December 14, 2023 • 27 mins
On this episode of Building Billions, I'm joined by Eddie Valentino, the new group Chief Financial Officer and Chief Operating Officer for Cardone Ventures. Eddie comes to us from global leaders in the alternative investments and private equity industry. Eddie most recently served in a global leadership role at KKR, who manages over $500 billion in assets, and previously served in various leadership positions at Cerberus Capital Management, who manages nearly $60 billion in assets. Eddie discusses his journey joining Cardone Ventures and the impressive growth of the organization.
The conversation delves into the dynamics of capital deployment, the motivations behind driving deal prices up, and the factors influencing business valuations. As the focus shifts to Cardone Equity Group, we unveil our plans to work with family offices, managing their co-investments and strategically investing in assets. The podcast sheds light on the advantages of Cardone Ventures' unique pipeline, where thousands of entrepreneurs engage with the organization, providing a constant flow of potential investment opportunities.
Looking towards the future, we express confidence in Cardone Ventures' potential to grow exponentially, positioning it as a dynamic player in the market with a distinctive culture, swift decision-making processes, and a focus on small and medium-sized businesses globally. If you're intrigued by the world of finance, business growth, and ambitious ventures, this episode is a must-listen!
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Episode Transcript
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S1 (00:00):
I also remember a couple of years ago when we
first started talking, you were telling me about this wonderful
business and all of these great things you were going
to do. Uh, and I'd be lying if I didn't
say at the time, I thought it was a little
bit of, you know, a little bit of extra bullshit
in there, but can I say that? Yeah. Of course
you can say a little bit of bullshit. Um, but
then to see that everything that you said became reality,
(00:21):
that that was very meaningful and holds a lot of
water with me. So, uh, it made me very excited
to become.
UU (00:27):
Part of the team.
S2 (00:35):
Hey everybody, it's Brandon Dawson. Welcome back to another episode
of Building Billions. Today I have a very special treat.
We're going to be talking about all sorts of things
money and business. I am here today with my new
chief financial officer and chief operating officer for Cardone Ventures,
Eddie Valentino, who I recruited away from one of the
(00:58):
largest firms in the globe, KKR, where he was running
their money around the world, chasing it down, making sure
it went where it was supposed to go and went
out to who was supposed to go out to. So
I am thrilled because coming from one of the top
firms in the globe, making the choice to come work
(01:19):
with us here at Cardone Ventures as our Chief Financial officer,
I think it would be great for you to hear
why he made that career choice. And so I want
to introduce you to my new chief financial officer and
chief operating officer and friend, Eddie Valentino. Eddie, welcome to
the show.
S1 (01:35):
Hey, Brandon. Thank you. Thanks for having me. I'm excited
to be here. And with Cardona Ventures, um, in terms
of why I joined, I ultimately very aligned with the vision. Uh,
and I'm really excited about what we're going to be
doing with the Cardona Equity Group and thinking that I
can come add a lot of value to to help
with that journey.
S2 (01:54):
Yeah. Thanks. So for those of you that are like,
what's Cardona equity Group? Cardona equity Group is our newly
launched private equity venture, strategic investment side of the business,
where we're going to be focused on working with family
offices and managing co investing, or having them invest through
(02:16):
us into assets that we're going to be out acquiring
in the marketplace, that we know we can significantly impact
with our professional operational platforms. So, Eddie, why would a
guy leave an institution? How big is KKR?
S1 (02:30):
Uh, KKR manages roughly 509 billion of AUM, $509 billion.
S2 (02:38):
And then before that, where were you?
S1 (02:40):
I was at Cerberus Capital Management, so I was based
out of London most recently. Prior to that, I was
in New York. Cerberus manages around 60,000,000,060 billion.
S2 (02:49):
So two firms combined almost $600 billion that you've been
in the flow of the money with.
S1 (02:56):
Yeah, yeah. You know, I think the traditional private equity
space very interesting. Learned a lot in my time there.
But ultimately, you know, I was really interested in the
business that you've put together, how you were able to
grow it from, from zero to where we are now
in such a short period of time. No debt, no
outside capital. Um, and I like that we work with
small and medium sized enterprises, and I think that there's
(03:18):
a lot of opportunity, particularly with where the macro environment
is these days with, uh, in the small and medium
sized business space.
S2 (03:25):
So when you, you know, KKR would not be investing
in half a million, million, $10 million businesses, right?
S1 (03:32):
No. Not generally. No.
S2 (03:34):
What would be the size before they would even probably
be interested?
S1 (03:37):
I mean, typically you're talking about transactions that are going
to be 100 million plus depending on on the line
of business. If it's if it's private credit, if it's
private equity, real estate, etc., but it's typically going to
be in the larger end. And that's true for most
private equity firms, because particularly when you get to the
50 billion plus of AUM, because they ultimately have a
certain amount of capital they have to deploy for their LPs.
(04:00):
And so if you're managing.
S2 (04:02):
Well, you're on building billions with brand. And, and our
average clients listening to these huge or listener, sorry is
listening to these huge numbers. And you're using words like
AUM that's assets under management. That's correct. Then you're using
all these other big words that I'm sure that some
people like me don't quite understand what you're saying. So
(04:23):
explain to them without using the acronym.
S1 (04:26):
Sure. So ultimately, when a fund is raised, there's typically
an amount of money that is committed by a series
of investors. So if you have 100 investors and they
each commit a million dollars, your total commitment for that
fund is $100 million. And so that money won't all
come into the fund on the first day. Ultimately, the
(04:46):
firm then will call that money as they have to
deploy it into investments. And so there's often a lot
of money sitting idle or awaiting to be called. And
that money typically either isn't earning a fee for the
private equity firm or it's a much lower fee, then
once that money is called and deployed. And so, uh,
(05:06):
private equity firms or wherever you have funds that are
structured in that way, typically there's incentive to call and
deploy the capital into investments so that you can then
start accumulating those fees on top of that. So is that.
