00:37:46 · Giuseppe Balzano
[00:37:46] S1: think you learn a lot. People that know me from from a relationship or friendship point of view, they always tell me, you like to listen. You like to listen and to listen to old people. Part of the answer is yes, because this is my job. But on the other side, I really do. I think there is a is a lot to learn. Like, from people that have eight years, or seventy, or sixty, or fifty, you know, it doesn't matter. I'm 30, so there is a lot to learn from me. They have intuition. They have life, you know, experience, defeats, you know, they can tell you about mistakes or just the story. You know, when when you ask... This is one of my flagship questions, you know, how did you end up building this company? The most boring is, you know, my father or my mother gave it to me, which is not, you know, my preferred answer, of course, but it is what it is. The best answers are the most creative. And and there are, you know, books to be written with with these kind of meetings. I agree. I think I'm lucky. I'm lucky to have the possibility to just speak to successful founders, you know, every day. In the end, they managed to use the company to sustain the family and then to have the second generation studying. Italy, again, leaving aside, you know, the industrial revolution of the sixties and seventies was a poor country, you know, before that, so during the war. So we have the countryside of Italy, which is full, maybe like in Estonia, but I'm not an expert, full of farmers, you know, or fishermen. So having people that managed with nothing, naudily, normally, nothing, just an idea to evolve, you know, and and give some sort of credibility and reputation and and and sustaining, you know, the future of the generation is amazing. And sometimes, you know, I ask myself, without an Internet connection, without, you know, capital or my resources or my investors, would I be able, you know, to start from scratch, just debt, just, you know, collecting money from, I don't know, random clients that wanna pay you because they like you. I don't know. But yeah, this is the outcome, know, hundreds of meetings.
00:40:07 · Mikk, Giuseppe Balzano
[00:40:07] S0: Okay. I want to cover the LP side, capital allocation side. How was the fundraising? How did you explain the liquidity for LPs? Because if you go there, you're a young guy, just a base 30, some of your LPs, maybe the guy is 65. He wants to see some liquidity. So what's the story there and how did it all go for you when it comes to fundraising? [00:40:36] S1: Short answer, it was tough, Very tough. Every time, you know, I listen to some of your other people, you know, interviews and and experience, and then there are people saying, you know, yeah, it was easy, and I managed to raise capital. It's either they they have capital or they have a lot of connections with with with people without a capital, or, you know, they are famous in a in a given country or in a given sector. But for me, it was impossible. Like, it took me two years to to put together all the relationships, also with family offices that, you know, believes me, and we did deals like we did. Maybe we'll be one family. [00:41:17] S0: Sorry for interrupting. You're full time. Right? Full time.
00:41:20 · Giuseppe Balzano
[00:41:20] S1: Oh, yeah. Absolutely. I'm a... I started full time two years and a half ago. Mhmm. No salary, nothing. Just, you know, let's do it. You know? So some family offices, was saying, they maybe did some deals with me, you know, convincing them on another story in which I was the obligator. The the first answer is, but you never bought a company. You've never been a CEO, so how are going to do it? So yeah, the short answer is tough. How I did it, it's a matter of brute force this time, so you speak to other people, And and some some people will just, you know, decide to not invest. Some other people will be very helpful, and maybe you convince one out of 100, but that person is gonna introduce you to five people, and all of them invest. So in the end, you you want five people out of 100, you know, because there was a connection. I think that was that was what happened, you know. So it's a matter of finding people that like you as a person, like the idea, and and then and then they think you're credible enough, and you have a story, you're... You have you have energy, you have the passion, you know, you have nothing to lose, which is my case, to to do that. You know? And and that... That's that's what happened. On the liquidity side, that was another tough conversation, and I lost investors because of that. They wanted to see in the shareholder agreements, you know, a close with maybe, like, a put, you know, or some some kind of promise on my side that the deal would then end in six years or seven years or eight years. No. Like, this is not what I'm doing. You know? So the the conversation ended. Some of the times, I I must say that we ended up having an honest conversation, hey, Giuseppe, you're 30. I'm 65. So, okay, you wanna do this for fifty years, but I don't know if I'm gonna be here for fifty years. My first answer is, well, your kids are lucky. Sometimes it didn't work as a... As an answer, unfortunately. So in that case, there is an handshake. There is an handshake. There is a promise, best effort on my side that I'm gonna buy the the shares when they want to liquidate, which is not the best outcome, of course, for for them, clearly. For me, it's better than than giving dividends, so it's a sort of a buyback. I think it's fair.
