Join us for an insightful hour with Don Wharton, an accomplished entrepreneur, investor, and fund manager. Here's what you'll gain from this enlightening conversation: 🧠 Learn from Don's unique investment philosophy and strategy 💰 Understand the true utility of money and why smart investing matters 🏢 Explore the world of serial acquirers and their capital raises 📊 Discover how to assess your investments effectively 🎭 Master the emotional side of investing and avoid psychological pitfalls 🙏 Find out how successful investors keep their humility in check 🌐 Get inspired by Don's journey in building a thriving internet company and funds Whether you're a seasoned investor or just starting out, this video offers valuable insights to help you navigate the complex world of investing and entrepreneurship. Don't miss this opportunity to learn from one of the best in the business! 📈💼
Connect with Don
Twitter: https://x.com/donwharton_ss
Sure Swift Capital: https://www.sureswiftcapital.com/
Connect with me :)
Linkedin - https://www.linkedin.com/in/david-barbato/
Twitter - https://twitter.com/ghrxcutvjb
Time Stamps
00:00:00 Intro
00:01:56 Who is Don?
00:07:15 The Meaning of Money
00:11:10 Investment Philosophy
00:22:20 Investing in Serial Acquirers
00:29:30 Capital Raises in Serial Acquirers
00:40:00 How to Assess Your Investments
00:45:23 Emotional Side of Investing
00:50:40 Keeping Humility in Check
00:55:06 Don's Investment Vehicle
01:00:10 Building a Successful Internet Company and Funds
00:00:00.00
davidgalvis
do an introduction so you'll know when i when this actually starts. so
00:00:08.36
davidgalvis
Okay, one, two, three, and welcome to the Value Hunt podcast. And today I'm so excited to be here with Don. He's a long time investor and he's so experienced. So I'll be really happy to, ah okay, let's re repeat this. ah what What do you actually want me to say like in the introduction? um
00:00:33.54
Don Wharton
What would I like you to say?
00:00:35.74
davidgalvis
Yeah, or what do you suggest?
00:00:36.50
Don Wharton
um oh Oh, it doesn't matter. Just speak freely. yeah um You can start it just like a regular conversation, I think, like like when we just started earlier.
00:00:50.07
davidgalvis
Okay.
00:00:50.94
Don Wharton
Just say, I'd just like to introduce Don Morton, an investor with a interesting perspectives or anything anything that comes to mind.
00:00:59.02
davidgalvis
Okay. Okay. Okay. Just because I forgot to ask you. So yeah, ah usually I asked this beforehand.
00:01:04.16
Don Wharton
Yeah, kind of like.
00:01:06.18
davidgalvis
um But anyways, let's go to attempt number two. So welcome to the Value Hunt Podcast. And today I'm very excited to be here with Don Wharton, a long time investor. And yeah, we will learn a lot of stuff. So keep an eye. And Don, why don't you say a couple of words before we dive into the interview or the chat?
00:01:28.30
Don Wharton
Sure, thanks for the opportunity to speak with you. i um It's nice to know that the posts that I'm putting on Twitter are getting getting some attention and I think that's how you came across my profile and um you commented that I had some interesting things to say and it might be relevant for your listeners. And i just a fair warning, a little bit of preparation goes into the tweets before I put them out. lot less A lot more preparation and then the questions that you're going to ask me on the spot. So we'll see if the answers are as interesting, but I'm ready for you to take it away.
00:02:02.82
davidgalvis
Yeah, i'm I'm pretty sure we'll we'll have a lot to learn from you. And ah yes, I actually came across your profile on Twitter. I don't really know how but I found it interesting and that's why I reached out to you. ah So let's see where the conversation goes. I think it's always exciting to to talk with people that are more ah experienced than you are. So I guess that this is the case. So Maybe you could introduce a bit more your your background and talk on that. And I always ask this question, which is super deep, but very simple at the first glance, which is who is Don.
00:02:44.57
Don Wharton
All right. Well, who is Don pretty much delves into where I came from and and the journey that led to me to led to where we are today, I suppose. So where will I start? um i I think I'll summarize by saying I think I have a different perspective than a lot of investors and that I don't just assume that what's said or what's done is the right thing to do. um I like to be different and to challenge the status quo and i to me I always think that there's a better way.
00:03:16.97
Don Wharton
um Society evolves, our systems are from investing involved, the types of businesses that we create evolve, and I think we're getting better and better over time with experience. And I think in order for that to continue, you've got to question what's done and decide if really it's if it's the right or the best way to do things. so ah For me, I guess where it comes from, challenging the status quo was really growing up. i I learned that a lot of the things that I was taught weren't necessarily true. And that kind of started me on a journey of questioning, you know, is there a better way? For example, I was told as that as a child, never go into sales. Nobody likes a salesperson.
00:04:00.32
Don Wharton
I was told never invest in stocks because your your great aunt Kate lost a fortune in 1929 and that continued through the generation.
00:04:08.68
davidgalvis
Wow.
00:04:10.40
Don Wharton
I was told never go to university because my father, I mean from his own experience, he he said 20 years into my job, I'm making more than the person that just graduated. So from his own experience, he thought he was giving me the best advice not to go to university. But it's just, there's three examples. I mean, it's what you're told and what you kind of hold as as truth from a young age. um A lot of times you stick through those, you know, to your own detriment through life, you you stick to those theories. And so I learned to question everything. The first thing I,
00:04:48.83
Don Wharton
did after um after college is I got a job in sales. I was told never to do that. I got a job in sales instead of working for an hourly wage and was able to make three or four times what I would have made otherwise. And that started me on the process of going through a whole bunch of sales jobs from selling just about everything to figure out if that was kind of my calling, I suppose. um I also started dabbling in the stock market from a young age and trying to figure it out, and it really intrigued me. um So flying in the face of the ah the advice that I was given that that, you know, never invest, you'll lose all your money.
00:05:27.12
Don Wharton
at some point I kind of grasped onto maybe that's one person's experience but look at all these other people there seems to be so much success on wall street and bay street and there's a lot of the really successful people seem to do so in the stock market so I was so intrigued that it at one point I that probably was my draw to get me back into university after taking a few years off And my goal was to solve the market really. So I went into economics and ah financial economics courses were some of my favorites. Econometrics was my favorite of all. I don't know if you're familiar, but Econometrics is really looking at the data and figuring out which data points are relevant to predicting um a certain outcome.
00:06:12.43
Don Wharton
So my theory was if I can figure out if weather patterns or interest rate patterns or the price of oil um and and supply and demand, the money supply, all of these things, like which of these data points really matter to predict the stock market? If I can put them into an econometric model, I figured that that would be my beginning. Maybe I was an aspiring young Jim Simmons, if you're familiar with Renaissance technologies, but
00:06:40.73
davidgalvis
i am
00:06:41.18
Don Wharton
um It took me in a different direction, but I'm still very, very much involved in in the stock market and still trying to solve the market. But I think a little bit further ahead than I was 30 years ago.
