then a football. Right. It would have to be football. Oh, my God. It is crazy football guys. Right. So you remember the old Bobby Knight guy biting on the towel and just it's a crazy sports. Lots of food, lots of big hair, lots of belt buckles with your name on it, you know, and it was a great place to just grow up. So that's where I was born and raised. I grew up single mom, moved all over Texas as a kid. And so it was first grade here in second grade here in third grade here and that kind of a thing. So I grew up there, went to high school up here, went back to Texas for university. And then between my junior and senior year of university, I came back to Seattle to see my friends and see my family and that kind of thing. And I met who is now my wife lied to or told her I was going to be rich and famous and good looking, you know, all this other kind of stuff.
[00:04:07] What does that mean? You are way we are rich and good looking. I'm looking at drug buy work in progress.
[00:04:14] And so, you know, to learn is that we were going to do great things and come along with me. Sweetheart, life is gonna be great. And she's still trying to hold me to those promises and I'm still trying to make do. So now here we are in Seattle, Washington.
[00:04:27] So, yeah. Well, you know, it's interesting. I feel like just culturally. Texas is a lot different than Seattle. I just feel like it's a lot different than Seattle. So it sounds like you bounced around a bunch. Yeah. Right. And in a place like Texas, I don't know how the kids were back then. I mean, we didn't I don't think we called it Bulleen back then because I bounced around a lot as a kid to really and a military brat. But there was a lot of skirmishes. So did did you bounce around a lot. Can you talk a little bit about that, maybe how that defines how you operate today or maybe how that helped you get to where you are today?
[00:05:07] Sure. Great question. So, you know, as as a as a kid, for me and maybe for most. Right. Like everybody is trying to fit in. Right. Like even even as adults, everybody is trying to find their people and find their place and figure out who they belong to and what makes them important and all that kind of thing. And as a as a kid at the time, I it sucked. Right. Like, I, I hated having to make friends every year. That's artist here. And then so my mom worked for a big insurance company at the time. And so we she's been two years at this office of a year at this office and a year at this office and that kind of a thing. It's we're moving all the time. Right. And so at the time, you hated it because you were always on a different soccer team or a different football team. You were always making new friends. You were always the new kid and you're always the new kid. And so you get frustrated. You at the time that especially as you started getting older into middle school and high school, that a lot of the people that you hung out with and they had they had known each other and been friends with each other since second grade or something. Right. He'd been here five minutes, you know. And so it was whereas it was frustrating at the time when I look at it today.
[00:06:16] That was a blessing, was a huge blessing, because you figure out how to be resilient and you figure out how to fit in and you figure out how to connect with people in a different way that that that you never would have thought of or appreciated as a kid. Now, it's easy to make friends. It's easy to fit in. And whether I'm in Seattle or L.A. or London or New York or anything like, it's easy to find your way, easy to connect with people, easy to make friends.
[00:06:40] And what had been I thought, you know, a trial or a curse as a kid is now been a huge blessing. And so that that that for me was great. Now, I hated it as a kid. But, you know, looking back at it now, it was huge.
[00:06:57] Yeah. It also, you know, I share a similar experience and it also makes for at that time, a a stronger family unit. I think you have closer relationships with your siblings. If you have those, you have closer relationships with your parents or parent because you don't you don't really have any one else total bouncing around like that, without a doubt.
[00:07:18] And that's that's absolutely true. So it was just me and my moms. My parents divorced when I was young and young. Right. So they divorced when I was two. I met my dad when I was 12. When he died when I was 20. Right. So it was just kind of me and my mom all the time. And so it it was just that, like you said. Right. It's just you guys together, whether you're in Lubbock or Midland or Dallas or wherever it is that you were at the time. And so it was just us. And so growing up, you're kind of thick as thieves, right? And so it definitely puts you together when there's nobody else around just to you.
[00:07:48] So, yeah, I want to bring up something interesting as well. Now that you're having this conversation about, you know, bouncing around and growing up in. And I also want to suggest that so corona virus, there is a lot of, I guess, trepidation about sending kids back to school and some of this other stuff. But as I think about, you know, you came from a family with a single parent. Your mom had to actually work. Sure was. No, there wasn't. Zoome She didn't sit at home and work. So there's this notion back in the day for the younger folks that listen to this show, there is this notion back in the day about being a latchkey kid. So did you did you. You spent probably a lot of this time at home on your own.
[00:08:36] Is that accurate? I did. I mean, the whole idea of the latchkey kid was like, you know, the shoe string around your neck with a KION like you. You hear about this now and after school specials and people refer to no, that's how it was. Right. I had a shoe string on my neck or in my backpack with my house key on it. And so my my mom was gone a few minutes before I left for school. And you either walked with your buddies or rode your bike or did whatever it is that you did. And then you brought your cellphone and you open the door and let yourself in and got your granola bar in order to say whatever. You wait till Mom got home and you're not allowed to go out of the house until Mom gets home. Right. That's right. Yeah. I mean, so totally. A lot of that was was like that into whereas now in such a weirdo kind of sensitive environment, you'd think, oh my God, you know, you're neglecting your kids or they're raising themselves or whatever. No, nobody thought that that and that was just normal. Everybody's parents worked or did whatever. Right. You know, and so everybody was kind of fending for themselves and doing what it is that they're doing. And it definitely makes you know, I know you in your background, too. Same thing, right? You're moving around all the time and kind of growing up not on your own, but growing up a little on your own. And it definitely made you stronger. That's for sure.
[00:09:46] Yeah. It's interesting. You have to grow up really fast. And an interesting point. I remember when I first started playing football, there was this style of shoe called kangaroos. I don't know if you remember these shoes. Vaguely. Yeah. But but in these shoes, they actually had a little Velcro pocket on the outside of the shoe. Yes. Undid the Velcro pocket. You could put your house key in there. I remember that. Yes, I remember that. I was like, I need those shoes. Need those shoes, man. ZocDoc, you want to be able to run, run faster and jump higher and all sorts of stuff, man. I got that. And when I get home, I need to be able to unlock the goddamn door because no one home is me. So. So the follow up question to that, too, is, I mean, do you still. Are you still connected? I know you spent a lot of time in Seattle, but are you still heavily connected in Texas? Do you still have a lot of friends and family there?
[00:10:46] I mean, I've got a lot of I mean, all my family's there, so and my wife's family is between here and between New York. All of my family is in Texas.
[00:10:56] And so I don't get back as much, partly because just the demands on life. You know, you're married and wife and kids and business and everything else. You're busy partly because of the demands of life and partly because, you know, shitty as it is to say, I don't want to. Yeah, it. Yeah. Because you just I don't really care to some. Like, I've got some some some wonderful people in my family.
[00:11:22] It is that I love that are as much as you love them. They're difficult to be around and everybody's family has that type of thing at some point. Right. But I've got a fantastic collection of friends. It is from either growing up or high school or people that or somewhere else that are now, you know, living in Texas for one reason or another, that have been great friends. It is that you keep in touch with either, you know, over the phone or over social media and Facebook and that kind of a thing. So in you know, in Texas, there's a there's a couple of things that people always relate to. And they say that, you know, taxes, it's like no other country. It's like, you know, it's like it's own country or whatever they say right now. But then they also say it is that there's there's two kinds of people it is that are from Texas. There's people it is that, you know, if they grow up and they leave Texas, they always come back or there's people it is that never leave. And so I don't really fall into any of those things. Like I'd like some of the foundational things about me as a person that came from growing up there. And I miss some of my friends and some of my family, but I have no desire to go back to visit a dancer. I don't have a desire to go back to move.
