Secrets of Fund Management ft.Tyson Cobb

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Structure is the strategy for the modern capital raiser, and this is where the industry is heading. Coming to you live from Best Ever Conference 10 in Salt Lake City, it's a special edition of Unlimited Capital and the Best Ever Sierra Network, I'm your host Richard McGurr. Today I am joined with, I'm actually really intimidated by this guest at this point in time, because it's not often like, as you guys know, I'm a fun to fun sky, we do pretty well, but then when I heard the numbers that Timberview was doing, I was blown away. So I am here joined by Tyson Cobb of Timberview Capital. Richard, thank you for the invitation and the intro. We're just where we are for two reasons. We're blessed. We have a wonderful team, and we hang out with a lot of smart people just like yourself. It meetings like this, and that's what's kind of taking us to the next level. So yeah, why don't you just give us the real quick bullet points about what you do where you're at right now? So on a semi-retired orthopedic surgeon, I left my group in 2019, dropped back to one day a week doing orthopedic surgery and moved into Rose State, and somewhere along the way we wound up raising capital for deals, and that's just kind of exploded. I was very, very active in academics in orthopedics, so I know a lot of orthopedic surgeons and probably more importantly, a lot of orthopedic surgeons know me. People that, I income people that make a lot of money are looking for good investments, they just don't have to find them. And so if you can solve that pain point and find the deal and present it in a way that they can understand and feel comfortable with, there's a ton of money out there waiting to be placed. It just needs somebody that's willing to kind of help unlock it. So I heard you guys did 40 million last year? Yeah, so it was 36 by one accounting method and 44 by another, depending on how you count it. But yes, somewhere in that range and our goal this year is to try to do 100 million. And it's just taking good care of your investors. I think it's probably the number one thing. And our biggest growth resource has been referrals. And I think in order to have those referrals, you have to really do a good job of taking care of your investors. Really quick. I want to go back to something you said about having a good team, because actually the way we were introduced is I met your CFO, D'Natto, and he was a incredibly impressive young man. And actually I was looking forward to kind of talking about how you got him on board and how you found him because I'm a huge, I have a very small team, but a very good team. I also, I'm on like my third business and that at this point, I'm like totally culture obsessed. And I would much rather have like a much smaller, much more highly skilled team that can be absolutely trusted and delegated to and that I really, I would hire that kid in a second. I'm not going to try to, but like, yeah, let's go into team for a little bit, you know, because I would say fund to fund managers, most of them do not have a team at all. You know, you are actually one of the few scaled fund to fund managers I've ever met. Take that where you want to. So I think you're number one, you have to have a good culture. We have that. We really take care of our people. And they want to be here because we're doing fun things. And you know, my big hairy audacious goal is to put a portfolio together that will allow Tim Revy capital to give a million dollars charity every year. Love that. And people like to be part of something that's bigger than themselves. Oh yeah. Will. And the other thing that's been important for our growth is we get into a ton of masterminds. We come to a ton of meetings like this and hang out with cool people like you. They are also trying to move to the next level. And when you're hanging out with people, you know, in their masterminds or meetings like this. And everyone is striving to be better tomorrow than they are today. It just, you know, there's just a lot of synergy in those rooms. So, you know, Denado hates it because he's hired him to come in and deal with cash low issues we were having because we were having massive growth and not always face cash full problems. Particularly in this industry because we get so much equity on the back. Yeah, the cash on conversion is such a big. Exactly. And we look like rock stars on paper, but we got to pass the check at lunch right. And Marcin talked about that and one of his talks that he gave here. And he's part of the M1 group and you know, it's a solid group for, you know, people join that they're wanting to raise more capital. But, you know, he had to nail on the head as you grow. You're going to have constraints and you have to be ready for those. And Alex from Oz, he talks about that. I quote him multiple times in episodes. We just did his mastermind a few weeks ago in Vegas and it was, it was tremendous. And we actually signed up for it. You did the upsell. Yeah, we didn't do the upsell on the upsell. The 200K. Yeah, that's. Yeah, your wallet didn't even stop sizzling and he's already upselling on the upsell. So, you know, it's a good sell. And what can I say? A lot of people were irritated by that, but I wasn't surprised at all. I love being sold personally. I get highly entertained by really good sales. Yeah, my better half in Denado both kind of team up against me because I am so fast. It's been money on things like mastermind. I just joined the Joe and Matt's mastermind that they just launched here. To me, that's just, you're going to 10X as long as it's something that you're good fit. Yeah, right? I mean, if you're a good fit, you should be 10X in or 100X in the money you're spending on the mastermind. You're going to take your time, but to explore them and make sure that that's the right culture and you're a good fit for them. And they're a good fit for you. But I think that's been instrumental in our growth. There's come into all these conferences and being in the right rooms with the right people. Absolutely. So, may I ask how many masterminds