How This Founder Raised $800K in Capital With No Experience to Acquire an $8m Business with Kevin Bibelhausen, Founder of Fruition Capital

This transcript has been generated using AI technology. There may be minor errors or discrepancies in the text as it follows a natural conversational flow.

Susan Sly 00:00
Hey superstar, I have a question for you. Do you ever feel overwhelmed with stress as an entrepreneur or an aspiring entrepreneur? Well, in today's episode, I can promise you we get raw and real, especially toward the end of the show with my special guest, and he is an incredible entrepreneur. In fact, he raised 800,000 in capital and bought a business that he actually had no experience in, which is incredible. And from there, he went on to start a venture fund called Fruition Capital, which focuses on helping entrepreneurs buy businesses that have a very specific EBITA. And a track record of over 10 years. It's a very different business model from things perhaps you're used to hearing about. And in the show, as we talk about his entrepreneurial journey, we get to the point where he discloses that No, he isn't managing stress well at times, and we just have this beautiful conversation. So I know that this show is for one of you listening, because you are struggling, and perhaps it's time for you to step up and admit it and get some help. Because you know what we we only see the glory, we don't know the story. And it's all well and good to look at people who are having amazing exits, or getting funding and all of these things, but we don't know what's going on behind the scenes. And that's why the show is important to share these messages and to be able to say, yeah, it's okay, you're not alone. So my guest today is, as I said, an entrepreneur, he is a business buyer. He's an investor. He is an operator based in North Carolina. And he is the founder and general partner of Fruition Capital a fund investing in small businesses, and that focus on businesses that do manufacturing, distribution, business services, and B2B. And he is the owner and president of Heritage Fabrics, a wholesale fabrics company he acquired in 2020, not knowing anything about fabrics, FYI. And prior to purchasing Heritage Fabrics, he spent over a decade in corporate technology and operations, leadership roles in hospitals and health care. And it was his battle with a near fatal case of COVID and cardiomyopathy that caused him to look in the mirror and say, hey, I want to change my life. And so this founder today is Kevin Bibelhausen, how's it and I know you are going to enjoy the show. And don't forget, if you are listening, stay tuned at the end for Startup Diaries. If you want to see me do The Startup Diary, head on over to my YouTube channel where you can see me talk about this week's startup diary. And it is going to be raw and real. So with that, I hope you have an amazing experience with this episode. Don't forget to hit the subscribe button and leave a five star review. I read all your reviews. So with that, let's get into this episode with Kevin Biebelhausen.

Susan Sly 03:02
This is Raw and Real Entrepreneurship, the show that brings the no nonsense truth of what is required to start, grow and scale your business. I am your host, Susan Sly.

Susan Sly 03:16
All right, Kevin. Well, there are so many ways we could begin to show and we could talk about fundraising, we could talk about what's lighting your soul on fire now. But we're gonna ask this question because I want to know, what was your first business?

Kevin Bibelhausen 03:35
My first business was, I was a classically trained opera singer. And I was in the business of managing my own career and trying to, you know, book jobs and manage expenses, and very little revenue. And a business where I was trying to sell my, my, my art to, to the highest bidder or any bidder. I realized very quickly, you know, more or maybe not as quickly as, as I should have. It's really hard business and anything music, anything arts based is very difficult. But that's that was my first kind of foray into entrepreneurship and realizing that I liked I liked kind of being the CEO of my own career. That's not something so I ended up with, you know, going out in my early 20s. And doing that, and then I, you know, realized I had to get a real job in corporate and then I kind of lost that, you know, being in control of my own destiny feeling. You know, even if, even if I didn't make a lot of money, I felt like I was in control. I didn't feel a lot of control in corporate so so yeah, I mean, that was that was something I was trying to do since I was like 13 years old is to start to go sing, sing opera.

Susan Sly 04:46
That that you're the first person and almost

Kevin Bibelhausen 04:49
I assumed I was yeah.

Susan Sly 04:51
We've had many, many, many different first businesses and I was I was sharing with you prior to the show, you know, selling rattlesnakes, watermelon. The and, and I know firsthand how tough that is. My cousin, Michael Hope is a classically trained opera singer. And he is with the Calgary Symphony. He's also an amazing bassoonist. And it's two different kinds of combination. Right? Yeah. And, and but to go out there and sell yourself and to your point. So often people don't think about professional speakers, or authors or other forms of artists, that they that is a business. And selling yourself is such an interesting concept, especially when it comes to fundraising. Because that is who you're selling. Oftentimes, as an angel investor, I bet on the founder, like their idea, I know they're going to pivot, I know things are going to evolve. But I'm really betting on on that person. Because I know that they're going to be adaptable. So you I found in preparing for our shows something really interesting because a lot of founders I know there's they're taking an idea, they're starting something they've perhaps you know, had some successes, they've had some failures, but they keep on going keep on going, you made a decision to purchase an existing business, raising $800,000 in capital, with no real fundraising experience. So I want to, I want to step back, what made you decide to buy an existing business as opposed to starting one of your own?