[00:12:25] So, yeah, you like you like sixty days of sunshine in and what gets you as many as a fifth.
[00:12:36] The the weather is definitely a little bit better, that is for sure than there. But it's the my wife and I have decided it is the only way that you can live happily in Seattle is you have to leave three or four or five times a year if go to where it's sunny and not so crazy.
[00:12:52] Yeah, that's interesting that I mean, that's just the weather up there, I guess during certain times of the year. Beautiful. But it's it's a little rough the rest of the time. I spent sidelights in England, so I think Seattle probably mirror that relatively closely. Yeah. Right. So. So let's talk about college and how you got in to being an investment banker, investing capital markets, all this stuff, because I think that wasn't what you were going to do initially. Right. You're going to be a doctor. What? Me what were you gonna do?
[00:13:25] Yeah. I mean, so for some reason when I was growing up is that I always had in my mind it is that I wanted to be a doctor. And, you know, I loved math and science and biology and all that kind of stuff. And, you know, you remember Discovery Channel and Jacques Cousteau and all the cool. Yeah. Did you watch it? And I just loved that stuff. Just loved adventure. Yeah, exactly. It just it really, really enjoyed it. But for some reason, one of the things that sticks in my brain as a kid is that when I was growing up, if I was out with my parents or my mom or I was out with my grandparents who had a big impact on me, and you were at the country club or church or the cafeteria, you know, like you remember as a kid in Texas. It's that anytime it is that that somebody would walk by or go by or say hi to my parents or grandparents or something like that, they would always say, oh, that's, you know, something. Yeah. His dad's a doctor or all. He's a doctor. So and so when I go get Grayton, you know, you drive by and we'd always go look at houses and drive out to the country club and do that kind of stuff. My grandfather's alisi that over there, and that's so-and-so and he's a doctor over its own so and so seemed like every kind of connection there for either success or notoriety or respect or affluence or anything was that that dude was a doctor, this, that and the other thing. And so I, I didn't know whether I actually wanted to be a doctor, but I did want people to talk about me the way that I heard other people talk about them, that they had the nice house and they had the nice car and they had the respect in the community and they had money and they had the pretty wife and they took the nice vacation and they had the although I don't know if I want to be a doctor, but I damn sure that others. So that's interesting. Doctor sounds good to me. Let's do that. Right. And so you get into two undergraduate studies in university and walk into your biology class and there's 700 people in there and you're thinking this is kind of weird. Right?
[00:15:13] You know, and ultimately just life teaching you lessons. I realized I. And no desire to be a doctor. Right. And I'm glad that I didn't write like I still I still really love and appreciate all of the sciences and math of the biology and all that kind of stuff. I'm glad I don't make a living doing that, especially in today's climate.
[00:15:32] But, you know, really, that was my my intent. And so, you know, the crazy story is that when when I when I met my wife that summer, I came up between my junior and senior year and met Christine is my wife now, is that I went back to school and just like everybody was, you know, lovestruck and couldn't be without her. And I. Decided it is that I was going to leave school. Went to my professors who didn't pay attention to me. So I got to the dean of the school and said, hey, here's the deal. I'm going back to Seattle. I'm on leave now. And I want to I want to check out of school.
[00:16:14] And the dean's like, you know, you're in your junior year, right? What do you say? Wow. I'm like, yeah, I'm go. And he's like, Wait, wait, wait, wait. Does that make me a deal? He goes, finish the semester, at least in the summer. I'm not going to finish the semester. And I'm going to miss my wife or miss who's now my wife. I'm gonna go sell this hot chick and be my white friend, you know? And he said, look, here's the deal. He goes, how about this? Because I'll give you 30 days to study.
[00:16:40] And if you can pass all of your classes.
[00:16:43] In the semester, in 30 days.
[00:16:46] I'll give you full credit and I'll let you go. So great. OK, I'll take that deal. And so I studied my ass off for 30 days. I passed my entire semester in 30 days. He checked me out. Let me go.
[00:16:59] And he said, if you're going to do this, I've got a friend in Seattle who's a pastor. And when you get there, make sure you and this gal go see that guy ended up being the pastor. It is that Mary us. But so I checked out. I put all my stuff on a railroad in Seattle because I couldn't afford a moving truck at a little shitty car that nothing would fit in.
[00:17:17] And so a railroad was by far the cheapest way to move stuff back forever ago. And they took six weeks. That took six months to get it. You forgot what you said, you know. Right. And and, you know, it costs probably 80 bucks to ship something like nothing up that I didn't need anyways, but I felt like I needed to have it. And so I checked out a school, checked out of my apartment, moved all my stuff, didn't tell my family, didn't tell my parents, didn't tell my grandparents, didn't tell Christine because they all would have said no. But they all. What is that? What the fuck are you doing right now? I called Christine from a payphone in Phenix. And said, hey. And she's like of, you know, where are you calling me from? And I'm like, I'm going to pay phone at Phenix. And she's like, The hell are you doing in Phenix? And I told her what happened. And she's like, What do your parents know? I'm like, No, no, no. She goes, whole. They're going to be pissed, you know? And so I said, Look, I'm coming back to Seattle. I love you. I want to marry. And she's awesome. We'll figure it out when we get here. And so it was about five or six days later after I had gotten to Seattle, after we had done whatever my grandparents were in town, and they stopped by my apartment and I wasn't there.
[00:18:27] And my roommates are like, yeah, he left. He went to Seattle.
[00:18:30] And they're like, He what? Oh, no. Like, I mean. So, you know, most people have and most of the entrepreneurs maybe it is they're listen to this. Have a a better story that it was you know, I went to college, I got good grades that worked for this company that I started. My own mind was not like that, like mine was mine was like, you know, an accident after a go this way really fast. And when you hit something turn, you know, I think it's everybody has their idea of what their process in success is going to look like. And more often than not, it's never that it's some facsimile of that, some part of that, some little part of the narrative. But for me, this kind of beautiful, happy accident for not only coming back to Seattle and meeting Christine and dropping out of school and starting our first business and all of that stuff that kind of led to today, you never would have planned, you know. Yes.
[00:19:25] So you're 20 what, 20 some odd years old at this point. Twenty two. Twenty three. Twenty four. Yeah. You drop out of, you know, probably not to be 21 yet. Yeah. Probably premed or some kind of variation of thinking. If you want to go to medical school, which is a long, hard road, obviously smart enough to get all the work done. Just heart wasn't in it. Definitely there is a phase of your life. And I think it's a well-known physiological fact that most kids brains aren't even formed until they're 24 years old. So, yeah, I was born quite there, but yeah, I do it her clothes. I tell my kids I'm going to be their boss until they're like twenty five, until I can ensure that they're on that bell curve. That's right. But you can't I'm, I'm quite certain that you didn't have like hundreds of thousands of dollars sitting around to go get an apartment and sit around and pontificate the meaning of this new life with Christine. So, like, what did you do? What did you do for money? How did you. Like you mentioned, a business that you inherited started like how did you what did you do?
