PODCASTS / E119
Episode 119 – A Conversation with Samyr Lainé of Freedom Trail Capital – Part One
June 1, 2024
Dr. James Richardson:
Welcome to Episode 119. This is part one of my interview with Samyr Lane of Freedom Trail Capital. Alright, welcome Samyr. Thanks for coming on the show.
Samyr Laine:
Yeah, thanks for having me. It’s a pleasure. It’s a pleasure.
Dr. James Richardson :
So I think first of all, people want, because I don’t have a lot of guests, so everyone has to change their listening ears and now they have questions, so they want to know more about you. So tell us about your background, whatever you want to share.
Samyr Laine:
Yeah, yeah. Well, I usually start by sharing with folks. I’m a lawyer by training slash education. Don’t practice anymore. I’m still, I guess you consider myself a retired member of the New York State Bar and now also an operator turned investor. And so believe it or not, I spent about 10 years after law school as a professional track and field athlete, went to an Olympic games and finished 10th and went to six world championships and three Pan-American games representing the country of my parents’ birth, Haiti. And then transitioned from that into my goal in going to law school is to work at the intersection of sports business and the law. So after my athletic career, I actually started in sports world. I worked for Monumental Sports in DC from there to Major League Soccer, and then got into this odd world of entertainment and consumer and brand building and everything else. But I’m a native New Yorker from upstate New York, not the city itself.
Dr. James Richardson:
Oh, where upstate?
Samyr Laine:
In Orange County, which now that I live in California, people always look at me funny. I’m like, no, not on the other side of the country. There is another Orange County, but Newburgh, New York.
Dr. James Richardson:
And what was your track specialization?
Samyr Laine:
I did the triple jump. I did the triple jump. It’s weird because in high school ending college, you’re not usually just doing one event alone. I started to specialize toward middle to tail end of my collegiate career. And so at Harvard I did multiple events, I did all of that, but I ended up the school and actually for a time the conference record holding triple jump, I went from there. I used one final season of collegiate eligibility at the University of Texas where I got a master’s degree, but I competed for the Longhorns as well. And then professionally I did solely the triple jump. That was it. There are some people who do both the triple jump and long jump, but there are also a lot of people who just solely triple jump or solely long jump just because to be truly at an elite level at multiple events is very difficult.
Dr. James Richardson:
I never understood how detail-oriented track was kinesiological with movements and it just was. It’s crazy.
Samyr Laine:
Yeah, yeah.
Dr. James Richardson:
That’s Impressive. It’s like getting a dissertation.
Samyr Laine:
It is. And I also tell people the triple jump is one even more so, right? Because not only do you have three phases, you’re running full speed, you take off on one foot, you have to hop and land on that same foot at full speed, and then you switch legs and you go into the sand. But to your point, that dictates that you’ve got to do it at certain angles and your foot has landed at this angle. And if you do it wrong, especially in the triple jump, you can end up hurting yourself. So I always joke with people, I never quite mastered it personally, I feel like was close and I was close to really performing at my utmost best. But I’m someone whether track and field or anything for that matter, I just want to see how deep the rabbit hole goes. And so when I finished at Texas, I got my master’s degree.
I was supposed to be going to Georgetown for law school. I still in my mind, felt like I was just scratching the service of understanding the events and how to do it well, and the movements and the angles. I was just getting there. And so I said, I’m just going to do it even though I’m in law school, I’m going to find a great coach in the area and keep training and trouble jumping. And I never advised people to balance that while still being in law school. But for me, it was exactly right. Your inquisitiveness, your desire to understand at a deeper level that was constantly pulling me. And so I said, there’s more here. I haven’t really, I’m just tapping in. And then by my first year of law school, that summer, I just missed qualifying for the Beijing Olympics by a few centimeters.
My second summer of law school, after my two L year in law school, I was the seventh farthest jumper in the world. And then I finished law school. I was supposed to have gone to one of the big hoity-toity New York City law firms. It ended up being around that time when I graduated 2010, you just had the financial crisis. A lot of law firms were telling people, we don’t have enough work for you. We’ll pay you a portion of your salary, go take a year and then come back. And so for me, in that year, I was like, this is amazing. It’s my first time ever where I can focus on just being a track and field athlete. I can be a professional athlete. And in that year I qualified for the Olympic Games and I was again, top 10 in the world. And so you forgot
Dr. James Richardson:
About the luck
Samyr Laine:
Luck. Yeah, exactly. When that year was up. And also I had passed the bar exam too. So when that year was up and they said, so your start date is October, whatever. I said, actually, I’m not coming.
