#363 - Jason Illian - GP & Co-Founder @ Highmount Capital - Growth Equity, Investing in Dude Perfect, Launching Koch Disruptive Technologies

Chris Powers: Jason, welcome to the show. 

Jason Illian: Thanks for having me. It's good to see you, bud. 

Chris Powers: Welcome back to Fort Worth. 

Jason Illian: Man, I love this area. Like I was just telling you, this feels like home to me. Anytime I get a chance to come back to Fort Worth and the people and TCU and a lot of good purple, it makes me excited. 

Chris Powers: So, you played football at TCU? 

Jason Illian: Back in the day, yeah. I don't want to say it's back in leather helmets, but it almost feels like it. I had the privilege to play. When I was a senior, LaDainian Tomlinson was a sophomore. So I still haven't received the checks that I think I should have for blocking all those years. But it was a great experience. 

Chris Powers: Were you on the line? 

Jason Illian: So, I came as a quarterback, and we kind of joked that I ate my way closer to the ball. So, went quarterback, played linebacker for a couple years, and then played tight end for my final year when LaDainian was there. 

Chris Powers: Okay. You ended up- I want to talk about your time at Koch, but tell me the bridge between leaving college and then how you made your way to venture capital at Koch. 

Jason Illian: Yeah, so like most things in life, it's not like a straight and narrow and expected path. So I was at TCU, my final, after we beat USC in the Sun Bowl, which we were 17 point underdogs, that was fun, I went to London School of Economics. So LSC had a joint program with TCU. When I was over there, I'd won an award with the USA Today and got recruited by a company out of Milwaukee called Strong Capital Management. Strong later sold to Wells Fargo, but at the time they managed like 45 billion. So, they recruited me to Milwaukee from Fort Worth, and I spent three years up there just learning all sorts of finance, everything from venture to hedge funds, institutional work. After doing that for three years, I didn't like the snowstorm in May, which I was thinking all my friends here in Texas are hanging out in their shorts. So I came back, came back to Fort Worth and started helping a bunch of family offices and doing kind of more investing work. And from there, I ended up actually starting a couple software companies. So, I started one of the companies that later became GuideTube and became one of the Christian video sites that sold to Salem, and then started another e-book company that sold to another private equity group. And at that point, my family was in, they were in North Dallas, and we'd just built what we thought was going to be our forever home. And that's all you have to say is think like that. God will have other plans. And that's when I got recruited to Koch. After we'd sold our last business and just built a brand new home, Koch Industries came calling and said, hey, would you ever be interested in moving to Kansas and helping us build our venture and growth team? So that's what got me from TCU to Wichita, Kansas. I lived here in Dallas for about 20 years. 

Chris Powers: And when you sold that second company, were you thinking you were going to get into venture or did you not know at that point? 

Jason Illian: I didn't know. I'd done some- we'd taken venture and family office money before, so we'd been down that path. And I'd also made a bunch of seed investments, just done my own type of investing, but I was also an entrepreneur by heart. So, I was in the trenches getting bloody day by day on the things that you need to do. And so when we left, my wife just said, hey, why don't you take some time off? You've been running hard and just kind of open your eyes to what's coming around you. And so, I thought that maybe starting another business again. I definitely wasn't thinking I was moving to Wichita, Kansas. That was a surprise, but a good surprise. 

Chris Powers: Okay, when Koch comes calling, how does that actually happen? You were just walking down the street one day, you get a phone call out of the blue? 

Jason Illian: Yeah, I mean, it's relationships. I mean, as you continue, as your life and your kind of professional life expands, you just build relationships. And it's always kind of been in our family's DNA to just help people when you can and just build good relationships, not asking for anything in return. And so, 10 years earlier, I'd gotten to know a gentleman at Koch and I didn't even know what his role was. Well, come to find out five years later, he's the head of mergers and acquisitions for Koch Industries. Well, at that point, we'd been friends. And so, after I'd sold my last business, he and I were talking, and he's just like, hey, would you come to Koch and just talk to our executives about venture and growth investing and what that all looks like? And just as a favor to him, I said, yeah, I'm happy to come up. And a 30-minute meeting turned into like a three hour meeting, which then snowballed, and one day they called and said, hey, would you be interested in coming up here and helping us build our growth and venture unit? And so that all came, literally that point came because 10 years earlier, I just became friends with a guy in Wichita. 

