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Why should High Net Worth investors allocate a portion of their portfolio to private equity? And how might private equity be used to fund new technologies, make acquisitions, and provide more working capital?
Will Walker, Managing Partner at Hall Venture Partners, is a private equity veteran and advisor to Hall Labs and HVP. He is also the founder of Walker Group Ventures, where he advises entrepreneurs and business owners how to prepare their business for funding and matching them with experienced and motivated funding sources.
Click the play button above to listen to our conversation.
- What private equity is and what private equity firms do.
- The different types of private equity funds and their risk/return profiles.
- How private equity fund works and the typical life cycle or size of the fund.
- How High Net Worth self-directed investors get started with private equity.
- How private equity firms return the capital to investors.
- What to look for evaluating a company (public or private) or a fund and comparing it to other investment opportunities.
- The current trends in private equity and venture capital investing.
- How private equity and other investors, municipalities, business leaders, and developers can benefit from Opportunity Zones.
- Some of the challenges in private equity and venture capital today.
Featured On This Episode
- Will Walker on LinkedIn
- Hall Venture Partners
- Publicly-Traded REITs
- Johnson Controls
- Environmental, Social, and Governance (ESG) Criteria
Industry Spotlight: Hall Venture Partners
Hall Venture Partners, located in Provo, Utah, is a capital investment firm led by a management team that supports patent-protected companies and helps them grow. With over $6B in transactions across multiple portfolios and sectors, HVP provides capital to grow patent-protected technology companies.
Learn More About Hall Venture Partners:
About The Alternative Investment Podcast
The Alternative Investment Podcast covers new trends in the alternate investment landscape. Hosts Jimmy Atkinson and Andy Hagans discuss diversification opportunities in the alts universe, including direct investments, DSTs, opportunity zones, private equity and more.
Jimmy: Welcome to The Alternative Investment podcast. I’m your host, Jimmy Atkinson.
Andy: And I’m your co-host, Andy Hagans.
Jimmy: Andy, pleased to be back with you for yet another episode here today of the “Alternative Investment” podcast. Today, we’re talking about private equity and how it fits into the alternative investment universe. And joining us today to discuss this and more from Delray Beach, Florida, is private equity veteran and managing partner at Hall Venture Partners, my good friend, Will Walker. Will, welcome to the show.
Will: Thanks, Jimmy. Thanks for having me. You and Andy, appreciate being here.
Jimmy: Always a pleasure talking with you, Will. Let’s dive in. I wanna zoom out and get the big picture on private equity in a minute, but first, why don’t you tell us about the current project that you’re working on Hall Venture Partners? What can you tell us there?
Will: Well, you know, in my 28 years of private equity and experience in raising capital and structuring deals and evaluating companies of all sizes, the 70-year-old Hall family office in Hall Venture Partners is probably the only one I found in my 28 years of experience that checks all the boxes, both for risk mitigation and for profitability in tangible technology, which is all ESG, which is all the rage right now out there to go forward with tangible technology products and projects. So it’s really exciting to have everything from electric vehicles and powersports vehicles to AI toilets and real-time data coming in through our chips that are used by Facebook and many other big companies out there and be involved with such great private companies with a great history of both private and public exits and profitability. So very exciting. We can talk about a little bit more in our talk today, but I’m very proud of it, and it’s taken me 28 years to find a group of incubator, a big incubator, more of an accelerator that really checks all the boxes in what I looked for in both safety and profitability.
Jimmy: That’s great, Will. So that was just a little taste of Hall Venture Partners. I may wanna come back and get some more details on that group and Hall Labs a little bit later in today’s episode if we have time because there’s a lot to discuss there. But first, let’s zoom out and I wanna hear the macro-thesis on investing in private equity. Will, why do you think a High Net Worth investor should allocate at least a portion of his portfolio to private equity?
Will: Well, once again, your evaluations, your management team, your group of advisors, there’s so many different elements that go into evaluating a private company as opposed to a public company and why there should be some allocation for anybody’s balanced or diversified portfolio into alternative investments. And many of the ESG products and services and solutions like et all fit into that box, but it can be as diversified as things like a professional private network of doctors. You know, Doximity is a good example of a company that was private for a long time. And they just went public and got a 10 billion with a B dollar valuation on the New York Stock Exchange. They’re even higher than that now, but that’s a large group of a professional network of doctors and things like that.