you're in? You know, probably a dozen at any given time. You know, they're constant flux. I just canceled one yesterday that we weren't getting much out of anymore. And so, you know, you kind of have to keep your finger on the pulse because otherwise they just keep adding up. And if my better half didn't kick me from time to time, I probably would be in 20. But, you know, like Martin, I mentioned Martin's mastermind. I don't have time to go to all the stuff that he provides because he provides a huge amount. There's literally meetings every day, but I send my team. And so, when you have a team that you can send and let them go learn and let them figure out how to solve problems in the business. And then we try to have, when our travel schedule allows it, I try to have like a checkout type of thing on Friday. Where it's like, okay, what did we learn this week? What meetings do we go to? It does two things. It creates a level of accountability with your team because they know you're going to be asking this Friday. And the second thing, it just allows you to keep your finger on the pulse of, okay, how much are we making on this mastermind? Are we actually converting this expense into growth that's going to give us a return on investment? And so, you know, some of the masterminds are really more from my team than for me. And that's a nice thing about the one that Joe and Matt just launched. It's for the whole team. You know, they've stated that when they launched it will bring your whole team to these meetings. So, for me, that's rich. 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But currently what we're doing is on Monday, each of us talk about what we're going to do for the week. And then Friday, we look back and say, "Okay, how did we actually do with our goals and our numbers?" And look for the constraints and solve those. I tell my team, I say, "Look, you know, it's just like Alex says, you know, as we grow and we solve one problem, something else is going to break." And that may be you. So if you got too much on your plate and you're overwhelmed, you need to give a shout out and let us know. So we can distribute some of those tasks to other team members or we'll hire somebody if we have to, but we're not going to stop growing. We're just going to fix the constraints and keep moving. So what you're going into is a Lai-u M Goldrats theory of constraints. I'm a big fan of that. I have not done a monologue on that, Spencer. Spencer's not here. But you just gave me an idea for a monologue because it's so important. You know, and it's like, you don't hear about theory of constraints a lot in real estate. Like, I can really tell here that you're like a business builder and this is primarily a show about business and not real estate. Just with the business of real estate, I guess, but more of the management and entrepreneurship side. That's like a two minute on what the theory of constraints is. And then I really admire that you're monitoring in that, that carefully, like on a weekly basis. Yeah. So, you know, I think different people describe that differently, but I think as it relates to my business, the first constraint that I saw was we mentioned earlier was a cash flow. And same. I mean, I think that's just pretty common in a lot of businesses, but I think it's more common in our business because we get so much on the back end. So we've got to ride this business through to that point. And you have to make sure that you have enough acquisition fee so that you can pay your bills every day. Those bills start mounting up pretty quickly. Start growing a lot. Well, especially because you start getting your sentiment becomes good. And then you're like, yeah, let's invest. And then you're like, where's that money going to come from? Right. Exactly. So, and it's, you know, it's actually quite easy to create cash flow within the business. If you'll just spend some time, you know, Keith Cunningham talks about, you know, now go think and he talks about taking time off away from the business to just spend time thinking about the business and thinking about what you need to do next. Because it's so easy to just get busy with the day to day. I mean, you saw me. I'm working in here. I'm answering text. You know, I've got stuff going on from, you know, from a medical standpoint. I have stuff going on from Tim Review Capital. And I have things related to my personal investment. So, I mean, there's just a lot of stuff happening, particularly in a meeting like this, where you're off the phone for a period of time. And now you, you know, everything's piled up. There's 20 texts on there and a bunch of emails that you're never going to get to. So anyway, back to your question. You know, that was our first big constraint was the cash flow. We started a mastermind, which helps with the other cash flow. And we just started negotiating better acquisition fees up front so we could pay our bills. And then, you know, as soon as everything takes off again, some other constraint is going to pop up. I think one of the constraints we're dealing with is my investor relations team member is like very, very busy now. And so we help our investors do discounted raw throw-overs. And the way that works is a lot of these investments go through a period of time where on paper, they're diminished in value. And so the way that would work is, is, you know, they invest for their self-directed RA. And then when the time is right for the for the decrease in value, you have it valued by someone that does that. So you get an actual valuation that then they turn into their custodian. And let's say that they invested a hundred thousand and now it's worth 50 paper because, you know, it's locked up long term. There's no guaranteed return. There was a bunch of depreciation or something. Yeah, it could be a lot of different things. I mean, it can be like it's a multifamily. Maybe the occupancy's gone down now because you're remodeling 20% of the units or whatever. So it, you know, it can vary on what that is. But there are a lot of investments that they will qualify for that. And then you roll it into a Roth. And so let's say we roll it