S2 (05:19):
Why, um, is that why you see the price of
deals going up so much? Not not recently with the
downturn of the the interest rates going up and deals
slowing way down. But is this one of the incentives
for private. Groups to deploy, even drive prices up in
order to get capital in the marketplace so that they
(05:41):
can get fees on it.
S1 (05:43):
So I wouldn't say it's an incentive to drive prices up.
I think it's more of a byproduct of the need
to deploy capital. So they're willing to pay higher prices,
particularly also when there are fewer opportunities because capital has
to get deployed.
S2 (05:58):
And so if you're a business owner, um, does it
matter the size of your business? If you're a $5
million business, 10 million, 50 million or 100 million or
500 million, does the multiple of profitability that a buyer pays?
Does it matter the size of your business?
S1 (06:16):
Absolutely. Um, ultimately, you're going to be able to see
multiple expansion as the larger the business is multiples of profitability.
S2 (06:27):
So so if you're a $10 million business making a
couple million bucks, you might get paid 5 or 6
times what you pay yourself. But if you're a $100
million company and you're making 20 or 30 million bucks
that you're going to get 15 times. That's right. 18 times.
S1 (06:43):
Yeah. Yeah. Ultimately, there's a there's a premium for that
larger slug of capital that that can be deployed.
S2 (06:51):
So so getting bigger in business while maintaining profitability. It
isn't a 1 to 1 equation. It's a there's a
there is a true multiplier on the value of your business.
The bigger you are just because you're bigger.
S1 (07:07):
That's right. And it will vary by industry ultimately as well.
And that's something that we've we've done some research on.
But uh, it definitely, you know, on, on average and
in aggregate, we could generalize and say that that's absolutely
a true statement.
S2 (07:22):
So when you looked at, uh, Cado Ventures and you
and I were talking for the last couple of years
and you've watched what we've done, basically go from startup
to to a business in four years, it's generated over
300 million in revenue and 80 or $90 million of
of EBITDA, with no deployed capital, no, uh, investors, just
(07:43):
purely a private company owned by basically Grant and I, um,
and then I showed you how we're going to scale
this to a billion. You were like, you called me
one day and you go, hey, I noticed that you've
got the CFO posting. You never directly asked me if
I'd be interested, but I think I'd like to be
your CFO. Yeah, that's how it happens.
S1 (08:05):
Yeah, that's exactly that's exactly how it happened. Um, yeah.
I mean, at the time, I wasn't aware of the
numbers either. Of course, we went through that subsequently, and
that that made it to me a lot more serious. Uh, and,
you know, I also remember a couple of years ago
when we first started talking, you were telling me about
this wonderful business and all of these great things you
(08:26):
were going to do. Uh, and I'd be lying if
I didn't say at the time, I thought it was
a little bit of, you know, a little bit of
extra bullshit in there. But can I say that? Yeah,
of course you can say a little bit of bullshit. Uh,
but then to see that everything that you said became reality,
that that was very meaningful and holds a lot of
water with me. So, uh, it made me very excited
(08:46):
to become part of the team.
S2 (08:47):
How important is that when you think about it? Like
like I was telling you in my second year starting
this business, what we're going to do in the third
to fourth, the fifth year. And with all your experience
at KKR and before that service, service, service. Yeah. Um,
and seeing all the deals and looking at all this stuff.
How many companies had you ever seen that went from
(09:10):
startup organically grew, not accessing anybody's capital and not taking
on any debt and performs at the level that we
perform as a personal person that's run a half $1
trillion to your hands, how many businesses have you seen
come across your desk that look like what we're doing?
S1 (09:28):
Yeah, I'd say very few, very, very few, if any. Um,
you know, maybe occasionally you see something like that and
like the tech side, uh, but but not really in
the realm in which we're operating.
S2 (09:42):
And that's where you're like, okay, if they can do
this in from startup, then what happens when we actually
gain momentum?
S1 (09:50):
Exactly. What happens when we gain momentum? What happens when
we start adding different, uh, layers to the business, other
components or services, being able to create scale, value opportunities
for our clients, all of that sort of stuff. Because
the bigger this business gets, the more effective we can
also be. So it's really self-perpetuating.
S2 (10:10):
And so so when when you because now we're talking
about we're this podcast is really to announce the launch
of Kardan equity Group, which is our venture incubator, private
equity piece of the business, to take direct investments into
business opportunities that we feel and we believe we can
significantly improve. Um, when you think about that. He said
(10:34):
the business. When you look at our core operations and
you look at the fact that we currently have $2.2
billion of businesses that we work with every day in
Cardon Ventures, that's where we generate our revenue. And you've
seen the success those businesses have had. What level of
confidence do you have that we can be not only
(10:54):
a great investment vehicle into those businesses, but great operators
to actually improve those businesses.
S1 (11:03):
I'm 100% confident that we'll be able to do both.
I mean, realistically, the number of businesses that we see
meet every year ultimately is, is way above what anyone
attempting to do any sort of similar type of investing
will ever see. So we have a flow that is
unparalleled to any other things.
S2 (11:25):
Thanks, Mr. Grant Cardone.
S1 (11:26):
That's right. Exactly. Thanks, Mr. Grant Cardone.
S2 (11:29):
I mean, I mean, let's let's expand on that a minute.
So people understand most private equity groups or venture groups,
they need to go find an entrepreneur that they're interested
in investing in, or they need to review thousands of
pitch books to decide which one is the most interesting.
And then once you have a great reputation, uh, and
(11:49):
you build relationships with other founders, they'll sometimes walk a
great deal into you, right? Yeah. But have you ever
seen a business case where a company like what we do,
we bring in thousands and thousands of entrepreneurs through all
of our learning systems, and then we're hired by hundreds
and hundreds of them to actually engineer their business case.
(12:11):
So effectively, we get free research and free shot at
over 500 to 1000 actively working businesses a year where
the business owner is like, hey, show me how much
bigger I can get and I'll share it with you
if you help me. Have you ever seen a business
system like that?