Kevin Bibelhausen 06:37
Yeah, I mean, I think one of the one of the scars that I bear from an early music career is the fact that, you know, you are pretty well, starting from zero, you've put a lot of time and energy and effort into something that, you know, the market, just this is just the reality, like the market doesn't value very much, you know. It's not, it's not something that you can make, you know, a decent living at, unless you're at the very, very, very, very top of echelon. So I think I realized from that how important cash flow was, and profitability, and product market fit, you know, and, and it was once I read the Harvard Business Review Guide, buying small businesses, which was published in 2017. And I realized that like, I grew up in a neighborhood that there were so many there was, there was doctors and dentists and business owners, and these guys wouldn't you know, oh, he owns an asphalt company, or he owns a construction company or whatever. Like, I thought you either started the business or you inherited the business from your dad. You know, like, that's kind of that's those the only paths that I saw, you know, and then I read the Harvard Business Review Guide, and was like, Oh, you can actually buy these businesses? Oh, well, I guess, yeah, they have to have an exit option. And I didn't know what an investment banker was in 2017, 2018. And so that's how I mean, that's how I figured out that this whole world existed where you can buy a middle market, lower middle market business, through, you know, utilizing an SBA loan utilizing investors, and putting together sort of like a mini LBO - mini leveraged buyout, which is, you know, that's exactly what I did, and utilized, you know, government assistance programs at the SBA and capitalist investors and put the two together and all of a sudden, you know, I now own a fairly decent sized company.

Susan Sly 08:18
Well,

Susan Sly 08:19
and my curiosity around that is okay, let's backtrack a bit. Because lots of folks aren't just picking up the Harvard Business Review Guide to Buying Small Business,. Like they're going through an airport and they're getting Men's Health or US Weekly, like, like, like, let this how did you end up being curious about that?

Kevin Bibelhausen 08:40
That's

Kevin Bibelhausen 08:40
a great question. Because I think most people find their way through different alternative assets or different ways to like, you know, you're searching, you know, in your cubicle or at night, you know, you're on your laptop, basically, like, how the hell do I get out of here? You know, how do I get out of this job? How do I do something with my life that I will enjoy on a day to day basis, create financial freedom, you know, economic security, whatever that looks like, you know, and you got you go through the gamut, or at least I did was like, Oh, well, here's this day trading thing. And here's this real estate thing and here's this so you kind of like try on different clothes to see what fits. And I tried on some multifamily clothes for a while and that wasn't really wasn't for me. But what I really resonated with was small business. You know, I grew up in a in a around small business, my dad was my dad ran a chain of pharmacies, a small chain of pharmacies in the Midwest. And so like, I kind of was used to it. I saw it up close from an operations perspective. And it just it seemed like something that I will, I would, I. It seemed more personal to me and something that I was more comfortable with than like buying a building, and you're like, Okay, now what do I do with it? Well, the answer is kind of like, there's not there's not a whole hell of a lot you can do with it. Like there's a few levers you pull, but like, the beauty of real estate is that you just sort of, like, let it go. And I wanted to be more active, I wanted to take over ownership of a company and put in my, you know, utilize my corporate experience that I, you know, a decade plus an Operations and Technology to scale to take the business from, you know, maybe a one to a 10 instead of going from zero to one. You know, there's, there's, there's, it's a fundamentally different role to come in as an entrepreneur to an existing business and then take it to the next level, versus starting at zero, and kind of creating the initial, you know, the initial engine, very different skill sets. I'm doing kind of skill set, the startup skill set, while I own this business, like I'm building other brands, but I'm always doing it from a base of cashflow, you know, that I'm profitable. And this is sort of the platform company that I bought in order to ladder, you know, other brands and businesses on top of.

Susan Sly 11:00
I have so many questions like the, you know, the, the vision I had is, so your dad owns these, the, you know, the small chain of pharmacies,

Kevin Bibelhausen 11:10
He was president, he didn't know that he didn't have any equity. Oh, he did. Yeah, he's

Susan Sly 11:14
So he is running them. So he's in the business, but he's not owning the business. So you're sort of, you're seeing this level of responsibility. There are a lot of ways you could have swiped right. Like you could have been like franchising, right? No, like, and I and so I'm thinking, I'm still curious, Kevin, because I'm going, okay, there, there are a lot of enticing ways to your point, to be able to create cash flow for yourself, that you can do some cash leverage. Like, you know, investing in real estate, as we talked, you know, you spoke about like there's multifamily. There are other kinds of businesses, owning franchises, as I mentioned, and but you said, this is this is when I was reading your bio, and I was doing my research on you and like, this guy's wired a bit differently, because not only are you buying existing businesses, you don't care if you know anything about that particular business. Like at all. It's just looking at a balance sheet. I need to get in the psychology of your brain for a minute, professionally trained opera singer and someone who says I'm buying a fabric business, but I didn't go to fashion design school. How does that how did that happen?