into a Roth and it's valued at 50. Now we're paying taxes on 15 instead of 100. It's basically a backdoor Roth with a twist. But our people need help doing this. Well, because that's not a common tax maneuver. I'm familiar with it. But yeah. So so she wound up, you know, staying terribly busy with that. And so we've got to bring in other team members to help take that off her plate so we can get rid of that constraint. And so, yeah, I mean, it's just I think having a heightened awareness that you know that it's coming. Something's going to break and you should be looking for that in your business every week if you're growing. Now if you're a steady state, it's a different type of situation better when you're. If you're not growing your dying. There's no such thing steady state. That's true. Yeah. So to kind of elaborate on the theory of constraints, what it. What it says is that there is an any given business or process. And of course, the business is just like a large process. There is on and only one actual bottleneck in the company at any given point in time. But there can appear to be other bottlenecks in the business. Or you think like you can have a million things going wrong, right? Or not going wrong. You can say like I'm kind of short on staff, but I'm also short on leads. But I'm also short on being able to deploy capital. And then what the theory of constraint says is that there's actually probably just one that is the main bottleneck. And that working on anything else except the main bottleneck is a waste of time because you still like if you have, let's say a series of valves and that the one at the end can have the lowest throughput no matter what you do to the other valves before it or after it that will not change the throughput of the smallest valve. And so that you're trying to address like like there's one thing in the business that is always holding you back. And actually for us, it was cash flow. I'm very not surprised to hear you say that because I think kind of the challenge with. Well, I'm pretty sure putting words in your mouth, but I started this business because I was trying to generate assets and that unlike previous businesses where I was in a lot of service businesses like I mean high end consulting. But there's really no EV to be totally honest, especially if you remove me, you know, like the projects can stop all these things can stop. And then you got a bunch of payroll. Like not much left, you know, yeah, we've got some processes. Yeah, we've got a little bit of a brand, but you take something like funds. We're like, I have a large pool of capital that is throwing off at yield and then I'm taking a piece of that yield. And it like like that is an actual asset like that's like actual balance sheet assets and the problem is. You need huge amounts of capital to throw off passive income like like that's why your average like the risk free rate is like 5% you know right now approximately and that means to live off that. You need like 10 million like that's that's how hard it is to build that asset is that it's worth like yield is worth so much. And that it's that just shows how hard it is to generate like true passive yield is because this is something that is desired by everyone and worth a lot. And so we put in a lot of work up front. I mean, do you kind of know where I'm going with this? Like like we're building something really big. It's just that the yield strip is small today. But you know, you do like a 10 year cash flow or five year cash flow and that's why it's worth 30 million dollars or something like that but that the yield strip is small and that as an asset manager, which essentially we are. It requires a lot of full of assets. It really does and that there's there's major problems with kind of like minimum viable. Fun size that you have to get you to support an actual business with good staff monolar go over yeah I will reflect a little bit on my vision of the of the constraints the way that I apply it. So I think what you've described is a good way of looking at it to kind of digest the overall picture. And that is there's really one thing that you need to get done today right you got to figure out what that constrain is and get it done. I think that is a perfect explanation for the guy who's not doing anything but I'll take it one level further anytime you can identify one major constraint and three. Minor constraints you have to look at those minor constraints and say okay when I fix this major constraint and open up that bottleneck what is that going to do to those three minor constraints and probably it's going to magnify one of them maybe all of them. So I don't just attack one I attack one with enough effort to know that I'm going to fix it so I you know higher CFO to come in and say okay we've got to get this casual thing fixed let's jump on pull every lever you can because that's our big constraint but at the same time I'm looking at my director investor relations and going your plates too full. We either have to hire somebody to help you with this are given the fact that we're in a negative cash flow right now maybe the best thing to do is find somebody on our team who can take some of this off so I got off on the on the back door just kind of Roth Roll over that's all time consuming to hold the investors hand do the introductions so you know we're bringing other people in our team to take some of that offer her plate to fix that problem but I think it's for me I like to look at multiple constraints you realize there's one major. I don't realize there's one main about those minor ones that are in behind that that you should be looking at you should be thinking about what are those where those going to look like in two weeks when we fix the main bottleneck right now because there's a good chance that one or all I'm going to get worse yeah I think my constraint am I the constraint that I have my eyes on right now I'm not saying it's probably not the constraint today but like you said it's the one that's which come I think one domino down is I think the size of my like BDR team. Not the closing team and I'd like your thoughts on how I'm going