conservativejock: Thoughts on capital formation

At the core of my belief in Capitalism sits the history of a company that began operations in 1888 and did not borrow money either from banks or through issuance of bonds or notes until the business was 102 years old.  In 1990 the business issued $10,000,000.00 in notes.  Two years later the business was sold and off shored.  A shadow of this business is operating in Georgia with gross revenue of around $40 million and zero debt.

I have often admired my peer (surprise) Warren Buffet because of his belief that debt should be minimized.  It is true, Warren borrows primarily through the issuance of bonds.  Warren does not however operate Berkshire in similar fashion to a Bain Capital, a BlackStone, or a TPG Capital.  Berkshire of course is a share based company and by design and definition Berkshire shares are not loaded with fees (although many funds, even the Bain funds, are not always technically loaded.)

I will not go into detail on this blog.  I will give you an example that you can take at face value or simply deny.  This is not about blowing my horn.  I personally don’t give a “you-know-what” whether any reader accepts my prostrations or not.

Last year, I think it was in February, I funded a start-up business in Texas.  The initial investment was $20MM.  My actual real-life cost of this capital was 0.8%.  That’s 20,000,000 X 0.008 using the 0.8% as the APR.  A second level of funding brought the total to $40MM.  The business is almost to break even on the balance sheet.  (It is obviously well past break-even on the income statement.)

What I did not go into above was how that 0.8% was obtained.  Let’s just say this is not venture capital funding a la Bain, Goldman Sachs, or BlackStone.  This scales by the way.  The above was to provide someone with a damn good idea and ability a future.  The business off shored in 1992 has scaled to a $6.3BB entity once released from the confines of the U.S. Economy/Government, which by the way, I see as one-and-the-same.

Do not think I am a saint folks.  I will not under any circumstances operate a venture capital firm in which you can invest.  I prefer my business and dinner in private thank you.  The RealJock challenge is as far as I go.

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