Menu
Do you need $3 million for some kind of new project?
I remember my days of looking for those tiny amounts of working capital. . . and I don’t remember them fondly.
It was pure hell.
Looking for $3 million or less is a job just one step above selling encyclopedias door-to-door.
If you’ve ever heard the expression, “It’s easier to borrow a thousand dollars than it is to borrow ten,” there’s a lot of truth to it.
This is why I’ve always stuck to deals with a valuation above $20 million–preferably, above $50 million.
There are lots of reasons I love deals in this valuation range – for one, it’s easier to get a 5X return from a $20 million deal than it is from a $400 million deal.
But here’s what you need to know about larger deals:
You get a strong gravitational force that pulls in money, people, and resources:
I like to call this force “Deal Gravity.”
Small deals usually attract B-player investors who are trying to play the game of money with small checks (or no checks.)
But the larger (or more exciting) a deal is, the easier it is to attract capital, joint venture and affiliate relationships, key employees, suppliers, and vendors. Bigger deals have gravitational pulls that get harder and harder to resist.
And there’s nothing that attracts people to you more than a big deal where you’re consistently hitting milestones on time and beating your original financial forecasts.
Here’s what I mean. . .
When we first started raising capital for my Current Big Deal, this is what my pro forma projection looked like: $61 million of EBITDA profit.
But when you look at this, you ask yourself: why no revenue for 2024 and 2025 in my forecast?
That’s because I need a custom-built 500,000-square-foot building with 70-foot clear ceilings–and that’s not something you can buy or rent.
You have to build it.
And that takes 18 months.
Even though I think this is the best deal I’ve done in my career so far, it’s still completely different from a typical tech company where you take customer “pre-orders,” then use that revenue to ship an MVP as fast as possible.
In manufacturing, there’s no “MVP” or beta test like that.
In a real (non-software) business, you invest UPFRONT. You ship REAL PRODUCT to customers.
But there’s always a turning point in the deal where–all of a sudden–everything starts to fall into place, you hit critical mass, and inertia takes over.
That’s when you hit DEAL GRAVITY and things start magically happening on their own. And here’s how it happening in my Current Big Deal.
Here are a few of the things I’ve completed in my Current Big Deal over the last 90 days that have created Deal Gravity:
And if that isn’t enough to get those greed neurons firing. . .
It seems like every week, something new happens that continues to confirm my investment thesis and make the deal bigger, badder, and better.
If you read my previous post about the Las Vegas convention I went to. . .
I didn’t just place an order for 20,000 quartz slabs. Oh, no. I also signed a purchase order for $26 million of additional equipment based on my personal balance sheet.
And as we continue to lock in purchase agreements for land, labor, and equipment, it gets easier and easier for people to say “YES! I want to be involved in this project!”
THAT’S DEAL GRAVITY.
As more people attach their name to your project–whether that’s as lead investor, major partner, or a key employee–the more likely it is that other people will follow this group of solid investors into the deal.
Even better? As the deal becomes bigger, the more likely you are to get introductions to other key players in your industry because doing so will make them look good–and signal high status–to their network.
And in turn, this increases your gravitational pull in the market. This is the power of having a big deal in the market.
One of the key things I learned from my mentor Russell is the value of always having a big, sexy deal on the market–it sucks new and interesting people into your orbit, and they are often interested in multiple deals off the back of your big one.
And that might be the best benefit of Deal Gravity.