Managing Partner, Harbor Street Capital
What led you to work as a partner at Harbor Street Capital?
Alejandro Alvarez [NYU Stern ’19] and I met when he was at the Stern School of Business and I was at the Law School. We were interns together at Goldman Sachs, and so was Juan Jaramillo, and we stayed friends. One day, four or five years out of school, we were talking about how we had always wanted to do something entrepreneurial. A business came across our desk through a large tech company where Juan was working. Alejandro was talking to me about it. We thought, “You know, what if we tried to buy it?”
So we tried. We ended up getting outbid by a large public company. Instead of being discouraged by it, we realized, this is so much more exciting than working a corporate job. We had always talked about being in business and doing our own thing. Now is the time.
We went on message boards,talked to alumni, and anyone we knew who ever raised money for anything. We explored different strategies and different types of funds, and we essentially found a niche within the search fund community. They were so receptive to helping people out. They answered our questions. They would send us their cap tables [listing their] investors. They explained what they did, which was to buy these smaller, mid-market businesses. The thesis is simple: When you’re competing in a lower market, businesses offer a cheaper valuation. They trade at lower multiples [of profit because there is less competition to buy them]. If you can go in there and operate and grow the business, you can sell it to private equity in five to seven years for [more money] and at a relatively higher valuation.
We started by cold-calling people and saying, “Hey, tell us how you rasied money and can you send us your cap table [of investors]?” Most people tell you no, but some people were kind enough to say yes. So we eventually had the names of a few hundred investors.
From that point, we were reaching out to investors, saying, “This is our team. We’re a little different. We’re a little older, we’re three people, which is unusual. Usually it’s one or two. So we’re looking for a little bit of a bigger deal. We’re looking to do more M&A around it because we have more experience. Will you invest in us?” We reached out to hundreds of investors, which became dozens of serious conversations, which are now about 16 people in our cap table who we raised money with, and we launched earlier this year.
Describe your current position: What are the challenges? What do you like most about it?
Each of us chooses different verticals to pursue so we don’t cross wires too much. Juan [worked in TMT at Goldman, so he] looks at tech companies. I have more of an asset management, commercial real estate background, so I’m focused a lot on building services: alarms, security, electric, things like that. Alejandro has more of a consumer background, and an M&A background. He’s looking at very scalable and roll-up-friendly businesses like commercial cleaning and waste management, etc. We each try to find the universe of companies in our selected industries that fit our portfolio, and we each tackle that individual vertical.
Each of us reaches out to 100 new companies a week through cold-calling, cold-emailing brokers, accountants, trust and estates advisors, every channel we can think of. That converts to a certain number of conversations with business owners and CEOs, which converts to a small number of people who have a company that not only we want to buy, but also that they want to sell.
If you think about the process, we’ve probably reached out to close to 10,000 companies by this point. And there’s probably been fewer than 10 that were actually good fits.
What advice do you have for law students interested in investment management?
When you come in to law school, you don’t necessarily have to practice law. It teaches you a skill set that is more transferable than otherkinds of skills, with a focus on critical thinking and hard work. There are companies that really value someone who goes through a school like NYU Law that’s so rigorous and has a great reputation.
People who go to law school tend to be less flexible in terms of their risk tolerance. But you’re here for a reason. It’s an amazing school. You’re a very smart, capable person if you’re here. If you want to do something that’s not traditional, go for it. Don’t be afraid that you’re going to miss out because of what you think you’re supposed to do. Give it a shot.
How did NYU Law prepare you for your career path?
Given the rigor and demand of 1L, if you want to handle the class load, and you are silly enough to sign up for extracurriculars or have other responsibilities—just to be able to balance that is an accomplishment. You have to learn to use your judgment to prioritize not just what to study, but how to study. There’s also a certain confidence you get when you get through it with a good result. I had never done anything this rigorous before. So when I got through it, I thought, “Hell yeah, I can do anything.”
As far as actual education goes, I think what you learn in law school is less concrete than, I would say, taking a hard science. It’s more about critical thinking—seeing two sides of an argument or multiple sides or different variables. From reading cases and opinions, you see different ways of structuring arguments. It made me less rigid in the way I thought and approached problems.
What was your favorite class or favorite activity at the Law School?
I focused a lot on business classes. I did corporate tax. I took bankruptcy with Gerald Rosenfeld, who was a great professor. I took a cryptocurrency class at Stern.
In my career, I’ve found Contracts extremely useful. I review a lot of contracts from the companies I look at. What are the cancelation terms? What are the main payment terms? For what reasons could a large customer contract they have be terminated? How would that would affect the valuation of the busines or the risk of purchasing this company? I would say that tax was useful as well—the way transactions work, the way you can use the tax code to understand the incentive for why things are done the way they’re done in certain businesses.
I would recommend that every single person take Accounting for Lawyers, just to understand how a balance sheet, income statement, and cash flow statement work. No matter what business you’re in, you have to know what’s coming in and what’s coming out and how that’s recorded.
I was also president of the Middle Eastern Law Students Association, which I found super engaging. I was in charge of getting everyone together and being a resource for one another. It’s a very crowded city, but a lot of people don’t have someone to reach out to.
If you could go back in time, what kind of advice would you give yourself?
In law school, as far as career goes, practice your interviewing ability. That’s so important. Practice your answers. Time them. Say them in front of a mirror. Record them. Listen to them back.
As far as studying goes, I think you should be practicing answering questions more than reading and memorizing cases. Don’t beat yourself up, don’t have a breakdown before your finals. There’s a lot of emotions going into that study period. Remember you’re going to get through it and it’s going to just be a memory. Enjoy your time here, because it goes really, really fast.
This interview has been condensed and edited. Posted December 22, 2024