[00:20:33] Yeah, exactly. So, you know, the first thing it is we started we were young and dumb and broke and, you know, just figuring stuff out. Anybody it is it needed work. I'm happy to do it right. And so we worked at restaurants, I tended bar, I did construction. I did everything just to try to bully myself and stay afloat until we figured out up from down.
[00:20:55] Right.
[00:20:57] And so ultimately, what ended up happening? I got introduced to a guy named Michael. It is true. This is back in the early 90s that had gotten heavy into the cell phone business. And so the cell phone business at the time was this is back when it was Western wireless and voice stream before that became T-Mobile is regulation.
[00:21:16] Right. They had just deregulated a lot of these businesses. Yeah, the ma bells, the baby bells. There is a lot of regulation going on.
[00:21:24] You've got it. So up here in Seattle area, they had the Mackoff family and so Mackoff Cellular ended up becoming cellular one, which ended up basically becoming AT&T and AT&T Wireless. And so all of the little companies it is that spun out of that or know whatever was there was John Stanton. It is which he had Western wireless voice stream. And VoiceStream is going to be the greatest thing since sliced bread. Now, nobody remembers that, but it's become T-Mobile. You had AirTouch, which has become Verizon. You had a group of guys it is that spun out of the macaws and that kind of thing that ended up starting a group called Next Telles. We helped launch Nextel at the time and we were at the time what was called a master agent. So you're basically an unemployed salesforce? That's right.
[00:22:06] Because they don't want to. They don't want to deal with these sales guys and sales. Gow's hustlin. It's hard to motivate these guys and pay him commissions and health insurance and all that desk, right?
[00:22:17] That's exactly right. So it was Michael and I and he had a couple of guys working for him, and he was new and young and married and drink beer. I was new in your perfect beer, about to get married. And we were like high five do. This is business, right? And so it was just it was just the dumb luck and the stupidity of just being persistent and working real hard and not knowing that you have no idea what it is that you're doing. And so the master agent for us is rather than, you know, selling cell phones to your girlfriend and your mom at the mall or something like this. We took a more corporate approach and we were setting up a group up here called See First that became Bank of America. And we were setting up corporate accounts, Boeing and large commercial general contractors in this kind of a thing. So we're not selling to phones. I'm selling you two hundred and fifty. Right. Because you've got a distributed workforce across the country or up and down the West Coast. One thing or another, we took an interesting approach. And the you know, our little master agent that was two guys became six, became 20, became 40, became about 80. Wow. Good. A little business. And at the time, it was all the, you know, 21 years old. It was all the, you know, the beer and bullshit that you knew what to do with it is this is it.
[00:23:28] These are the kind of businesses correct me if I'm wrong, I've never done it, but these are the kinds of businesses where you book, you know, two hundred a 200 plan, a cow. You get paid probably 20 percent commission on all of their top line and residual for as long as they keep that account. Right.
[00:23:48] Well, the smart guys got that. So we were not classified as the smart guys were the beer guys.
[00:23:54] That's right, Vergas. And so, you know, there was there was a group of master agents. It is that we're just basically selling you. A really strong commission per line of activation. But then if they were there for 20 years or whatever it is, you get paid one time and you know it's OK. Deal the deal. And so my frustration with the way it is that Mike let organize the businesses that it was that you could make a ton of money this month or this quarter. But then it's back to the old thing and business and say, this is what have you done for me lately? Yep. Got to go do it again. And you've got to go do it and get a go do it again. And so you weren't you were building something of enterprise value, but not really anything of enterprise value this that you could ultimately monetize. Not for you. Exactly. For everybody else. I've experienced the same. So and there were there were folks it is that were starting to do that in the business to where it is that they would go and basically come up with a licensing agreement that they can sell somebody else's time. They wouldn't get paid, you know, a quarter of what it is that we did upfront. But then they would get a little, you know, annuity tax stream. As long as that guy was there. That was a much better approach. Well, yeah, because there's no churn, right? I mean, go sell two hundred phones to someone in an office that has a crew of, you know, whatever construction workers. That's what they're doing. They're not gonna do this again. Yeah, exactly. And so years ago, I was diagnosed with the disease called delayed intelligence.
[00:25:13] Oh yeah. I d I yeah. Usually I ask delayed intelligence syndrome.
[00:25:18] I'm going to be a lot smarter here in a couple of months than I am now. Right. And so all of these experiences just gets you to point to where it is that you're you're learning as you go. Right. And so, you know, the old thing for the entrepreneur is right. You jump out of the plane, you build the parachute on the way down. Right. And so a lot of that has been for us is that you're you're getting smarter along the way. And so, you know, I don't have a Harvard MBA, but I've paid for one like two or three times, at least already. And so you take these experiences and that's what leads you. It is to hopefully become a not only a better version of yourself, but to be able to to deliver a higher and better value for, you know, your friendships. It is with guys like you and new opportunities. It is in business or finance or one thing or another. Right.
[00:26:02] So how do you get into finance? So you're crankin, right? You're obviously bouncing around as a kid is helpful to build relationships which which immediately leads into some kind of communication or sales role like it could've done PR. You could've done sales. Right. Either way, modeling obviously, of course, would have done modeling. Hand modeling. Yes. Though. So now you you know, you hit that point in your career. And I've been selling since I was 16 years old. I started doing a call center. And you wake up one day, probably in your late 20s, your early 30s, and you kind of go, what the fuck, man? But like, there's no if I don't do another deal tomorrow, nothing I've worked for back at the time, like nothing I've worked for the last 20 years. I would say this is paying me today. Yeah, right. So you kind of get frustrated with that. And maybe that's what happened. You. So how did you figure out, like the people that hold all the cards or the money people? Yeah, I was going to say the money guys, but, you know, there's money girls. So there's money people in maybe that clicked with you. At some point you're like, fuck this, man. I need to get to the top of the pyramid here.
[00:27:09] Cheering And so for us is that, you know, after we got out of the wireless business, my wife got pregnant and I thought, OK, something to grow up and be a little bit more responsible. Right. Like, we're gonna have a baby.
[00:27:24] We should we should get health insurance, health and. Oh, yeah. Really good idea. Right. We're gonna have a baby health insurance. Let's get some of that right. I should probably wear a coat and tie. You know, I should I should be responsible, should dress up. I should give me a pager, you know, pretty important. Now people want to get me and should get a pager. I should get one of those little clips on my belt buckle. It's got my name on it gets me in the building.
[00:27:46] Oh, yeah. Well, what do I gotta do to do that? We've got to climb the corporate ladder, brother. Climb the corporate ladder. I'll go get me a job, baby.
