Krishan Patel

Founder, Laplace Capital | Acquiring distressed startups and converting them into cash-flow generating businesses

[Krishan Patel @KrishanPatel_GP]

@moneyfetishist That you actually left out how much more you accomplish in between 1:38am and 4:17am!

[Krishan Patel @KrishanPatel_GP]

@paulswaney3 Sounds interesting, and agree.

will DM you.

[Krishan Patel @KrishanPatel_GP]

@paulswaney3 Absolutely! The whole industry is built on mis-led euphoria (kind of have to in order to sustain its incentive models).

But hey, we just focus on building solutions and find the arbitrage where left behind.

Love your posts and value add btw.

[Krishan Patel @KrishanPatel_GP]

This is exactly what my fund has to deal/manage with now.

What's even worse is the conflation between paper gains and actual dollar in vs. dollar out. Founders are often stuck in the baseline assumption that their startup is worth what the VCs or investors agree to state on their early SAFE notes (or convertible).

So typically PE has to come in when there are no options left for the companies and of course they underwrite all of the risk and lack of logical reasoning behind the cap table, business model, and lopsided sided unit economics.

You'd be surprised that a business burning 2-3x its revenue rate, cash flow negative, have the audacity to assume their company is worth any multiple above .5x or 1x (depending on the turnaround costs/integration playbook working capital).

[Krishan Patel @KrishanPatel_GP]

Sincerely appreciate your candid and extremely authentic writing/posts.

Your type of content is what keeps me going as it feels like we live in a simulation where everyone regurgitates "business" knowledge but never tried to go against the grain even once.

Speaking from experience I grew up in a family business (20 unit motel) and had the lived experience of helping the family while going to school full time.

Especially as a 2nd gen immigrant it was extremely tough at first as both worlds - school (American culture) and home (traditional Indian working culture) clashed at times and it was up to me to assess my experiences and what i should take from it.

As I grew older, the hands on experiences shaped my core and I noticed I viewed and operated differently than most around me. I had this edge of business, grit, and overall exposure that drove a high level of internal locus of control.

I didn't go to Ivy league, parents learned English while running the motel, no deep rooted connections to opportunities, etc. BUT they taught me how privileged we were to live in America and HOW to earn opportunities by leading with value.

Started my second fund (first was a 3x, 39%IRR), continuing to build brick by brick with no recognition that other emerging managers get. But that doesn't stop me.

"The American Dream" is real and unforgiving. BUT there are vast opportunities right in front of us and success is what you make of it.

Your posts, hold so much value, only those who have shoveled and eaten shit day after day understand.

[Krishan Patel @KrishanPatel_GP]

This is absolute gold.

95% of capital allocators opt in to copying/imitating existing forms of deal flow generation. Funny enough the mold of schooling, finance bro mentality, etc. Causes this avoidance of outlier behavior (even though this is literally the baseline foundation required for asymmetric returns).

My fund targets distressed startups (seed-series A) that have built fundamental makings of PMF, convert them into cash flow businesses, and then compound them in an evergreen model. Given venture scale creates inefficient unit economics, our thesis requires us to source these startups BEFORE they even realize (or in most cases accept) the fact they will not receive additional VC funding and are stuck fending for themselves.

The ideal place to "time" the acquisition is 12 months of runway. But we start planting the seed/approach starting at month 18.

Of course this thesis has its challenges, BUT as a holdco long term fund, we are patient and can focus on execution.

[Krishan Patel @KrishanPatel_GP]

....this resonates with me so much.....

Everything is so saturated and people 95% of the time are so surface level that they dont even know what they want but even worse they cant/dont understand the benefits/potential of the deal right in front of their faces.

Not to mention its rare to come across genuine, authentic, and frankly candid discussions. People rather say their interested or pretend they care and then just ghost anyway?

People forget your word and reputation means everything and how you operate and follow through on your actions/said word SHOULD mean something.

Its exhausting and makes things getting competently done that much harder. Deals used to be done in leisure/recreation. Now its spam spam spam even if people dont need/want it (dont get me started on S&M ai agents ie a complete waste of time)

[Krishan Patel @KrishanPatel_GP]

@moneyfetishist @PEoperator This take is spot on.

The social animal by Elliot Aronson changed my perception of human behavior and unlocked my understanding of influence.