S1 (12:27):
I've not. No. And I think that that's really where,
you know, our differentiating and competitive advantage comes in from
the equity group perspective of, uh, ultimately the fact that
that is our pipeline and it's self-perpetuating and it ultimately
comes to us is a huge differentiating factor. And then
it also allows us to be a lot more selective
(12:49):
because as I was talking about earlier, where you have
kind of a need to deploy capital in order to
earn a fee and that sort of thing with our,
our value proposition and how we ultimately earn money is
very different from that. And so we can be patient
and selective where we need to be. And also, realistically,
we have a very significant pipeline and flow where if
(13:13):
we wanted to deploy capital quickly, we could, but also
if we want to be more selective and just, you know,
ten x those returns, we can do that too when.
S2 (13:22):
So it's one thing to see the business case that
I was telling you about for the last few years,
that to be honest and be fair to you, almost
every one of my friends, even my larger private equity friends,
when I told them what I was going to do,
most of them said the same thing you said. They said,
looks great on paper. Sounds great. Brandon, you're really a
talented guy, but we've never actually seen a business case
(13:45):
like this work. Yeah, I was told that by a
lot of people, but now you see it work. But
on top of that, I introduce you to my business partner,
Grant Cardone, who is the only human being on the planet.
You come out of traditional financial mechanics with these large
private equity groups. Had you ever met anybody that raised
(14:06):
$1.3 billion in four years directly from individuals with no middlemen,
no commissions, nothing, 1.3 billion. And in his case, to
buy some of the best real estate in the world.
S1 (14:20):
No, no, I mean, that's another really impressive component of,
of of the ecosystem is ultimately what Grant's been able
to do on the real estate crowdfunding side is, you know,
very unique as well. And I think that only further
demonstrates the reach, uh, you know, that the organization has
and ultimately the people that have confidence in faith in
what we're doing. And so, you know, I think for us, realistically,
(14:44):
the problem is going to become we have too much
money that people want us to manage, versus it's difficult
for us to get capital because at the same time,
we're also looking at small and medium sized businesses, which
there's going to be tremendous upside potential in. But realistically,
from a deployment perspective, you have to you have to
put some reasonable caps on on how much money we're
going to take.
S2 (15:04):
So when you think of when you think of the horsepower,
a grant doing something that nobody on the planet, in fact,
you told me when I showed you what Grant was doing,
you were like, this is where the institutions want to
eventually be able to get to. He's already done what
all of them would eventually want to do would no
help from any traditional financial segments in the marketplace.
S1 (15:26):
Yeah, it's actually really interesting. I mean, there's been a
big shift in focus across the number of firms, uh, to,
to look at. Ultra high net worth in private wealth
space for alternative asset classes. And so things like traditional
private equity real estate in the same way, effectively that
what Grant has already done, except they're using financial intermediaries
(15:46):
and wealth managers to ultimately distribute that that product where,
as Grant was able to use his his platform ultimately
to to raise capital without any of that.
S2 (15:58):
Pretty remarkable, isn't it?
S1 (16:00):
Yeah, definitely.
S2 (16:01):
1,000,000,003. I mean, just in four years. Yeah, it's pretty crazy.
And now he's going to go on the road with
us to raise capital for our PE group, our venture group,
our incubator, I like to call it business incubator group. Uh,
we're not prohibited from making investments into anything that we
deem to be a great opportunity. And really, you and
(16:21):
I strategically have decided that the segment of the marketplace
we want to work with is family offices. And the
reason for that is many of the family offices already
have direct investments in assets. They're not really geared up
to manage them. Uh, they were following big, multiple trends
in the marketplace and trying to capitalize early stage in
(16:42):
their local markets and then work with them to help
manage and run their assets, but also bring them in
as investors into what we have going and crowdfunding on
top of that, with Grant, when you think about the
opportunity to work with some of the best family offices
in the world, help manage their assets, and then have
(17:05):
them co-invest in assets with us, and then engineer these
marketplaces that have $12 trillion of untapped access, like the
small business space is $12 trillion today, and no one
has been able to tap into it. And if we
can prove that, we can tap into it and we
(17:25):
can work with elite family offices and we can create
our own ten team of investors, highly capable people, and
then put grants formula of promotion on top of it
for raising crowdfunding capital. So every day ordinary people can
share in these investment strategies with us. How exciting is
that prospect to you?
S1 (17:44):
Yeah, I think it's very exciting. I mean, I think
for family offices, there's a lot more natural alignment because
a lot of those family offices came from business owners themselves. Right.
And ultimately it's business owners investing in smaller businesses and
helping them also grow and then being able to return
some capital on top of that. And I think you
(18:04):
said it perfectly, where they ultimately don't have the operating
executives or the operating resources to be able to go
in and fix these small businesses. And so this is
also an area where they typically wouldn't have exposure. I mean,
in many cases, a lot of these family offices are
also investing through these larger funds. And so they're getting
exposure to a very small piece of exposure to a
(18:26):
much larger business versus potentially having a much larger piece
of many smaller businesses. And so, you know, there's going
to be a lot more intimate of a relationship between
their capital and the investments that they're making coming through
Kardan equity Group. And what we're doing then there would
be going through a larger institution.
S2 (18:44):
Because they can have direct involvement and they can be
one of our partners if they have assets already in
those classes.
S1 (18:49):
That's right.
S2 (18:51):
When you think about where we're at and you think
about all the things that you've seen now that you've
been in here a couple of weeks, right? Yeah. You've
been looking under the hood when you think about what
we've built, the team that we have, what Grant's been
able to do, the team Grant has, and the fact
that between grants, organization and organization, we're now at 300.
(19:12):
This year will be over $300 million of revenue. And
if you count real estate into that, we're over 650
million in revenue. And it's all been home grown organic,
with no outside influence, no outside institutional money, literally doing
business with people that do business with us, keeping it
inside the ten X ecosystem. How big do you think
(19:34):
this thing can get?