[00:27:54] And so I tried that because I'm I'm trying to be a responsible husband. I'm trying to be a responsible dad. I'm trying to do just like all of us. Right. The best for our families that we can. I think I had thirteen jobs and about two and a half years. And the quick kind of fast forward equation there is I am a really shitty employee, right? Like, I'm like my wife. You know, one time I came home and I'm like, OK, you know, I quit the I got canned today again or whatever it is. And my wife, like, finally looked at me and she's like, you're really bad at this. Like like you're really bad at this, you know? And so that kind of got us to a point where it's like, OK, we've we've got to get back to doing something. It is that we have a little bit more control over. And so at the time, in the early 2000s, in 2001, 2002, is that you remember the real estate business was going bananas. And so when the mortgage broker, a real estate guy, a builder, developer, or whatever it is, you did not have to be that smart or that good looking to make a lot of money. And I was like, those are my two qualifications, man. This thing about Morlin and. So I grew up with with both my father and my grandfather, it is kind of the construction of architecture and development trade. In one thousand job sites, I love watching stuff come together. Right. And so I was like, this is cool. I'm going to I'm going to go get my real estate license and we'll learn as much as I can about the business. We'll figure out something to do in real estate. So I did that, got my real estate license, and I went out and realized very quickly it is that there's twenty five thousand real estate agents in the state of Washington and everybody's smarter than the other guy.
[00:29:30] Right. And only one per cent of them even matter one percent of the money. Ninety five percent of all the deals.
[00:29:38] That's exactly right. And so there's twenty five thousand guys in the business now. There's twenty five thousand one. Here I come, baby. Open the door. Right. You know, and so in about six months of being in the business, I was completely bored. I was like, this is a stupid business and it's not a stupid business. It's a great business for some people. It just wasn't for me. I've got a bunch of friends it is that are in real estate mortgage that kick ass and have great businesses. But for me, if you remember, I was I was looking to do something. It is that that gave me some degree of validation or importance or something in my psyche. It is that wanted that. And so I'm going through and as you do meeting people and I go meet with this developer named Jeff. And so we're sitting down and getting to know each other. And he had a good reputation as a small builder. We're talking getting to know each other and all this kind of thing. And he starts telling me about his next project and this wonderful man, you know, sounds great. That's exciting. And so on and so forth. And he said, well, you know, but I think I'm going to list it with so-and-so over here. And I was like, OK, well, I'm not I'm not interested in listing your business.
[00:30:39] He's like, well. What are you here for? And I'm like, no. I'd heard good things about you, had heard good things about your business, wanted to meet you, wanted to get to know you had heard great things. And so and he's like all of a sudden his demeanor changed, like, you're not here to hustle me. You're just here to get to know me. And I was like, okay, well, now we're friends.
[00:30:57] So tell me about your business. Had this thing start and had you. I mean, like all this stuff, it is what we're doing now, you know? And so he starts telling me about this next project, build these, you know, ten houses or duplexes or whatever it was over here. That's great. And I said, how do you how do you finance all this stuff? You know, your dad invent the color blue or something like you just get a tan. What's the deal? And he's like, well, I know, you know, we've got about a million bucks of our own on the banks, giving us a million after two. And so know I'm short about half a million bucks. And so, you know, I'm gonna go out and friends and family and some investors and this kind of thing. And I'm like, okay.
[00:31:33] You want help with that? And he kind of stops and he's like, well, do you think you can help? And I'm like, Well, I don't know. I know a lot of people let me, you know, tell me about the project. Let me see what it is I can do.
[00:31:45] And so over about 30 days or so, I have the to Gary's half my bucks, didn't he? And he didn't charge him anything for it to stoop. You know, that I should have. Yeah, right. And I was like, well, that was cool. That was fun. And so about two weeks later, I got a call from another builder, developer guy named Dan. And Dan calls and says, hey, I was talking to Jeff the other day, said it is you helped him on a deal. It was one of the if you could come in looking to do.
[00:32:09] Sure sounds good. And so I go meet with him and he tells me kind of the same story. Here's what we're doing. So on, so forth. Bob. Bob, I need, you know, half a million bucks, whatever it was for the deal. Do you think you can help? And I'm like, yeah, I think so.
[00:32:23] And he's like, okay, Will, you know, how do you think this is gonna work? And I'm like, well, let me tell you, from all of my experience of two weeks that I've been doing this now. Right. Whatever. I'm like, here's how I think it should work. And here's I think his age should communicate your message.
[00:32:36] And here's what you know kind of how we should wrap this up. And this is probably what it's gonna cost you. And he's like, okay, okay, okay. That sounds good. That sounds good.
[00:32:44] Well, so, Jeremy, for you to help out, what do you what do you charge? Oh, like up until now, nothing. Right. Because I'm too dumb to know that I should. Right.
[00:32:54] And I was like thinking to myself, we're real estate agents charged three percent. So it's three percent. Hey, buddy. I charge three percent. Oh, forever. Money making news.
[00:33:05] It's like, okay, well, we can do that. That sounds great to give a contract or something you can send over to us. Yeah, of course I did. No problem. By the way, I don't think legal zoom existed at this point. No, not at all. Ragamuffins. And then so we're leaving. He was. Hey, by the way, what's the what's the name of your company?
[00:33:23] Shit. I'm like, it's it's. It's J.B.. J.B., it's J.B. Capital.
[00:33:30] Yeah. Oh, you're capital guy. Yeah, exactly. Oh yeah. I've heard you guys. I was like, yes, yes. And so we get to sleep and, you know, whatever it is.
[00:33:38] And I go get in the car and I'm like I pick up my phone and call my attorney. And I'm like, hey, I think I just started a business and he's, oh, OK, we'll do it. Doing what? And I kind of tell him the story here is kind of what happened on this, that the other thing or whatever it is. And he goes, What? And I'm like, Yeah. And so here's the deal. I need an agreement today. Here's what it needs to read. And oh, by the way, you need to go form an LLC today and it's got to be called J.B. Capital because that's what I told this guy.
[00:34:10] Yeah. And he goes, do you have any fucking idea what you're doing?
[00:34:14] And I'm like, no, sorta. He's like, you know what an accredited investor is. You know what the Securities and Exchange Commission is?
[00:34:22] That's exactly CRIDDLE reticent Morningstar credit card. What he'd know. I know. Just dumb as rocks, but just figuring it out. Dumb enough to try and that's it. Dumb enough to try it like some people are or are too smart for their own good now because they're too smart.
[00:34:41] They never start, you know. We should write that down. Yeah. That could be. That's a good show. Yeah. I like that.
[00:34:48] So it's art to start you smart to start man. You know, thank God for that headline. I'm going to go for it for sure. So. So you've started so. So that's how it happened and you just. Decided to use persuasion, communication skills that you've always had and you basically just went out and started raising money, right?
[00:35:08] Yeah. And I mean, it really was just kind of a happy accident because it didn't you know, it didn't come together, fall together, like on a perfect plan. I'm going to go right in outlining a business plan, analyze the market, look for avoid not like it just kind of happened. And you you you do find that there's a group of people that is the start thing, perfectly planned and organized and set out in that kind of a thing. And that's awesome for a lot of people. It's not that a lot of people are figuring out something. It is that's a mechanism to survive or pay the bills or get through this month or this quarter, this year that all of a sudden, five years later, is actually turned out to be a pretty damn good business. Yeah. So it's it's different for everybody. So let's talk about.