Kevin Bibelhausen 12:25
Yeah,

Kevin Bibelhausen 12:25
by accident, I mean, I everything, everything looks like there's, you know, a great plan when you when you you know, hindsight being 2020, you look back and you can connect the dots and say, Oh, this was all you know, by design. It certainly wasn't like I, my experience was, well set the music piece aside, but like my corporate experience was in healthcare, and in technology. So I ran it, I ran at the end of my career, I was running technology, strategy and operations for a large public health system in Texas. And so those are the businesses I was initially interested in, I was looking at healthcare businesses, and I was looking at technology service businesses. Well, I was looking in 2022, where all healthcare businesses had record years, coming off of COVID. And so they're all overvalued, or in my opinion, they were overvalued because knock on wood, we don't have a pandemic and regularly. And then the technology service businesses were bid up, valuations were pretty high, too, because private equity loves that space. They're going in and gobbling all those companies up. And so they trade for ridiculous multiples. So I couldn't afford it. You know, and so I had to go to an industry or I had to be a little bit more willing to be an industry agnostic, because I couldn't, I couldn't afford to play at that level, I needed to be able to buy something for you know, three to five times EBITA. And I found this distribution, what turned out to be a design house and distribution business. I thought it was more distribution. When I bought it. Turns out to be a happy accident that it's very design focused, because it kind of feeds my creative soul. You know, that kind of okay, well, like I can say, Yeah, I can say like, Oh, look at this, and I often do, it's like, you know, I can I'm feeding the music side of me doing this other artistic expression. That's an accident. Like, I didn't plan that, you know, it just I can only see, you know, the connection afterwards. Like, I'm not I'm not that smart or that lucky. I guess maybe I am lucky if it if it kind of happened that way. But But yeah, I just I said multiple times, as I was searching once I realized I couldn't afford or didn't want to afford the businesses that that I was first interested in. It was like, I just, I don't care what Jersey I wear. I just want to play the game. You know, just let me in. Let me let me play and I'll figure it out. Once I'm once I'm in the chair, you know, and that's that's kind of what I felt like I've been able to do over the last couple years is, you know, I told you that I'm building other brands and businesses on top of this one like this is was kind of always the plan. And for me it's it's mitigating risk, because you're you know, you take on a significant amount of debt when you buy a business. Especially, you know, if you do it the traditional, like the self funded search way, it's very levered. It's very a lot of debt. So you need to you need to grow. And how are you going to do that except for adding, you know, different products, different markets, different channels. And so that's been kind of my goal over the last, you know, 18 months is to kind of figure out where the business needs to go and what what I need to kind of bolt on to it. To get there.

Susan Sly 15:28
The you, it seems to me that you have this really solid toolbox full of skills. Okay, you said, doesn't matter what jersey that you wear, I love NFL football. So I would I am not Jersey agnostic, but I will say that, but the, you know, doesn't matter what jersey, you just put me in the game. You obviously, you have a high tolerance for calculated risk. A lot of people I know, especially as a an AI founder or two time AI founder and technologist. And now my new startup is in health care. I, you know, I know a lot of folks who would not go into a space that they didn't know anything about. I did have another founder on here, she acquired a landscaping business. And she didn't know anything about landscaping. I another person that I know she acquired a plumbing business didn't know anything about plumbing. But that is a skill set to be able to say I can take a look at a balance sheet. And I can look at several other factors and take a calculated risk. What I want to know Kevin, what are the other factors you're looking at? Because it's not just EBITA? Right? There's, there's, like we can look at, we could look at 100 deals of just EBITA. And not all of those are going to be successful, even if you put an all star in. So what else do you look at?

Kevin Bibelhausen 16:55
Yeah, I mean, I, so like I said, you know, I did kind of approach this from an industry agnostic viewpoint. And, you know, so that means basically, my metrics are the same as I was looking at all these different businesses. And I think subconsciously, I was drawn to the textile industry, because of my, my previous experience in music. So when I was looking at this deal, like, I'll tell you right off the bat, the thing, the thing that I loved the most was that they had reviewed financials for the last decade. So it was very professionally run. So if if you're getting reviewed financials from a CPA firm every year, and I have access to them for the last decade, I pretty well know what I'm buying. You know, that's not the case in a lot of these small businesses, a lot of the mean, you know, this, like a lot of the financials are done, like, basically on the back of a cocktail napkin. And, you know, there's just, there's, it's, they're really messy, and I didn't have that with this, you know. I knew what I was buying, when I did when I did my financial due diligence, the EBITA flushed out, you know, the, the accountants got the same ish, you know, number close enough to, to what the what the stated, you know, EBITA was. When like, okay, so this business actually makes the money it says, or the seller say it does. It had, I like the fact that the business had assets. So a lot of people who buy businesses, so like your landscaping example, or even your plumbing example, like the assets in that business might be a couple of trucks, maybe a building, maybe, usually not. Equipment, so you're probably under, like, you're probably under $300,000 in assets in the business. I acquired when I bought this company, I acquired $5 million worth of assets, including inventory, and AR. So I think I think I ended up you know, three and a half million in networking capital for the deal. So, day one, I have three and a half million dollars on my balance sheet as assets that are that are lendable that are, you know, that are, you know, in the business versus just, you acquired all goodwill, you've acquired reputation and brand. Like that's certainly a part of it, but I actually have collateral to back it up. I like that. I like that I like the reviewed financials. So I knew what I was buying. It was the owner had not been present really in the business for the last couple of years due to some health issues, family health issues. So I knew the business could run without him. So your you know, your question about like, why we are comfortable buying in an industry you knew nothing about? Well, he wasn't there. What was a difference? You know, if the people here already running the business, I'm gonna be I'm gonna be in the office every single day, I guess. I mean, like, I know myself well enough to know that like, I'm gonna pick it up quickly because, well, I'm incentivized to. I better learn it quickly. But, you know, my, my livelihood is, you know, all wrapped up in here. And, and I was willing to kind of take that risk and realize that the owner you know, he wasn't integral to the day to day, he wasn't himself like a textile guy. He came out of furniture in sales. So an adjacent industry but not the same. And, yeah, it was just it was, you know, the fact that I could I could, I felt like this was a place that I could kind of plug in and learn as even as the CEO. And that's been, that's been true. Like, I've, I've got a really great team here, that they're all pretty much original employees, they've been working here for 20 years, and they're thrilled to have somebody that's younger, come in, and look at the next 30 years, and here's what the business can do. They're not going to be here in 30 years, but they still care, like their professional, you know, not credibility, but like pride, right, and the company that they helped start. You know, they're around at the beginning, a lot of them. So to see it kind of be set up for success, I think is really rewarding for them.