S1 (19:36):
Yeah, I mean, I think it can get multiples bigger
from where it is today. I mean.
S2 (19:41):
That sounds like a Wall Street hedge. Uh.
S1 (19:44):
Multiple multiples larger, at least ten x bigger. If not,
you know, uh, 100 x.
S2 (19:51):
So between real estate and our businesses, that puts us
that puts us at about a ten, $15 billion enterprise.
S1 (20:01):
Yeah. And look, I think also from a scope perspective,
obviously we've been also heavily focused on the US. And
I'm not suggesting that we necessarily go outside the US
at this point in time. But realistically there are small
and medium sized businesses everywhere in the world, and there's
no reason that we ultimately at some point could not
do that as well. So, you know, I think you
(20:22):
mentioned how large is this small medium sized business market?
1212 trillion, 12 trillion US and that and that's that's
just the US. And, um, you know, there's there's there
really aren't too many people. That are focused on that
right now and realistically historically, because ultimately, the operational burden
in in putting all of that together, right. And ultimately
(20:43):
the types of management owners, leadership that you're dealing with
is very different from what traditional private equity would interface with. Right.
And so, uh, we have that experience working directly with
all of these small and medium sized business owners, and
you have started and exited businesses. And ultimately there's there's
just a lot of knowhow within this organization that really
(21:05):
differentiates it and the pace at which we move, just
as a part of this culture and environment is also
much quicker than I think most other people are comfortable moving,
so it's going to give us an outsized market share
in this, even if somebody else tries to come in
and replicate what we're doing.
S2 (21:23):
That's interesting. So you get like, because you come out
of the you know what? How big? $500 billion, how
big was kicking.
S1 (21:30):
Yeah, five. Just just over.
S2 (21:31):
500. Those numbers just huge.
S3 (21:34):
Huge huge huge.
S2 (21:35):
When you come out of an organization that's that big,
what's it like coming back into an organization where there's
a couple hundred people?
S1 (21:43):
Yeah, I mean, it's it's interesting. I mean, the in
any organization, there's there's always going to be, you know,
the desire to get better and grow and achieve more.
And that's where things are, no matter how large or small,
you know, that still exists realistically. And, you know, all
businesses ultimately grow, uh, or the businesses that do grow,
(22:06):
I should say, often grow without, you know, necessarily thinking
about where they're headed and making the right changes and
putting the right infrastructure in place and that sort of thing.
You know, I think for, for us, you know, we've
been in business for just under four years in total. Um,
so there's nothing that is really, you know, unexpected. I
(22:27):
think what I, what I see here and what I'm
experiencing that's very positive ultimately, is just that everyone's rowing
in the same direction. Everyone has big, big dreams, big vision, uh,
and ultimately puts in the extra effort to, to deliver
for the organization. Um, and I think that, you know, realistically,
you know, the day to day we're forced to focus
(22:49):
on many different things and you kind of have to
bounce between priorities. But all of it is really more
so from an opportunities perspective than from a risk perspective.
Or we're dealing with some some problem or anything like that.
It's it's we're building the next thing. And so that's
been really exciting to to come in and be a
part of.
S2 (23:08):
Well, I know that people, you know, just just for
people that have been following me, I, I'm very transparent.
I tell people we did 2.5 million this year. We did.
We're going to do 13 or 14 million next year
and then we do 14. We're going to do 35
million next year. We do 38. We're going to do
75 million next year. We did 83. You know, I, I,
I choreograph and, and, and I am very transparent about
(23:32):
what we're going to do in the future because as
I have all that footage and, and what I'm really
doing is documenting that it can be done if you
know how to do it. Because if our job is
to help other entrepreneurs do it, we need to be
the example, right? When you fast forward, if we've been
able to get to this point with literally no employees
four years ago, fast forward another five years. Literally my
(23:57):
target internal target is to be over $1 billion in revenue.
When you think about that kind of growth, not to
mention the value of the enterprise, I mean, at the
at the rate and the numbers we're going to hit
this year in a little better market, maybe 18 months ago,
I could easily guarantee you someone would put $1 billion
(24:18):
valuation on our on our enterprise today. It's probably conservatively
going to be 600 million at the end of this year.
When you think about how much more value can be
created in another five years, I mean, it's.
S1 (24:32):
It's billions and.
S2 (24:33):
Billions of dollars. Yep.
S1 (24:34):
Absolutely. Yeah. I think, you know, again, the equity group
is obviously going to be a very valuable asset for us,
what we're doing with the various verticals, uh, what we're
doing in insurance also is another potential, you know, really
good opportunity for us. I think that also the level
of talent that is being brought into the organization and
(24:55):
the level of, uh, expertise and specialization now, uh, that
that's coming in for the various verticals to provide support
is going to really also help take us to the
next level and deliver even more value for the clients
that we're bringing in. So I think, you know, that that, uh,
is going to result in higher retention and ultimately the
higher retention is going to increase enterprise value and multiples
(25:17):
more as well for us.
S2 (25:19):
So, look, I mean, we're making this our first podcast.
We will be doing podcast on and off over the
course of the next five years, updating where we're at,
what we're doing, how we're getting there because we're building
it as we're going and we're able to. Share that.
Which is why this show, by the way, is called
Building Billions. Because like you said, we can add billions.
We are going we are going to continue to document
(25:41):
our journey of building billions. And I'm so excited about
you being on the team, helping us do it. If
you've got a family office and you're listening to this
and you're like, okay, what are these guys really up to?
We're going to be putting together a presentation of what
our strategy is going to be, the type of people
we want to work with, the things that we're looking at,
the people involved with our organization, our enterprise, and also
(26:05):
grants going to start promoting for crowdfunding, like we're going
to we're going to make some noise on this cartoon
equity group, and we have a whole bunch of other
businesses we're rolling out this year. Uh, so 2024 is
going to be a very exciting year for us as
an organization. Thrilled to have you on the team. If
(26:25):
you're listening to this podcast or you're watching it on YouTube,
this was an interview with Eddie Valentino, our new chief
financial officer and chief operating officer, uh, recruited him from
years of working inside of KKR, uh, running a half
$1 trillion. And and we are just so excited to
have him on our team to help shape, shape the
(26:46):
the direction of how we're going to be building billions
in the future. So stay tuned, because we're going to
have a lot of great things to be talking about.