Dr. James Richardson:
Tell us a little bit about how you segued into CPG investing in the last couple of years.
Samyr Laine:
Yeah, yeah. So it’s interesting. I mean, as I mentioned, when I went to law school, my goal was to have a career at the intersection of sports business and the law. And I started working for Monumental Sports in DC who owns the Washington Wizards and Washington Capitals and mystics Klum gig. I loved it. And then moved to New York. I worked at Major League Soccer at their league headquarters. Loved it, loved the job, loved my team. And then I had a recruiter who wooed me away from Major League soccer saying that Jay-Z in particular was looking for someone who could do X, Y, and Z. Was I interested or did I know anyone who was interested? And of course at that point I said, if this is a real email, I’m interested and hopefully it’s not a prank. And it turned out that it wasn’t a prank.
I ended up spending a few years at Rock Nation working for Desiree Perez, who is now Rock Nation’s CEO. She was COO at the time, but she also happens to be Jay’s business manager. And so all of the business endeavors, all of the entrepreneurial things that Jay-Z’s involved in, Desiree helped spearhead a lot of. And so in working for her, I had not just a ground floor view, but a very up close and personal view of operating those brands, launching those brands, incubating them, scaling them, and then in Jay’s case, leveraging his cultural cachet for the benefit of those brands. And so there, during my time there, I did and touched everything from apparel to spirits to champagne, cannabis, consumer tech, because of course we had a music streaming platform, which ultimately sold to Block. That was my first foray, sort of on the ground floor view of what it meant to operate the business, what headaches could mount up as you’re building or scaling or operating a business, you’re looking at margins and sourcing and the inventory management.
You’re looking at 3PLs and all that stuff. I mean, when I was there, I helped the apparel brand Paper Planes get onto Shopify. We were still a WordPress website. It was 2018 now, which isn’t even that long ago. But then now you launch a consumer brand, you’re thinking, all right, it’s got to be Shopify most likely, or WooCommerce or Magento, and you can use Squarespace and it kind of works. But back then they were on WordPress and we had to port over to Shopify. So I got to do everything from, like I said, apparel to cannabis. We launched a book publishing division while I was there, but I really was able to get not just a baptism by fire source, right, because I was thrust into so much while there, but at the same time, really got to understand what scaling those businesses and then what Jay’s influence was over making those businesses popular or well-known or palatable depending on the audience.
And then at the same time I came to the West Coast, I got to play a similar role for Will Smith and Jada Pinkett Smith at their media and production company, Westbrook Inc. Where they had some entrepreneurial and consumer focused endeavors that we were involved in as well. So, JUST Water, which is the family’s water brand. I had a board observer role there. And then we built and incubated some brands from scratch there as well. So we did everything from coffee to personal care to apparel again and again, trying to understand what it meant to just build an amazing brand and business, but at the same time leverage star power for the benefit of that brand and business.
Dr. James Richardson:
Is there a different time horizon that Westbrook has versus JayZ’s group?
Samyr Laine
It’s a great question. I wouldn’t say so. I mean, I think you take JUST Water as an example. JUST Water is probably about the same age in terms of brand as some of Jay’s companies. But at the same time, I think the goal is you build it, you have an impact, and there’s an exit hopefully an exit insight, right? In some 3, 5, 7 year time horizon, Jay has since exited for the most part, the brands that we have been working on. D’Usseé sold to Bacardi, the champagne sold to Louis Vuitton, Hennessy streaming platform, sold to Block, the Music Stream platform sold to Block, of course, and it’s similar for Westbrook and the Smith family as well. Got this water brand, you’ve built it. It has an amazing impact. Is there a time to exit that is within that five to seven year life cycle?
Dr. James Richardson
Now, tell us what is your particular fund, which you’re doing that initial raise, but what is your intended objective in the VC sector.
Samyr Laine
Goal for us is to invest in and support and back culture shaping, culture shifting consumer brands, and I say consumer broadly because the idea is consumer as in CPG, but also consumer as in consumer tech, apps, ai, consumer SaaS and so on. But brands at the intersection of culture, lifestyle, and influence that have the ability to shape or shift culture, that have products that are excellent and differentiated, that have brands that are well thought out, that are run by amazing talent executive teams. And then our sweet spot is when those brands also happen to be founded by or partnered with a person of influence. And so my background operationally has been working with the Jay-Z’s and Will Smiths of the world on things that they’re doing. Even since my time at Westbrook, I’ve been doing a lot of consulting for folks. So for us as a fund, that sweet spot is when the company is amazing in and of itself, but just so happens to be able to benefit from having a partnership with a Serena Williams for example, or Kim Kardashian or whoever that might be, that individual that can really help bring an audience, bring a community, bring a fan base, and really disseminate a message, right?