Susan Sly 20:53
And my observation about everything you're saying, too, is that you you care. So people who are watching on YouTube, you'll see it like when when Kevin's talking about the team, when he's talking about, you know, the business, he actually cares, you can tell it's very evident. And the I think the other piece, I would say is a superpower of yours. Because you can look at numbers, you can SWOT test a business, and that's all well and good. But you're also having to look at industry as a whole, because AI is changing the landscape digitization. If you and I had looked at Blockbusters EBITA in the day, even two years before the collapse, it would have looked like a great business. But what Blockbuster was taking for granted was digital, right. And that's where Netflix saw it. So clearly. And even Kodak as an example that I had their former CMO, Jeffrey Hayzlett, was just on the show. And and he left before that. But Kodak made the fundamental error of saying, Hey, we're we're a noun, as I say. I wrote a case study on it at MIT, we're noun, we're not a verb or an adjective. So you, you have to have another skill in that toolbox of yours, Kevin to take a look at this. Because as we talk about the funds, you're raising, as we're talking about buying these small businesses, and I do a lot of as I'm sure you're aware, a lot of speaking all over the world on AI, and what's happening with AI. There are some businesses that are going to be so radically transformed that they're not going to survive, but there are other businesses that are going to rise and the values are going to be higher. So what else are you looking at with these businesses? Beyond the numbers?

Susan Sly 20:53
Absolutely.

Kevin Bibelhausen 22:45
You know, I'll tell you, I'll tell you one of the other things that you know, is you're talking about AI, because that's certainly something that I mean, I came out of out of technology, right. So like, we were, we were starting to see the early, early, early stages of that. So I've been out of healthcare, really, since this whole thing took off, but we certainly knew it was coming for what we're functionally doing is design. So like we buy art, we use, you know, archives archives, that can be you know, kind of scaled to an unbelievable amount, because you don't have to spend necessarily 1000 bucks on a on a piece of art anymore. Or if even if you do, it's you can get, you know, the productivity of the artists can be so vast because they can get a lot of these starts, AI can generate, you know, get to 80% there and then tweak, you know, by the individual artists, and sometimes their output can just be that much more vast. So it's it's certainly coming. We've, we've also looked at ways to use AI in our business that that makes the shopping experience different. You know what, there's, I'll get back to my point. Earlier, but like when you're when you're putting together a website, and in a virtual showroom, you know, people don't necessarily want to go into showrooms anymore. It's a it's a weird experience. Everybody's in like a suit and tie. It's kind of like hushed tones. It's not a fun shopping experience. So how do we do? How are we able to give people more confidence in purchasing something online. And so we've been messing with some AI tools to kind of show, okay, here's how the fabric drapes, here's how it looks on a sofa, here's how it looks in your particular room. You know, all of this is sort of like early stage for us. But the all underlying all of this is that what attracted me to this industry is that it's it's one of the oldest industries in the world. It's but it's a product business, that we make a thing. You know, AI isn't going to make that thing obsolete. You know, there's a lot of technology businesses like you said that are gonna go away because AI you know, will will eat their lunch. Or lot of these like, you know, massive call centers or, you know, here's the 1000 person BPO in the Philippines. You know, that's going to be different now that they can scale AI. You're already seeing it, you know, with with different companies taking advantage of it. So I really liked the the ability to come into an old world economy business, and then apply digital transformation, digital marketing best practices, to kind of drag it into the 21st century. And that was kind of the the idea and buying one of these old quote unquote, boring businesses, you know, non tech businesses, brick and mortar businesses, is that you can, you know. These things aren't going away, you still need something to sit on, you know, but, but then we can use AI and digital transformation, to get us, you know, more profitable in the future.

Susan Sly 25:53
It makes a tremendous amount of sense. And I love what you're talking about these old world businesses. Because, you know, when you look at things like robotics, and AI, so there's robots that will do roofing now as an example, which but the thing people don't understand is how expensive those robots are. And, and even why is it that when we go in a parking garage, we're not just seeing robots everywhere, there's the expense of them, people damage them, people will shoot them literally, like, you know. And so you look at that, and you say, well, some businesses are going to be radically transformed, and some are going to be enhanced. And so when I'm, you know, when I'm looking at a business, things that appealed to me are definitely trades, that, you know, having that person come in and fix something in your house, or whatever the case is. Plumbing, electrician, that kind of thing appeals, definitely. Landscaping, all of those things. So, you, it's so interesting, because you also, you know, you buy this business, most people just buy a business and start to focus on it. But no, you decide this is again, Kevin, zone of genius, right? Because I get you think differently. I'm sure people have told you that. So you also start a fund, you're helping other people invest in these types of assets. So what made you go from, hey, I'm gonna raise money, I've never raised money before, to within, you know, a three year period, you're also starting a fund teaching other people how to do it, like, Do you sleep? Like what?