00:06:52.65
davidgalvis
Yeah, hope hopefully you are. ah But um it's actually a really interesting ah story, ah challenging the status quo ah from a young age and working into sales. it's It's really interesting and it's a helpful mindset, I guess, when it comes to stock market because even though if you're not directly in Wall Street and hearing all the noise. ah There's other stuff like Twitter and the internet where where all people are are talking about the same stocks and you get like, oh, maybe I should invest. But it's good to have that mindset that you described earlier. So um I find that pretty cool and interesting, actually.
00:07:33.77
davidgalvis
um Maybe we can take this in a whole lot of different directions, but since you talked about ah making 3x or 4x the money you would have made ah in other jobs, or regular jobs, ah since you engage in sales and selling large a lot of different products, ah why don't you speak about ah the value of money ah in your opinion and yeah, what's what's your philosophy ah behind accumulating, investing or distributing ah the money?
00:08:09.97
Don Wharton
Well, let me go back to a book that I read years ago, trying to remember the author. It was Wealth Without Risk for Canadians. Charles Givens, I think, was the author. And I don't know about you, but I read all these books through the years, and there's just one or two things from each of them that I kind of grasp onto and hold onto. And I think that's the value that I get from these books. From from that particular one, um the thing that really resonated with me was multiple streams of income. and
00:08:38.19
davidgalvis
Okay.
00:08:38.94
Don Wharton
I grew up um in a, I was told we were middle class, upper middle class. i I learned that those were nice words to kind of soften the fact that we were, we definitely weren't, you know, a really challenging upbringing and and really having very little. And so when I read this this book by Charles J. Givens and I read about the multiple streams of income, it really just clicked with me that just in case something goes wrong, you've got a backup plan because I didn't want to go through a scenario where
00:09:11.45
Don Wharton
um you know there wasn't meat for the sandwiches or or you know there's only one sandwich instead of two for lunch and and that kind of thing so i kind of always wanted what i what i didn't have and i was trying to figure out how to get there i guess for my young age so multiple streams of income was something that really resonated and so probably from my 20s i started figuring out um different paths that I could get in order to to achieve those multiple streams. For example, I invested in real estate from a young age and thought I was thought i was doing so well because I would buy a property
00:09:50.57
Don Wharton
and fix it up a little bit and sell it and make $20,000. And I'd buy another, use that as a down payment and buy another one and do the same thing. And I did that five or six times in a row thinking that, wow, look at this, what a wonderful way to make a living. I've made a hundred grand from selling these profit, these properties. And not realizing that because I lack the experience of of knowing that that's not how you make money in real estate. You have to have a long-term mindset And so that 100 grand, um just to make a long story short, about within about two to three years later, the market went up.
00:10:28.04
Don Wharton
If I'd held on to those properties, um I would have had about two and a half million in in value if I'd just held on in equity instead of just flipping.
00:10:36.11
davidgalvis
Wow, that's crazy.
00:10:39.03
Don Wharton
So I mean, we're limited by our experiences. And to me, I thought I was doing great by making 20,000 each time, but not knowing, you know, if if there was somebody that told me that you know, long term is how you have to view real estate, then I yeah would have been so much further ahead. But it's a benefit of hindsight. But as long as we learn from our experiences and take them forward, I mean, next time we'll be able to apply that to and that lesson learned, I guess, to future decisions. But as a young 20 year old, I didn't know.
00:11:12.00
davidgalvis
Yeah, I guess that's that's also the problem with a lot of investors. Maybe you might make a quick 20% gain, but if you just held on for, I don't know, a couple of years more, ah it would have turned out to be a 10x or whatever.
00:11:20.90
Don Wharton
Thank
00:11:28.87
davidgalvis
so it's It's really interesting for me how you can learn about investing in other fields of your life, not necessarily in the stock market or with investing in companies. um And I guess you you learned that lesson ah with your own experience.
00:11:41.76
Don Wharton
you.
00:11:48.03
davidgalvis
um And it's it's pretty interesting. I would be curious to know um how all these lessons translated into your current investment philosophy because um obviously you did a lot of things, sales and um you you looked into, ah let's say, more trading ah perspective.
00:12:03.01
Don Wharton
you
00:12:11.25
davidgalvis
So how has that evolved over time and how do you look at companies now?
00:12:18.45
Don Wharton
Great question with not such a simple answer. but Let's see if I can kind of pinpoint a few of the experiences that kind of led to my philosophy now. and Right now, just to I'll tell you what my philosophy is and then I'll tell you you know some of the reasons why I arrived at that.
00:12:36.59
davidgalvis
Okay.
00:12:37.43
Don Wharton
um i My greatest successes have been from individual companies, owning individual companies that were operated really well, um really watching every expense dollar to make sure that it was and a dollar well spent. There was a return there from it. um and And because my my greatest successes were from individual businesses, What I'm doing now is I'm really focusing on on companies that buy other companies.
00:13:08.95
davidgalvis
Okay.
00:13:08.99
Don Wharton
And just to boil it down simply, if you own one company and there's all kinds of competitors that are competing with you trying to take away your market share, there's people trying to innovate and come up with a better solution to the product that you offer that might make your own product irrelevant. So there's a lot of forces that are that are kind of headwinds for a company to succeed. But what I do now is I focus on companies that buy other companies and specifically serial acquirers. So companies that have a very disciplined playbook that they pay a certain amount for a company that that meets certain requirements. and And one of those requirements is cash flow and paying a multiple of cash flow. And then they take the profits from that company and put that towards more companies.
00:13:59.65
Don Wharton
And if you intelligently leverage a little bit of debt in there, if you intelligently raise equity when when it makes sense, then you've got a company, as a if it's really good at being a serial acquirer that's a really great capital allocator, then the product is really the risk of having one product or two products is is much less because really the business model is being really, really great at allocating capital. Um, whereas, um, any other type of company that's just, you know, product specific, there's all kinds of things that can, uh, that can be a challenge that can kind of, um, take you off off your path to success and you might have to start over again. So I'll tell you why, ah why I got there, I guess. Um.
00:14:48.04
Don Wharton
So I've constantly, let me just take you back a little bit earlier to my days of econometrics and looking at the data. I was trying to figure out what are the data points that I can look at that will determine if a company is gonna be successful. And ultimately over the years, I've realized it's really difficult to boil it down to specific data unless you, if you're a single product company. And one of the, um Just pause for a sec. One of the one of the things that that really taught me a lesson is that I've had really great success in a couple companies that were really, really successful one day, and then um competition would set in, or or external factors would set in, something would fly in from left field, and it would totally derail that company. And I'd almost be back to square one to try to build something new from from scratch again.
00:15:46.18
Don Wharton
And it really kind of cemented in my mind that a serial acquire and really focusing on capital allocation was the right was the right thing for me. um Some of the lessons I guess that I've learned over the years were um Buying and holding is probably one of the things that most people don't really realize is and is as important as it is. and The model with serial acquirers, you're buying companies and you're intending to hold them forever. um For me, i one of the lessons I learned was buying Apple stock um probably
00:16:24.86
Don Wharton
I remember the trade specifically because I remember the broker saying, oh, I haven't done a trade for $100,000 before. I need to get two sets of approvals for it. And so my it was a day trade at the time. I bought Apple stock for about $100,000 and I sold it for like maybe 20 cents per share profit the next day. And I thought again that that's such a big win.
00:16:46.78
davidgalvis
Wow.