00:43:41 · Giuseppe Balzano, Mikk
Hopefully, you know, they know that they are not expecting a liquidation in five years because it's not gonna happen. So I was very, very, very brutal, honest in every meeting that this is gonna be a long term project. Of course, you know, this is a this is a private market. So if one shareholder find another shareholder and they... They're able to to find a compromise and and buy and sell the position, who am I, you know, to say no, unless the guy is a is a bad guy. So I think in this way, I managed to convince someone, but very little. If you if you put together all the people I try to convince and how many people I have in my cup table, is ridiculous. [00:44:22] S0: You're an engineer, very systematic, data driven. Do you have or do you want to share any data when it comes to how many people you talk to and how many people eventually ended up investing?
00:44:36 · Giuseppe Balzano
[00:44:36] S1: Oh, yeah. Absolutely. So if I put together two years of... Less than two years of fundraising, because as I told you, I started as a, you know, let's buy one company. So my my first pitch was let's buy one company. Then I had to change the pitch. This is an holding company. I lost one investor. So if I put together what happened in two years, clearly and without any issue, I spoke with more than 120, 130 between, you know, funds, holdings, angels, maybe not investors because it's easy to say I'm an investor, then I don't know if you're an investor. You know? So in the end, yeah, I think more than 200... More than more than 100 for sure. And how many people decided to invest is 15. 15, 16. Out of which, half and half, like, eight, I found, and and the other 50% are introductions from people that decided to invest. You know? So there is a reputation, credibility kind of chain. You know? So for whoever is raising capital, again, it's either you're you're very strong, better than me. There are many out there. Or you have a better pitch maybe because you had done something for fifteen years and, you know, it's clear that you're gonna make it. Or the gradient to to embark in a in a probability game. You just have maybe one percent of probability to convince someone. So out of 100, one, two, three people will say yes. Unless your thesis is so strong, so easy to understand, so naive, but at that point, as an investor, I would be suspicious, you know, if you're doing everything right. There must be something new in in the equation. This is what works for me.
00:46:30 · Mikk, Giuseppe Balzano
[00:46:30] S0: And you have this international background. You were studying in US, working in US, now going back to back to Europe, back to Italy. 15 investors. How many of them are from Europe? How many of them are from US? [00:46:44] S1: 7075% are European. Could be also 80. I need to check. I I don't have this estimate. But the the large majority are Europeans, and out of that, the majority are Italians. Again, you know, this is my my background. You know? I'm coming from here. So it was easy to to bet, because I think in the end, what they did two years ago, one year and a half ago, was to bet on something, because I didn't have any deal. I didn't have any any deal flow. I didn't have any team. I just had an idea and some slides. That's it. So the first person I convinced is is the first person that I started the call with. He is a person that know me and trusts me as a person. You know? You have to start with them. It's either you convince your family and friends or network or the chance, I think, the chances of raising a proper holding company with lot lot of equity, you know, to do deals. It's it's it's it's low. Now, of course, you know, it is it is becoming easier and easier. I think the model starts to be properly understood in Italy. In other jurisdiction, it's very easy. So the chances are higher. But for me, so my experience in the last two years, very difficult. [00:48:11] S0: How do you structure the deals? Just curious. How much how much depth, how much equity do the do the owners roll equity? How does it work?