Kevin Bibelhausen 27:38
Yeah, and, you know, not seen on camera as my emotional breakdown last night. So it's certainly not it's certainly not for the faint of heart or

Susan Sly 27:47
went to for a different maybe a different reason. But yeah, you know, it is Raw and Real Entrepreneurship. Yeah,

Kevin Bibelhausen 27:54
Yeah. Listen, like this isn't it's not all sunshine and rainbows. Like I it, we can make it seem like that in a podcast or online and look like there's. That's one of my friends like to say likes to say, like, entrepreneurship is a knife fight in a phone booth. Like, that's what it feels like, you know, you come to work every day. And you're like, What am I going to what, what's going to happen today? And hopefully, hopefully, I get through today. Okay. Yeah, so I mean, the reason we started the fund was because the fundraising experience, like I had to raise eight or $800,000, I didn't have any family money, didn't have any, I didn't have any rich friends. So what I ended up doing was, I, when I, when I got this business under LOI, I had a letter from one of these capital providers out there, that said, you know, hey, we're gonna we, we commit $5 million in equity to you. So go out and find a business that works, and then the money will be there. Right? That was awesome, because I didn't know how to raise money. And I was a little afraid of it. Well, three days before my LOI was signed, they gave me a call and said, you know, we're just really busy. So, good luck, we're going to tear up this contract. Okay, so then I had to make a decision, like, do I go? Do I kill the deal and tell the broker that my funding was pulled? Or do I just sort of figure it out? And I sort of figured it out. So I made a couple phone calls was like, Is this something that you think I could do? Like, how do I do this? Like, oh, yeah, you're gonna be fine. We'll help you. You know, we'll give you some names to kind of start with and so I got a list of, I don't know, like 30 names or something of people that had invested in these kinds of deals before. And then eventually, I think I ended up contacting close to 300 people, you know, just by phone, email, whatever. I don't know how many conversations I ended up having, but I was raising $50,000 at a time. So do a little bit of quick math and realize that my cap table is quite large. And my cap table has 10 or 11 people on it. It's a lot of people for a business of my size, you know, we're doing 9 million in revenue. And so it was just kind of like the I enjoyed the process. I enjoyed conversations like this in raising capital. But it was I did it at the most stressful time of the year, I did it between Thanksgiving and Christmas. I mean, I remember, sitting in my parents basement, I had gone home for Christmas. And I was sitting in my parents basement, like making phone calls. And I think they thought I was trying to like, you know, do some drug deals or something because they didn't fully understand what's going on. But I had to get, I had to finish out my capital raise in order to close it immediately after Christmas. So it was stressful. And a lot of these buyers are going through the people that we invest in are going through this for the first time. So they're going through the SBA loan process for the first time. Which if you've never, if you've never gone through the process, or you don't know anything about it, imagine getting a mortgage, but it's like 20 times worse. You know, they they want to, they want documents for everything it is it is a government loan program. And it comes with all of the red tape that you can possibly imagine to get an SBA loan. It's a wonderful program, but it is what it is. So there's, there's difficulty in managing that. There's difficulty just managing your seller, you know, and the relationship there. There's, you know, you probably are doing, you're probably spending more money on legal than you've ever spent in your life, you know, 10s of 1000s of dollars on legal. And so there's you have enough on your plate, as an entrepreneur who wants to go buy a business, capital is available out in the market, and is, I hesitate to say it's a commodity, but it's like, you don't you don't need to be a professional capital raiser, I proved that like you can go do it. But wouldn't you rather press the easy button and just be like, let's go to a fund that can write a big check, and take out the majority of this raise. So if I had to raise 800, like our fund would have invested if our fund had existed, we would have invested like six to 700. And then we would have told me the entrepreneur, here's here's a few names, see if you can raise the additional 100 or $200,000. Because it's good for you. Like it's it's good to kind of eat your vegetables, it's good to build your own network of investors. And so that's our model like we we, you know, the benefit for the investor is that you get access to a lot of these really private, off market deals hard to get the deal flow. We see all the best deals, because we write one of the larger checks in the industry. And then as a sponsor, as an entrepreneur coming in buying the business, you can kind of have your capital raise taken care of, if you buy the right size of business, and it fits our Buy Box . We will take up the majority of your raise, and even help you raise the rest of it. So it's it ends up being a win win for everybody. I mean, we don't we don't charge any money for sponsors to work with us. We charge investors, it's a typical fee structure for the funds. So it's very much right down the middle of the fairway.

Susan Sly 33:00
And I think that's so significant for a variety of reasons. Because the you I mean, you said so much there. The, I have experienced with a very large cap table in a you know, and even raising money, this round for my new company, thePause. So we're like average check size is 25,000 to 100,000. And then some research came out the other day, talking about you know, safe rounds, which are, you know, safe rounds are still going strong. It doesn't matter if you're an AI, it doesn't matter if you're a multi time founder, it just is what it is. But cheque sizes are even below 25,000. So you're you're gonna see people with these cap tables that have dozens of people on them possibly, and and it just is what it is. Right. But it Yeah, and in a way I have a different philosophy around that in that we're being very choosy, Kevin with who we're having invest. I've said no to investors. And but you know, but that by that token, that not all money is created equal. And that's why I love what you're doing with this fund. Because you're and I love that it's like saying to that entrepreneur, okay, put some skin in the game, like go out and get some other people who believe in this. We I have a philosophy when I'm working with founders to say Listen, what I want to see is strategic investors who are maybe angels that have depending on what, like, you know, one of my investments is Une Femme wines. We talked about that. I have to disclose my investments anywhere on the show. But the thing with Jen and Zack is like, who are the other investors? Are they going to advocate on social media? Are they going to do those things, because that being strategic like I look at investors as advocates, so it's not just they're giving us capital, but they're also expected to advocate for the company, and that's just, you know, the philosophy,

Kevin Bibelhausen 35:03
It's in everybody's best interest if they advocate for the company.