You’re trying to build people who can evangelize your company. And regardless of what you think about these individuals, it’s nice to reach 400 million people with a single click. For us, we’re looking for companies that have the ability to do that, or sometimes we as a fund will help bring in that talent partner after the fact and help leverage our relationships to bring a person of influence into the mix.
Dr. James Richardson
So we’re going to talk about those two different models in a little bit, but I just wanted to help for listeners, wanted to have you share what your funds current or long-term investor mix is, and how does it differ from a classic Wall Street funded LP model of venture capital?
Samyr Laine
For us, we are looking for your typical venture, seven year life cycles, usually 10, call it seven to 10 years. Again, a lot of times you do not always, and this isn’t a promise that we made we ever make, but a lot of times you have celebrity van brands, they exit a bit quicker, and it’s not because the company’s doing any wizardry is because with the talent, you’re able to scale a little bit faster, you’re able to get a quicker adoption, you’re able to get better distribution deals and so on and so forth. So we are investing at seed series A stage, primarily opportunistically at the series B stage as well, but typically post revenue companies that are looking for venture capital. The other thing that we find is a lot of times talent backed brands don’t have as many fundraising rounds, so you might get a seed round or a series A round and that’s it. So that’s where we’re at.
Dr. James Richardson:
That because the founder’s putting in a lot of seed capital or they’re just magical at getting angels to write checks?
Samyr Laine:
No, sometimes you do get that. A lot of times you’re able to, if you hit it right, you get a C to series A, you’re able to kind of get that critical mass. You don’t need to fundraise again, especially if you’ve just got a model that is, it’s profitable enough and in some cases, you’re trend chasing, which is not something that we like to do as a fund. If you’re trying to chase a fad or you’re trying to be fashionable, which apparel that’s typically what you’re doing is a tough place to be.
Dr. James Richardson:
And do you have an analytic process you use to sort through founder brands? Can you share what that looks like?
Samyr Laine:
Yeah, yeah. So for us, our due diligence is really in three phases, and I kind of alluded to it before. The first is the product. Is the product amazing unto itself? Is the product differentiated from anything else that’s out there? And how are people reacting to the product? Just what is it that you’re selling the app or the thing that’s on shelf. The second is the brand. And so a lot of times we’re speaking to founders and saying, what does the brand stand for? How are people perceiving it? We want to make sure as a fund that the brand is well thought out, that the voice of the brand is well thought out, that the way the brand connects with communities is more than just the transaction itself. That third phase for us in the due diligence process is also what the team looks like, right? What’s their background? What have they accomplished? What are they bringing to the table? Those are the three phases for us in diligence. And then from a metric standpoint, we’re also looking at is it profitable or cash flowing, or will it be nearly profitable or cash flowing? What’s the time horizon for there to be cashflow? And then also what’s the scale look like? Then the last piece is acquire ability. Sometimes there are amazing companies that, especially in consumer, they’re not that acquirable.
Dr. James Richardson:
Where Once UponI want to get a little controversial. Where have you seen, and you don’t have to name names, please don’t, including stuff you’ve read, where have you seen alignment between investors and founders really break down the most?
Samyr Laine:
Yeah, yeah. So yeah, I’ll speak more generally, but there are two ways. A, sometimes investors, and again, sometimes investors don’t put the interest of the company and the founders first, and I say the company first because you’re investing in a company, sometimes the companies and the founders’ interests aren’t aligned, right? That’s a whole different ball of wax. But a lot of times when you invest in a company, you want to make sure that the company’s interests are first and foremost, as opposed to now we all have LPs that are investing in our funds that we also have to look out for. We have a duty fiduciary duty to look out for them and their interests too. So sometimes those are at odds, and so an investor is looking for an exit in some abbreviated time horizon. They’re pushing a founder to make decisions that maybe aren’t in the best interest of the company in the long term, but have for the investor’s purposes, are looking like, we can sell, we can do this, we can do that.
And the founder is saying, look, slow and steady wins the race. Here’s how I want to scale. Here’s how I want to build this business. So yeah, I mean, I’ve seen instances where an investor might say, look, I need to see how you can build this company to a hundred million in revenue. And a founder says, A, I probably can’t build to a hundred million million in revenue, and B, that’s actually not necessary for us to reach the exit we want to reach. Maybe we build it more evenly and we get the 30 million in revenue, but there’s someone who’s willing to acquire us or 50 million in revenue, whatever that is. And so a lot of times investors have their own time horizon. They have their own constituents that they’re advocating on behalf of. The founder is beholden to the company, and those you can get a lot of trouble.