Well, there’s others that are in that same space, like AngelMD, full disclosure, I’m working with them. And they also work with Hall, and they have over 25,000 doctors, High Net Worth surgeons, family offices, even Fred Zuckerberg, the Zuckerberg family office are part of the AngelMD network. So there’s many reasons why different themes, different avenues in today’s marketplace on the private side should be considered. And certainly, there’s many, many variables to check off before, you know, moving forward with any one company or any one group, but highly recommended, Jimmy.
Jimmy: Good. And actually, I might maybe bring in Andy to this discussion too, might be beneficial for our listeners to define private equity coming out of the shoot here. What do we really mean when we say private equity? What are we talking about exactly? And, Andy, I’ll let you chime in and, Will, you can go after him.
Andy: Well, Jimmy, it’s equity that’s private. Well, so private equity, we’re talking about funding companies with equity that are not publicly traded, right? And so there are different types of private equity funds. So, for instance, you have venture capital funds, and then even within venture capital, you know, you have seed stage, mid-stage, late stage. So the idea is it’s gonna be less liquid than investing in publicly traded stocks. Sometimes you’ll have the benefit, though, of more control. And then there are some other benefits with sometimes using debt financing, sometimes just creating value by removing disincentives in management structures in the case of taking publicly traded companies private. So private equity can really be all over the map in terms of strategies and fun types. But that being said, Will, what are some of the historical trends you’ve seen in private equity during the course of your career? Like what was popular in the ’80s and ’90s versus, you know, some trends that are playing out right now?
Will: Yeah, well, I hate to admit it, but I was alive in the ’80s and the ’90s and out there kicking and raising money and structuring deals. But thanks for the great question. One of the things that got me started on private equity and so hard to try on it early on was in the early ’80s when cable television was a newborn asset class and no one ever believed that they were ever gonna get content except for B, schlock stuff and certainly even pornography. And, you know, it was really the same thing that the internet got in the early ’90s. I’ll cover all these stages of grief that you get and resistance that you get from even astute investors until certain models are proven out.
But cable was where I cut my teeth with Bill Daniels. I was fortunate to meet a pioneer, a true visionary. He’s known as the father of cable television. Now, at that time, it wasn’t like I say it was known. You know, only CBS, ABC, NBC, the major networks were gonna keep it down, never give them any good content because they had a stranglehold through all the studios. I was fortunate because I was a professional actor. I’d had some success. I won a pretty big award in television from Universal TV and had several A-list movies out that I co-starred in. So I had a good vantage point. I was able to meet a lot of the people that were the decision-makers at Universal, 20th Century Fox, Paramount, and knew that they were willing to give this newfangled thing called cable TV a decent content if they brought the eyeballs, if they continued to spread.
And fortunately, I met Bill Daniels, and he needed a spokesperson that was kind of on the inside of the studios then and could get up and talk to investors about this incredible reoccurring revenue model because that’s what it came down to that could and would, you know, not only survive, but thrive and be everywhere. And someday there’d be a, you know, weather channel, a news channel, a financial news channel, like, you know, pay per view boxing. Oh my gosh, we talked all that stuff way before its time. Unfortunately, it’s all come true. But the model was really proving out, even in second and third-tier cities, and we were able to fund things like Reno, Nevada, and Redding, California, and, you know, lots of different second and third-tier cities where it was extremely profitable.
So that’s what got me started, you know, probably more than you need to know there. But, you know, when you can spot a theme in any emerging asset class, and I’ll go through a few that I’ve been fortunate to spot and be involved with along my almost 30-year career, that’s where you really want to start. If you have interest or knowledge, you know, whether it be healthcare, whether it be ESG, social impact, innovation of any kind, those are great areas to start to learn more and do your homework, so to speak, and find some different capable projects that will lead the way.
So, hopefully, that makes sense to you and your viewers and I’ll keep going. You know, I went right out of that into cellular telephones with Craig McCaw and doing partnerships there where…you know, but he was carrying those things around with suitcases. And someday we said, “No, no, no, someday they’re gonna get smaller, and people are actually not even gonna have a home phone. They’re gonna just have this cell phone in a lot of cases. And boy, I tell you, people laughed, they threw stuff at us. We were fortunate to have a big belief in some of the Bell engineers and different people that I was privy to know and they were certainly…probably knew that the technology was getting better, faster, smaller, computers were getting more powerful inside of them, blah, blah, blah.
