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The key to reaching an average portfolio hold of 15 years

The business world, just like any other social ecosystem, is dependent on connections and trust. Whether you are co-founding your new venture, hiring someone to help you build your vision or looking for an investment, there is no better recipe than knowing and trusting the person you are dealing with.

Nowadays, when it comes to sourcing investments, businesses have a variety of options. Risky, technology-driven companies confident in their ability to scale over 20–30 times might try venture capital. Entrepreneurs with some collateral could apply for a bank loan, which is a traditional way to raise capital without giving up equity. And, of course, friends and family are always there.

Most business owners who come to Skidmore family office, however, tend to choose between us and private equity firms, since we operate on seemingly comparable levels. Few get the distinctions between us upfront, when, in fact, there are two critical differences.

Average hold time

Private equity flips companies, not contracts. For many, investing is a purely financial relationship expressed through a P/L statement. They’ll buy in if it seems like a good opportunity now and sell as soon as a better one comes along.

Still, there can be good options in PE for companies that look for and understand the risks of a money-only backing. In contrast, a family office like Skidmore believes in investments that align with our vision.

Being in business for over 70 years and three generations, we’ve developed patience needed to return not merely good, but great results. Every investment for us is a partnership that on average lasts 15 years. And when your time horizons are longer than most marriages, you learn to evaluate each potential business just as thoroughly as you’d do with a lifetime partner.

Two secrets for selecting the right partners

We keep things thorough, but simple. In our view, there are basically two ways one can gain trust needed for a big move.

The first one is to have less than two degrees of separation from a potential investment. If we don’t know who you are, but our trusted partners do and are ready to vouch for you, part of their trust is likely to transfer into becoming a foundation for our relationship. And we can move on from there.

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For example, networks like Young Presidents' Organization and Entrepreneurs' Organization are known to trust each other. So if you have gained the trust of one of them, that trust might be passed on organically to your intended recipient, although diluting a bit in the process.

Without a doubt, the internet is a great place for connection. Everyone has email. But when it comes to long-term business, you need to meet in person, you have to be in the same room and discuss. Feel the other’s presence.

Secondly, there is no better way for gaining trust than working together, even if it means something small. Doing a successful deal first will build our rapport better than all the lunches one can pay for. Reaching such level in full alignment is a strong signal for our long-term compatibility.

Investment philosophy

Even before we embark on a process of evaluating a company, we in turn are open about companies evaluating us. Magically, such practice filters out a lot of potential businesses that don’t fit within our worldview, pain free.

We have defined and shared our criteria as follows:

  1. We are interested in companies with $10–50M enterprise value and $2–7M in EBITDA.
  2. We are looking for unconsolidated industries with wide fragmentation
  3. We work with companies in North America with strong growth potential, either through a unique customer segment or strong relationships.
  4. We want to work with smart, driven and humble leadership teams who are vested in the long-term growth of their business and people

In addition, every investment that lands on our desks is invariably checked against the list of our values, shared freely on here.

  1. We work in trust
  2. We are open
  3. We expect excellence
  4. We collaborate
  5. We give back
  6. We keep evolving

Consistently applying just these two lists radically reduces the number of incoming opportunities. But long ago we have decided that even if at any given moment we don’t see the investments that satisfy our criteria, it pays off for us to wait, in the long term.

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“Patience is the companion of wisdom”
Saint Augustine
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