Matt Willes
@SkolCapital
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Investor (Willes Capital, Mountain Mezzanine, SKOL Capital) and Minnesota Sports fan. Spouse (). Dad x4, Grandfather x2
Sandy, UT and Newport Beach, CA
Joined December 2018
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Pinned Tweet
X:
It’s not you, it’s me
After two weeks in Africa (with intermittent internet) focused on good friends and the marvelous ecosystem, I am taking an extended break from this platform
I find real life much more interesting and stimulating
Thank you for the last several years!
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What’s your most ridiculous personal HR experience?
I’ll go first.
Once had HR complain to my boss that I was reading with my feet on my desk. I was managing a $1.1 Billion corporate bond portfolio while getting in trouble with HR for having my feet on my desk. Good times.
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True Story: Mom and Dad had a place similar to this picture in NW Wisconsin
One day, my brother and I were taking turns driving while the other one skied. I was 10-12 y/o
Just happened to be the one day each year the Sheriff launched his boat on that lake
He pulled us over,
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Just sitting at my desk using the greatest calculator of all time.
Any other fans out there?
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Say whatever you want about Cousins, but everyone would be having multiple orgasms if Rodgers, Allen, Herbert, Mahomes or especially Brady threw for 460 with 4 TD’s in the biggest comeback in NFL history.
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@SportsCenter
Sadly we’ll never see it, but MJ would crush and all of you would have to stop asking such silly questions
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How I see potential debt/equity investments.
The star is most of what I do (lower middle market and smaller mezz).
The dirty secret is this: expected returns are just as high (or higher) for me as VC/PE and I’m taking less risk.
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I’m a private lender (also called mezz lending).
I lend money to operating companies (usually $10-100 million in revenue) that have exhausted opportunities with commercial banks or aren’t bankable.
It isn’t cheap capital, but it’s less expensive than equity!
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I ran a $1 Billion corp bond portfolio in the 00’s for a small insurance company
I beat my benchmark by 177 basis points annually from 2003-2008 (when I left) - If you don’t know, this is massive performance
Lots of chatter about about interest rates, so here are a few lessons
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Reminder: 15 months ago Jack moved $1 Billion of $SQ stock into an LLC earmarked for charity.
He has disbursed over $400 Million of it.
Remaining value: Over $3.7 Billion.
I’m moving $1B of my Square equity (~28% of my wealth) to
#startsmall
LLC to fund global COVID-19 relief. After we disarm this pandemic, the focus will shift to girl’s health and education, and UBI. It will operate transparently, all flows tracked here:
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16 months later: I hold my granddaughter for the first time!
Enjoy the weekend everyone.
Life is better than I deserve!
I try to keep my posts positive, but today I’m hurting.
Last month my daughter (who’s pregnant) moved to Japan. We woke up to a msg describing some complications. She’s going into pre-mature labor as I’m writing.
COVID travel restrictions prevent us from doing anything.
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Also, think I’m going old-school on the plane with an actual paperback book … anyone read this?
In Scottsdale tonight (only one night) - anyone around and want to hang?
Related: first in-person board meeting since COVID.
Prediction: I will find it just as annoying as I now feel when somebody says, “swing by my office.”
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Say whatever you want about Cousins, but everyone would be having multiple orgasms if Rodgers, Allen, Herbert, Mahomes or especially Brady threw for 460 with 4 TD’s in the biggest comeback in NFL history.
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@Sherrinadeau
Ok, I’m old … like what year are we talking about here?
Also, that’s ridiculous!
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Personal Note: I apologize for this, but my heart is full of gratitude.
I have a college age son who struggles with some personal issues. In a COVID world college isn’t ideal, so he just finished the
@DevMtn
program.
Today he started his first job.
He’s happy.
Life is good!
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Personal: first walk with my grandson ...
Related: Grandchildren are highly recommended
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@JoePompliano
Or, you know, just proof that the world doesn’t revolve around the east coast …
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@JoePompliano
This tombstone from a securitization they did 20 years ago still sits on my desk…
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UPDATE: I have a granddaughter!!!
Mother and daughter are both in stable condition.
A long road ahead, but I am overwhelmed with gratitude for modern medicine and the skillful care from their doctors and nurses.
Thank you all for your concern - you’re the best!
I try to keep my posts positive, but today I’m hurting.
Last month my daughter (who’s pregnant) moved to Japan. We woke up to a msg describing some complications. She’s going into pre-mature labor as I’m writing.