Chris Powers: So was it a sneak attack, come talk to our executives, but there was a little more to it? 

Jason Illian: Well, honestly, I don't actually- in hindsight, I don't even think it was a sneak attack. I think it was literally them exploring, should we go build this and go do this? And they were just- Koch’s very thoughtful, so they're gathering information and talking to people in the industry. And I think I was just one of those people they were talking to, to just say, well, who should we talk to in the VC world? And how do you go originate best deals? And how do you think of mental models and frameworks? And just from there, it just happened to be that I knew some people, and my wife was from Wichita, Kansas. That was her home. And so, a lot of those stars aligned to allow me to come up. 

Chris Powers: Okay, before we talk about Koch, real quick, was there anything from the venture partners that you had in the two businesses that you ran that you loved, and was there anything that you didn't love about the venture partners that you had that kind of gave you more framework to how to think about this? 

Jason Illian: Yeah, I mean, the good thing about being an entrepreneur and running a business is you get to be on the other side of the table. So, you get to learn the things that you like and the things that you dislike. And what I would say, just like in any business, whether you're in real estate or buying burger companies or whatever it is, some people are of high integrity and some people aren't. Everybody's really good at pitching you up front of why they should take your money and how they're going to be a great partner. And I think it takes real discernment to say, who can bring just capital to the table and who's going to bring capital plus insights, expertise, and a real value add to help you grow. And I don't think I really differentiated that as well as I should have early in my career. As I've gotten older, I've started to realize like who's the person sitting across the table from me and how accountable and responsible are they going to be once I take this money? Because as soon as you take money, you have a new partner. And that's not a partner for like a year. We often say these are Christmas card trading partners. You're going to have many Christmases together where you get to see their family and they see yours, and you've got to really like to spend time with them. And fortunately, I've had more good ones than bad, but there have been some bad ones along the way that just didn't hold up their end of the bargain on what they said they would do.

Chris Powers: Yeah. You get to- well, real quick, what's an example of we will promise you this and then we don't do it? 

Jason Illian: Yeah, so in one of our businesses, one of the board members talked about, hey, we're going to give you autonomy to make big decisions, and if you need to change direction on something, you have our support. That sounded great on paper until something actually hit the fan and I went in there and one of the board members is like, no, we're going to do this our way. And that became a real dogfight in the room, knowing you have a person that's not operating your business, not making decisions on a day-to-day basis, wanting to go a direction that you know is not right. And at the end of the day, who's going to be responsible for it? I am. Because when something goes wrong, the first thing they do is they go to the CEO and the people in the business. They don't go to the board members and be like, I can't believe you let them do this. And so, those are the decisions and the partnerships that you really have to think about long-term, is do you feel comfortable calling this guy on a Saturday afternoon and talking through something, and will he or she really be that sounding board and partner that you need them to be? Because every deck you see on any business you see, it always goes up and to the right. There's not a blip. It's just up and to the right. But that's not business. Business is a zigzag line that you hope goes up and to the right over time. But there's highs and there's lows and there's going to be all sorts of problems, and that's how business actually works. And so, choosing the right people in your corner or, as Jim Collins would say, putting the right people on the bus is really important.

Chris Powers: Okay, so Koch comes running, or comes knocking, and you decide this is going to be a huge opportunity. What was the opportunity? 

Jason Illian: Yeah, so it was really a mandate from Charles Koch himself to say, hey, we have mergers and acquisitions, we have a huge treasury arm where we have a lot of capital.

Chris Powers: What's a treasury arm? 