Susan Sly 35:06
Exactly, exactly. So

Susan Sly 35:08
with your funds now, like what I was reading about the average deal size, and you know what, just super, super quick, what are the kinds of so anyone listening to the show? What are the kinds of deals that you know, you're looking to fund this year?

Kevin Bibelhausen 35:27
Yeah, so we, we just finished out our first fund and made our last capital deployment, in that. wWe're going to start fund two in August of this year. So this is sort of like the ramp up period, which will be a larger fund. So we're looking to make about one to one and a half investments a month at this fund. So it's gonna go pretty quick. I mean, look, our buybacks is relatively simple. Like, we want to look for businesses that are, you know, that have some tenure. 10 plus years is usually what we say B2B only. That's probably the weirdest thing that that you could say. And what that means is it functionally knocks out those home service businesses that you were talking about, right? Like I know, tt, I have tons of friends that have bought home service businesses, I've got no problem with home service businesses. But for the thesis of the fund, we want to be in these, like B2B. So we've got like specialty manufacturers, a commercial towing like that, that tow semis, you know, that has specialized equipment, commercial kitchen, like hood cleaner, just things things like that, that like, you would never you wouldn't see him like on the street, you they're tucked in these office parks, you know, like I'm sitting in right now. tThere's businesses that you would have never heard of that don't really do a lot of advertising because they're, they're B2B. So that's, that's, that's kind of our criteria there. And then we want to, we want to see businesses between one and $2 million in EBITA. And we're pretty hard about that, like we we will peek a little bit lower, but there's got to be some consistency above a million in EBITA, because of the cheque size that we want to write. So we want to write a six to $800,000 check into these deals. And so that means we're, we're looking at a bit larger when you think of lower middle market businesses. And they're, I mean, there's a reason for that, right? So the one to $2 million dollar EBITA, the deals are difficult to finance. So they're too big for sort of the retail Mom and Pop type investor. And they're really too small for private equity to kind of come down because they have a lot of overhead. And these deals are not really big enough to keep the lights on. And you can really only finance them with, you know, seller finance, well cash, cash will always work, you can show up with a briefcase full of cash.Seller financing, or, and or an SBA loan. Like there's, there's really those are really it, that's the combination, that's the capital stack. Any commercial bank isn't going to touch it, or conventional loan or anything like that's, it's too small. So we like being in that area, because we're able to use SBA leverage, tenure money. And, and personal guaranteed by the sponsor. So there's, there's skin in the game, from the entrepreneur coming in. Which turns a lot of people off, you know, if you're not willing to personally guarantee the loan, you can't get the loan. And that's kind of the magic that makes this work, is the access to leverage that you're able to get.

Susan Sly 38:29
So I love that. And this, I think that we're going to see an influx of people who are buying existing businesses for a whole variety of reasons. And the this whole investment ethos that your fund has, like B2B, this, we're very specific, we are not going out of our swim lane. And I think that's essential, because again, going back to this not All money is created equal. And if you take you know, if you take money from a fund, that is your your business is outside of it, and they don't understand it, it's not going to be a healthy relationship. And you want your investor, boys and girls listening all over the world, you you want your investors to understand the business you're in. Not necessarily, whether it's fabric, or whether it's commercial window cleaning, or whatever it is, but understand because your investor, your lead investor also becomes an adviser to you and they want to help you out because they want a really good return on their money. So

Kevin Bibelhausen 39:29
I was gonna say I did a panel on that at a recent conference called SM bash. We were in Salt Lake City last month, and this was one of the main topics is like why would you take Why would you take money from a fund if they may require better investor terms? So like, what you just said, not all investors are created equal, like the money is still green from like friends and family or you know, but is that the only relationship you want? Do you just want that transactional type of thing? Or do you want somebody that's actually going to be in your corner and if you're Giving up an additional 5%? Like, what are we talking about? Like is that are you really going to die on that hill? Like, to me, that's a no brainer. But exactly as you know, judging by the fact that you had to do your little, you know, get on your soapbox there, that's, that's something you've experienced to where people just link to it. And they they try and get the best terms possible without considering the benefits that certain specific investors bring to the cap table.

Susan Sly 40:24
Absolutely. And my my philosophy right now, you'll laugh, Kevin is, if I have to explain menopause to you, you're not investing in the company. Like, you know, I'm so clear, not just what our moonshot is, but I'm clear on how to do it, because I've got decades of experience doing so. Like, if you don't know, then it's not the right investment for you. Right. And people will laugh, but it's, it wasn't my past company. We're doing computer vision in retail in a very specialized area and the gas station convenience store sector. And I didn't know anything about that sector coming into that. But my gosh, I learned to the point where I could even tell you like gas ratios, or how they use artificial intelligence in ML to set gas prices. And like all sorts of things I could tell you like about order basket, and you name it, I knew it. And I learned it, right, like you and you do and then you just take those principles and you wash, rinse and repeat to other sectors. My final question for you since it is Raw and Real Entrepreneurship, how do you how do you personally Kevin manage stress?