00:16:49.45
Don Wharton
But if I look back, um that $100,000 trade, this was quite some time ago. It would be worth $100 million today if I just held on to that stock.
00:16:57.77
davidgalvis
wow
00:16:57.74
Don Wharton
what a lesson What a lesson in buy and hold that was for me. If I just did my research, bought smart, and then held on, put it in the coffee can, they say, ah to hold forever, then that 100,000 would have turned into 100 million.
00:17:10.33
davidgalvis
Yeah, exactly.
00:17:13.59
Don Wharton
So it's kind of one lesson in in a buy and hold strategy of which um serial acquirers are are um do. um They focus on on buying and hold for the long term and just taking the profits and the cash flow and continuously making new acquisitions. Another mistake that I made is using margin. um Interesting story, this is kind of my start right out of the university. um This is back in 98, 99. I noticed that a lot of people were starting to make money buying momentum stocks.
00:17:47.29
Don Wharton
And I i did my research and kind of jumped in and and bought some ah ah momentum plays. I remember specifically borrowing money on my credit card and every dollar that I could get, putting that into a brokerage account and then levering up with margin. And I was able to put $75,000 into my brokerage account, borrowed money.
00:18:05.74
davidgalvis
Whoa.
00:18:12.29
Don Wharton
ah for the most part and turn that 75,000 into 750,000 over about four month period from 1999 the winter of 1999 to early 2000 thinking that you know I've got the system that works 75 to 750 and of course your you're extrapolating what that 750 is going to become over the next four months. you know That's lacking the experience of knowing that what goes up comes down. ah But right after when the market crashed in early 2000, my 750,000 would dip down to 650, and then I would maybe sell some of the stock to to alleviate some of the margin. Then it would dip again, and I would go all back in.
00:19:01.28
Don Wharton
As so many people do, they buy the dip, the buy the dip mentality. And so I had to learn lessons the hard way that margin can be very painful. It's exhilarating on the way up, but it's excruciatingly painful on the way down. And it proved to me that margin is something to use very, very carefully, um keep it to a minimum, and certainly don't take advantage of the maximum margin amounts that your brokerage account um wants you to take, I suppose.
00:19:33.17
Don Wharton
um Other lessons learned that kind of led to my current strategy is is having to go through um the lessons of day trading and learning that, I mean, you never really hear about somebody that's really, really successful that that day trades for a living. I guess you do. you If you read the books by Shwager, Jack Shwager, Market Wizards, I guess there are some people that have had tremendous success. But I think that would be a small percentage of the people that that try, that venture down that road to begin with, thinking that they're going to make their fortunes through day trading. I went through that, tried tons of different strategies, volatility strategies to isolate myself from downturns.
00:20:16.38
Don Wharton
um you know buying the breakouts, more advanced strategies that if you look at the data and you can back fit the data to prove your thesis just about every time, then you it works until it doesn't. Everything works until they don't. um And so I totally eliminated that from my investing philosophy. So no day trading, a very careful margin if any at all, buy and hold for the very long term so I don't have a repeat of my Apple mistake.
00:20:48.66
Don Wharton
And it really landed me on focusing on the coffee can strategy, um which I forgot where I first read it. But I believe it's mentioned in the 100 Baggers book by Chris Mayer, which is just an exceptional, exceptional book that I wish I had when I was 20. It really resonated with me. In fact, I bought copies for all my kids and anybody that would um that I brought it up that seemed interested, I would give them a copy. I just ah just and was so excited about that book and and the philosophies behind it and and just the data behind it. I mean, it's really, you're looking at the data, you're looking for the companies that have proven that there um that they work, that they're able to return a certain return on equity above a certain threshold, like 20 or 30% or more.
00:21:42.57
Don Wharton
and just buy those companies. Not the ones that have a story to tell, but the ones that that actually have the data to prove the story that they tell. And just kind of a simple way to to boil down the the strategy was just buy and hold for the long term and focus on companies that have the ability to to repeat their business model in perpetuity, repeat their generation of profits in perpetuity. The longer runway, the better. Excuse me.
00:22:14.02
davidgalvis
i No worries. ah And that's actually a beautiful story on on how you you came to your philosophy. I guess I was a bit more lucky. I just the found out about Chris Mayer. I don't know when at some point. I read his book and it just clicked. and I guess we have a similar strategy. ah And I'm also very interested in the serial acquire model. In my youtube YouTube channel, I try to to explore that deeply.
00:22:44.43
davidgalvis
For example, I just launched a ah video. I don't know if you read the REQ paper on the serial acquires.
00:22:51.89
Don Wharton
I have, yes, very impressive, very impressive.
00:22:53.45
davidgalvis
Yeah.
00:22:56.17
davidgalvis
Yeah, so I'm really curious to know, yeah let's say, obviously, when you talk about series like serial acquires, ah Sweden comes to mind ah immediately, almost. ah But since you are a so a challenger of the of the status quo, and most of these serial acquires that are really successful got pretty popular in Twitter and other platforms. I was wondering what's your strategy and do you look for the more obscure ones or ah how do you think more specifically about this type of business model, so to speak?
00:23:38.92
Don Wharton
So while you're talking about what I think about every day and that's figuring out, you know, do i should I focus on a serial acquire in the early stage before multiple expansion is kicked in or should I focus on the ones that have been proven to really understand the model, how to allocate capital and management has proven themselves. And of course the risk with buying the the early ones is management really, if they haven't made all the mistakes that are possible to be made yet, they're probably gonna make them at some point. Whereas if I buy the ones that have been around for a long time, where multiple expansion has already increased their valuations so much, like I'm not that familiar with a lot of the individual um Swedish names, um but i I understand that through my FinChat,
00:24:32.57
Don Wharton
um mempa i I subscribed to them recently and I was actually able to for the first time figure out what the Swedish acquirers are trading at.
00:24:38.11
davidgalvis
Hmm. Yeah.
00:24:43.06
Don Wharton
And they seem to me to be a pretty healthy multiple, not quite as big as a constellation software or their spinoffs like Topicus and Lumen Group, but they're still, you know, they're well known and that's boosted their valuations substantially. um So do I want to pay a little bit extra for their the ability that they've proven already that they have or do I want to take a chance on the early guys that haven't made a bunch of mistakes yet and they probably will. And so that's kind of me figuring out is there a way to look at the earlier ones
00:25:16.97
Don Wharton
get the get in early at a lower multiple. But if there's a way that I can figure out if management really understands what they're doing, and then just bet on those ones early on, rather than focusing on just the more mature ones. And that's kind of where I'm set right now. But I'll give you a couple examples. One early stage company, um Oh, what great what a great leadership team, great management team. I'm not going to give you the name of the company. It's just too small. um i I really liked what they had to say. They really understood the model and it really made sense to me. And they were publicly traded. And I started buying and accumulating shares thinking I'd like to build a meaningful position because these guys really get it. um But this was probably in 2021,
00:26:09.51
Don Wharton
that I started building the position. I got to the point where I had 9.9% of the company. and And then the market ended up going down, like their access to capital wasn't really there from 2022 onwards.
00:26:15.81
davidgalvis
Well.