Jason Illian: So, Koch Industries has a number of operating businesses, including things like Georgia-Pacific. So, if you have toilet paper in your house, it's probably from Koch. If you're wearing clothes, there's probably a good chance some of those are Koch materials. You don't know how much of your life is actually being touched by Koch, massive operating businesses. Those kick off a lot of cash, so much cash that they can't even pour them all back into their businesses. So, they're like we need to create a- instead of just buying big businesses, we need to go invest in the next generation of businesses. So that was the opportunity is to say anywhere from a $5 million check to $500 million check, we should go invest in the next generation of businesses. So, I was basically one of the founding members of that. From the ground floor, myself and Chase Kock, Charles's son, had a chance to build this. And Charles's first mandate, I remember sitting at his kitchen table and asking him like, what kind of companies are you thinking about or how should we invest? And he just said something like, I just want to invest in the best companies at any stage in any type of industry. And I remember walking out of there thinking, we're screwed. I have no idea how to do that. Like, how do you just get any company at any stage anywhere? Fortunately, with Chase's help and some other great executives, we were able to put together a framework of how do we think about the type of companies we want to go after. And that really kicked us off where we started with two of us, and kind of over a period of say six, seven years, we built a team of 15, 20 investment professionals and put a little over $3 billion to work at the time. 

Chris Powers: Okay, let's talk about how you built the framework. Like, did you just say, let's go on a retreat, we'll get some paper up on the, and we'll start nailing it down? Like, how do you actually build a framework from scratch when money's really not the thing that's the limiting factor? 

Jason Illian: Yeah, I think there's a couple things here. So, you'll hear me say a lot of times, in any business or even in my family life, everything's built around principles and frameworks, decision-making frameworks. And so, what we had to do here was before we went and pinned a bunch of things on the wall, we just went out there and had conversations with some of the best people in the industry. So, one of our first meetings, we sat down with Mark Andreesen and Ben Horowitz and said, how'd you build Andreesen Horowitz? And we did that with a number of great people who have built incredible investing arms. And so we just said, what are your learnings? Like, what are the things that you would say if you're building from scratch again? And once again, this is a benefit because you're Koch. When you have unlimited capital, people are like, sure, come in, we'd love to tell you how we did this. So it was a real benefit that we got to go talk to some of the very best. And then once you kind of get these, not only best practices, but then also, hey, here are the things to watch out for, you then have to bring them back and compare that to your vision and values. And so, the things that I- the three things that I always tell people is like you need to have aligned vision and values to do something. You need to build out complementary capabilities. So your team needs to be- you don't need two Jasons. You need a Jason and a Chris and people that complement each other with the skill sets. And then you have to build aligned incentives. So we've all got to march together and succeed together or fail together. When any of those are off, different visions or values, you don't have complimentary skill sets, or you don't align your incentives, something's going to go awry. Even when all of those are aligned, it's still really hard to build a good business, but it gives you a much better chance, much better opportunity. And so that was kind of the process we took was like go out and learn from the best, reflect on like what's important and our vision and values and build out that framework, and then you can start actually making investments.

Chris Powers: How long did that take? 

Jason Illian: I think- it's a good question. I don't remember exactly. I want to say we were probably over a year, year and a half in before we made our first investment. And some of that had to do with just building out the right teammates, and also building the origination framework. At the end of the day, if it's a really good company, especially at a later stage, everybody sees it. So what gives me the benefit of investing in it over any other great investor out there? And so you have to build a trusted network. And where I spent quite a bit of my time as we got going was just building relationships, not at the time that they were looking to invest, but six months, year, years before, so that you knew the best CEOs and were seeing the best businesses, and hopefully even helping them along the way. So, I think that kind of secret power that people should have is, if you call me today and say, hey Jason, we're building Fort companies and here's the things we're doing, and if I can help you now, and then five years from now, there's a chance to invest, well, I've already helped you. You believe that I can be helpful for you, I have a much better chance to be in that conversation than I did if I just waited for you to call me and say, hey, I need money now. 

Jason Illian: Did you guys decide in that framework that you were going to focus on later stage, or was that a function of we have a lot of money to put out and it only makes sense to be at later stage because the checks are bigger? 