COVID travel restrictions prevent us from doing anything.
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1) Do you know that I love you?
2) Do you know that I love your mother?
3) Do you know you are beautiful?
4) Do you know that I’m proud of who you are?
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True Confessions: I wore a tie just starting out in my career to get ahead … it worked.
Last night I wore a hoodie to a reception because that’s who I am … it worked.
I don’t think the hoodie would have worked when I was young and I don’t think the tie would work now.
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Heard today the first original, good idea for repurposing old mall anchor/big box stores …
Can’t disclose anything yet, but let me say this: creativity and innovation are wonderful!
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Attn REtwit: Thinking of starting a new series here called “LP Corner” discussing thoughts and suggestions from an LP perspective.
Decent idea, or horrible idea?
Thoughts
@moseskagan
@Keith_Wasserman
@fortworthchris
@scottyo21
@seandsweeney
@sweatystartup
and anyone?
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The percentage of time required to send a wire transfer is incredibly frustrating.
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@SMB_Attorney
1) If you care, you are ahead of the game by a mile (sad but true)
2) Give yourself a break (nobody is perfect), laugh, and try again
3) Try to find reasons to say yes rather than no
4) Electronics go in the “charging station” overnight that happens to be in your room
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When my son bought his condo late last year he got a 30 yr fixed rate mortgage at ~2.4%
Turns out it’s also assumable!
I just informed him that I’m take a ROFR for when he decides to sell
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Good Morning!!!
Personal Update: 6 months ago, our granddaughter was born prematurely with some serious complications.
I’ve never held her (they live in Japan), but here’s a screen shot of our FaceTime with them last night.
Life is better than I deserve!
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A really fun
@Timberwolves
season and I just donated $11,500 to
@2harvest
!
I love this team!
Cc:
@JonKrawczynski
@MarcLore
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Next time (I know...) you are in an Apple ($AAPL) store, I want you to look at the tables. Seriously, look at them.
Why? It’s time for another mezz thread (this time with some pictures!)
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Been engaged for the last 36 hours on $SIVB … a few thoughts/lessons/stories:
1) Just heard of a guy with $28 M at SVB - oof
2) 5 days until payroll at many companies - going to be “interesting”
3) No CDS (with leverage) link this time, but lengthening duration of MBS matters
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Tears streamed down my face as each answer came back
But this time, each answer was a firm and confident
“Yes”
….
Life is better than I deserve
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Ok, question for REtwit:
I know at least 2 very HNW (mid to high 8 figures, but not 9) individuals financing personal real estate purchases with portfolio loans at 1% rather than mortgages.
Going to end well, or in tears?
(Yes, this is basically an interest rate question)
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Told a company recently, “Sure I’ll do a term loan for you at 18%”
Company: “Great, we’ll get back to you”
(A week of silence)
Company: “We think we can raise at 10%; are you interested?”
Me: “No. Good luck”
(A week of silence)
Company: “Is that 18% still available”
Me: 😂
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It has been a rough 24 hours personally, and I took it out on
@sweatystartup
- my apologies.
Today’s Gratitude Corner: I’m grateful for all of you and this community where we can laugh, learn, and grow.
I’m committed to being more constructive; thank you for your patience.
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New term sheet signed for a “mezz” deal!
1st position at roughly a 50% LTV (liquidation value)
16% interest, monthly pay
3% origination fee
2 yr term
Liquidity is drying up and the phone is ringing.
Top of the 1st inning IMO!
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“Matt, your son doesn’t qualify for a mortgage. Will you co-sign?’
“No”
“What about your wife?”
“Goodbye”
“Ok, we’ll figure it out and he can close on Friday”
What a joke…
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True Confessions: the wet signature crowd brings out the worst of me…
I have no clue why it triggers me so much
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When it comes to real estate why am I a LP rather than a GP?
I simply refuse to go through the mortgage financing process ever again...
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Youngest daughter:
✅ Crushed her entire junior year; especially spring term
✅ Off to Greece (trip 2 of 4 this summer)
✅ Unsolicited “Thank you for the opportunity” comment as we drove to the airport at 5:30 this morning
Life is better than I deserve!
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HUGE personal news!!!
After over 2 months my new granddaughter has been released from the hospital!!!
I just don’t have the words…
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Good times on my first flight! I don’t even know what I don’t know, but I’m going to get my license.