Anyway, those are some of the trends. And once again, came back to a reoccurring revenue model because, of course, everybody can’t get away from paying their cell bill or their cable bill every month, or they get cut off. That was also a big selling point. You know, somebody didn’t pay their bill, they’re late, you’re gone, and they gotta run down to pay you off in order to get it turned back on almost like electricity. So, regardless, these are some things that I worked with and visionaries. Somebody I…if it’s okay, I want to mention that was a big mentor. I wish he were here today. He didn’t always invest in my private deals that I brought him, but he always gave me great pointers and really helped me out a lot in learning how to find investors, how to talk to investors, how to structure deals, how to go where people aren’t or where they’re not expecting it to be presented, and how important that is.
And that was Ely Callaway of Callaway Golf, still kind of brings a little moment there. It gets a little emotional. But Ely was a great guy. And certainly, he turned wine magazines, sporting equipment, golf clubs, everything he touched went straight up. Now, nothing goes straight up, but basically, it took off pretty fast. He was just a master at structuring deals and bringing in the right advisors and really going at the private side in a meaningful, exclusive way. Exclusivity always sells deals. So, of course, he was a big early influencer and advisor and helped me out a lot and certainly did invest with me in certain areas. So I wanted to mention him.
And then if it’s okay, I’ll keep going into early-stage computers that was in the early ’90s, same thing. People said, “That’ll never work. It’s only gonna be used for terrible stuff.” I’m sure a lot of your listeners know or remember when internet was considered almost an evil thing in that it was only gonna get schlock content and even pornographic and used by who knows who out there from foreign powers. So regardless same negativity, China bandit, much like they’ve done with crypto and certain blockchain ventures now, and the old joke in private equity was if China bans it, just go into it full force and wait, you know, two to five years, it’ll turn out to be one of the biggest things since sliced bread.
So, you know, from computers in the early ’90s and having some success there, segued into blockchain and cryptocurrency about eight, nine years ago. And this was something that I believed in because I was fortunate to know Rees Morgan, and Rees Morgan was a high-level engineer at Microsoft. He was one of the first engineers with his team to be assigned to this newfangled thing called Bitcoin and blockchain and really develop some sort of a payment system and transfer system for the banks. So I saw and knew that Microsoft put 150 million in. In those days, that was a lot of dough. And they brought in Bank of America and JPMorgan. JPMorgan, who poos all of this stuff now on TV, they put in 100 million apiece, I believe was the number. This was all hush-hush, unfortunately. This was the money in the budget that Rees and his team had to work with to develop the blockchain systems that are still being used in patents that are being used and acquired today in those mediums.
So I’m a big follow-the-money guy. I’m a big patent and licensed guy, hence, I’ll talk about Hall and why that was attracted to that, you know, with over 1200 patents issued on our private, tangible technology on our portfolio companies. So that really got me going, and I really fell in love with patents and licensing and IT and IP from that because of my early days even as an actor. Through the Screen Actors Guild, I got 100% residuals for many years and still get couple thousand dollars a year and I haven’t made a movie since 19…in the early ’80s. So it really taught me about the power of reoccurring revenue models and licensing and patents and influencers, which are now everywhere these days, and really have changed the landscape for private equity. It’s advisors attached to a deal where company influencers are huge. Of course, the old influencers, like my day were Ryan O’Neil and many of my co-stars, Steve McQueen, and anyway, James Garner, all the people that I looked up to and was fortunate to work with over a period of time. So I know this is longwinded. I’ll shut up now and try to turn it back to you, Andy, and see what else you want me to cover, you and Andy.
Jimmy: No, I think it’s not longwinded. I think actually all of that context is important because what you’re talking about, first of all, is identifying macro-trends. I think that is so important with private equity, especially a venture capital side of private equity because timing is so important, right? If you time something correctly, you can do very well. And if you don’t time it correctly, you know, even if you’re “right in theory,” if your timing is wrong, you’re still wrong, right? So I think that’s really interesting how you’ve identified those trends over the course of your career and then, you know, work to put deals together and raise money based on those trends. And then the other theme I was kind of picking up was just based on the relationships and people in the space. And I’ve worked a little bit in private equity and nowhere near as much as you have. But what I have found is you build relationships based on people that you trust and who have done right by you and you’ve done right by them. And then it’s funny how it keeps coming back around to working with the same people and they come back to you.