Jason Illian: Yeah, so at first, we didn't know, to be frank. We didn't know how we wanted to play that. We also didn't want to miss the very best opportunities if that showed early stage. So we really knew we couldn't write a check typically smaller than five or 10 million just because of function of the size of the war chest we had. So that kind of naturally drove to a later stage, but we did write some early stage checks. More of those were relationship oriented. But the focus over time started to focus more on later stage companies because not only could we bring capital, but the sheer horsepower of Koch Industries to bring behind it can help a larger company. It will overwhelm a small company. 

Chris Powers: Yeah. It's kind of like there's a website you can go to look at like Warren Buffett's wealth, and it's just this meter, like five million dollars a second or something. Okay, in the venture space, what does a great late-stage company actually look like? I'm sure there's different profiles, but if you had to paint like a good idea of what a great late-stage company, the characteristics it would have, or what you all, or what you look for, what you were looking for at Koch, what would that look like? 

Jason Illian: Yeah, so a later stage, so most of the companies that we looked at, just to be clear, were like technology or technology-enabled companies, which now is a pretty wide swath because the name and industry does not have technology enablement behind it. But we weren't looking at just your standard HVAC company or something of that nature. But kind of a good later stage company, what we’d look at is like, first and foremost, what's their leadership team look like? Not just the CEO, but the other people around the table as well. It meant a lot to me if we got into a meeting, if the CEO was the only one talking or if everybody around the table agreed, it made me nervous. Like I love to get into a meeting where the CEO said something, then the CFO chimed in, then the CTO kind of disagreed, and you can see this healthy conversation. Because there is no company where everybody agrees all the time. So, if you're sitting at a table and everybody's agreeing, it just feels fabricated. So you wanted to see a complimentary and good leadership team. Not perfect; I mean every team has some holes in it, but just a good healthy one. Two, you wanted to see a company that had relentless focus on what they were doing and good product market fit. So whether that was a software or a widget or whatever they were building, you saw that the market resonated with it very well. The team was red hot on fire for driving this and they were always thinking about how do we add more value to those that are buying or using our goods and services. So you wanted to see that relentless focus. You also wanted to see continuous innovation. Like they weren't- they knew where the focus is, but how do they continuously get better and do that? And then as part of that too, that was also creating a strong internal culture that they believed in something. Like everybody was on board, they all wanted to get the tattoo. Everybody wants the tattoo because we believe in it. Yeah, sticker on the car, we're in this team. So, we were looking for those types of things. Now, obviously, we also wanted to see strong unit economics, strong financials on their growth, and the best companies were looking to grow at least kind of 30 to 40%. Some of them grew way more than that, 80, 90%, but they were targeting kind of a 30, 40% growth year over year. And that just gets hard when you're doing 50, 100 million, 200 million to keep growing at that pace. But you want it to be thoughtful growth because I think what you saw in the last few years is there was a lot of unthoughtful growth. Let's just throw money at stuff, and if we throw more money, we should grow faster. That's not how business works. I actually like the CEOs that are like, yeah, we don't need to spend all this money to grow. We're going to be very disciplined about how we spend our money. We have a strategy. Hope's not a strategy. And so, seeing those types of good conversations, those companies are still thriving in any environment, good or bad. 

Chris Powers: And then when you're investing late stage, how long are you expecting that investment to be in play? Three to five years, ten years? Obviously, it's late stage, so what's the timeline you're trying to- what's the timeline you're thinking about at that stage? 