Kevin Bibelhausen 41:36
Not well. I mean, I I've, I was talking to my wife about it last night that, you know, it sometimes just feels like. I liken it to like being a kid, or maybe like an early adult, where like, your room is really dirty, or your apartment is really dirty. And you're like, I really need to clean, but I don't have the energy. And so you just like shut the door. And we're like, if I don't see it, it's not going to stress me out. Sometimes, like entrepreneurship can feel that way where you have so many plates spinning or like, I just rather not look at that problem right now. But it's eventually it comes back and you know, rears its ugly head and you have a bigger problem on your hand. Listen, it's a work in progress. For me, I've thought about I reached out to a couple people a few weeks ago and asked about therapists. I think that's probably something that I need to look into. I thought that for a little bit, but again, like I still haven't pulled the trigger on it. I think it's important to have a sounding board. One of the things I would recommend that you do, and that has been good for me and but this is sort of like just like, a baby step in the right direction is I joined a CEO, like peer group. And so we have close conversations, and we meet once a month and we are have a Slack channel that we're all on. And, you know, there's been all kinds of personal things shared, you know, there's somebody that, you know, got acquired by private equity, and then another person who's got, you know, a spouse with cancer, you know, and so and then everything in between, right, we're trying to all of us are so intertwined with our businesses, that there really, there's no such thing as work life balance. For us. It's more about integration, and how do we how do we maintain some level of sanity while dealing with like normal human things, because those things don't stop. Like cancer waits for nobody, you know, illness waits for nobody. And then the good things happen and you can celebrate those. So like seeing that and being a little bit more real in a small group because it's hard to do it like in a mass communication you put out on X , you put out in your newsletter, you do whatever, you know, podcast, it's it's hard to get that granular that that and get in like a no under all those layers. But if you need if you have a group of people, you know, that you trust and that you meet with regularly, I find that to be very valuable. I wish I've missed the last meeting because I was, you know, I was at a customer site. So it's it's one of those things that I kind of view as a tune up. That's been the best thing that I've done. And then other than that, you know, I'm looking to I don't feel like I have really any hobbies. Like this is kind of all I do. You know, you asked me earlier like if you're sleeping or like, I don't know, not really, this is kind of what I do.

Susan Sly 44:23
becomes almost a catharsis, right? And I want to I want to celebrate you because we're, this is kind of the the first generation of men who. It's very like even this morning, one of my best friends is Rebecca Zung. She's very well known in the world of how to negotiate with narcissists and just like my best friend and sister, and we're texting at seven in the morning talking about stuff. And women do tend to do that right and will bring a close group of women and we'll have those conversations. Men are just starting. And I'll share with you very openly because, you know, starting this new startup and going from Okay, now I have no income and I'm building and I, you know, I've got these past relationships. So I'm so grateful like Microsoft, and you know, all these amazing people. And I'm spinning up this product. And I'm bootstrapping the company. And I have investors. And I'm a mom. And you know, and and Yeah. And so I read, I audio read Benjamin Hardy, and Dan Sullivan's book 10x is not to 2x. And in friend mode in front of the entire world, the audio book is really great, because Benjamin reads it. He is a organizational psychologist. And Dan Sullivan is Strategic Coach, very well known. And at the end of each chapter, he interviews him. And that book, actually, you know, one of the, you know, the big pieces for me was getting rid of anything in my life that wasn't 10x. And that is a you know, that is a process. And even with the show, we just moved the show to the C Suite Network, because I wanted to level up and have the show be a 10x show. Because I'm like, if I'm going to do this once a week and sit down with a fellow founder and just have a conversation, like we're having a cocktail or a coffee, I want to level up everything about it, and send it out to the world. Right. And it's the same thing with the business, but that I highly recommend that audio book. Don't just read it. Yeah. Awesome. You'll have to let me know how it goes.

Susan Sly 44:23
Well, Kevin, thank you so much for being on the show. And I want to wish you all the success in the world. And I'm cheering you on and seriously, I love what you're doing. And you know, maybe it's okay to to give yourself permission to say work is my hobby. And life is my work. Just a thought.

Susan Sly 44:23
Work

Kevin Bibelhausen 46:53
It's pleasure being with you.

Susan Sly 46:54
Yeah. All right. Well, thanks so much, Kevin. And with that everyone, you can get all the links to Kevin's fund in the show notes and follow Kevin on social media. It's all in the show notes on Susansly.com. And with that, God bless go rock your day and I will see you in the next episode.

Susan Sly 47:15
Well, I hope you enjoyed the episode with Kevin Bibelhausen. If you're listening or watching sorry, on YouTube, and you're watching Startup Diaries, and you didn't watch the episode go check out the episode. You can watch it on YouTube, you can listen to it on wherever you listen to podcasts. And I want to just jump right in and this particular week for Startup Diaries should be going like. It's it's been a week. And so to take you into my life, it's the here's the good stuff. I'm getting texts from friends. Rebecca Zung, one of my friends if you haven't checked out our YouTube channel, How to Negotiate with a Narcissist, sent me a text she's like, You go girl, you're crushing it, your business is moving so fast. It is we announced our partnership with Microsoft for Startups so . Love you Sally Frank, who oversees the healthcare startups for Microsoft in that ecosystem. That's fantastic. I got a press invite. So I am going to be doing LinkedIn Live with The Female Quotient in July, which is huge, huge, huge. Like if you don't follow The Female Quotient Algorithm for Equality, Shelley Zalis, like oh my gosh. She is everywhere South by Southwest. She's at Davos, she's at CES. And she's bringing together women in technology. And it just incredible. So I got asked to speak on a virtual live event, which was amazing. We have another big press announcement coming out with a strategic partnership. I have people reaching out who are interested in investing in the company. And that's awesome. I'm not taking all investors, there are very specific requirements that we have. And and you know, one of the big requirements is that if I have to explain what menopause is to, then this is not for you. But it's you know, that's all the good stuff. What's going on behind the scenes is it's been a week. I'm a mom, and my son AJ just graduated from university and that was beautiful. But there's also like the the aspects of organizing the graduation dinner for him and getting you know, getting him all sorted out and and organizing the kids. Then I have another child who's moving out from university, one that's coming into the last part of her grade nine and and she had a qualifier for state championships. She was told she didn't make it and then we found out she didn't make it. And I was supposed to fly in a business trip and then she was crying like Oh, but you won't be there and so I moved my trip so I could be there for her. And in this week's diary, I want to talk about life. And I said to Kevin, at the end of the show, that maybe your business needs to be your hobby because he's a workaholic. And your life needs to be your work, and how often are we putting more effort into our businesses than we are into, say, our partnerships, marriages, our, our relationship with our kids. And those things just sort of become a secondary like have to, as opposed to I get to. And one of the things I had to remind myself of this past week was, I get to. Like, I get to go to my son's graduation. This is really just raw, unreal, our son is on, you know, on the spectrum. And he was told that he would not be able to qualify to attend community college, ever played team sports. And he graduated with honors in University with a degree in design and advertising. And in and I was like rushing and getting things set up, like our AWS account setup, and our Microsoft, you know, for startups account, verified and doing all of these other things and talking to investors and, and it was like...