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BREAKING NEWS: they are moving back to the US!!!!!
Life is better than I deserve!
16 months later: I hold my granddaughter for the first time!
Enjoy the weekend everyone.
Life is better than I deserve!
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My 82 year old Dad is slowly going blind.
Yesterday, I was watching the sunrise reflected off Mt Fuji while eating breakfast when I just burst into tears thinking about Dad. I mean full sobbing in the middle of the restaurant.
Remember to look up and admire the views!
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PSA if you ask me to look at your mezz deal:
Yes, I will find it if you distributed out $3 Million of cash to your owners and now you “need” $3 Million of cash.
We’ve reached the “debt funding of cash distributions” phase of the cycle.
Be careful out there!
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My typical mezz deals are to companies in 1/3 categories:
1) M&A
2) Growth Capital
3) Special Situations ...
Here’s an example on
#3
:
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Just landed in LA (ok, really the OC) for Reconvene …
Somebody, please remind me why I don’t live here full time…
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“We make a living by what we get, but we make a life by what we give” - Winston Churchill
For the last 22 years I have kept track of our cumulative charitable giving as a percentage of our year end net worth (cumulative savings)
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I have desperately tried to keep politics out of my Tweets. But, I will share a few thoughts/actions and then I will be silent:
1) My first reaction was one of anger - I believe today’s violence in our Capitol was anti-American. If you disagree, fine, I respect your rights
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Why do I love Mezz lending?
Equity returns without equity risk.
Over the last 5 years I’ve watched one company almost fail 3 times with unreasonable growth expectations.
I just keep clipping 16% coupons…
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I try to keep my posts positive, but today I’m hurting.
Last month my daughter (who’s pregnant) moved to Japan. We woke up to a msg describing some complications. She’s going into pre-mature labor as I’m writing.
COVID travel restrictions prevent us from doing anything.
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True Story: Every year the local paper published Dad’s comp (it was public info).
It was fine until my 8th grade science teacher (public school) made the link and ranted for 30 minutes to the entire class about the immorality of Dad’s comp.
Good times.
Growing up, did you know how much your parents earned?
Do you think that information is something kids should know?
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@shawngorham
Biggest disagreement in my marriage. I’m an unapologetic wash before you put them in…
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Update: Every year I compare our cumulative charitable giving (since we were married in 1997) with our year end net worth (our cumulative savings).
Related Confession: I don’t particularly enjoy giving money away, but what else am I going to do with it?
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Yes, California sucks
1) Unreasonably warm 77 degrees yesterday at the beach
2) Are those … clouds … almost obscuring the sunset last night?
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Last week
@girdley
made a comment about amateurish SMB financials ...
Thought I’d pile on here with a thread on evaluating different parts of those amateurish financials.
(Reminder, often there is opportunity, but it requires some work)
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Last week our granddaughter turned 1
She was born prematurely. Our daughter knit the pictured doll to the same dimensions as our granddaughter at birth
She is still small, but growing!
She is still in Japan (I’ve never held her), but I love her!
Life is better than I deserve!
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Reality of SMB to lower middle market deal making:
It’s just as much work for a small deal as a large one.
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We made it! Congratulations... My 2020 year of twitter
✅ Lurked for 8 months and had < 50 followers
✅ Found FinTwit, RETwit, etc and started posting
✅ Ending the year with ~1750 followers
✅ Invested $1 Million in deals through Twitter relationships
On to 2021!
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True Confessions: I went to a meeting today in an office …
It was horrendous, and I’m now convinced the anti-WFH crowd is basically middle-management and those that thrive on office politics
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Say whatever you want about Cousins, but everyone would be having multiple orgasms if Rodgers, Allen, Herbert, Mahomes or especially Brady threw for 460 with 4 TD’s in the biggest comeback in NFL history.
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@JumpInRE
I worked hard; like really hard. So, unfortunately, my wife and kids paid a price. My lifestyle is MUCH better today, my marriage is terrific, but still working on my relationship with my kids.
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@tsludwig
Final sourcing note: I can’t stress enough that I believe in doing favors. I really believe that trying to be a nice person and treat people fairly is the right thing to do AND pays enormous dividends for future deals.
I’ll respond on structure tomorrow!
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Lot’s of new followers, and it’s been a while …
My primary business is (was? - more on that later) LMM and smaller mezz lending
Over the past 10 years I pounded out annual cash returns averaging 17.7%
How I see potential debt/equity investments.