Jason Illian: Yeah, I mean, what I would say in the spectrum of early to late stage, I like to kind of come in in the middle stages because it allows us to catch things before they hit the hockey stick growth and add more value, and that's better for returns and relationships. The later stage that you get, you're going to get diminished returns. Now, you may get closer to liquidity events, but if really your goal is to be part of a company's long term, when you're investing your own money, my own personal money or [inaudible] money, it's kind of long term capital. You don't need it back in three to five years. But a good, a great company, you at least have optionality in that three to five year period, meaning you could go public, somebody could want to buy you. But that doesn't mean you want to. I mean, if your company's growing at even 20, 25%, where else are you going to put your money that's growing at 20, 25%? And so, we were always of the mindset, let's create optionality for our companies. And optionality could mean liquidity, could mean buying more of it. And we wanted to make sure that investors or like CEOs of the companies had flexibility. I think it's in the natural mindset that everybody's like, well, for me to create liquidity, I've got to go public or I've got to sell my company. That's not true. There's lots of ways to create liquidity. And Koch’s a perfect example, but they say they're still private. And Charles was always beating the table of saying like there's a reason I'm private because I can think about my 40-year plan instead of my quarter-by-quarter plan. And so, we wanted- and that still resonates with me today, even the way we think about our new firm, Highmount, is how do we best help CEOs and groups think about the long-term plan for their company? That doesn't mean it has to be public. It doesn't even have to be acquired. There's ways to create aligned liquidity events and other things to let them do that. And that was first probably infused in me because Charles did such a great job of taking a company from 20 million to 150 billion in revenue, which is just unheard of. 

Chris Powers: Our thesis is that people will still need toilet paper and still be wiping their you know what 100 years from now. That's a good thesis. 

Jason Illian: Well, and remember that- 

Chris Powers: Johnny, you're still using toilet paper, right? Thank God. 

Jason Illian: Yes, well, that's good to know since we're all in one room. But you remember the toilet paper run during COVID? Who do you think benefited from that? Georgia-Pacific could not make the stuff fast enough. 

Chris Powers: I can't imagine. 

Jason Illian: That is crazy. And like when you're on the other side and you're just seeing the thing just spin continuously, like that's just wild. And if you look at it, why did we all make a toilet paper run? Like that was the main thing we all needed? Everything hit the fan, it was the toilet paper? I guess so. But it worked out really well. And full credit to the Koch family; they've built a conglomerate of companies that don't move in unison across the market cycle. So when one's up, another one could be down and vice versa. And so, they've smoothed out a lot of that because of the different companies that they have, which is really smart. 

Chris Powers: That's awesome. All right, so you spent seven years there. 

Jason Illian: I did. 

Chris Powers: I'm sure you learned a lot about venture and then you had an idea to go start something of your own. So maybe explain what you're doing today after leaving Koch? 

Jason Illian: Yeah, so kind of the transition, what was happening was Koch's a great place, a lot of wonderful friends still work over there, I think it's great. But one of the things they were focusing more and more on was we want to focus on things that are strategic to Koch Industries. So not only good financial investments, but things that would be strategic to any of the Koch companies. So what was happening is we were missing other opportunities. We were missing some other really big opportunities because they just didn't have a strategic element that were to Koch. My focus primarily was doing a lot of the software-oriented deals and those types of companies. And so most of the key deals that I thought were really interesting were the ones that were not getting done at Koch anymore. So as we saw that over time, and I saw more and more of those, I was like, these are deals that I would love to do. And so, as that continued to happen, I was like, what if we just did this ourselves? Like, we've built this amazing origination engine from some of the top VCs and investors and entrepreneurs around the country that want to bring us deals, but I keep saying no to deals that I want to do. And so basically as that continued to happen, we had a couple of families that we'd gotten to know that had said, hey, if you ever break off on your own, just let us know. And so when I finally said, hey, I'm going to break off, and I left, I spoke to a couple of families, and they said, we want to be part of this. We've seen what you guys have done before and want to be part of that. And one of them was the Green family who founded Hobby Lobby. They just said, hey, we love the way you guys take a principled approach to investing. We'd like to help anchor your firm and get you guys off the ground. And really, the thesis of our firm, Highmount Capital, is like we're not focusing on the early stage companies, and we're not focusing on the very late stage pre-IPO. We're really focusing on those middle, so growth stage to kind of early private equity stage companies. So companies that are doing at least 10 to 20 million in revenue, anything to companies that could be doing hundreds of millions in revenue is really kind of our sweet spot. 

Chris Powers: Do you consider it venture capital or do you call it something different? 