[Krishan Patel @KrishanPatel_GP]

Fantastic....its crazy how well this mathematically articulates the simple notion that if you want to be the top 1% then you have to do what the other 99% are NOT doing.

However this also means you have to deal with the constant pushback, unsolicited "advice", and mental sparring matches from those who don't even try to understand the core logic behind what you are doing.

Basically imagine you are in high-school and you are the kid who dresses, acts, and thinks differently from everyone trying to be "popular".

[Krishan Patel @KrishanPatel_GP]

@credistick @matt_slotnick PREACCHHHH DAN PREAACHHHHH

dollars in, dollars out - it really can be that simple.

[Krishan Patel @KrishanPatel_GP]

Having lived in three major tech hubs

Silicon valley (my whole life)

Miami (during the blockchain boom and shortly after)

Now Austin (current life)

I can attest Miami has a culture thats known for partying BUT when you live there you actually experience the drive of all the entrepreneurs who are there trying to build.

The amount of support and ease it was to just meet with other founders or startup ecosystem players was refreshing.

Silicon Valley (because its established and highly competitive) has many hierarchies and social ladders you have to navigate and due to an imbalance of opportunities, it can feel ingenuine and tough when you are constantly battling (essentially its probably like how the gold rush felt back in the day).

In Miami, you could have easy access to the mayor, HNWI LPs, and other founders who were willing to introduce you to strategic connections all in one room. It was definitely much more collective.

[Krishan Patel @KrishanPatel_GP]

See the reality of blowback quite a bit in the distressed startup acquisition markets.

Any/all valuations induced by VCs completely dissipates once they walk away and deem your startup unworthy of venture scale.

More often than not these startup's margins are lopsided and immediately upon VC ghosting, their valuation directly associates with their actual P&L and what the real market value is of what you built.

Its pretty jarring how reality strikes in an instant and all that euphoria of "building the next unicorn" is pulled right out of you.

[Krishan Patel @KrishanPatel_GP]

Agree with all the sentiment here.

Psychologically, a good amount of this results from a type of "incompetentcy debt". Many of the recent ZIRP investors and LPs started on the premise of thinking they are being logical when investing in the "trends".

However, unfortunately much of it was built on faulty assumptions disguised as "certainty".

Once those deployments have been made and the realities strike. Everyone rushes to save face and optics as a method of preserving their egos.

[Krishan Patel @KrishanPatel_GP]

So fascinating, my opinion is you flip the sentiment.

Deal flow comes first: proprietary, low competition, niche/market thats undervalued, etc. Is what drives a higher level of accuracy when it comes to asymmetric ROI opportunities.

Deal selection comes second: if you have a really strong generation funnel, the accuracy of great investments significantly increases.

Value add for VC models is variable depending on how well its structured and how it plays into your specific market segment.

I've seen incompetent VCs get access to top tier unicorns in earlier stages simply due to the fact they were in silicon valley and had access. The density of access to top tier VC Deal flow is rare for everyone else. So you have to do the actual hard work.

[Krishan Patel @KrishanPatel_GP]

@TheGeorgePu Your biggest moat, is simply just doing the things other people convince themselves "it's too hard".

[Krishan Patel @KrishanPatel_GP]

What's funny is, this is supposed to be the basis of venture.

The issue was too much cheap liquidity injected into the space + traditional fund structures (close ended funds) caused allocators to default to moon shots.

Instead of giving the money back to LPs telling them clearly "this is too much money, and the market doesn't have enough for it" VCs tried anyways.

LPs also didn't think anything of it and kept the money flow on (but now, different story).

[Krishan Patel @KrishanPatel_GP]

To clarify for those who are reading this. It's more about connecting the vision of what you are trying to manifest with the real world markets.

Of course one may argue VCs are a bit unorthodox in diligence, but still tracks when it comes to selling your product and aligning your team.

[Krishan Patel @KrishanPatel_GP]

@TheGeorgePu When you go down the path of entrepreneurship and you realize just how unforgiving, tiresome, challenging, and just outright brutal of a life it is.

You wouldn't trade your life for that at all. Simple pleasures are what keep things real, dont forget this.

[Krishan Patel @KrishanPatel_GP]

@ericbahn @dunkhippo33 🤣🤣🤣 your back must be hurting!