Will: Yep, you hit a big theme there because that started with my movie and TV career of 12 years too. Once again, I was privileged to work with John Frankenheimer and Walter Hill, some of the biggest and best directors of the ’70s and ’80s. You know, Walter did 48 hours. He wrote all the early Steve McQueen pictures, “The Getaway,” and, you know, just a fantastic writer-director. And they use the same ensemble because they trust them and they know they’ll deliver. And for time and money and execution, ideas are welcome, but “Execution is Worshiped” is one of my favorite songs over some of my bigger investors desk, Jeff Hoffman is founder of Priceline and people like that.
So it all comes down to that who you like and trust. It’s a big deal. And that comes down to finding themes, macro-themes, like you say, that you like, and you’re interested in, or maybe you come from that world. Like I say, the AngelMD group that I’m attached to of 25,000 family offices and high-level angel investors, you know, they’re all in healthcare and social impact to some degree. So it’s great to be able to have a group of advisors of top surgeons or people in that element that can really add credibility and even write their own checks early on to be part of a company or a project or a solution that they believe in that much and maybe take board seats or whatever it would be. But it’s really important on some of things you seized upon that are common ingredients for anyone to stick with, spot something, spot a trend, be interested in it, like it, and then find people, if you don’t know them already, that you trust, that have the experience, that have the intellect, have the connections and background to make things go in good days and bad days, because in private companies, just like in public companies, you’re gonna have always challenges.
You know, right now, it’s supply chain stuff that’s really slowing things down, or making people adjust their forecast, or even pivot in some cases. So you really want to have some strong hands at the helm and different aspects of it of people you trust and like, and certainly to have their money in line with your money. This is why I’ll tell your audience on a venture fund of any caliber, I always recommend a diversified fund. I’ll bring up Hall again. It’s probably one of the things that attracted me to it. You know, out of the six companies that are in our venture fund right now, we have everything from a very profitable electric vehicle with more coming out already in profit, unlike the other EVs out there through the Vanderhall Motor Works, and we have things like two-way chips that are used by Facebook already and soon to be used by several other huge organizations, and partner with Johnson Controls.
People don’t know who JCI is. They’re the 800-pound gorilla in installing and everything that goes in communication and security in buildings, hospitals, government, building, homes, everywhere. Johnson Controls supplies Microsoft for General Motors, Facebook. I could go on and on and on. They can use anything they want and they use Hall’s chips. And it’s two-way data transmission, it’s secure, goes through concrete steel. It’s amazing. So there’s a private company in our portfolio of operating companies of six on top of the profitable electric vehicle, on top of an AI healthcare product that predicts 85 preventable diseases with 70 patents already issued on it. So you can see the diverse nature just on those three that are in revenue, heavily patented, already have proven anchor investors attached to them. That’s another thing I’d like to bring up. So, for people who are just looking to diversify or balance their portfolio, whether in real estate or other things, this is something I’d recommend rather than single issue.
Now, I’ve done a lot of single-issue and I still do, and we have some at Hall too, but once again, you’re using one bullet in your chamber and you hope that it’ll hit the target in the timeframe that you’ve allotted or they’ve allotted for a profitable exit. Historically, you want to check historic exit times and Hall its two to five years. These six will probably be two to four years. So that’s a 20-year track record. So between that and the 1,200 patents issued and the diverse nature of all the operating companies, you can see why someone doesn’t have to hit a home run with each of the companies to come out with… Our historic is 8.3X. 8.3X, that’s at the very top of any venture firm as far as profitability in 20-year track record. So you don’t have to hit all home runs and you don’t have to be an expert in everything, you just have to have the theme down and understand the ingredients, which I’ve outlined there and what boxes it checks for you to take full advantage. But I always recommend a diversified venture fund in private equity as a good first base that’ll get you to the home plate pretty quick.