[00:35:51] So this brings us to a good spot to talk about J.B. Capital. What you guys are interested in, what separate. So if we think about the market, if we think about venture capital, is we think about private equity, we think about big banks like Bank of America. We think about angel investors like Precede and see what's the market that you play in. Like you look at a fund size, you look at a vertical or a kind of business that you want to invest in. Can you explain to us how that works?
[00:36:24] What's your target? Of course. So the genesis of the business for nearly 20 years is we've been in the basically the investment banking and capital markets business, which means you hire me as a Green Beret, Navy SEAL to go out and find your money. Right. And so over since the beginning of 2003, up until recently it is we we had had advised, brokered or transacted almost a billion dollars in transactions. It is for these companies, real estate projects and this kind of thing met incredible people. We'd been all over the place and a lot of deals, met a lot of entrepreneurs, seen a lot of stories. Had a great time last year after kind of deliberating really heavily for a few years as we made the election. It is to move out of the middle from being a banker and incept our own version of a credit strategy of a credit fund. And so simply what that means is rather than acting as broker and banker, we're now investing off my personal balance sheet and our investors balance sheet. What it is that historically I'd been doing for wealthy families and other funds and banks and credit institutions and that kind of thing. We're now doing that internally. And so for us in the private credit world, we kind of fill a void for these companies that don't necessarily fit what a bank can do. And they're too small. It is for traditional private credit or private equity to be able to afford to pay attention to you. And so, you know, headlines every day we're seeing Apollo and KKR and PIMCO and, yeah, everybody else that has come up with a new one billion allophone or two or 10 or 12 or 15 or whatever it is awesome. Makes cool headlines. It's a great story for Wall Street. And there's some guys that fit that like Apollos latest fund that they announced about a week or a week or two weeks ago. It is is a 12 billion dollar opportunistic credit strategy to where they're going to write.
[00:38:15] Twelve one billion dollar checks.
[00:38:20] Like, how many people do you know that are looking to borrow? Twelve are looking to borrow a single check of a billion. I would love to do it right there. Jeremy JTR, make the check out. No. But no, you're right.
[00:38:34] The the the the asymmetry in our market right now. And it feels like what you're trying to tackle is, look, you people pay attention to people. Big, big, big. Either way, way, way at the top. Sure. Or maybe they pay attention to micro, like small, small, small at the bottom. But who's paying attention? And there's so many of these companies. There's tens of thousands. I'll call them. You're probably mid-market, right. Which defined by the mid-market Small Business Association as 10 million to a billion. Right.
[00:39:11] Big is just asinine, if you think about it. Right. So we're going to categorize the same guy that's got a 10 million dollar restaurant to the guy that's doing a billion dollars a year. Yeah.
[00:39:19] So, you know, there's other guys to your point, it's real easy. You walk in there and I have SBA loans for our business. And you walk in there a regular traditional right down the center. Banker will come in your office. He'll look around and go, OK. You have some assets. Let me look at your contracts. Because banks are risk adverse. They will not. They will only take a deal if they're gonna make money. The risk is super small. So they they give you money based on your current assets. But what you're saying, I think, is that you guys will do a little more nontraditional lending because the money comes maybe from family offices, private offices and people that want to get better returns. So they're willing to take a bigger risk. But you have to manage all this and hustle it, right, 100 percent.
[00:40:09] So there's there's there's a void both in the market for where it is that we lend and the size both. Right. So just like we're talking about these larger funds there, you and I and everybody that's listening right there. There's there's tens of thousands more companies. It is that that fit the model of being able to borrow five or 10 million. Then there are guys that are trying to borrow 250 million or a billion dollars. Right. And so it seems like everybody's paying attention to the shiny penny of trying to loan somebody 250 million bucks when the business down the street from you or me that's been there for 10 years that doesn't, you know, needs a different solution from their bank. That's got good profitability, good customers, good contracts, good clients, this kind of thing that needs to borrow five million. Nobody wants to pay attention to that guy. Well, they get their fee.
[00:40:54] They get their fee. The fee is the fee. So whether it's 250 million or five million, you know, you're probably getting anywhere between five and 10 percent if you're an investment banker. I guess maybe that's the commission. You would know more than me. But why if you're a investment banker, would you be. Same thing you did with the wireless guys, right. I'd like you to go to the mall and hustle these these these moms and dads walking through the mall. I'm going to go get 250 cell phones.
[00:41:21] So how is the fee structure for for investment bankers? Is it in that range five, 10? I mean, I know they're all different, but just general rules.
[00:41:31] So bankers from my side on the debt side, which is where it is that we've focused historically. And so when we were back in the banking business, it is we charge a retainer of whatever it was. And then we're charging anywhere from kind of three to five, three to seven percent, depending on the complexity of the deal. There's guys it is that are, you know, taking companies public that are doing larger M&A transactions that will have a minimum fee. So they'll say something like, you know, we have a minimum fee of, you know, half a million dollars or five percent of the transaction, whichever is greater. Right. And so all of that stuff, when when companies are dealing with bankers or they're negotiating somebody, it is to help them go raise money or anything like that. The majority of that stuff is kind of negotiable. But, you know, standard is, you know, kind of three to five, three to six percent on debt. If somebody is coming in and charging you. You know, 10 percent on a fee for something. It's probably pretty perverse, right? Because if I'm going to charge a, you know, 10 bucks to go Rasiah 100, you know, the value of the hundred bucks it is that I raise, you better have a 50 percent margin. And when most people have, you know, a 15 percent margin, you're going to give up 10 percent to me to go raise you the hundred.
[00:42:40] Like, can you even afford to take this money? Yeah, it puts you in the hole. Yeah. Pretty quickly. It's some things like that. It is. You've got to you've got to understand what you're getting into or understand how you're getting out of it before you get into it. And so it's it's important there. So J.B., capital is debt or equity firm. So we have we invest in debt. So today is a big difference. It is in how people it is viewed the world. And in my view of the world, historically as a banker and now as a principal that is investing our own capital, is that I like the idea of debt, not only for myself personally, but ultimately for our borrowers, is that, you know, debt is like dating and equity is like getting married. Right. And so all of us know somebody it is who's been married, who happen to marry the wrong person. And you know a buddy. Yeah, exactly right. And about half a. Right. And so, you know, 44 for me, it's been a huge blessing. Right. Christine, I've been married. Twenty five years is the greatest thing since sliced bread. Twenty five years later, she's still as hot as she was, if not hotter. And we've got three wonderful kids and she supports me and all the rest. But that's not everybody's equation, right? Like, there's some people. It is that their equation? It is that when when there's a fracture or there's a divorce in the marriage, it can completely wreck not only your psyche, but your your finances, your kids, your relationship, your your everything. Right. And so very similarly in business, if you happen to choose the wrong equity partner, it can have a significant detrimental effect on the business and can even kill the business. I agree. Right. And so for us, we've always looked at debt like dating. Right. Like, if I like you and we're dating, well, we can go out this Friday if we like, and we can go out next Friday. Right. And so if there's a point in time to married is that we no longer feel like it is that we want to date. You know, we can always refinance them out. They can always refinance us out and they can go find somebody else to date. And so I liked the idea of having a good, solid, intimate relationship. It is with our borrowers. It is to where we're providing value. But as a as a debt lender or as a lender, not an equity player, I really don't care about the valuations of the company and I'm not going to argue with it. If you think it's worth 50 and I think it's worth 30. I'm just a lender. I'm renting you money. You think it's worth 50? Sounds great to me. Tomorrow is worth maybe. Cool. Sounds great to me.
