Menu
Here I am at my son’s hockey practice, but instead of watching him play hockey, which is what I should be doing, I’m finishing the website for our investors’ trip to Italy.
But it doesn’t matter how many Super Bowl tickets or trips to Italy I offer people; there are only two things every investor I know inevitably wants:
They want to invest in a company that becomes a unicorn.
They want to invest in a company that goes public.
Why? Because those are the stories that have the most sex appeal when you talk about them to other people, especially at parties.
Yes, I’ve been talking a lot about my $200 million money machine I’m building in Dallas.
But if you want to understand why I – and my investors – are so excited about this business, it’s not just because our original forecast had us on track to become a $1 billion asset in around five years, although they love that. And it’s not even because our product solves the current silicosis crisis that potentially harms American workers.
The biggest reason people are getting so excited is because of one single competitive advantage – we can make our product using raw materials that are 100% domestically sourced!
Even though most people are either foaming at the mouth for Artificial Intelligence ideas or the typical high-priced SaaS company, there’s a reason I’m investing in asset-heavy, next-generation manufacturing facilities instead of sinking my capital into some hot software company that’s potentially going to scale “to the moon” – asset-heavy stocks are trading at a discount to asset-light ones.
Whether you’re in sales, operations, or capital investing, you want to make money the easy way; the key is to let the market do some of the work for you. Here’s the thing you have to understand about markets – they move in cycles. And not just the typical boom-bust cycles that happen every 5-10 years. Entire styles of investing go in and out of style every 10-20 years. Take a look:
The era you’re probably most familiar with is the most recent: when Silicon Valley mastered its most important narrative – the myth of the unicorn factory. Thanks to the magic of software (and wishful thinking), you too could get rich on the promises of untold future riches.
But here’s the problem with Silicon Valley: the unicorn factory is closed. According to Sam Lessin’s “The End of Factory-Farmed Unicorns,” the myth that Silicon Valley has the secret formula for making billion-dollar assets out of thin air relied on one simple ingredient that didn’t really come true. It relied on the assumption there would be infinite demand in public markets for these factory-farmed unicorns after 7-10 years of being stuffed full of toxic money.
Of course, there were a number of massive winners concentrated in the hands of the privileged few that were actually unicorns. But the idea that betting on 10 companies to produce one winner was somehow a solid financial investment strategy is just ludicrous. More importantly, unless you’re a professional seed stage investor who lives inside this Silicon Valley ecosystem, you have no business investing in these types of deals.
So why am I so confident I’ve discovered the formula to building a billion-dollar asset in the next five years? Simple – instead of pretending like I can guess what the public markets are going to want 7-10 years from now, I’m shooting for narratives I believe will perform well 18-36 months from today.
It’s never been more obvious to me that asset-heavy businesses, especially American manufacturers who can source 100% domestically, are going to have a huge premium on their cash flows in the near future.
In today’s market, our forecast $60 million EBITDA in 2029 might only be valued at a 12x multiple (or ~$720 million market cap) in public markets, and it might be valued at 22x and be north of a billion. But one thing I know for sure is that the better AI becomes, the faster it will wipe out whatever moats software companies have.
For companies that are producing highly desirable, high-margin physical goods like we are, we think investors are going to place a premium multiple on our cash flows due to how much more defensible our position is. That’s why I’m 100% focused on investing in US-based manufacturing companies with next-generation IP that can source everything domestically.
If you want to understand the real path to building a billion-dollar asset, start looking at asset-heavy, next-generation manufacturing facilities that leverage 100% domestic sourcing. The market cycles favor these investments, and the defensibility of producing high-margin physical goods ensures a premium on cash flows. This is the future of smart investing.