Jason Illian: We consider it more kind of growth equity. Some people call us early private equity. And so we're a little bit of a hybrid in that space. We're not really the venture guys. Although we work really closely and have a lot of friends in the venture space because those are the companies we're watching grow. We want to build those relationships early to see them at the stage that we are. So we started the company with myself, my investing partner David Hawkins, who's in New York City, and he comes from Gladebrook in Providence and has a background, he was an early investor in Alibaba and Airbnb and things like that. And then our COO general counsel was at Koch Industries. And he was there, we call him the old man, the wise old man because he was there basically helping Koch build their family office and all the early infrastructure at Koch. So that's kind of our three executives that started here. And then we have a brilliant younger guy that kind of comes from Silver Lake and SoftBank and stuff that's working with us as well. 

Chris Powers: It's awesome. 

Jason Illian: Yeah, we're blessed. 

Chris Powers: I think the answer is relationships, but you've said it twice, you've said we've built a great origination engine. How did you build a great origination engine? 

Jason Illian: A good origination engine starts just by a lot of time and effort and just truly caring. I learned some of this from Brad Feld. And when I was a young, dumb entrepreneur, for no good reason whatsoever, Brad Feld wrapped his arms around me and just said, here, let me pour into you. And the more I got to know, I was like he wasn't even invested financially in me at the time. He was just giving back. He was just saying, I'm investing in you because I see something and I want to be part of that. And that kind of give first mentality, because I experienced it so well from Brad and Steve Case and other ones, I realized that's something I needed to have in my DNA too, is saying, how do I just go build great relationships? And there'll be dinners that I'm not even sure why I'm going to that dinner, but I should show up. Over time, what happens is you get to know people who are starting cereal companies and real estate companies and inline skate companies and all this random stuff. You're like, what am I supposed to do with this? What happens is you get to know somebody who starts a cereal company and they're like, hey, we also know the guys that started the milk company. All these things start to fit together. That doesn't mean I'm going to financially benefit, but when you get the cereal people and the milk people together, something special happens. Or you get the guys that have a vision for a big tower in downtown Fort Worth and the people who can actually build it in the same room, something special happens. And so, that's really how we started building our origination network. And like I said, we have actually a mental model and framework for this too, meaning you can't build unlimited close relationships. So we have a three-tier model that says you have your community, your network, and your ecosystem. Your community is like your 20 or 30 closest friends and buddies that if they call, you call them back that day. You text them back, even if it's 11 o'clock at night, Chris, if you call me, even if it's 11, I'm going to text you and be like, hey, you want to talk now or talk in the morning? Because I trust you. Like, you're in my community. I know you're not going to toss a bunch of junk over the fence. The next one's your network. That's like your next 50 to 70 people that you're getting to know. They're maybe new to your Christmas card list. You may know the name of their dog, you don't know them quite yet, you're kind of building a relationship. And then there's the ecosystem; that's everyone else. But you can only really focus on the first one or two areas. And those change over time, different stages of life, different companies, people move in and out of your community. But that's no different than your personal life too. You can't be close friends with 150 people. You've got to have a tight-knit group of people. But that's the way we also think about just originating great deals is who believes in us and who do we believe in and how do we add mutual benefit? 

Chris Powers: Yeah, as you were talking, you'll probably resonate with this, but there's periods in my life or periods in my calendar or year when if you actually looked at all the meetings I'm taking and things I'm doing, there wouldn't be like a through line through it, it kind of looks all over. And somebody was like, you're kind of like always mining for gold. You don't really know when you're ever going to find it, you're not necessarily looking for it, but you're kind of collecting pieces along the way and it's not until hindsight that you're like, oh, this is why I did that thing. 

Jason Illian: Yeah, and it's always hard to explain to your spouse, right? 

Chris Powers: Well, it's like Capitol Camp, where we met. People are like, why do you go to Capitol Camp every year? I'm not going to raise capital, I don't have a deck, I'm not going around- I'm kind of just going serendipitously, and we wouldn't know, we wouldn't be sitting here had we not met three years ago. But every time I've gone, I've left with like three or four things, but when I'm explaining to people why I'm going, I never have this great answer other than it's really fun, you meet super interesting people, there's great talk. It's all these great things you want, but there's not like- they're like, well, do you have an ask while you're there? Like no, maybe in 20 years something will happen from it or maybe not. 