to manage it and partially I'm doing this as an explanation for the audience is that where I. Because hiring another salesperson is going to be very risky and very expensive you know especially because as we've kind of gone back and forth on I'm a big believer in hiring good staff like I'm way past the point in my career where I hire cheap staff because they're just not worth the ROI I go straight to like well paid senior people what I'm watching is the task to close timeline. And our SLA on like call pass to close you know because you got to hit people when they're really hot and that you'll have you know times 10 well you're almost a guy like times 20 results if you can call in five minutes right you know and so I am but I've also got this cash looking strength but that there's going to be a point where if I miss that SLA I am definitely losing money in the business and it's like I think that's what I'm going to be watching well that is what I'm watching very carefully to be like okay we are definitely losing money because I cannot make enough calls or we can't make that SLA to put it very simply. Unlike call time yeah so for me the way that I'm dealing with that and my business is trying to unload the less important so what is that 80% stuff that's keeping that individual busy doing. You know on the on the on the part that is important I think that's the most cost effective way to deal with that but at the same time I'm looking at hiring someone we're investigating who that person would be and what's going to be a good fit for our culture and for our team. Yeah you just did something really smart which is that maybe my response was not the correct one because maybe I can make my salesperson more efficient and that that's a not going to cause me another hundred grand a year in payroll number one you know and number two that's going to be like a permanent uplift and like much more valuable even to like do a better job making it so that this guy can like keep making quality calls but way more of a minute in a day by like either like optimizing a CRM workflow that's usually where that answer is or figuring out higher quality calls versus lower. Quality calls versus lower quality calls like there's so many levers to pull on that it's not just hiring because I always say that and then my co-founder is like very rightfully and I sound like an idiot but they're kind of like pretty sure we shouldn't hire especially because the mission of our company is like not to hire my my previous business I had over 80 staff and like I very definitely do not want to do that again. So we're so careful with head count and that yeah very often someone will be like I want to hire and then everybody else pushes back super hard and we say like no there's probably something else we can do to be more efficient because we're very technology forward you know and you know maybe that's just the first step maybe that's the most cost effective lever you can pull today. You know to get you you know a few months down the road and give you time to look for that rock star because as you mentioned before if you're in a big hurry and you wind up with a warm body it's not going to be a good outcome. No I mean that's going to hurt morale. Yeah it's going to make me look bad the person could say some stuff that they shouldn't say to an investor and you can't take that back like yeah hiring is just so hard like that's another reason why we try not to like keep head count low is it's like so hard to find good people. And so even just building it like I'm extremely proud of the team I have today it's like by far the best people I've ever worked with in my life and well just in terms of the average quality of team you know what I mean like we have zero be players we've got only a plus players and the problem is you dilute that with a B minus higher and it is so much damage to your culture. Because what can happen is that people just start going like I guess the standard really isn't that high or they get mad like or they get frustrated because they're trying to work with this other person in this other person is like we're going to like incompetent like let's speak very quickly. A players do not like working with a company people know yeah it's tough yeah it can ruin the culture very quickly so it's something you have to be careful of and as you pointed out it's not easy to find a players so what do you do what's your strategy. You know I've just been blessed with with fantastic people I walked in the bank one day and the lady was my. Private banker for 15 years I knew me very very well and it was very upset and you know I'd never actually seen her look unhappy she's always smiling always happy and. The bank had recently sold and I knew there was some problems with the way they were handling staff because my the lady who handled the trust department was my go to person quit a week or so before that and had nothing good to say about the new owners of the business or the bank and so I said Tracy why don't you just want to just join me I need help doing exactly what you do here at the bank and so we had dinner and she and her husband talked about what that would look like and you know she came on board. And there was a good move for the team so. If I were to kind of unpack what happened there so you had somebody that you knew was really good already so that that was not so that obviously dramatic de risking work with the person in the past obviously they had had a good time working with you. You know so you were not a jerk yeah well done on that one yeah I think it's the best way to hard good people you know it's just find people that. Either you know personally or somebody that you know knows so you know direct director for all and you know think it works well with the investors I mentioned earlier and works just as well with with hiring people yeah so another thing that I want to go into is. A subtext that I think I was picking up on when you were talking about these Roth rollovers I think was solution designed for your LPs which is very much a fawf thing because GPs one of the reasons one of the benefits I think to working with a