[00:45:07] Here's your interest rate. Pay your bill. You have enough assets maybe to cover it in case you default. We'll renegotiate it if we need to. We'll talk about it. But, you know, equity equity lenders get wiped out all the time.
[00:45:20] What's first loss? Capital. Right. You know, and there's for me. I've always thought it is that there's ways it is that you can deliver equity level returns with all of the protections of debt. Right. Like, I can yield as much for ourselves and for our L PS as a normal equity investor would. But I'm at the top of the capital stack. And so if if the company gets paid off, I get paid before I get paid and retired off before the equity guys do if the company goes to shit and goes into insolvency. And you've got to bring in somebody receivers. The debt gets paid off for the equity guys. Right. Their first loss capital. Right. So I like my position there. And if we can create a structure to where it is that I can deliver equity level returns, but I've got all of the all of the throttles and all of the mechanisms it is to get the returns. It is that I want. For me, I look at that like almost like a bit in a horse's mouth. Right. Like, you have a little six to eight ounce piece of steel. It is. That's controlling and moderating a thousand pound horse. Rack em up. I can slow him down. I can turn left. I can turn it. I don't need to own the damn horse. Right. Right. I just want to be that little piece it is that can direct and kind of moderate the business.
[00:46:29] So do you come in, you get board seats? Are you basically like, look, here's the money? We ran it through the model. Good luck with that. Have a nice day. Are you actively participating and involved in these businesses yet?
[00:46:42] Not 100 percent. So the thing is that we do is that the minute it is that somebody takes a check from us is 100 percent of what it is that I have is what you have. Right. And so if it's context, if it's Rolodex attorneys, dot, whatever it is that you need. Right. Anybody. It is that I know you you're now in the family. Right. And so the old mafia things. Is he a friend of yours or a friend of ours. Right. Is now friend of ours. Right. And so is that regular?
[00:47:08] Do most bankers and investment bankers. I know. That's what I want to draw some contrast here to how you operate. That's very different from everybody else.
[00:47:16] Yeah. We we almost wanted to take a very hands on almost private equity approach to loaning money, right. And so for us, again, we're not equity investors, we're lenders. But the job here for most lenders are what it should be is tied to you're printing money, which means I want it back in two or three or four years. But during the time it is that we're dating, that we're together. I'm wanting to contribute value. I'm wanting to be accretive to your business. I'm wanting to help you think through decisions. It is that you're doing it is to get you to a point to where two or three or four years from now is that you have gone from revenue to revenue. B, you have bought on a new part. You did acquire that company. You did do some of these milestones that the use of my capital has been for. So we take this very hands on approach. It is what it is that we're doing. Oftentimes, about half of the companies that we are in right now, we have a board seat on. If not, we have board observation. Right. Interesting. And so we do other things that is from kind of, you know, some investor protections for our L PS to kind of put guardrails around, you know, the company so they don't go too far off. We require each of our portfolio companies. It is we talk to each of them every two weeks and we meet with them face to face once a month.
[00:48:38] Wow. And so what do you do? So the structure of the firm, do you raise this money through like an SPV, like a special purpose vehicle, or how is the fund structured? Because your I mean, someone has to manage all of this stuff that you're talking about right now. And typically people that are giving you capital that I don't know if they want to sit in these meetings with these founders or these or these owners of businesses, would they delegate that to you? You know, they give you the special purpose vehicle and then you own all the responsibilities on their behalf. Or how does that work?
[00:49:16] Yeah. So we're in s.E.C. Regular Regulated Fund, right. So this is a rig, the offering that goes out into a pooled investment vehicle, which means it is that we collect money from investors and then we have a management company that is that manages the money of that fund that we collect from investors. And that management company is who is making the investment decisions, doing all of the managing, the reporting, the everything else that is on our investors behalf. Right. And so dissimilar to nearly everybody else in the market is that the majority of companies that are private equity or venture capital or SBIC or whatever they are, they'll go out and raise money and they'll charge management fees. It is to their investors for the privilege of taking their money. I'm gonna go raise 50 or 100 or two hundred and fifty million dollars on a charge. My investors two percent gonna split the Kerry 80 or one thing or another. I always hated that business model because I felt like why should I charge money for somebody for the privilege of giving me money?
[00:50:11] Yeah, I you look at the economics on this.
[00:50:14] Some of these guys and I did it and I listened to a lot of shows about this. These guys are raising 100, one hundred, 200, 300 million dollar funds and some of them will charge up to five percent. I think you go back to your prior point. That would be on the extreme side, maybe dumb money. But even if you're getting two percent of, you know, over two hundred million dollar fund, you know, you're looking at, you know, what is that for four million bucks and she wants to show up to work. Yeah. What I don't know in some of these some of these folks have, you know, whatever a 10 person office, you need four million dollars to cover 10 folks and a couple of partners like I don't like I don't get this at all.
[00:51:00] Like the little economics in that business model are are set to benefit the manager. And so when you it's funny because you start to see some of these larger firms that will have, you know, fund three last year was a billion dollar fund for this year is a it's four billion dollars. Hey, wait, hold on. Fund five next year is gonna be out. And you you start looking at this and going this this seems like this is more of a of a game of collecting assets under management first and then. Oh, by the way, I'm also a private private equity investor or private credit investor. Read this because if I've got, you know, a billion or two or five billion dollars under management and I'm clipping one hundred and fifty or 200 basis points, you're Cocoa Krispies are pretty fucking crisp. Yeah. Right. Regardless of what's happening to the underlying portfolio. And so so ultimately there for me there was kind of a mismatch in incentives. It is because I saw partners getting rich by delivering academic returns. Yeah, this is this is crap.
[00:52:02] And you can't get these returns in the stock market. You can get these returns in bonds in some cases like that. Got all of these guys, you know, all of these guys are returning the fund. Like, if it's so, you're paying for the privilege to. Either if you don't if you don't get 20 to 30 percent year over year returns, by the way, it takes seven years for some of these guys to to realize that. Wait a second. It's not it's it's not working really yet.
[00:52:31] And I think we're a little bit formulaic, clipping four million bucks in an annual management fee to show up for work. Right. And so you look at that in the returns. It is for most of these guys, especially on some of the smaller funds that are less than half a billion dollars. The economics really don't make sense to the L.P. It doesn't make sense to the ultimate investor. And so when when you know, again, remember, for 20 years, we were kind of the Rosetta Stone, right, where the guy in the middle between those who have and those who need trying to get everybody to play nice in the sandbox. Right. And so I felt like that not only was there something different that the investors ultimately the L PS and all of these funds needed needed a better solution. Ultimately, how that translated to the borrowers for the guys, the Christian Jeremey software business or whatever it is that we do that's borrowing money. The effect that it had on them for how it is that their growing business was impacted in my mind as well. Right. Because there was a there wasn't necessarily the motivation.