Jason Illian: But I think that's part of the power of it. When you go into relationships without an ask, you're just there to really learn and ask other people questions, then you're not pushing your agenda. It's opening new doors for you. And that door may not actually be something you've walked through for 10 or 20 years, which is how I got to Koch. But it also could be something that either helps you now or even helps somebody else in your network. And I can't tell you how many times I've walked out of a Capital Camp or something where, yeah, three or five great relationships. But one of those relationships I've tied to somebody else in my network to be like, you absolutely have to know this person. And I got a call yesterday from somebody I met at Capital Camp that I met two years ago. And we just became friends. And so it's just one of those things that I think is actually healthy and we talk about it in our firm right now is if you have that gut instinct that you should go to an event, but you're not exactly sure why, just go. Just go and you'll figure it out when you get there.

Chris Powers: I totally agree. I'm in that camp. And to people that don't think that way, they think that is the most foreign concept ever. 

Jason Illian: The island of misfit toys over here. 

Chris Powers: All right. You're going after companies that are at an inflection point, and I'm excited to talk about this next thing. So, the first deal you did is you went and you bought the world famous Dude Perfect. I wouldn't say you bought the whole thing. You can describe what you did. But your first big investment was in a company called Dude Perfect, one of the fastest growing media brands in the country. They were at an inflection. So maybe before we talk about Dude Perfect, in your mind, what is happening in a business right before the hockey stick begins to happen? How do you know it could be right at that spot? 

Jason Illian: Yeah, so it's kind of a bespoke answer based on the opportunity that it's different by company for company. But in this situation, the dudes have been building this business for 15 years. Many people are like, ah, it's an overnight success. 

Chris Powers: I love how you call them the dudes, too, by the way. 

Jason Illian: Oh yeah, it's the dudes. That's what you're going to hear the rest of the time. They're the dudes. But they'd been doing this for 15 years. And they'd gotten to this point where they realized the opportunities that were incoming with the Walmarts and Amazons were just too much. The opportunities were too big for the team that they'd built. And remember, Dude Perfect was completely bootstrapped. They'd never raised capital. They just built this from five guys at A&M to nearly 100 million subscribers on their social and YouTube. 

Chris Powers: Which is more than every single national organization's YouTube combined, NBA, MLB. 

Jason Illian: Yes, they're bigger than all the major sports teams combined. They're massive. And these are from five guys starting trick shots. And so we got to know them. Once again, this is another story of we got to know them because we had a friend that was an advisor to them. And there were a couple of really large private equity groups stepping in saying that they either wanted to buy them or invest. And they said, would you guys mind talking to the dudes and just giving them advice, like helping them unthink and unpack the way that they're thinking about this. We said, yeah, we're happy to take a call. I'm thinking more than anything like I get street cred with my kids because I got to talk to the dudes about how they were doing this. And the more we got to know them, the more I got to notice like, one, these are really high quality people. Like this wasn't by accident. These five guys are really brilliant in what they were doing. And two, they have intellectual honesty that they need help taking this to the next level. And then we found out, wow, look at what a great profitable business they have and look at the upside. And so that's what started the conversation of like, yeah, we can help you with these other groups, but have you guys thought of another option on how we could structure this? And that's what led us down the path for Highmount winning the opportunity to work with them. 

Chris Powers: And what do you see as the opportunity? 