fawf if you're an investor point of you versus going direct is that. A deal guy as I call them they're all about their deals like their business revolves around their deals and then they happen to need investors so like like growing their portfolio and doing more deals is the primary. Like as it should be like you know they are focused on performing on their deals doing deals scaling all that when you work with the fund of funds we are very focused on the investor mostly because we are we're kind of like the last mile in the transaction we have to respond to their needs we've got a build product suites for them. We have to and that's like. A big iterative feedback process kind of thing versus you wouldn't want a deal guy to be like I'm going to completely change the type of deals I'm doing right now because of investor demand like in fact that would be an enormous red flag. But so is this Roth roll over something you put together because you saw that your client base kind of like could take advantage of that because there's obvious tax benefits to it so did you structure deals in advance that were well designed for that process. Not really so I picked that up in a mastermind that I was in and you know it's just one of those deals where you know it's like ice cream on apple pie you don't have to think about it very much. Yes right so I mean as soon as I learned how to do that and then learned how to identify the right investments to use for that so that you get a good deduction. Pretty simple after that after that it's just introducing clients to that most of them don't have self directed accounts we have to help them with that do the introductions. And there's a fair amount of hand holding associated with that so it does take a lot of time but it's you know it's one of the services that we provide to our investors they appreciate it saves them a ton on taxes and you know the interesting thing is you know their CPAs and their financial advisors aren't helping with any of this stuff. That's a very esoteric transaction to it mildly yeah but I mean I would say you didn't you don't give yourself enough credits or in terms of being able to say like you design this incredibly amazing like tax benefit that has to be structured very carefully you assemble that end to end and now you bring that to market that's something that in my opinion if you're really good for off that's what you're doing like that's what we're doing all the times is like what are the needs of my investors like we're very income focus because my my investors are successful. Small landlords. You know late 40s to late 60s aggregated portfolios over like 10 years single family let's be very clear and that now they are very high equity very low cash flow because that is the nature of single family and it took us a long time to iterate on the product offering that exactly met their needs you know and that even what you just told me now I was like okay I'm going to go for lack of a better word like clone that I'm like that's amazing because if I can line up that deal they want that too. The beauty of coming to meetings like this you know you're able to learn that stuff and you know it goes back to what we said at the very early part of the of the other podcast is you have to take care of your investors and you know you have to take care of your investors. And you know the people that are going to grow the most and do the best are the ones that are doing the best job of taking care of their investors know we're very focused on investor returns and negotiating the very best returns we can so in a perfect world we want our network timber view capital network investors to get a better deal with us then if they go direct to the sponsor. Yes and then we just take it one step further and and for the people that are our mastermind we want another little bump there so that they're actually getting additional return on investment from the mastermind in that regard so it's you know in addition to an educational thing helping them save taxes you know now we have some actual cash flow that they're getting as a result of being in our mastermind. It was funny is do not explain that to me and he didn't explain the cash flow point of view and I was like oh you did this to pull returns forward huh or I'm not returns for but to pull cash for it huh and he's like yeah I was like brilliant. Yeah but there you know we've just been well we just started this two months ago we've had five investments that we've been able to bump in the return on on the 12500 mastermind fee is already over $130,000. Yeah so that's our goal and will will increase the price of our mastermind as that number goes up so right now we're over a 10 acts and a 10 acts is where I want to be not including the tax savings and educational and so for so just with the actual projected return difference. Well it's like Alex from OCC make the offer so good they feel stupid saying no boy that's a good question you know we're in a lot of different masterminds and I obviously love them because I'm still writing checks you know when they renew and as I mentioned we you know we do cancel and and get out of the ones where we feel like we're you know not not still getting value but you know I think for capital raising and more than one is a very nice complete mastermind it has the added value that I mentioned earlier of you being able to send your team if you can't make it and I would encourage you to figure out some mechanism to kind of monitor that progress and and you know make sure they're in the in the right ones and taking problems. So if this content creation they should be you know showing up to that particular weekly meeting with their content and getting some recommendations and advice on how to improve that so whatever constraint you're dealing with you you can get some advice from them and you know learn off of their 20 year history of raising capital. You know that like I said I mean I can't always apply myself on a weekly and daily basis in fact I don't even come close I just because you know I'm so busy being able to send your team makes a huge difference. Yeah why are you enjoying it.