00:26:26.26
Don Wharton
And the one one of the things that's super important with the serial acquirer is you need to have access to capital to make acquisitions all of the time. you're not If you're only
00:26:36.12
davidgalvis
Yeah.
00:26:38.50
Don Wharton
If you're a holding company and you have a number of companies and you bought, let's say, five or six companies, you're not gonna be valued very highly if you're not continuing to make acquisitions. In fact, you're gonna receive a holding company discount, typical which is typical of the public markets, if you're not proving that you're gonna continue to make new acquisitions, acquiring new streams of cash flow. And so this company kind of fell into a bit of a rut where ah they weren't able to raise new capital at a higher valuation, And then the market went down further, and then they weren't able to raise new capital at all.
00:27:12.88
Don Wharton
And that meant that without making new acquisitions, they received a very serious holding company discount.
00:27:13.20
davidgalvis
Mmhmm.
00:27:20.63
Don Wharton
um And then if you couple that with some debt that they put on the company early on, when times were good, ah they were really in a holding pattern, and they still are today. So it really went nowhere. um So that's an example of putting a lot of money into a company early on that said everything. um Their story was great, charismatic management team, I mean they just had everything going for them with the exception of what was out of their control and that was market forces, interest rates, access to capital, etc.
00:27:52.60
Don Wharton
um At the same time, I also invested in another company that was quite a bit larger, but it's been around for about seven years or so and started building a meaningful position in that one. and Same kind of thing. Serial acquirer really focused, really understand the market. but The ability to raise new capital wasn't a problem for them and has never been a problem for them because of their focus on profitability early on. So that's my takeaway from these two examples is always focusing on profitability and keeping expenses down
00:28:29.22
Don Wharton
is not just a nice thing to do, it's it's a must for serial acquirers because you're not going to be able to access new capital unless you're a profitable company and those profits are predictable for three, four, five years out. because lenders, when when times get a little bit tougher and interest rates go up, um they're not going to give you money unless you've um unless you've proven that that you really understand the operational side and that's not having any unnecessary expenses and that's not spending on on your cash flows on unproven initiatives, but taking those cash flows and banking them for new acquisitions.
00:28:46.03
davidgalvis
Yeah.
00:29:11.58
Don Wharton
And that's kind of my learning from those two scenarios that um the companies that succeed as serial acquirers are the ones that really truly focus on capital allocation. The ones that that struggle are the ones that think that they can take the excuse me take the profits made and reinvest into their existing companies rather than saving that money for new acquisitions.
00:29:42.12
Don Wharton
That's a signal for me to talk less and listen more.
00:29:45.32
davidgalvis
I don't think so. Today you're the you're the talker, I'm the listener. so um yeah But what you said is pretty interesting and i'm I'm really curious to know why you put so much emphasis, I guess you boiled it down in the end, but I want to to go deeper on the on the topic of raising capital because At least for my experience, the really high quality ah serial acquirers, maybe the the multiple expansion or expansion already has kicked in, ah but higher quality ones really don't have so much needs of raising capital just because
00:30:26.56
davidgalvis
ah their existing companies ah provide ah enough capital to reinvest.
00:30:30.20
Don Wharton
Okay.
00:30:33.74
davidgalvis
and um yeah Obviously, when you are trying to run too fast or ah raising too much debt to to fund more and more acquisitions, ah you you might end up falling or just being punished by the markets. um I'm curious to know whether your strategy allows for companies that raise capital and issue shares and ah take on debt and how do you think about all those things?
00:31:04.45
Don Wharton
Sure. Well, let's start with Constellation, kind of the most successful of them all. And if you look at any graphs that are comparing the different serial acquirers, they're leagues ahead of everybody else. I think including um ah most of the the Swedish ones as well. And I think their return on returns on equity are about 30% plus, and they have been for 15 or 20 years.
00:31:21.12
davidgalvis
Right.
00:31:27.41
Don Wharton
So they're in a situation where their own cashflow that they generate internally is all that they need to make future acquisitions. But they're actually at a point now where they've got, they don't just have the cash flow, they've also got the expertise to expand even further. And it it'll be interesting to see what they do in the future if they if they go bigger, if they go into different um areas rather than just vertical market SaaS or mission critical, but they've got the cash flow to do it and they have the expertise to do it.
00:31:59.70
Don Wharton
um But if you look at some of the smaller company, but they've also got the multiple expansion, so you're paying a premium for all of that. So if we if we look at a smaller company, sorry, that doesn't necessarily have the cash flow, all of the cash flow that they need to make new acquisitions. um it's and they they They can raise debt if they're able to. There is a very smart way to do it that a lot of people just look at um debt and equity, raising equity for that matter. um They look at it negatively. and But if you boil it down to what value is being generated by that company on a per share basis, then and making sure that the the amounts of debt to equity um aren't too high,
00:32:51.75
Don Wharton
um You can actually really, if you boil it down to a per-share basis, there's actually some really, I think, smart, smaller companies that haven't yet experienced the multiple expansion that Constellation has, but they're on the trackp they're on the right path. So if I can buy a company that um issues debt, they don't have just their own capital to make new acquisition, but they do it intelligently, maybe their debt-to-equity ratio is less than one, um I would say. And then if that same company also issues ah new shares,
00:33:26.69
Don Wharton
On the surface, a lot of people would look at that and say, oh, there's dilution there. I don't want to buy that. I want to buy Constellation or or one of their spinoffs. But to me, if I boil down that new share issuance to ah on a per share basis, are they creating value on a per share basis, new profits, new cash flows, an increase in owner earnings on a per share basis after each equity raise? And are they maintaining that debt ratio of ah one or less, for example, then I'd be really interested in a company like that if they're if they're that disciplined. It's the companies that raise equity and they're not looking at the impact on a per share basis that get into trouble. There's a company that um I looked at recently that buys veterinary practices.
00:34:19.07
Don Wharton
And I looked at their their stock has just been decimated, I think down 99%.
00:34:26.92
davidgalvis
Well.
00:34:27.02
Don Wharton
And I looked into it a little bit, and it's like they're raising equity and making acquisitions, but they're not creating any value each time that they do so. So at some point, the investors that participate in those equity raises, um if a red flag is going to get raised if it hasn't already, that, wait a second, The story makes sense, but every single time you raise new equity, my share price goes down. And so hopefully the last questions about really, you know, maybe pausing new acquisitions make the existing, in their case, veterinary practices profitable and start creating value for shareholders before doing another equity raise.
00:35:07.91
Don Wharton
So if you that's an example of raising equity and making new acquisitions without being perceptive of the fact that you need to create value first so that you can mate make sure that each new equity raise is at a higher valuation for the shareholders. So there isn't really that dilutive effect. um So those that get that and those that get the the ah the reasonable debt amount, um keep that within reason. um and the focus on per share value being created for for investors, then I'm really interested in finding those companies early on before they get the multiple expansion that Constellation has.
00:35:49.62
davidgalvis
Yeah, I guess it it all boils down to return on invested capital and reinvestment rates. so
00:35:56.64
Don Wharton
Per share, per share, because all those things can be great, but if it's not per share, then it's kind of just a vanity metric, essentially.