If you like this episode, leave a like share it. Um,
leave a message. And, uh, either way, thank you for
listening to another episode of Building Billions with Brandon Dawson.
And thank you for joining me, Eddie.
S1 (27:04):
Thank you for having me, Brandon. Excited to be here.
I also remember a couple of years ago when we
first started talking, you were telling me about this wonderful
business and all of these great things you were going
to do. Uh, and I'd be lying if I didn't
say at the time, I thought it was a little
bit of, you know, a little bit of extra bullshit
in there, but can I say that? Yeah. Of course
you can say a little bit of bullshit. Um, but
then to see that everything that you said became reality,
(00:21):
that that was very meaningful and holds a lot of
water with me. So, uh, it made me very excited
to become.
UU (00:27):
Part of the team.
S2 (00:35):
Hey everybody, it's Brandon Dawson. Welcome back to another episode
of Building Billions. Today I have a very special treat.
We're going to be talking about all sorts of things
money and business. I am here today with my new
chief financial officer and chief operating officer for Cardone Ventures,
Eddie Valentino, who I recruited away from one of the
(00:58):
largest firms in the globe, KKR, where he was running
their money around the world, chasing it down, making sure
it went where it was supposed to go and went
out to who was supposed to go out to. So
I am thrilled because coming from one of the top
firms in the globe, making the choice to come work
(01:19):
with us here at Cardone Ventures as our Chief Financial officer,
I think it would be great for you to hear
why he made that career choice. And so I want
to introduce you to my new chief financial officer and
chief operating officer and friend, Eddie Valentino. Eddie, welcome to
the show.
S1 (01:35):
Hey, Brandon. Thank you. Thanks for having me. I'm excited
to be here. And with Cardona Ventures, um, in terms
of why I joined, I ultimately very aligned with the vision. Uh,
and I'm really excited about what we're going to be
doing with the Cardona Equity Group and thinking that I
can come add a lot of value to to help
with that journey.
S2 (01:54):
Yeah. Thanks. So for those of you that are like,
what's Cardona equity Group? Cardona equity Group is our newly
launched private equity venture, strategic investment side of the business,
where we're going to be focused on working with family
offices and managing co investing, or having them invest through
(02:16):
us into assets that we're going to be out acquiring
in the marketplace, that we know we can significantly impact
with our professional operational platforms. So, Eddie, why would a
guy leave an institution? How big is KKR?
S1 (02:30):
Uh, KKR manages roughly 509 billion of AUM, $509 billion.
S2 (02:38):
And then before that, where were you?
S1 (02:40):
I was at Cerberus Capital Management, so I was based
out of London most recently. Prior to that, I was
in New York. Cerberus manages around 60,000,000,060 billion.
S2 (02:49):
So two firms combined almost $600 billion that you've been
in the flow of the money with.
S1 (02:56):
Yeah, yeah. You know, I think the traditional private equity
space very interesting. Learned a lot in my time there.
But ultimately, you know, I was really interested in the
business that you've put together, how you were able to
grow it from, from zero to where we are now
in such a short period of time. No debt, no
outside capital. Um, and I like that we work with
small and medium sized enterprises, and I think that there's
(03:18):
a lot of opportunity, particularly with where the macro environment
is these days with, uh, in the small and medium
sized business space.
S2 (03:25):
So when you, you know, KKR would not be investing
in half a million, million, $10 million businesses, right?
S1 (03:32):
No. Not generally. No.
S2 (03:34):
What would be the size before they would even probably
be interested?
S1 (03:37):
I mean, typically you're talking about transactions that are going
to be 100 million plus depending on on the line
of business. If it's if it's private credit, if it's
private equity, real estate, etc., but it's typically going to
be in the larger end. And that's true for most
private equity firms, because particularly when you get to the
50 billion plus of AUM, because they ultimately have a
certain amount of capital they have to deploy for their LPs.
(04:00):
And so if you're managing.
S2 (04:02):
Well, you're on building billions with brand. And, and our
average clients listening to these huge or listener, sorry is
listening to these huge numbers. And you're using words like
AUM that's assets under management. That's correct. Then you're using
all these other big words that I'm sure that some
people like me don't quite understand what you're saying. So
(04:23):
explain to them without using the acronym.
S1 (04:26):
Sure. So ultimately, when a fund is raised, there's typically
an amount of money that is committed by a series
of investors. So if you have 100 investors and they
each commit a million dollars, your total commitment for that
fund is $100 million. And so that money won't all
come into the fund on the first day. Ultimately, the
(04:46):
firm then will call that money as they have to
deploy it into investments. And so there's often a lot
of money sitting idle or awaiting to be called. And
that money typically either isn't earning a fee for the
private equity firm or it's a much lower fee, then
once that money is called and deployed. And so, uh,
(05:06):
private equity firms or wherever you have funds that are
structured in that way, typically there's incentive to call and
deploy the capital into investments so that you can then
start accumulating those fees on top of that. So is that.
S2 (05:19):
Why, um, is that why you see the price of
deals going up so much? Not not recently with the
downturn of the the interest rates going up and deals
slowing way down. But is this one of the incentives
for private. Groups to deploy, even drive prices up in
order to get capital in the marketplace so that they
(05:41):
can get fees on it.
S1 (05:43):
So I wouldn't say it's an incentive to drive prices up.
I think it's more of a byproduct of the need
to deploy capital. So they're willing to pay higher prices,
particularly also when there are fewer opportunities because capital has
to get deployed.
S2 (05:58):
And so if you're a business owner, um, does it
matter the size of your business? If you're a $5
million business, 10 million, 50 million or 100 million or
500 million, does the multiple of profitability that a buyer pays?
