Amazing time last week at the TechStars Patriot Boot Camp. The entire experience was fantastic…from hanging out with other veterans to making some new friends in the tech scene to hearing from a Medal of Honor winner. Felt energized afterwards to a degree that has been tough to duplicate lately just waiting for the market to get rational again. Was also thrilled that fellow vet and Spoke Fund master Steve Kiel was able to watch demo day and help me take advantage of the open bar on the last night, too.
In short, got some great feedback on the Spoke Fund in a Box idea, all of which confirmed that if done right, it could be a helluva thing – both as a business and more importantly for PMs and their investors. Which, of course, we already knew. Most of the folks on the funding side there were generalists, and it’s now clear to me I’ve gotta make more friends in the “fin tech” or financial technology community to build out a TAMP. And some of those efforts are already in motion.
More to come here on it soon, but in the interim, here was the script of the pitch I made at “Demo Day” on Friday. Basically had two minutes to give your spiel to an auditorium of VCs, angel investors and other attendees. I was presenter #10 out of about 70 total. I wasn’t asking for money, like many presenters, but was wide open for advice and ideas from all comers, and I got some of that afterwards, too. I believe someone from TechStars also shot a video of my pitch, which I’ll post here as soon as I see it. The video should also capture the brief Q&A I had on stage after my preso.
So here was my pitch:
I’m Cale Smith, the managing partner of Islamorada Investment Management, based in the beautiful Florida Keys, and I came to Patriot Boot Camp to save investors from mutual funds.
There are more than 7,000 mutual funds in this country, which means there are more mutual funds in the U.S. than Taco Bells. The industry’s dirty little secret is that mutual funds are financial products that are made to be sold, not invested in. The vast majority of mutual funds underperform the market, charge fees that are too high, and 60% of all mutual fund managers don’t own a single share of the funds that they run.
I would like to build a platform to help the next generation of portfolio managers launch and run a better kind of fund. In 2008, I created an alternative structure for my portfolios, that I eventually came to call and trademark as a Spoke Fund. A Spoke Fund is a group of separate investor accounts, that are all linked to a core account that contains most of the portfolio managers’ own money. So the portfolio manager and the investors are truly in it together.
My Spoke Fund has grown from zero to $13 million in assets under management. I have been profitable for the last year and a half. I have also helped 8 other portfolio managers launch their own Spoke Funds, and you can find most of them on SpokeFund.com.
The platform I want to build will earn money the same way the portfolio managers do – as a fixed percentage of the assets under management. The business is capital-light, has monthly recurring revenue, is easily scalable and if we do it right has the potential to capture some network effects.
The number one thing I learned this week is that I really need to find a technical co-founder – someone with serious technical chops and who is also up for picking a fight with Wall Street. I’m also looking to put together an advisory board of people with significant experience in financial technology. So I’d love to talk more to anyone afterwards who might be able to help with either.
Thanks for your time.