00:35:57.37
davidgalvis
if you can't if yeah first
00:36:06.04
davidgalvis
I guess, yeah. and But even if you raise equity or debt and you can you are able to do that on a per share basis, as you said, you eventually end up increasing the intrinsic value of the company.
00:36:08.17
Don Wharton
Thank you.
00:36:20.33
davidgalvis
And I get what you say. And obviously, ah as a rule of thumb, you you you don't like to be diluted and stuff, but sometimes it's easy it's useful to look deeper. ah but still be aware of being diluted and not really getting ah the the intrinsic value ah increase that you would like to get. so
00:36:45.11
Don Wharton
let me give you Let me give you an example of that just to kind of show where, and i there's some Twitter conversations where people kind of have piped into some of my posts and and they said, oh, I won't look at that company, look at the dilution. So there's one company, I don't want to name companies on on on this set call, but there's one company where um their model is to buy buy new companies, buy cash flows, and then distribute dividends, share the dividends, and then raise new equity, new debt, make new acquisitions, and then increase the dividends um for shareholders.
00:37:15.01
davidgalvis
Okay.
00:37:22.57
Don Wharton
So essentially what they're doing is, let's say you've got, um let's say there's a dollar per share in dividends.
00:37:23.48
davidgalvis
Okay.
00:37:30.84
Don Wharton
Now let's say that company, per share, now let's say that company raises a little bit of debt and a little bit of equity and maybe another 20 million combined and and buys another company. Now that dollar per share, let's say, goes up to $1.20 per share. Now, let's say they do that again. They buy another company by raising debt and equity, even though they've taken on a little bit more debt and they've raised new equity, diluting the existing shareholders. But if they were able to make that second acquisition and increase the dividend per share from now $1.20 to $1.40, doesn't it make sense? Because it's on a per share basis. So if this company continues to do that over five or 10 years,
00:38:16.31
Don Wharton
10 years from now, they could have five times the the at the number of shares outstanding shares that they have today. But if that, what started at a dollar per share dividend rate is now $10 per share dividend payout, isn't that worth the dilution? Isn't that worth the the debt that they take on to get that type of return? so That's just one example looking at a company that focuses on paying out dividends. but There's also companies, and I can think of another one in Canada that's doing the same thing but without paying out dividends. They retain all of those all of that cash flow and they put that towards new and larger acquisitions. So if you're cognizant of of the per share metrics, then don't let dilution scare you away.
00:39:06.34
Don Wharton
but look at the value that's being created per share. So every time they issue new equity, are those new shareholders better off, or pardon of me, are the existing shareholders better off? And then for the new shareholders, are they made better off for the next acquisition that's made? And then so on. And for the two companies that I talked about, digging into the data, exactly, they are made better off each time a new acquisition is made. So dilution isn't necessarily a bad thing if you're creating value for share.
00:39:38.52
Don Wharton
and depth as long as you um make sure that you're not over leveraged and susceptible to an unexpected interest rate interest rate increase, um as long as that's kept at a low level, then that also can be very smart and and augment your returns even further.
00:39:55.73
davidgalvis
Would you think that people are a bit scared of the dilution also because it's harder to value a company of ah when you get more dilution? Because ah if the share count is increasing, it doesn't look as well in the model, ah so to speak.
00:40:11.13
Don Wharton
i think I think a lot of people just look at certain things that they've been told to look at, like like the outstanding number of shares, and then they just turn away.
00:40:21.20
davidgalvis
Yeah.
00:40:22.42
Don Wharton
It's it's kind of like a a screening problem where if you've got a few things that you're looking for, one of the common things that people look for is they don't want delusion, just because they've been told that it's a negative thing. But to really find the best opportunities that the serial acquires that haven't realized that that multiple expansion yet, um you've got to look a little bit deeper and you've got to be willing to dig into the per share metrics, which a lot of people aren't willing to do, and that's fine. But that means that's an opportunity for those of us who do look a little bit deeper.
00:40:58.95
davidgalvis
Yeah, that's that's interesting, looking where others don't look at. It's always a ah source of opportunities, I would say. um Now, getting out of the serial acquired topic and back again to your investment process and philosophy, um I would like to ask you, ah since you have a really long-term mindset due to your experiences and and so on, ah how do you actually ah deal with the problem of the super big feedback loop but that you have when you invest, say, in a company for the long run, ah let's say five, 10 years from now, you really can only assess the success of your investment, ah say, it at end of that period. So how do you make sure you're improving and you're not losing the du the key feedback that you should be receiving from those investments?
00:41:54.61
Don Wharton
So because I'm long-term focused, I don't really, I don't need confirmation that that what I've bought is working or doesn't work over the short term. So let's say I've got a ah basket of 10 serial acquirers. I've got a little bit more than that, but let's look at a basket of 10. um Each year, and this is where the multiple streams of income comes into play by the way, this all factors in, kind of like my philosophy where what I want to be able to do is I want to be able to add to my winners. ah So I want to take the profits from from other ventures and businesses and I want to be able to add to the serial acquirers that have created value on a per share basis um that year.
00:42:42.31
Don Wharton
And so right now ah in looking at my 10, I think there's only three of them that have created value over the past year. um Those are the ones that I'm going to add new profits to. So if I do this year in and year out, I take available cashflow and I add to my winners, I'm gonna end up having very, very large positions in and some positions that weren't winners and didn't have any money added to them ah that are very small and insignificant, in fact. So if you look back, let's say I did this 20 years ago and Constellation Software was in there and there's a couple other um Canadian serial aquires. I'm kind of focused on the Canadian ones more so. um ah Another one is called Ench House, which was I think around about 20 years or so ago.
00:43:36.57
Don Wharton
If I look at those two companies just as an example, I would today have a massive position in Constellation and a much smaller position in Ench House just because I would have added to Constellation almost every single year. another thing Another thing that I look at is Morningstar has a report available where it will you can enter a stock and it will show you if that company has outperformed the S and&P.
00:43:49.84
davidgalvis
Right.
00:44:01.79
Don Wharton
There's lots of ways to do this. I just look at Morningstar, but it will show you if if um that company has outperformed the S and&P that year and it'll show you the outperformance or underperformance over the past 10 years, in fact, versus the S and&P. So if I, it just gives you kind of the perspective of knowing how important it is to add to your winners and not to your losers. Like don't average down. I mean, you're going to end up owning a big position if you average down in something that could ultimately go to nothing. Whereas if you average up and your focus is on, on compounders and maybe one day, you know, actually getting a hundred bagger, ideally,
00:44:44.03
Don Wharton
then averaging up is always a good idea for your best companies. But averaging down is is often not a good idea ah because those companies can go from zero. So if I look at two companies, and let's say I make a thousand dollar investment in each, and those are the only two companies I ever buy, if one of them goes to zero and the other one's a hundred beggar, does the one that goes to zero really matter? Not really.
00:45:10.59
davidgalvis
Yeah, not really.
00:45:11.83
Don Wharton
So for me, the feedback loop that you're asking about, it's really a matter of adding to my winners and and worrying very little about those that that don't deserve my attention, I guess, so to speak.
00:45:26.03
davidgalvis
That's that's really interesting. You're basically applying a modified dollar cost average strategy ah to your.