[00:53:30] It is from the management team of some of these guys to do what's in the best interest of the firm or the portfolio. What what was in their best interest was to continue to to to tell a story that allowed them to raise the next fund.
[00:53:41] That's right. Which increased valuations, which on paper from an equity standpoint, looks good. But at some point, you that road has then you have to file to go public. Someone has to buy the company for that valuation or that equity and everyone's. So do you feel like after you feel like in the equity parts of the business, that there will be a reconciliation based on the crazy valuations we've seen? You know, I was watching CNBC the other day, and I think if you aggregated all the S&P 500 companies revenue, top line revenues down 40 percent, stocks were up like 50 percent. Like, there they're going. So I'm thinking like, if I was a you know, if I had 10 million dollars and I'm trying to ride it out and make sure they don't lose my life savings. Am I going to continue to invest in, you know, seed funds, v.C funds, where it's mostly equity backed? And I kind of feel like everybody is getting frothy or am I going to call JPM back? Look, man, I'm more interested in resiliency right now. Are you guys getting a lot of deal flow from what you perceived to be fear in weird markets?
[00:54:54] Yeah, I mean, we're we're we're definitely getting a lot of deal flow from from the entrepreneur community, the business community. It is that is either tired of, you know, the venture capital with the Gnomon culture of a vulture capital.
[00:55:09] You know, they'd rather play 50 percent for money from Uncle Lucky with heavy chains and gold knuckles than deal with this asshole in San Francisco. Right.
[00:55:18] And so and it's been it's I mean, all of us have seen article after article after article after article of of a venture capital and private equity firms driving metrics on a company that look good in a pitch deck that allowed them to go raise their next fund or to get a quick exit so they can flip it, you know, get a good return, use that in next year's pitch book to justify raising. But in any of those metrics actually may or may not be in the best interest of Chris and Jeremy software business or whatever our company is. Right. Like, it's there. There is a there is a misalignment in in in the parody of what it is that these guys are trying to do. It's mixed up. And so I think entrepreneurs are starting to get more wise to that. I think in the equity markets right now, there's plenty of smart people in private equity. There's plenty of really smart people in private equity that are doing well. They're making good decisions. But there's also plenty of guys it is that that are not you know, when we had this big change, it is from the banking business going from 11000 banks down to six, down to five and now continuing to consolidate.
[00:56:23] What it is that we saw is that you had a bunch of the guys. It is that we're half assed. Bankers have now become half assed private equity guys right now. Which to the other side. Right. And so the the unfortunate thing is that you see here is there is going to be a reckoning in that business. And so it does not make sense like you're talking about. It is to have forty five million people unemployed in the stock market going up. You know, when we're putting six trillion dollars into the market, we've kind of given the things CPR. But the minute we start printing money, then what happens to those equities? And so historically, what it is that we've seen that you were talking about with a lot of these firms, it is that are getting bananas, tech valuations. Is that private equity? Last year, their average portfolio company had seven and a half times leverage on the balance sheet. There is not a bank in the country that will give you three year, three and a half. No. And so you've got these guys putting undue amounts of leverage on the portfolio. It is in order to juice returns. Right. Remember, for them, leverage is just a yield enhancer.
[00:57:29] But what's the incentive? Because you you you very succinctly mentioned before that you don't believe incentives are aligned. So what is their incentive to do this silly stuff rather than play the resiliency game? Get on the board. Work with these. Got like what? What is an incentive for them to behave this way? Because they wouldn't be doing it if they didn't have the incentive make money.
[00:57:53] That's it. Right. Because if I can if I can lever up. So I met with a last night it is that was over that they spun out a company out of a large public company. They spun out a private company out of it. They put four million dollars into the company equity and they got twenty five million dollars in debt. So how would any banker or lender loan Chris, twenty five million dollars when the only at risk capital it is that you have is for.
[00:58:22] Well, let's let let's look it at like from a credit card standpoint for those of you out there who this conversation may be ramping up a bit. I love this shit. This is so fascinating. But if you don't understand this stuff, you don't study it. You don't look at it. You don't actually do deals. Like I don't actually do deals. JP does deals. But imagine as a as a as a consumer, you went to Citibank and you said, hey, I make a hundred thousand dollars a year. I'm a baller. And Citibank goes, well, here's what we're gonna do, we're gonna give you a credit card that's going to allow you to borrow 20 times what you earn and you can go do whatever you want with that. You just have to be able to pay the interest. Right. Is that the same analogy?
[00:59:07] Well, pretty pretty close, right? I mean, pretty close, right. So long as you can figure out a way to do it. And then oftentimes what it is that they're doing is they're borrowing what it is that they're paying in interest. Right. And so, you know, hey, I'm going to. Yeah. I got to make a hundred thousand dollars a year.
[00:59:20] I've got a credit card with a 20 million or a two to two point seven million dollars at 27 times leverage. Man, I'm going to pot. I'm going to part of. Right.
[00:59:31] And so, guys, it is that are doing is they're engineering financially. They're saying great. Two point seven million bucks. I'm going to borrow all of that and I'm gonna keep five hundred thousand dollars aside to keep making the payments. But I'm a party like a motherfucker on the other, you know, two million dollars. Two point two million, OK. Right. And so eventually, though, the music's got to stop.
[00:59:52] The bubble pops, the music stops, the asset prices have to deflate the money. The you know, the the stuff you buy at the grocery store has to stop going up in price because real wages and real earnings have not improved at the rate of inflation yet. Right. This is a much larger talking topic. I'm super interested in this model. This is fascinating. We'll probably have to do another episode on it. All right. Before we go, before we start to wrap, what kinds of companies are you interested in? They have to be. Hey, Chris, if anyone's listening to this show in your XM million or whatever, you've been around for this long, you have this many assets and you're in these verticals, you know, services or whatever. Tell us who your target is. Because I would love for people to talk to you so they can figure out how to do the right thing when they think about funding their company. They do have an option right now.
[01:00:50] That's great. No, sir. So thanks for asking. So we invest in four buckets. So bucket number one would be companies that are in technology and technology enabled services. So think about companies that are either using or utilizing software or machine learning, artificial intelligence. It is to simplify large, boring business processes. Right. Got it. Companies have some type of SAS lag or recurring monthly revenue. Tech businesses. And so we love those type of businesses. Right. So company with their software is doing 500 thousand dollars a month in Armagh. And they need two or three million dollars to do X, Y, Z, and it's going to take them to a million or two million dollars an hour. Love those businesses. Right. We also invest in, you know, head over tech, a normal business and business services. So think about law firms, CPA practices, dental practices, consulting practices, software businesses, that kind of thing, heavy on the services side. But your IP walks out the door every day at 5:00. So the bank doesn't like it right now. Also, within the traditional business side, we look at consumer products and specialty foods companies.
[01:01:48] Let me let me ask you a question about the services side of the business. Sorry to interrupt you. If the bank doesn't like it, why do you like it? Because what what is that capital typically used for when you give it to on? You're like, all right. And by the way, is it also five hundred and MRI monthly recurring revenue for the services CPA firms as well is at the target for those guys too.