Does it matter the size of your business?
S1 (06:16):
Absolutely. Um, ultimately, you're going to be able to see
multiple expansion as the larger the business is multiples of profitability.
S2 (06:27):
So so if you're a $10 million business making a
couple million bucks, you might get paid 5 or 6
times what you pay yourself. But if you're a $100
million company and you're making 20 or 30 million bucks
that you're going to get 15 times. That's right. 18 times.
S1 (06:43):
Yeah. Yeah. Ultimately, there's a there's a premium for that
larger slug of capital that that can be deployed.
S2 (06:51):
So so getting bigger in business while maintaining profitability. It
isn't a 1 to 1 equation. It's a there's a
there is a true multiplier on the value of your business.
The bigger you are just because you're bigger.
S1 (07:07):
That's right. And it will vary by industry ultimately as well.
And that's something that we've we've done some research on.
But uh, it definitely, you know, on, on average and
in aggregate, we could generalize and say that that's absolutely
a true statement.
S2 (07:22):
So when you looked at, uh, Cado Ventures and you
and I were talking for the last couple of years
and you've watched what we've done, basically go from startup
to to a business in four years, it's generated over
300 million in revenue and 80 or $90 million of
of EBITDA, with no deployed capital, no, uh, investors, just
(07:43):
purely a private company owned by basically Grant and I, um,
and then I showed you how we're going to scale
this to a billion. You were like, you called me
one day and you go, hey, I noticed that you've
got the CFO posting. You never directly asked me if
I'd be interested, but I think I'd like to be
your CFO. Yeah, that's how it happens.
S1 (08:05):
Yeah, that's exactly that's exactly how it happened. Um, yeah.
I mean, at the time, I wasn't aware of the
numbers either. Of course, we went through that subsequently, and
that that made it to me a lot more serious. Uh, and,
you know, I also remember a couple of years ago
when we first started talking, you were telling me about
this wonderful business and all of these great things you
(08:26):
were going to do. Uh, and I'd be lying if
I didn't say at the time, I thought it was
a little bit of, you know, a little bit of
extra bullshit in there. But can I say that? Yeah,
of course you can say a little bit of bullshit. Uh,
but then to see that everything that you said became reality,
that that was very meaningful and holds a lot of
water with me. So, uh, it made me very excited
(08:46):
to become part of the team.
S2 (08:47):
How important is that when you think about it? Like
like I was telling you in my second year starting
this business, what we're going to do in the third
to fourth, the fifth year. And with all your experience
at KKR and before that service, service, service. Yeah. Um,
and seeing all the deals and looking at all this stuff.
How many companies had you ever seen that went from
(09:10):
startup organically grew, not accessing anybody's capital and not taking
on any debt and performs at the level that we
perform as a personal person that's run a half $1
trillion to your hands, how many businesses have you seen
come across your desk that look like what we're doing?
S1 (09:28):
Yeah, I'd say very few, very, very few, if any. Um,
you know, maybe occasionally you see something like that and
like the tech side, uh, but but not really in
the realm in which we're operating.
S2 (09:42):
And that's where you're like, okay, if they can do
this in from startup, then what happens when we actually
gain momentum?
S1 (09:50):
Exactly. What happens when we gain momentum? What happens when
we start adding different, uh, layers to the business, other
components or services, being able to create scale, value opportunities
for our clients, all of that sort of stuff. Because
the bigger this business gets, the more effective we can
also be. So it's really self-perpetuating.
S2 (10:10):
And so so when when you because now we're talking
about we're this podcast is really to announce the launch
of Kardan equity Group, which is our venture incubator, private
equity piece of the business, to take direct investments into
business opportunities that we feel and we believe we can
significantly improve. Um, when you think about that. He said
(10:34):
the business. When you look at our core operations and
you look at the fact that we currently have $2.2
billion of businesses that we work with every day in
Cardon Ventures, that's where we generate our revenue. And you've
seen the success those businesses have had. What level of
confidence do you have that we can be not only
(10:54):
a great investment vehicle into those businesses, but great operators
to actually improve those businesses.
S1 (11:03):
I'm 100% confident that we'll be able to do both.
I mean, realistically, the number of businesses that we see
meet every year ultimately is, is way above what anyone
attempting to do any sort of similar type of investing
will ever see. So we have a flow that is
unparalleled to any other things.
S2 (11:25):
Thanks, Mr. Grant Cardone.
S1 (11:26):
That's right. Exactly. Thanks, Mr. Grant Cardone.
S2 (11:29):
I mean, I mean, let's let's expand on that a minute.
So people understand most private equity groups or venture groups,
they need to go find an entrepreneur that they're interested
in investing in, or they need to review thousands of
pitch books to decide which one is the most interesting.
And then once you have a great reputation, uh, and
(11:49):
you build relationships with other founders, they'll sometimes walk a
great deal into you, right? Yeah. But have you ever
seen a business case where a company like what we do,
we bring in thousands and thousands of entrepreneurs through all
of our learning systems, and then we're hired by hundreds
and hundreds of them to actually engineer their business case.
(12:11):
So effectively, we get free research and free shot at
over 500 to 1000 actively working businesses a year where
the business owner is like, hey, show me how much
bigger I can get and I'll share it with you
if you help me. Have you ever seen a business
system like that?
S1 (12:27):
I've not. No. And I think that that's really where,
you know, our differentiating and competitive advantage comes in from
the equity group perspective of, uh, ultimately the fact that
that is our pipeline and it's self-perpetuating and it ultimately
comes to us is a huge differentiating factor. And then
it also allows us to be a lot more selective
(12:49):
because as I was talking about earlier, where you have
kind of a need to deploy capital in order to
earn a fee and that sort of thing with our,
our value proposition and how we ultimately earn money is
very different from that. And so we can be patient
and selective where we need to be. And also, realistically,
we have a very significant pipeline and flow where if
(13:13):
we wanted to deploy capital quickly, we could, but also
if we want to be more selective and just, you know,
ten x those returns, we can do that too when.
