Delta Seven: ‘Investment Thesis’

During the Million Dollar Challenge, I raised a few dollars. Making it the smallest ‘fund’ in the history of funds back then.

However, outside of the MDC I always had plans in 2024 to go bigger and scale accordingly. But the original fund had a huge surprise for early supporters making them actually majority shareholders of a few upcoming acquisitions under the challenge.

But I am not stopping there. For myself at least personally.

I plan to go big. And find my Everest, with Tiger Global being my role model in the landscape of investing.

Preparing myself for over a decade to make this move, 2024 will be the starting point.

Before diving into the ‘thesis’ or call it strategy, here are a few things you need to know:

Why

I was always a fan of PE, VC and Investment Banking in general.

But Tiger Global, is on another level than any other PE firm I ever followed. I made that clear in a previous blog post.

The entire reasoning has been mapped out in the other post, but it’s also for me a steppingstone to think about retirement in 10-15 years from now.

I am getting closer to 40 years now and that’s a serious age to consider your trajectory and endgame.

And Delta Seven should become my endgame and Everest eventually.

Here is my reasoning or ‘thesis’ what I plan to do in the first year (2024).

Thesis

Well, I wouldn’t call it a thesis but there is some early stage structure that I believe makes more sense than a traditional route.

I want to point out that this thesis is partially applicable under the MDC but primarily represents the entire model outside of the Million Dollar Challenge. Since the MDC has a different restrictions and is also fueled by supporters that will receive nice surprises and hopefully MRR in 2024.

Hybrid Model

I have been trading capital markets for as long as I can remember and I run a private fund with smaller funds layered in it. However, my day trading activities on a personal level and on a more institutional level will be baked into Delta Seven.

Since acquisitions are a long-term bet and will not provide (usually) immediate returns or net positive returns, I am adding a hedge fund structure under Delta Seven, providing me liquidity.

This will increase my pace acquiring businesses, place an actual hedge on long term buys and is more data driven than an acquisition.

There are three main brackets:

  • Partnerships and co-founding status (like Pocketsflow and Supercharged)
  • Day trade and equity markets, ensuring liquidity
  • Acquisitions that can be freerolled with trading activities

Fund Size

Is currently split between 3 types

  • Personal assets – $450K, available for immediate deployment in acquisitions
  • Personal fund assets (day trading) – $200K with the goal of keeping it under a fund and increase the value
  • Crypto assets – $600K that are used to trade the futures market
  • Outside commitments (soft) – $500K that I can rely on in case I need more liquidity but is not direclty tied to Delta Seven at the moment

Actual AUM – $450K + $800K

Deal Size

Currently I am looking to buy micro projects anywhere between $5 to $50K but aiming for lower brackets first.

Reasoning: I am still working on an internal framework with current contractors that help me build, create or optimize. And the best way for me is to stress test smaller acquisitions that have no MRR and consider them growth experiments.

I need to:

  • Go into a discovery phase
  • Acquire enough to know what I don’t want
  • Test enough different verticals that would be leveraged with media (more on that later)
  • Buy smaller projects so the cost can be recouped through different investment vehicles such as capital market funds
  • Realize what I do not want long term
  • Prove a few financial and business models (for myself) before going bigger

Target

I want to acquire about 15-25 in 2024, regardless of the size. Including the ones that would classify under the MDC.

Industries

I am primarily looking into:

  • E-commerce
  • EdTech
  • Finance related
  • AI, even wrappers
  • Chrome Extensions
  • Healthcare
  • Project Management Tools
  • Productivity overall
  • SaaS but then ultra-niche or boring business

Fine, that’s all pretty standard but where will Delta Seven separate itself from other rising micro PE firms? (If you can call it already a firm…)

Hedge & Leverage

I wrote a different playbook for myself with risk parameters where I decide if I should buy a project or not. And it always boils down to: How to obtain plus EV and cash positive in a short period of time.