Susan Sly 51:19
wait a minute, the whole world has to stop for me right now, because I want to be present for my son's graduation. And that means I am not texting you while the graduation ceremony is going on. And I am not answering Slack messages. I am really focused on what is happening with my child. And, and in to be able to take that positioning. I know a lot of entrepreneurs don't. They literally could be in the middle of making out with their partner, and they're returning a Slack or returning a text. And, and to be able to set those boundaries. Because you don't want to resent the journey of the company you're building. You want to look back and go, Oh my gosh, that was so fun. I want to do another one. And that was amazing. And entrepreneurial burnout is real. And the burnout happens when you lose sight of the perspective that it's a get to not have to. You don't have to do anything you get to. And so in this week's journal, I just want to say like that, you might have a lot of life going on. And you might feel overwhelmed. That usually means you're doing a lot of things that you don't need to be doing, you are not doing the things you should be doing as a CEO. And you're letting your time dictate you, meaning that you're letting too many meetings on your calendar, you have meetings that have no meaning that you're doing things that don't have impact. And you want to start to think about small lift, big impact, like what are those things that when you show up, that you get the biggest ROI. So things like meeting with potential investors or setting the vision for the company, doing all of those types of things, you need to have a lot of energy for that. And you're never going to feel energized, if you're overwhelmed. And you're in this heaviness of, I have to do something not I get to do it. And so really, I want you to think about that. And then I want you to look at your calendar for you know, these coming this next coming seven days. And look at all of the meetings you have, look at everything you're doing. And ask yourself, Does this have a big impact? Is it something where I'm showing up? And there's this this large ROI for me? Because if it's not, you need to ask yourself why you're doing it. Because there's a massive difference between being busy and being productive. And when you look at your calendar, and you have eight, 9, 10 meetings, you probably have at least I would say 20 to 30% of those meetings, you either don't need to be in you could send an AI to in there to summarize for you like Otter or something. You don't need to be in there. You need to be better at delegating, or why are you even meeting with that person because you shouldn't be that person who is thinking I have to do graduation,I have to go to my job, Child's recital, I have to go to the track meet because you need to check yourself if that's you. Because that was me last week for just a nanosecond, and I stepped back and I went.. No, Susan, you get to you get to do this. And these diaries are raw and real because you don't need another book by someone who is freaking emotionally clueless and isn't involved with their kids lives, and isn't trying to get their workout in and isn't trying to do all the things they need to do to be an awesome human. And telling you it's all so easy that they raised money without even having a PowerPoint and they built a great company. But meanwhile they're on their 15th marriage. And they have photos on their desk and you don't know if they're your their grandchildren or their children, like you don't know if that's their, their partner or their child. Like you don't need more people telling you how to do something without telling you the grittiness and the truth. And the truth is that entrepreneurship is not easy. That's why not everyone is cut out for it. I believe anyone could be an entrepreneur, but you're not going to be an effective entrepreneur. If you burn yourself out, you lose sight of your perspective, you lose sight of your family, and you forget why you decided to be an entrepreneur in the first place. So with that, that's this week's diaries. And by the time you see the next story, we will have had a an amazing state running championship, we will have had a lot of amazing adventures as a family and on top of it, always looking at the progress because I never want to come to you with these weekly startup diaries without making some forward progress. So with that, go ahead, drop. If you're on YouTube, drop a comment below. I'd love to see your comment. If there's something you'd like me to talk about in Startup Diaries, please let me know. These are just from my heart to you. And hopefully at least one of you. These are helpful. So with that said me lots of love. And I will see you in the next diary.

Susan Sly 56:41
Hey, this is Susan and thanks so much for listening to this episode on Raw and Real Entrepreneurship. If this episode or any episode has been helpful to you, you've gotten at least one solid tip from myself or my guests. I would love it if you would leave a five star review wherever you listen to podcasts. After you leave your review. Go ahead and email reviews@Susansly.com. Let us know where you left the review. And if I read your review on air, you could get a $50 amazon gift card and we would so appreciate it because reviews do help boost the show and get this message all over the world. If you're interested in any of the resources we discussed on the show, go to Susansly.com That's where all the show notes live. And with that, go out there rock your day. God bless and I will see you in the next episode.