Jimmy: Absolutely. No, I think that’s very good advice. Actually, that’s a good bridge to the next question that I wanted to touch on. So we’re gonna shift a little bit from like the GP side of private equity to talk about the LP side. So, Will, I wondered if you could just zoom in out even a little bit more, if you could tell our listeners if they’re not familiar, like how does a private equity fund actually work? What’s a typical life cycle or size of the fund? And how would a High Net Worth self-directed investor get started with private equity?
Will: Well, you’ve packed a lot in there. I’ll try to unpack it as we go along. The fund that I’m currently working on for Hall with these six very mature risk mitigated companies is only 25 million. That’s a smaller fund. It’s actually being done as a continuation fund on our first fund. But typically, they’re anywhere from 20, 25 million on up to several hundred million, or more, they can be. But typically, the founders or the people that are running the fund, especially if it’s well-run, want to keep valuations down, they want to certainly keep more of the private equity as they move forward, either for a private exit or a public exit through an IPO or a SPAC of some kind. Those are some of the things you look for, the exit ability, and the timelines that you wanna exercise or partake in.
And typically, that’s anywhere from 2 to 10 years. In Hall’s case, it’s two to five and there’s many advantages, tax advantages to what we’re doing at Hall. I don’t want it to be only about Hall. But in the venture funds with all the caveats they’ve got and the timeframe with the diversity, it really is something that I’ve considered very rare opportunity on structure. Even on structure for the LPs, we as GPs invest our money from the general partner side as well as the LP side, which is rare. But you want to see that, you want to see if the managing partners, general partners have money in the LP side. It’s totally in line with your money.
The other thing is most of ’em come back with some sort of a 10% or 20% on first dollars on the exit ability or dollars that are earned on any type of an exit or a profitable allocation. They’ll take a percentage out before they give you 100% of your principal back. Again, at Hall, 100% of the LPs principle comes back before we take dime one as managing partners. So there’s a lot of things that you can look at to make sure that as a limited partner, that your money and your position and your voting power is in line with any fund structure or single-issue structure and try to ascertain or learn more about the possibilities or probabilities of an exit and timelines and all of those types of things go into it. Hopefully, that help.
Andy: Absolutely. And it’s important to know, you know, the devil’s in the details with those details with preferred investors and waterfalls. And it can get complex, but if you want to be an LP, if you want to invest in a private equity fund, there’s no alternative to educating yourself. I mean, you have to do it. You have to understand how the fund’s going to work and how you are going to get paid, how you’re going to get a return as an LP. Otherwise, it’s just straight-up buyer beware. That being said, I wanted to ask your fund or really with private equity, in general, who is your typical investor? So is it typically an RIA or a family office, or is it more often a self-directed high-net-worth individual investor? And related to that, do you have any sense how much a typical investor is allocating to private equity and/or to your funds specifically relative to their entire portfolio?
Will: Yeah. Well, again, there’s a lot to unpack there, Andy, but we’re very in tune, I would say, probably at least 30% to 40% of our investors are self-directed high-net-worth individuals because they have a capital gain situation and they would really like to have that deferred or exempt going forward. So the OZ format, we’re fortunate with our 130-acre campus in Utah to be in an Opportunity Zone and to have all of our portfolio companies, full single issue and the fund itself, being OZ-protected and themed. So that’s really a big deal. One thing I will touch on because the companies are qualified for the 1202 tax exemption, it’s a 5-year hold instead of a 10-year hold as most real estate ventures and other OZ opportunities are in tune with, or have to adhere to. So it’s quite a good double cherry on top for people in that category.
I would say second is family offices, but family offices right now, I’m getting a lot of interest in investors in the family office field because they’re heavy in real estate and they’re coming out over the stock market and need to defer capital gains again and wanna participate. But I also get about 30% straight investors high-net-worth funds and family offices that just want to invest because these are highly investible, late stage, risk mitigated companies. Many of them are mandated, whether it be in healthcare, social impact, ESG-related industries. And we have…like I say, we’re in revenue on most of our companies, anchor investors that really set the valuations for our companies, so you don’t have to just listen to the maitre d’ at this restaurant and the food’s great here.