00:45:31.49
Don Wharton
But it's also the coffee can approach. I'm not second guessing the choices that I made because I put the research in and I bought those companies for a reason.
00:45:34.14
davidgalvis
Yeah, exactly, exactly.
00:45:40.00
Don Wharton
So I'm giving them a chance to to prove themselves and to prove out. But they're only rewarded if they continue to produce a return on a per share basis. And that reward is is a continual investment whenever the opportunity arises, like huge market pullbacks or um at least on a yearly basis.
00:45:59.44
davidgalvis
Yeah, that's that's really interesting because let's say common sense says that you should average cost down ah when when something gets cheaper, you would want to to add to that or buy more. um But actually sometimes the winners are the ones that carry the most weight and over time what matters is is really adding to those winners and not to the losers.
00:46:14.68
Don Wharton
Okay.
00:46:21.33
davidgalvis
so I find that you are a true practitioner of the coffee can approach. So that's that's really interesting. And it takes, I would say, more of a psychological ah endurance rather than technical expertise. um Obviously, you have to put in the research. And I'm not saying that you don't do, ah let's say, deep research on on your names. but um I'm really curious to know ah what strategies do you have in place to make sure you are consistent with that ah philosophy over time because it's not just applying it one year and the year after you don't do anything, it's doing it over and over again ah for the long run. So how do you manage that emotional side and psychological aspect of investing?
00:47:15.20
Don Wharton
you know The psychological side, a lot of people hear it that haven't made the mistakes or lost a lot of money and they say, yeah, yeah, okay, you know that's not gonna get me. you know i'm I get it. I would challenge that people that haven't had the experience of of being really, really wrong probably don't get it yet.
00:47:28.73
davidgalvis
Yeah.
00:47:36.74
Don Wharton
Like for example, my experience in 99, 2000 of going from 750,000 to nothing, to being wiped out, actually less than nothing, because those credit cards I continued to owe money on, so I was actually 75,000 in debt after losing, after being up 750, so I had to figure out how to pay that off so that I could get back into the game. I was taken out for several years. and then had to start over again. So having that experience was quite a lesson. And another kind of experience with selling my Apple stock too soon was nothing really, like it it hurts, but it doesn't hurt like like tangible loss does.
00:48:15.85
Don Wharton
um So I mean, by going through those experiences, it kind of enables me to realize that you have to stick to your system.
00:48:20.36
davidgalvis
Mm hmm.
00:48:25.24
Don Wharton
And if you don't stick to your system, then you are going to be, there's a higher likelihood that you're going to be taken out of the market or be scared out, for example. Another thing, and something that's really huge in in my the system that I have that's evolved to this point is that The best opportunities are available when nobody has money to take advantage of them.
00:48:49.38
davidgalvis
Yeah.
00:48:49.45
Don Wharton
And so for example, when when the tide goes out, as Warren Buffett says, and you know those who, um well, you know the story, everybody's heard that, but um when the tide goes out, I mean, it's not just a matter of who's using margin and who's you know who's exposed, it's who can take advantage of that opportunity of of it going out. So in order to be in the right place when volatility kicks in and the market kicks out all of those that didn't have the experience to know better, um you've got to have the cash available to buy when when the values are there. And so part of my strategy is to is to always have the ability to take advantage of spikes in volatility when people get irrational. And it actually really, really
00:49:41.39
Don Wharton
is an amazing feeling to be able to, like if um if a stock that you've been watching for years gets cut in half, to be able to take advantage of that, buy those shares, and have a really low cost basis. It really kind of cements that you're doing the right thing, which really helps cement that, you know, that that you're not going to get scared out at some point because you've got that low cost basis. It's validation that that the model works of having cash available. And if you look at Warren Buffett as an example, he's always got a huge amount of cash available but case because he knows better than anybody that when there's a huge ah shift in market sentiment, that's when the opportunities are available.
00:50:25.72
Don Wharton
It's hard to do when you're when you're um young and and you're making small moves and you're still trying to kind of you know make your fortune kind of thing, but those with experience we should listen to. And there's a reason why he and others have cash available and something that I've i've done over the last number of years to make sure that I'm able to take advantage of of high volatility. When others are scared, that's the time to be um as they say to um to be greedy.
00:50:59.33
davidgalvis
Yeah, exactly. And ah actually, is it's really interesting to see how um theoretical economics or portfolio theory says you should should have like 100% investment invested because obviously cash can be a drag on your performance, at at least on a theoretical basis, but that doesn't take into account those Black Swan opportunities that happened once in a lifetime that you can buy, say yeah Berkshire Hathaway for like 50% of the intrinsic value. So ah it's really a matter of being prepared when opportunity comes, as you said. And for me, that's that's really interesting. And cash is actually my biggest position right now.
00:51:44.02
davidgalvis
ah But it's not intentional. I'm just trying to find really great companies. ah Ideally, I would have less cash, but yeah that's what I have right now. um And I guess one question I want to ask you, just because of your wealth of experience and all the ups and downs you've had in investing and making money and losing everything, ah how do you keep your humility in check? ah I would guess so it's ah you would remember your mistakes or something like that. But on a practical basis, on a day-to-day life, how do you keep yourself from becoming overconfident in your strategy and really being grounded?
00:52:31.92
Don Wharton
Thank you. I'm going to take a term from from my economics years. Everybody has heard of pre-to efficiency in the 80-20 rule. um For me, the pre-to term that that that I think of often is pre-to optimality, and that's um only making a change if focusing on trying to make everyone better off without making anyone worse off.
00:52:55.84
davidgalvis
Mm
00:52:57.51
Don Wharton
So my philosophy has often has always been um to try to to try to improve and to try to to make the businesses that I invest in, um try to make my my businesses that I own and and build, try to make decisions that make people better off without making someone worse off. So I've kind of been focusing on ah not myself, but on others based on because of that philosophy ah for as long as I can remember.
00:53:22.14
davidgalvis
hmm.
00:53:29.30
Don Wharton
From my experience, if you focus on yourself and focus on um in any business, if you focus on yourself, um you're going to maybe get a little bit ahead, but the real gains are possible if you focus on focus on making things better for others. And for example, if you do what others aren't willing to do, um you're not going to have that much competition. Like if you're if you're generous to a fault, if you're if you try to create um as much value as possible for your customers, then you'll have success ultimately overall.
00:53:54.84
davidgalvis
Yeah.
00:54:05.70
Don Wharton
um because you're you're going to have a lot less competition. And so for me it's really been not about you know what's in it for me, it's about how can I do the most good and then successes come from that. So I think to me it's it's a focus that um that should get more attention from people. If you're building a business or in anything that you do, you know try to make things, try to make life better, try to improve things for for others, try to make a product that has a material improvement for others and and the benefits will come to you many fold.
00:54:39.77
Don Wharton
um I don't know if that answers your question, but it's kind of, I'm not really focused on, you know, what i what do I get out of this? I'm more focused on, you know, what value can I create? And and happiness and success tends to come from that.
