Alternative Investment - Making a Good Deal

One of the most common topics when it comes to alternative investment strategy is understanding how to find and make a quality deal. RISE Sports Advisors Director of Business Development, Jay Bass and Payton Johnson - RISE Sports Advisors Client Relations Specialist - discuss what goes into making a good deal.

Payton: Jay, thanks for taking the time to talk about deals with us today. Let's dive right in. Can you tell us how you would define a "good deal?"

Jay: Of course! It's great to be here. I think I'll clarify a little bit first. When talking about good deals, one of the most important things is that it needs to be a good deal?for you. Is the deal accomplishing the specific goals that you have? If it's a business investment, is the team you'll be working with high quality, high-character group of people? If the answer to those questions is "yes," you are much more likely to find that the deal you are making is good.

Payton: That is a great insight. What things can distract clients from focusing on the correct elements needed to make a good deal?

Jay: That is a great question. The most common issue we see is that sometimes the opportunity is too personal. Some of our clients will have many proposed deals with close relational connections. It is very easy to let that personnel or emotional tie to an investment blind you from issues that might otherwise be apparent.

Payton: I want to revisit that, but I want to dive into something else you just touched on for now. When you invest in a business opportunity, how important is the relationship with the deal sponsor?

Jay: As you can imagine, it is one of the most critical aspects. That's what it boils down to, trust. Regardless of who the sponsor is, the amount of TRUST you have with this entity needs to be immense. You don't have to know everything about them or even be friends with them, but you must trust them.?

Payton: How do these relationships get started??

Jay: A lot of them are built genuinely. Looking deep into their background and understanding the quality of their team is an essential part of this process. It happens in a lot of different ways. Still, as I mentioned earlier, the key is high trust and continuing to build upon the foundation of that relationship and execute on the goals that are set from the beginning.

Payton: How involved is the RISE team in vetting and establishing these relationships and deals?

Jay: We are involved in every deal that comes across the table for our guys. We do our due diligence and research on every opportunity for them. We look for grit, drive, and morality in the teams that present these opportunities.

As a caveat to this, sometimes we will run into a situation where there's a quality investment opportunity. We can use "group economics," which basically means that if there are multiple clients we've identified as a good fit for that opportunity, they can pool their resources and participate in that opportunity together. Still, the minimum investment is too high for what one client can afford.

Payton: What is Investing Alternatively?

Jay: That is a great question. There are two markets: the public market and the private or alternative market. The public market will be stocks and bonds—investments into publicly held entities. The alternative market is made up of privately owned businesses, startups, or other investments that are not openly available to the public. We encourage our clients to be diversified in their portfolios. When we are talking about making a good deal, though, most of the work that we do with our clients will fall under the alternative investment category.

Payton: What are some of clients' biggest mistakes with alternative investments?

Jay: The most common mistake we have seen is investing with their heart and not their mind. It can be very easy to trust our emotions rather than research. As we said earlier, it is important to properly vet the opportunity and the team and their success history, character, and work ethic.

The other mistake that is often made is over-leveraging. It can be very tempting to bet big or go all-in on one or two things instead of diversifying and being smart about how we invest. Again, doing proper research and having a team that can help with big decisions like investing can help avoid both of these mistakes.

Payton: Have you found that athletes, particularly, have any significant blind spots when it comes to investing?

Jay: In general, FOMO (fear of missing out) is one of the biggest challenges. We advise our clients always to trust but verify. Just because there is a good opportunity, it doesn't mean it's the BEST opportunity for them. The other thing we will share to help combat the fear of missing out is that there is no such thing as a bad market. It's all about timing, and for investment, time is our biggest ally.

Payton: Tell me three must-haves in quality deals.

Jay: First, meet and know the team. You need to know everything you can about your investment! This is what you're betting on.?

Second, the investment needs to represent a significant amount of their market share. Who are you competing against? Can you own the market? How much are THEY owning the market??

And finally, you need to know what kind of competitive advantage your potential investment has? If there is no competitive advantage, it's probably not great.

Payton: What kind of research does your team do when looking at deals?

Jay: We will do background research on their team; we will look into the macroeconomic drivers, supply and demand, and anything else that factors into their vertical. We will also look at critical deficits and shortages in their industry. Another vital thing to our research and decision-making is whether we are solving a problem with this investment? Is what we are doing going to change anyone's life? We want answers to these questions when we do our research.

Payton: What is one piece of advice that you give to your clients that we haven't talked about already?

Jay: When you are partnered with an entity, you want to leverage your platform to boost the platform and performance of the company. Leveraging your platform is relevant for a minimal amount of time, so you need to capitalize on it when you have the opportunity to. Many clients need to be coached about this. Our clients will play their sport for a certain amount of time and will have the attention that comes with that platform for the duration of their playing career. If they don't take advantage of their platform in those days, that will be a significant missed opportunity cost for them down the road when they no longer have the same type of platform.

Another thing that is important is the mentorship aspect of what we do at RISE. Mentorship and development are cornerstones for us. We want our clients to walk away from their sport and not have to go coach or train to make a living. Many of our clients are first-generation EVERYTHING, and they don't know what they don't know. They make money, but they don't know how to make money work for them. We get to be a huge part of this growth for them, and that is something very special.

If getting insight into making good deals from Jay Bass interested you in learning more about RISE Sports Advisors and the team, check out our website and discover the other services we have to offer!