Most firms that operate in billions expect a cycle between 3-10 years to see their investment or costs back. But I can shorten that… to even 24 hours if needed.

At least in theory.

Here’s my hedge and leverage for Delta Seven:

  • I already operate and own over 700 niche blogs in specific industries, generating millions of visitors per month
  • I have a list of 500K plus subscribers in different areas. Maintained and cleaned up on a daily basis
  • I have more raw data than most people: I run a server that parses data across the web on trends, keywords and I can match popularity with Google Search Console Data to find optimal EV in specific industries
  • I track most of the investor data across the world, including an ongoing scrape of 8 million startups where I see shifts, funding rounds and interests from VC and PE (industries) which helps me determine the upsides or negs.
  • I have a ‘black box’ where I can find any lead in any industry within 2 minutes. Giving me an edge in case I want to acquire and go for a cold-email strategy.
  • My team is really good in SEO, and analyzing data – making a possible buy easier to optimize for the long game
  • Outside of my current media network, I am adding a new media division under Delta Seven (Kalmero) that will be supporting the PE side, and we aim to deploy at least 150 niche blogs within the next 4 years

Giving LBO A ‘New’ Meaning

Borrowing assets to buy a company or leveraged buyouts were really popular in the ’90s and even today Elon Musk for example bought X on an LBO model.

However, I created a scenario where LBO will hit differently and contains less risk than traditionally borrowing cash assets.

I only worked on this model because I got so heavily inspired by Tiger Global where I once read that they were present an investment opportunity in the evening, had the papers ready by morning and knew more about the business than they did and sign off on it before lunch time.

Yes, that’s fucking crazy but I always loved that pace and emphasizes the ‘killing what’s coming your way’.

So here is how my LBO will look like:

  • Buy a project
  • Leverage and borrow existing media assets (niche blogs, newsletters, etc) to drive conversion, traffic and deploy the writing team to prepare use-cases and/or reviews
  • Replace Mediavine or Google Ads with my own ads, making the cost per acquisition almost zero
  • The ability to buy it today and become net positive tomorrow

I technically did borrow assets but without exposing myself to any risk.

Other Possibilities

One of the options I am exploring is a combination of pre-seed rounds and media for equity, where media is deployed plus a cash cheque.

The difference is that cash amount is lower, but is balanced out with the media reach.

After all, one of the biggest burns a startup has is marketing and ad spend. And reducing their CAC by zero would make lots of startups faster profitable where the narrative is more controlled and the ads deployed are not at the mercy of a bidding war or risk of account closure.

Media for equity is a far more popular model in the Baltic Region, but I see my own channels of distribution and influence as an Alpha against most of minors in that industry.

Yes they might have more official PR exposure or have more established network than me, but I can beat the crap out of them with numbers.

I also plan to deploy:

  • Earn out models
  • Seller financing
  • Experimental investments in untapped markets

MDC

Yes this is not the same route I will take with the MDC. But eventually they will be merged once completed the Million Dollar Challenge. (Hoping to do this before end of 2024)

So the strategy will stay the same and if only it will fast track the current supporters in the MDC being that small passive investor.

Close

After going back and forth and mapping out scenarios (which I did not reveal yet), I was able to establish a model where I can:

  • All the upsides and none of the downsides
  • I can burn a project and fail but recoup my money through a hybrid model
  • Leverage media on a large scale and build more use cases for myself so I can become as efficient as Tiger Global
  • Reduced my risk of ruin to practically zero
  • Buy projects for the sole purpose of throwing them in the bin but merge portfolios or clients under one major platform
  • Work very data driven, backed by social signals and money flows
  • Predict trends on capital markets and extend that theory into the landscape of startups
  • Scout markets on a deeper level than just X, and find the boring businesses out there that will make sense and either keep them or sell them back on primary or secondary markets for a 20-35 multiple.

Micro-PE, I am coming.