[01:02:12] We've we've put money into companies that is that are doing, you know, four or five million dollars a year. And we're we've got two companies. It is that we're underwriting now, one that we're closing here in about three weeks. That'll do sixty million dollars a share. And the company is doing five million bucks. We look at companies doing one hundred hundred and twenty five. So.
[01:02:28] So what do you see about a CPA firm that you'll lend? You know, probably growth capital, I'm assuming, was what you classify this as that makes you feel okay about it, that a bank wouldn't do it. Like what? What is it special? What's special about what? You know, the banks don't.
[01:02:42] Yeah, of course. So, you know, banks like you started I remember part of the conversation today is banks are just completely risk adverse. No, it's it's you know, if we say it is that the banker's boxes as become less rounded edges and more defined corners. Right. Like the bankers, they used to be a little bit of gray. It is that we can kind of figure something out. Now, things have become very, very, very black and white. And so in these services business, the CPA firms, law firms, insurance practices in this kind of thing, we're beginning to see, especially in the Northwest and Tri-State area up in New York. But across the country, we're starting to see consolidation efforts in this business. Christmas businesses by and Jeremy's business or whatever it is. And then a lot of these law firms and CPA practices. It is you typically have a legacy partner who's been there, you know, 10 years or 20 years or whatever it is that's pulling out a million bucks or two million bucks a year. But he's no longer really adding new business, not as productive as he used hold. It's almost cost center. Right. And so as you are going and beginning to look at kind of M&A activities for business, aided by business B or whatever it is you're looking to kind of cut out some of that. And so the banks typically like these things when when the M&A activity is done, we're in the process of doing so that that cleanup effort they don't like. And so they like it once. It is that you've kind of speech on the thing up and made it a little bit prettier, but they don't like the dirty work it is that it takes to get there. And so the things for us that I like about that business is, number one, I know that I have a clearly defined exit because once I shine it up, the banks love these businesses. In the meantime, what it is that I like about these businesses is the majority of of law firms and legal practices and insurance practices and CPA firms in this kind of thing. They typically have very hyper sticky client relationships. Most people it is I've had my same CPA and accounting firm for 13, 14 years now. I'm on 15 years right now. So hard to unhook those people, hopefully in order to get comfortable with somebody else. Right. They typically have hyper sticky kind of KLAC relationships. They have solid EBITDA margins. Most of these businesses have kind of 35 to 40 percent EBITA margins. But the reality is, is that their IP or their intellectual property or the value of what it is that they do. Hey, Matt, it's five o'clock going home. And so for a bank to figure out a way to underwrite and securitize that, it's difficult for them. And so for us, we'll provide a little bit more flexible capital, that is to allow them to do that kind of clean up and spit shine process. So when they're ready to go to the bank, we've already sold those programs now.
[01:05:15] Interesting. So what I think there's two or three more categories you're going to mentioned. We were I rudely interrupted you.
[01:05:21] You got it. So tech and tech enabled services, the business and business services side. So you know this professional services side, specialty foods, consumer products, beverages, business. Love that. I like the health care business. And so in the health care business, I stay away from drug development and life sciences and biotech. And it's just too much regulation, way too much money. And it's you know, most of those things either win or fail big. Right. So knowledge than that. But I love the medtech business. I love the health tech business. I love what you call the healthcare MSA business. So, you know Chris Owens. Twenty five optometry clinics in Northern California and he wants to buy 10 more in Southern California or something like that. I love that kind of business. The walk in clinics, treehouse clinics, dental practice, love that kind of business. And then the telehealth business. Right. Oh, yeah. That's got to be off the charts right now. Right now. I mean, so that's that that business has been kind of bubbling for about 10 years. But obviously, the last six to nine months, it's been thrust into the limelight. That's a great business. So there's a lot of new practices there. And then we also allocate towards real estate. So for us, the operation of our businesses, J.B. Capital is meant to operate like a private version of a commercial bank. So about 75 to 80 percent of our portfolio is normal business and software businesses, food businesses, manufacturers, that kind of thing.
[01:06:40] And about 20 to 25 percent of the business is allocated towards a dividend paying or earning real estate security of one kind or another. Right. Or helping somebody finish an apartment complex or land development or one thing or another, that kind of world. And so ideally for us and for our investors, it creates a not only an industry, but a geographically diverse portfolio of assets that are generating cash flow that we give to our investors.
[01:07:05] Now, what about a franchise, a Wendy's or something like that? You guys can deploy capital against the the actual commercial properties. Someone licenses it and then they pay you rent it for the next 20 years. Eric, we've done all sorts of stuff. That's good money there, too. My buddy did something like that only. How do you do what you like, 10 grand a month? He's like, yeah. Is that it? By the building in the building to securitize by the bank. Right. Right. I'm like, what does I get out of this work. You got let me in on this man. Well, this has been fascinating, J.B.. One last question. Yes, sir. What is a piece of advice that you would give our listeners? You've got a long and successful career in a much longer career in front of you. Give us a piece of advice that you'd say, hey, guys. Think about life this way. Think about business this way. Think about how you operate.
[01:08:00] So I think there'd be two pieces. Is that realize that everything doesn't have to be perfect? Is that in 20 years, I've definitely learned something. It is that we plan and God laughs.
[01:08:14] Right. Like, we all have an idea of that things are gonna go like this and work like this and paint by numbers. And I'm going to read this business plan and get this money and get this contract and so on and so forth and be be okay with it not being OK. The idea here is to be committed to the end result, but does just not attach to the process. Right. Like, you know, before we're all working at home. Right. Every day I'm committed to going home and seeing my wife and kids. I'm just not attached to taking the freeway because if there's an accident or traffic or whatever it is, I'll just go a different direction. I'm still going home. Now you're gonna go see the people. It is that I love. I just if I don't take the freeway, I don't take the freeway. And so for your business, if you know where you're going and what it is that you're doing, be committed to that. The idea that you have about the process may not be the process that happens for you. That's going to change that. That's just. Yeah, exactly. I would think that that's critical. And for folks, it is that are growing their business. One of the best pieces of advice that I ever got and I remember the day that I got to where I was, what I was wearing and what cigar I was smoking. Right. And somebody told me, remember, the contracts are for the divorce. They're not for the marriage.
[01:09:26] And that was just critical advice, it isn't one of those things, it is that I remember. So.
[01:09:31] Excellent, excellent. Well, J.B., this has been a great session. And just to reiterate, you know, Jeremy Hils, the founder of founder and managing partner of J.B. Capital, a direct private lender providing responsive creative capital solutions to privately held middle market companies and small corporate borrowers. Just took you through the whole shebang. So we'll Shabangu man, if you didn't understand the last 20 minutes of this podcast and the kinds of folks that Jeremy works with. Don't call him me. That's heavy. All ultra clean. He's got it. He's your guy. All right. Well, Jeremy, thanks again. It's a pleasure to meet you and speak with one, too. And I'm looking forward to doing this again sometime soon. That was great, Chris. Thank you so much.
[01:10:18] All right. Ticker.
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