You really do look for a lot of different ingredients along the way when you’re evaluating a company or a fund for its assets and see how many of these variables or how many of these ingredients does it check off? Who are the advisors? Who’s the management? What’s the experience? What’s the track record? How long is the track record? I could go on and on and on. How’s the waterfall paid out? You hit on a good point there. And certainly, like on our fund, the six companies, with our historic 8.3X return in our 20-year history, we expect to have this whole portfolio turnover 2X or 3X. So it’s great for the LPs to have an LP-by-LP personal decision on whether to take a distribution and take it and run with it, or take portions, or leave portions in for further future tax exemption and that type of thing for profit. So there’s a lot to consider, a lot to learn about, but, you know, I always say find things that are the proven commodity and something that checks as many boxes as the 70-year history of Hall has done and really learn from that, even if it’s not your cup of tea, because these are things you’re gonna wanna look for in other funds and other single-issue opportunities.
Jimmy: That’s great, Will. It’s a good perspective that you bring, and it sounds like a pretty good composition of investors that you have at Hall Venture Partners and really in private equity in general. The larger private equity universe has a pretty good composition of both self-directed high-net-worth individual investors, RIAs, and family offices. Will, the second part of Andy’s question was, “Do you have any sense of how much a typical investor allocates to private equity?”
Will: Well, it depends on their net worth and what they’re trying to achieve, Jimmy. You know this as well as anybody. I mean, we have people that are nine figures and we have people that are eight figures, and all in-between that have different strategies that they wanna achieve. Typically, it’s between half a million to two million. We’ll work with people as little as $250,000 to put to work at Hall. But typically, it’s gonna be seven figures and above. I would say one to two million. I’ve worked with several high-impact funds at five million and higher. You know, I’m working with a group that’s working and backed by a lot of big green initiatives, and they will do something and they’re probably the 20 million plus range in several of our portfolio companies here at Hall.
So a lot of different strategies, a lot of different levels of participation. It’s a moving target. But you really want to adhere…you know, when you meet an investor, or whether it’s a single investor, or a fund, or a family office, you wanna find out what their holdings look like, what their timelines are to put money to work, what their needs are, and certainly what their timelines, what they’re looking for in exits. You know, it’s very important that you don’t get into a private deal of any kind when you’re expecting 7 years, which is typically what they’ll tell you, and it turns out to be 10 to 15 or more. We’ve all had those if you’ve been in any length of time. However, that doesn’t turn the crank. So learning who you’re in business with is important because if you’re in an OZ situation, it’s gonna be 5 to 10 years if you want 100% tax free in that particular investment or vehicle, and you really want to have that trust and communication and also understanding of both sides of what they’re planning to achieve and need to achieve in their strategy. Very important.
Jimmy: Yeah. Terrific, Will. Always a pleasure speaking with you. Thanks for bringing your unique perspective to today’s episode. Before we go, where can our listeners go to learn more about you and Hall Venture Partners, which is, you know, one of the first and only Opportunities Zone funds that focuses on private equity?
Will: Sure. My email for people who want to contact me or set up an intro call or get a deck in a summary, which I encourage everybody to do that’s interested even from an educational standpoint is [email protected], that’s [email protected]. And I’m sure, Jimmy, you’ll be able to give it out as well. Would love to hear from anyone or get any contact. And we’ve got some pretty good virtual tour videos too. They’re short, they’re very impactful and very innovative too with all of our projects that are going on. And I know you visited there personally yourself at our campus up in Utah and saw the light, as they say, like I did when I went there three, four years ago and got baptized. But certainly, wanna encourage everybody to continue to really look at the private side of things because that’s where the majority of the money from Wall Street and Main Street that smart money is going. You see that, they know where to get the right management team, the right valuations, the timing that Andy talked about, super important and super profitable. But certainly, you want to make sure it fits your category, and your strategy, and situation. So encourage everybody to learn more and hopefully we get a chance to meet on a very profitable deal together.
Jimmy: No, that sounds great, Will. I did indeed visit the Hall Labs campus a few weeks ago. It’s a tremendous complex that they have there. So that was [email protected]. I’ll be sure to link to that email address, and I’ll probably throw up a link to your IMDb profile as well in the show notes for today’s episode. Our listeners can find those show notes as always at altsdb.com/podcast. You’ll find links to all of the resources that Andy and I discussed today with our guest, Will Walker. Will, again, thanks for joining us today. It’s been a pleasure.
Will: Thanks for having me, Jimmy, and Andy, you too. Appreciate it. And thanks for letting me walk down memory lane and look forward to seeing everybody in the future.