S2 (13:22):
So it's one thing to see the business case that
I was telling you about for the last few years,
that to be honest and be fair to you, almost
every one of my friends, even my larger private equity friends,
when I told them what I was going to do,
most of them said the same thing you said. They said,
looks great on paper. Sounds great. Brandon, you're really a
talented guy, but we've never actually seen a business case
(13:45):
like this work. Yeah, I was told that by a
lot of people, but now you see it work. But
on top of that, I introduce you to my business partner,
Grant Cardone, who is the only human being on the planet.
You come out of traditional financial mechanics with these large
private equity groups. Had you ever met anybody that raised
(14:06):
$1.3 billion in four years directly from individuals with no middlemen,
no commissions, nothing, 1.3 billion. And in his case, to
buy some of the best real estate in the world.
S1 (14:20):
No, no, I mean, that's another really impressive component of,
of of the ecosystem is ultimately what Grant's been able
to do on the real estate crowdfunding side is, you know,
very unique as well. And I think that only further
demonstrates the reach, uh, you know, that the organization has
and ultimately the people that have confidence in faith in
what we're doing. And so, you know, I think for us, realistically,
(14:44):
the problem is going to become we have too much
money that people want us to manage, versus it's difficult
for us to get capital because at the same time,
we're also looking at small and medium sized businesses, which
there's going to be tremendous upside potential in. But realistically,
from a deployment perspective, you have to you have to
put some reasonable caps on on how much money we're
going to take.
S2 (15:04):
So when you think of when you think of the horsepower,
a grant doing something that nobody on the planet, in fact,
you told me when I showed you what Grant was doing,
you were like, this is where the institutions want to
eventually be able to get to. He's already done what
all of them would eventually want to do would no
help from any traditional financial segments in the marketplace.
S1 (15:26):
Yeah, it's actually really interesting. I mean, there's been a
big shift in focus across the number of firms, uh, to,
to look at. Ultra high net worth in private wealth
space for alternative asset classes. And so things like traditional
private equity real estate in the same way, effectively that
what Grant has already done, except they're using financial intermediaries
(15:46):
and wealth managers to ultimately distribute that that product where,
as Grant was able to use his his platform ultimately
to to raise capital without any of that.
S2 (15:58):
Pretty remarkable, isn't it?
S1 (16:00):
Yeah, definitely.
S2 (16:01):
1,000,000,003. I mean, just in four years. Yeah, it's pretty crazy.
And now he's going to go on the road with
us to raise capital for our PE group, our venture group,
our incubator, I like to call it business incubator group. Uh,
we're not prohibited from making investments into anything that we
deem to be a great opportunity. And really, you and
(16:21):
I strategically have decided that the segment of the marketplace
we want to work with is family offices. And the
reason for that is many of the family offices already
have direct investments in assets. They're not really geared up
to manage them. Uh, they were following big, multiple trends
in the marketplace and trying to capitalize early stage in
(16:42):
their local markets and then work with them to help
manage and run their assets, but also bring them in
as investors into what we have going and crowdfunding on
top of that, with Grant, when you think about the
opportunity to work with some of the best family offices
in the world, help manage their assets, and then have
(17:05):
them co-invest in assets with us, and then engineer these
marketplaces that have $12 trillion of untapped access, like the
small business space is $12 trillion today, and no one
has been able to tap into it. And if we
can prove that, we can tap into it and we
(17:25):
can work with elite family offices and we can create
our own ten team of investors, highly capable people, and
then put grants formula of promotion on top of it
for raising crowdfunding capital. So every day ordinary people can
share in these investment strategies with us. How exciting is
that prospect to you?
S1 (17:44):
Yeah, I think it's very exciting. I mean, I think
for family offices, there's a lot more natural alignment because
a lot of those family offices came from business owners themselves. Right.
And ultimately it's business owners investing in smaller businesses and
helping them also grow and then being able to return
some capital on top of that. And I think you
(18:04):
said it perfectly, where they ultimately don't have the operating
executives or the operating resources to be able to go
in and fix these small businesses. And so this is
also an area where they typically wouldn't have exposure. I mean,
in many cases, a lot of these family offices are
also investing through these larger funds. And so they're getting
exposure to a very small piece of exposure to a
(18:26):
much larger business versus potentially having a much larger piece
of many smaller businesses. And so, you know, there's going
to be a lot more intimate of a relationship between
their capital and the investments that they're making coming through
Kardan equity Group. And what we're doing then there would
be going through a larger institution.
S2 (18:44):
Because they can have direct involvement and they can be
one of our partners if they have assets already in
those classes.
S1 (18:49):
That's right.
S2 (18:51):
When you think about where we're at and you think
about all the things that you've seen now that you've
been in here a couple of weeks, right? Yeah. You've
been looking under the hood when you think about what
we've built, the team that we have, what Grant's been
able to do, the team Grant has, and the fact
that between grants, organization and organization, we're now at 300.
(19:12):
This year will be over $300 million of revenue. And
if you count real estate into that, we're over 650
million in revenue. And it's all been home grown organic,
with no outside influence, no outside institutional money, literally doing
business with people that do business with us, keeping it
inside the ten X ecosystem. How big do you think
(19:34):
this thing can get?
S1 (19:36):
Yeah, I mean, I think it can get multiples bigger
from where it is today. I mean.
S2 (19:41):
That sounds like a Wall Street hedge. Uh.
S1 (19:44):
Multiple multiples larger, at least ten x bigger. If not,
you know, uh, 100 x.
S2 (19:51):
So between real estate and our businesses, that puts us
that puts us at about a ten, $15 billion enterprise.
S1 (20:01):
Yeah. And look, I think also from a scope perspective,
obviously we've been also heavily focused on the US. And
I'm not suggesting that we necessarily go outside the US
at this point in time. But realistically there are small
and medium sized businesses everywhere in the world, and there's
no reason that we ultimately at some point could not
do that as well. So, you know, I think you
(20:22):
mentioned how large is this small medium sized business market?