00:54:58.02
davidgalvis
Yeah, for sure. like I asked this question to a lot of people, including Chris Mayer and other investors. and Actually, it seems to be a common theme that it's a struggle to to keep ground to stay grounded and humble. But part of the answer from what I've understood and what you said right now is really getting out of yourself and trying to really improve and ah provide value to other people and that kind of gets you out of your own head. And yes, it might be one of the greatest strategies to to stay grounded. I struggle
00:55:38.00
davidgalvis
a bit with this because when you're young you obviously are confident and want to and think you know it all but as you learn more ah basically you you learn that you are more ignorant ah than you think you are. So ah but by having these conversations, it's also a way for me to ground myself and really understand that there's so much to learn and it's actually really exciting to to to learn from from people like you. So I appreciate you ah yeah your answer. It means a lot.
00:56:16.66
davidgalvis
um Maybe one last question, which actually ah could have been part of the introduction, is really understanding through which vehicle do you invest. Do you invest privately or do you have ah ah some kind of partnership fund or separately managed accounts? How do you ah formally invest, so to speak?
00:56:41.05
Don Wharton
Well, that's a question I haven't been asked before. So through a number of vehicles now, so I have a number of holding companies with different partners that invest. And the reason why different companies were set up is so that I could have different partners with different share ownership.
00:56:59.08
davidgalvis
okay
00:56:59.04
Don Wharton
I have a company that with a partner that invests in compounders specifically and then we take the cash flow generated from those compounders to invest in more compounders. That's kind of a test to see where it will be in 20 to 30 years from applying all of our best practices. I've got um other holding companies and family trusts as well as um the most important thing to me actually is my kids' accounts.
00:57:21.59
davidgalvis
Okay.
00:57:25.43
Don Wharton
which every I wish that there was somebody that that taught me all of this when when I was a kid.
00:57:26.09
davidgalvis
Okay.
00:57:32.65
Don Wharton
So here I am buying 100 Baggers by Chris Mayer for each of my kids and getting them to read them. And they just sit on their nightstands and they I don't even think they've they've opened it. Well, one of the kids does. um One of the kids reads it, but the others don't. But what I did is I set up accounts for each of them that they're not allowed to touch until they're 52 years old, which is the which is the age I was when I set up the accounts.
00:57:55.66
davidgalvis
Whoa.
00:57:59.41
Don Wharton
So the youngest one has 40 years to compound and the oldest one is has about 35 years or so to compound. And in each of those accounts is um a bit a small amount of 15 or 16 serial acquirers. And so if I only had the knowledge to to to buy companies when I was their age that were focused on compounding, that were masters of of allocating capital efficiently, I can only imagine what you know a $50,000 account would be worth in 40 years or so. A lot. I mean, if it compounds at 15 to 20%, if it compounds even higher, I mean, it's it's it's unbelievable what they can be worth.
00:58:44.99
Don Wharton
um But hopefully I can convince the kids to from a young age to really understand this and to contribute to these accounts themselves. So when they each reach 52, I imagine these will be very substantial, very substantial for them at that point. I also have a company that's focused on building um that's a serial acquirer as well and has a bit of an innovative model that distributes cash monthly. So it's not a compounder per se, like a constellation software, but it's a it's a it's a fund that buys companies and then distributes the prop distributes the profits monthly. The goal being that when I was when i had a software company
00:59:34.20
Don Wharton
and had profits from that company. And I first started discovering serial acquirers and really understanding the the benefit here. I really wish that there was something available where I could buy smaller SaaS companies or smaller companies as like as an owner. um at a ah The smaller companies are available at lower multiples, like under a five times EBITDA, for example, whereas the more expensive ones that are publicly traded are 20 or 30 or more times EBITDA.
01:00:00.30
davidgalvis
Mm
01:00:07.80
Don Wharton
So my dream at that point was being able to invest and acquire companies at the lower end. So I created ah a company with a fund that enables accredited investors to actually co-own a basket of profitable SaaS companies and then receive profits monthly as if they were the owners doing all the work, except they don't have to do any of the work.
01:00:29.40
davidgalvis
-hmm.
01:00:30.85
Don Wharton
So that's something that i I'm working on building as well and ultimately in the long run, um I think that can rival some of these other serial acquirers, but still a work in progress.
01:00:42.57
davidgalvis
Well, that's super interesting. Maybe I should have done a bit more work on your on your past, because if I knew this before, I would have asked more about your are um career as an entrepreneur, basically, because you have so many companies. I don't know how much time do you have ah left, because maybe you could delve a bit into that. But obviously, I don't want to to yeah rob too much of your time.
01:01:09.86
Don Wharton
Oh no, that's fine. i can Another 10 minutes or so. I don't know how much time he set aside for the call, but um go ahead, ask away.
01:01:16.77
davidgalvis
Yeah? For sure, for sure. OK, perfect. So ah maybe you could give us a bit more background on your um on what you did until today to to build your capital base to do so many interesting things and setup set up accounts for your kids and so on. So for example, someone like me that's just 18 years old and wants to reach to that point where you're able to to to have several enterprises and holding companies and ah setting up accounts for their kids. like how how How do you got there?
01:01:55.71
Don Wharton
This is another hour at least, but I'll try to condense it. um but Let's go back to 1999-2000. Something that I was doing at the same time as as finishing my economics degree um is I was investigating the type of business that I wanted to to build. and I narrowed it down to software, and I didn't have experience in software, but I knew that there was higher the higher the highest profit margins were available in software, and I knew that it was a product that with um and a certain amount of fixed investment, I would be able to realize a recurring stream of of of sales.
01:02:21.72
davidgalvis
Hmm.
01:02:42.70
Don Wharton
And so I wanted to build something and I remember looking at Oracle and I remember looking at it and thinking, oh my God, there's a 90% gross margin, how can that be? Anyway, it really got me digging into software. So long story short, in the early 2000s, I was so aggressive. i This is before um a lot of the sites were available and and there was kind of ah a connection to overseas with ease, but I reached out to companies in India um China and the Ukraine to try to find a company that would build a software product for me.
01:03:18.69
Don Wharton
And the software product that I wanted to build was something that focused on on malware. Removing, back at that time, I don't know if you remember, theres um there were pop-ups were a problem, PCs dominated, the Macs weren't really around, and there wasn't iPads or anything like that.
01:03:26.32
davidgalvis
Hmm.
01:03:38.08
Don Wharton
so um With my brothers-in-law we got together and we we figured out how to market online. We read absolutely every single thing that that Google ever put out there. This was the early days of Google AdWords and we realized that there's an opportunity to be able to buy traffic. so and just to backpedal a little bit. We wanted to build a product. We realized that the two biggest constraints that were going to slow us down were cap the the capital to do so and the experience um and the ability to market.
01:04:13.34
Don Wharton
And so we we learned absolutely everything about marketing by signing up for reseller programs for other companies that produce similar products. And then we we created campaigns on Google AdWords and overture back them, and there's a whole bunch of other pay-per-click engines at the time, 7 Search, Canoodle, um lots of them that don't exist anymore. But we really became masters of of marketing. And it's kind of like knowing absolutely everything about AI today.
01:04:43.88
Don Wharton
Very few people do.
01:04:45.28
davidgalvis
Yeah.