The star is most of what I do (lower middle market and smaller mezz).
The dirty secret is this: expected returns are just as high (or higher) for me as VC/PE and I’m taking less risk.
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I just finished the most important thing I do each year that hopefully is totally useless:
I updated the “org chart” of entities/investments so my heirs know where stuff is in case I die.
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Last week I promised a few thoughts on cultivating deal flow.
I’m back after some time helping my wife with her art businesses, so the time is now!
How to make deal flow like:
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It’s time for another edition of “Value that company!”
Today, Pest Control - NW US!
$10 M ARR (24k customers at $100/q plus a little one-time)
95+% Customers are on cc autopay.
80% GM
$1.5 M SG&A
20% attrition in customer contracts can be replaced with part of SG&A
It’s time for another edition of “Value that company!”
Structural steel fabricator based in the western US.
$11.5 M revenue; 22% EBITDA margins
10-15% annual growth pre-COVID; flat this year
Customers are the usual GC crowd in their city
What’s your estimate?
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Final Update:
I don’t know what to say other than a deeply felt: THANK YOU!
Expected stay in the NICU is 4-6 weeks, and we are hopeful that we will get to see/hold our granddaughter soon.
Life is better than I deserve!
UPDATE: I have a granddaughter!!!
Mother and daughter are both in stable condition.
A long road ahead, but I am overwhelmed with gratitude for modern medicine and the skillful care from their doctors and nurses.
Thank you all for your concern - you’re the best!
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Conversation yesterday
Me:
When will demand destruction occur that is sufficient to bring down inflation?
Dad (a voting FOMC member in the late 70’s):
Well, real rates are negative 6% and there are 5 million more job openings than people looking for work. It’ll be a while.
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It’s time for another edition of “Value that company!”
Structural steel fabricator based in the western US.
$11.5 M revenue; 22% EBITDA margins
10-15% annual growth pre-COVID; flat this year
Customers are the usual GC crowd in their city
What’s your estimate?
OK, it’s time for a new game called, “Value That Company”
Selling lighting fixtures to western US distributors to builders of CRE.
$13 M Revenue TTM
20-30% YOY growth over the last few months
$0 EBITDA TTM
35% Gross Margins
$5 M existing LOC
Looking for $2 M cash
Thoughts?
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Why be a LP? My top 3 answers - Letterman style
3) Diversification - larger investment universe, and I don’t have to do all the work? Done!
2) Illiquidity - a premium for not being temped to trade? Done!
1) Returns -
#2
and longer timeframe means more compounding!
Done!
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1996 : met in Physics 221 (She got an A and I got an A-).
Promised to show her the world. 4 kids later, here we are in the Arctic last year.
Off to Africa next week!
The comments on this are great 🙂
If y'all wouldn't mind dropping a comment/quote tweet of where you met your spouse & a pic - people seem interested 🤷🏻♂️
We met on hinge 🙏
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Reminder: the biggest mistake entering a recession is running out of liquidity
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Unpopular Opinion: Five Guys burgers are … not good. $16 today for a very mediocre bacon cheeseburger and a Coke Zero.
Also, if the guy next to me is eating peanuts, I better be at a baseball game.
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Our youngest graduates in 6 weeks, and I’ve been thinking a lot about being a dad. Here are 12 pieces of advice on parenting.
But first, the disclaimer: I’m far from perfect. In fact, most of these came out of mistakes I made (sometimes repeatedly)
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Pretty incredible post by Clint.
Friday lunch was with a 69 y/o long time friend/business owner. Business will do $39/2.5 million in Rev and EBITDA this year - no Growth.
He asked about multiples, and after I answered, he said he’d be better off doing a controlled
Why the "Silver Tsunami" hasn't happened in SMB:
🧵
I came into business brokerage 10 years ago with a promise of a "Silver Tsunami", a demographic wave of Baby Boomer business owners with no succession plan and trillions of dollars of small businesses needing to sell in the
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YES, and with all respect I’m going to pile on here for a little parent corner
When our oldest was a teenager, life was pretty hard. We were all struggling and couldn’t communicate about anything.
Finally, I came up with 4 questions that I would ask my daughter at least daily:
Have three sons.
Literally the only thing I’m sure of, with respect to parenting:
When you tell your kids you love them more than anything in the entire world, they should groan & be like “Daaaaaadddd, you’ve told us that a million times”.
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