1212 trillion, 12 trillion US and that and that's that's
just the US. And, um, you know, there's there's there
really aren't too many people. That are focused on that
right now and realistically historically, because ultimately, the operational burden
in in putting all of that together, right. And ultimately
(20:43):
the types of management owners, leadership that you're dealing with
is very different from what traditional private equity would interface with. Right.
And so, uh, we have that experience working directly with
all of these small and medium sized business owners, and
you have started and exited businesses. And ultimately there's there's
just a lot of knowhow within this organization that really
(21:05):
differentiates it and the pace at which we move, just
as a part of this culture and environment is also
much quicker than I think most other people are comfortable moving,
so it's going to give us an outsized market share
in this, even if somebody else tries to come in
and replicate what we're doing.
S2 (21:23):
That's interesting. So you get like, because you come out
of the you know what? How big? $500 billion, how
big was kicking.
S1 (21:30):
Yeah, five. Just just over.
S2 (21:31):
500. Those numbers just huge.
S3 (21:34):
Huge huge huge.
S2 (21:35):
When you come out of an organization that's that big,
what's it like coming back into an organization where there's
a couple hundred people?
S1 (21:43):
Yeah, I mean, it's it's interesting. I mean, the in
any organization, there's there's always going to be, you know,
the desire to get better and grow and achieve more.
And that's where things are, no matter how large or small,
you know, that still exists realistically. And, you know, all
businesses ultimately grow, uh, or the businesses that do grow,
(22:06):
I should say, often grow without, you know, necessarily thinking
about where they're headed and making the right changes and
putting the right infrastructure in place and that sort of thing.
You know, I think for, for us, you know, we've
been in business for just under four years in total. Um,
so there's nothing that is really, you know, unexpected. I
(22:27):
think what I, what I see here and what I'm
experiencing that's very positive ultimately, is just that everyone's rowing
in the same direction. Everyone has big, big dreams, big vision, uh,
and ultimately puts in the extra effort to, to deliver
for the organization. Um, and I think that, you know, realistically,
you know, the day to day we're forced to focus
(22:49):
on many different things and you kind of have to
bounce between priorities. But all of it is really more
so from an opportunities perspective than from a risk perspective.
Or we're dealing with some some problem or anything like that.
It's it's we're building the next thing. And so that's
been really exciting to to come in and be a
part of.
S2 (23:08):
Well, I know that people, you know, just just for
people that have been following me, I, I'm very transparent.
I tell people we did 2.5 million this year. We did.
We're going to do 13 or 14 million next year
and then we do 14. We're going to do 35
million next year. We do 38. We're going to do
75 million next year. We did 83. You know, I, I,
I choreograph and, and, and I am very transparent about
(23:32):
what we're going to do in the future because as
I have all that footage and, and what I'm really
doing is documenting that it can be done if you
know how to do it. Because if our job is
to help other entrepreneurs do it, we need to be
the example, right? When you fast forward, if we've been
able to get to this point with literally no employees
four years ago, fast forward another five years. Literally my
(23:57):
target internal target is to be over $1 billion in revenue.
When you think about that kind of growth, not to
mention the value of the enterprise, I mean, at the
at the rate and the numbers we're going to hit
this year in a little better market, maybe 18 months ago,
I could easily guarantee you someone would put $1 billion
(24:18):
valuation on our on our enterprise today. It's probably conservatively
going to be 600 million at the end of this year.
When you think about how much more value can be
created in another five years, I mean, it's.
S1 (24:32):
It's billions and.
S2 (24:33):
Billions of dollars. Yep.
S1 (24:34):
Absolutely. Yeah. I think, you know, again, the equity group
is obviously going to be a very valuable asset for us,
what we're doing with the various verticals, uh, what we're
doing in insurance also is another potential, you know, really
good opportunity for us. I think that also the level
of talent that is being brought into the organization and
(24:55):
the level of, uh, expertise and specialization now, uh, that
that's coming in for the various verticals to provide support
is going to really also help take us to the
next level and deliver even more value for the clients
that we're bringing in. So I think, you know, that that, uh,
is going to result in higher retention and ultimately the
higher retention is going to increase enterprise value and multiples
(25:17):
more as well for us.
S2 (25:19):
So, look, I mean, we're making this our first podcast.
We will be doing podcast on and off over the
course of the next five years, updating where we're at,
what we're doing, how we're getting there because we're building
it as we're going and we're able to. Share that.
Which is why this show, by the way, is called
Building Billions. Because like you said, we can add billions.
We are going we are going to continue to document
(25:41):
our journey of building billions. And I'm so excited about
you being on the team, helping us do it. If
you've got a family office and you're listening to this
and you're like, okay, what are these guys really up to?
We're going to be putting together a presentation of what
our strategy is going to be, the type of people
we want to work with, the things that we're looking at,
the people involved with our organization, our enterprise, and also
(26:05):
grants going to start promoting for crowdfunding, like we're going
to we're going to make some noise on this cartoon
equity group, and we have a whole bunch of other
businesses we're rolling out this year. Uh, so 2024 is
going to be a very exciting year for us as
an organization. Thrilled to have you on the team. If
(26:25):
you're listening to this podcast or you're watching it on YouTube,
this was an interview with Eddie Valentino, our new chief
financial officer and chief operating officer, uh, recruited him from
years of working inside of KKR, uh, running a half
$1 trillion. And and we are just so excited to
have him on our team to help shape, shape the
(26:46):
the direction of how we're going to be building billions
in the future. So stay tuned, because we're going to
have a lot of great things to be talking about.
If you like this episode, leave a like share it. Um,
leave a message. And, uh, either way, thank you for
listening to another episode of Building Billions with Brandon Dawson.
And thank you for joining me, Eddie.
S1 (27:04):
Thank you for having me, Brandon. Excited to be here.
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On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!