01:04:45.35
Don Wharton
But back then, the new Google and search engines and pay-per-click and pay-per-click arbitrage was ah just a massive opportunity that few were aware of. So we figured out how to market. Then we figured out how to um outsource the development of a product, had the product developed at the same time that we were were're learning how to market through other companies. And when our product was ready to sell, we already had the campaigns all set up. So we knew exactly how much revenues we would generate on day one of launch of our own product.
01:05:19.07
Don Wharton
which is something I'm not sure can be repeated today, but it's just the opportunity that that was made available through reseller programs back then. I think LinkShare was one of the one of the sites, and I forgot some of the other ones. It's a long time ago. But um but when our product was ready, we knew on day one that we would be that we'd be selling, I think, $20,000 or so per day of that one product.
01:05:44.12
davidgalvis
Wow.
01:05:44.11
Don Wharton
um So when we launched the product and we had that success we learned very quickly what not to do in developing and that was don't have the company that's developing your product also do quality assurance on it because they're not going to find the the problems with it that
01:06:02.19
davidgalvis
The bugs.
01:06:02.20
Don Wharton
You know, they they didn't account for exactly. So as soon as we launched, we had to take it off the market, switch those campaigns back to the other companies that we're promoting. And we had to find a local company at great expense to actually take that product and really professionalize it before we could get it back out there. And and that that's what we did. So we put a lot of money into that original product, but but it was worth it. um And that was early on when malware solutions weren't ah commonplace. McAfee and Symantec didn't really offer it. Rootkits were a problem. I remember um hackers would use cross-site scripting and all these different tactics to to get viruses into your computer and Trojans.
01:06:50.09
Don Wharton
And we hired a local team to um that there their only job was to go out and find the signatures that these malware um that these hackers use to kind of inflict, to infect our computers and then and then automate it through a solution that would automatically extract the signatures out of ah out of a consumer's computer. And so we ended up building that team every dollar and went into what we called our SWOT team, spyware analysis team.
01:07:21.17
Don Wharton
that built this built millions of signatures over the years to be able to protect users computers and that company was enormously successful for almost 20 years and we ended up um expanding into over 20 different products from data recovery to parental controls to all kinds of tools um and then realizing probably about halfway through that there's a massive headwind that's coming and that headwind was was Apple and the iPad and the iPhone.
01:07:55.62
Don Wharton
All of our solutions were focused on the PC and there's this new computer coming out and the iPad's coming out where they were almost immune to to the same malware and to the same to hackers getting into the system.
01:08:05.98
davidgalvis
Yeah.
01:08:09.43
Don Wharton
so um Although that company lasted for 20 years and did really well, um it was just a great learning experience and enormously successful with 150 people. And it really enabled us to really understand the software space and really develop other solutions. And and then in 2015, I um actually through through that whole experience, I acquired other companies and technologies and and
01:08:41.18
Don Wharton
um integrated those technologies into some of our some of our products. um But through that experience of acquiring companies, I kind of caught on to this this business model. um Internet Brands was the company that got my attention. I didn't even know what Constellation Software was back then, but Internet Brands got my attention. And it was so interesting because this the CEO was buying companies that were profitable at four times profit, taking the cash flows and buying new companies, and then just repeating that process over and over again. But the key thing to me was this just seemed to be a business model that was almost immune to a lot of the struggles that I had in software, and that's competitors
01:09:21.62
Don Wharton
um the cost of advertising, all these things that were issues weren't an issue for for internet brands because they were buying already profitable companies that whatever they were doing, they were doing what was right. Otherwise, they wouldn't have the profits that they were.
01:09:33.75
davidgalvis
Yeah.
01:09:35.78
Don Wharton
So his only goal was to make sure that those profits continued and then take those profits and make new acquisitions and then repeat it over and over again. And I just love that model so much that i it led me to the founding of Sure Swift Capital back in 2015. and That was the beginning of of buying profitable companies and then ultimately learning that software as a service is really the most predictable best types of companies to buy. and That led us to years later launching fund a fund to make it available to are our model available to other
01:10:15.56
Don Wharton
founders and credited investors that wanted to also co-own a basket of profitable SaaS companies. And then our second fund, Fund B, was launched in 2020, which after a huge success with Fund A buying, I think, about eight companies and then generating um substantial cash-on-cash returns for our investors, we were able to launch Fund B um based on the exact same model. And that model is distributing the cash flows each month um after a reasonable management fee.
01:10:46.37
davidgalvis
Mmhmm.
01:10:48.10
Don Wharton
So something that just, I haven't seen available anywhere else. Any other serial acquirer keeps the profits and then does whatever they want with it to try to create more value for some long-term exit event. Whereas Shrestwith Capital's model is to focus on profitability, being great operators. and making sure that the companies that we acquire are better after we acquire them than before. And that translates into consistently increasing profits that's distributed to to the co-owners in our funds every single month. So it's turned out to be very, very popular.
01:11:23.29
davidgalvis
that's That's such an interesting model and I bet there's nothing close to that nowhere else. So ah where can people find your work?
01:11:31.16
Don Wharton
continue
01:11:32.68
davidgalvis
And ah me include that I'm really curious to dig in more on what you're doing with your funds and stuff. So ah where can people reach out to you or learn more about your enterprises and and funds and so on?
01:11:48.04
Don Wharton
SureSwiftCapital.com is the website. Sure as in S-U-R-E, Swift S-W-I-F-T Capital, C-I-P-I-T-A-L dot com. And that describes everything that that the company is about. and and what we're doing and and our focus on on operational excellence, not just telling the story, but actually doing what we say. And we have to be great operators because every single month we're evaluated by our investors because every month our investors say, well, how come our distributions are a little bit lower this month or or this is a great month, they're higher, you know, what led to that?
01:12:23.41
davidgalvis
Yeah.
01:12:27.30
davidgalvis
No feedback loop problem there.
01:12:28.79
Don Wharton
yeah and Pardon me?
01:12:31.19
davidgalvis
No feedback loop problem in there.
01:12:33.13
Don Wharton
No, no, we're we're accountable. We have to be every single month. But I must note they're only available to accredited investors. um Yeah, in only accredited, something I have to point out each time.
01:12:45.18
davidgalvis
Yeah.
01:12:46.28
Don Wharton
Yeah.
01:12:47.25
davidgalvis
Obviously, obviously.
01:12:47.24
Don Wharton
But yeah, feel free to check it out and and get back to me. Happy to answer any questions and and do a follow up call if if you wish at any time.
01:12:57.89
davidgalvis
Yeah, sure. I think there's so much more to to learn with your experience and to talk about. So for sure, maybe a couple of months from now, ah we we can have ah a part two of this chat interview, whatever you want to call it. So ah it ah it was really a pleasure to have you on. And it was a big surprise to to to learn ah more about your history because ah had I had noticed your tweets, but I didn't knew you were as interesting as it turned out to be. So ah it's it's really a pleasure to have you on whenever you want to get back, and and we can have a party for sure.
01:13:38.28
Don Wharton
I'd be happy to. Thanks, David. This was a lot of fun. I appreciate you reaching out and the opportunity to talk to you.
01:13:44.45
davidgalvis
Great. So see you next time.
01:13:47.21
Don Wharton
Thank you. Take care.
Don Wharton: Serial Acquirers, Building Them, and Earning and Losing Millions | ValueHunt #18