And then you’ve also got instances where an investor is pushing a founder to raise more capital because if I invest at a seed round at a certain valuation, and then I want the next round to be at a higher valuation, so I can tell all my right and the founder saying, Hey, we’re not ready for more capital B, we don’t need more capital C, that capital is only going to dilute us. Also, a lot of times there is such thing as too much money. We spend a lot of time advising founders around, what are you using the money for? Why are you doing this? Do you have to fundraise now? Is it going to be additive? Is fundraising just for the sake of fundraising, going to build your top line at the expense of your bottom line? Sometimes you get this thing where you’re burning cash and you’re not profitable. I think liquid debt is a big one now, right? Don’t what I’ve heard, I haven’t seen,
Dr. James Richardson:
It’s the ad campaign still looking for a business model at a quarter billion.
Samyr Laine:
That’s right. And again, I don’t know any of that team there, and I could be entirely wrong. I haven’t seen the deal myself, but my understanding is raise a lot of capital, build the top line still isn’t profitable at the bottom line, and so you’ve kind of got this upside down business, but you’ve got investors who are like, I invested at a 30 million valuation. I need you to go fundraise again and raise valuation so that I can say that we’ve got this paper growth.
Dr. James Richardson:
I have one client, John Forker, who’s raised over a hundred million dollars for Once Upon a Farm. He is the only one I’ve met who just has no emotional reaction to the pile. And that’s why it’s, well,
Samyr Laine:
John and Jennifer, his talent, his person of excellence partner, have done a tremendous job. And to be honest, they’re always a case study that we draw people to, right? There’s Jessica Alba, but the reason I do that is John is a tremendous business person. I think Once upon a Farm is a tremendous brand. I’ve also got an 18-month-oldd who we use once Upon a Farm. We give him those little pouches that you get at Whole Foods. Their focus wasn’t on Jennifer as celebrity. They’re focused on amazing product, great brand, great executive team. Those are the three things that I mentioned in our diligence process. And the fourth nice to have secret weapon was Jennifer Gardner. But you can combine that in the right way and you can actually do something versus having it upside down where you’re building a celebrity brand, but it doesn’t have any staying power. They just built a great business.
Dr. James Richardson:
Well, we’re going to get to that just in a little bit. Are there ways that you’ve seen, I imagine that you may have had to manage conversations with Jay-Z or the Smiths. They have opinion A about what one of their brands should do, and I assume you got caught running interference, right? No.
Samyr Laine:
Yeah. You know what? It’s very funny.
Dr. James Richardson:
You don’t have to tell me what you said.
Samyr Laine:
Yeah. There are times where not even those instances, and I’ve worked with a ton of talent at this point, but there are times where sometimes you are, especially when talent’s involved, there’s a question of is there a royalty or is there a cash or anything to that effect? And so a lot of times what I have to, I still have these conversations to this day. I say, look, if you take cash out, you are who you are and you’re super famous and you are worth X. And if you’re doing an endorsement deal with Pepsi for Gatorade, they would be paying you seven figures a year. Yes. This company cannot do that. And I have previously had to be on my investor side of the table. I’m advocating for brands and founders and companies and my other side of the table previously in a previous life where I’m on the talent side, I’m looking out for talent.
So my goal is as much equity as possible, as much cash as possible. To your point, I’ve had to say, Hey, you don’t need the money. And so just to take it, it’s going to hurt the business. You’re going to pull cash out of the business that they could be using for stocking fees or photo shoots or whatever that stuff is. And so I know that asking ’em for $500,000 a year is a huge discount. It probably is. But asking ’em for $500,000 a year, cash to put in your pocket is going to kill this business. And the equity that you’re getting on top of the deal isn’t going to be worth what it should be worth in three, four or five years. But in every instance, I think the people you mentioned like Will and Jay, their quintessential business people, but a lot of times you’re getting talent nowadays that are trying to be more entrepreneurial and they’re new to this space and they’re just pivoting from endorsement deal to equity deal.
But there’s still, there’s a part of them that is like, for my time, I need cash for my time. And you’re like coming, not that’s what talent manager, my agent’s been saying that for 10 years.
Dr. James Richardson:
And you’re like coming, not that’s what talent manager, my agent’s been saying that for 10 years.
Samyr Laine:
Yeah, I have to pay my agent 10%. How do I spend on equity? And so yeah, I’ve had a lot of very difficult conversations where I say, I hear you. You are worth what you’re asking for. You’re worth more than that, but if we ask for it, your equity is going to be worth zero. And you’re not playing a long game here. So let’s play the long game.