Jason Illian: I think the real opportunity has become the largest family-friendly brand in media and entertainment. I mean, to say that you could be Disney-like in the future is not shooting for the moon, in my opinion. I mean, these guys have, like I said, one of the largest audiences in the world. They speak to your kids in ways that even the Disneys and ESPNs are trying to figure out. And they barely scratch the surface. They did all of that with basically five dudes and a business manager. So, imagine if you had an entire team around them that were focusing that, and they're raising their hands saying, hey, we don't just want to do this with us five dudes. Dude Perfect has really become an ethos. It's really become a platform. When you think of like sports and family friendly and community, you think of the dudes. Well, when is that going to stop? Never. Because it doesn't matter whether you're NBA or NFL or college sports or lacrosse or cricket or hacky sack, whatever it is, you want to have fun, you want to build community, and you want to do sports. And these guys have injected that in there in such a way that you can see the dudes, if you go to Smoothie King and get a smoothie, you can see them doing Thursday night football from Amazon. It's kind of an unlimited ability to do that. And they want to grow beyond the five guys to add other dudes and girls in there. Because they really see this as a platform. Because they're not going to be 70-year-olds doing bottle flips, at least I hope not. If not, that's only you and me watching it. But they also realize like, hey, we should have more girls in here. I mean, my daughter loves watching them now, but there's not a girl dude. Or I'd have come up with a better name than a girl dude. Dudette. We're not on the marketing team, you and I here. 

Chris Powers: Yeah, clearly. We just got fired. 

Jason Illian: Yeah, we just got fired. But I think there's just that really unique opportunity. And I know some of the groups that we're talking to, and they're massive entities that are saying, hey, we want more duty, those that know what we're doing. 

Chris Powers: You've talked about family-friendly brands. It seems to be something that's been more sucked out of society today than infused, and between that and kind of biblical principles, because I know that's something that's important at Highmount, how do you think about that as you look at businesses going forward? We've gotten away from it. I think the world is craving it more than ever, clearly, with Dude Perfect having the success they have, but you've seen it in other media brands. And as you kind of think about what a family-friendly brand, what a company that runs off of biblical principles does, what are like the common things that you're looking for that are obvious but that we've kind of gotten away from? 

Jason Illian: Yeah, I think there's some really obvious ones that all families want. Like we want our kids to be safe. We want our kids to be able to view content without seeing the next exorcism trailer or pornography, which that's just not always the case anymore. I think parents want to know that if their kids are being exposed to transgender things or other ones that like it just sounds like crazy that we would never have allowed that 20 years ago, but now we're like, yeah, it's okay. We don't even- certain schools don't even tell your parents about it. That's nonsense. And so, to have a strong Biblical framework or even if you don't believe in the Bible but just a strong high-integrity framework, like you want your kids to be safe, you want them to have a chance to learn, you want them to have fun, you want them to be accountable. And that's the kind of thing that Dude Perfect has stood for over all the years. And to do that, they've had to turn down sponsorships from alcoholic brands and turn down gambling sponsorships and these things that would have drawn a lot of money into their ecosystem, but they just said we're not about that. And now that a couple of the dudes, now that the dudes have their own kids, they're even thinking we're so grateful we didn't because we know the world we want our kids to grow up in. And whether that's the dudes or even another company, even though our executives are all Christians and believers, we don't just invest in believers, obviously, but we do invest in people that are high integrity. Their yes is yes and their no is no, and they're accountable. I always look for people that will own their stuff, meaning if something goes wrong, are they going to point the finger, or are they going to say, that's me, that was my fault, I got that one. If you're owning your stuff, we're going to be good friends. I don't expect you to be perfect. I don't expect perfect execution. I expect perfect effort. And that perfect execution for perfect effort, those are two completely different paths. And we even talk to our kids about that all the time, whether they're in school or sports. You're not going to hit every three-pointer, you're not going to dig every volleyball out, but if you're giving perfect effort and you got there, I'm in. I'm a fan. And I think it's the same thing for your companies. It's like, I'm looking for those high-integrity people that are trying to add value well, that are being capital efficient, that are being responsible. And at the end of the day, if you're taking capital from us or anyone, you're really just a steward. It's not your money, you're stewarding it. And that's actually one of our taglines for Highmount Capital is we're stewarding capital in companies. It's not ours. So it's our job to be really a strong fiduciary responsibility to help these companies and these people grow, knowing that it's not ours. We're just here to help. 

Chris Powers: I love that on effort. We talked about it on the way to school, and it's probably more, I need to hear it more than my kids, but we talk about two of the things you can control, your attitude and your effort. 

Jason Illian: That's right. 

Chris Powers: Okay, five guys and a business manager built this incredible company. Y'all come in. Maybe let's just talk about how you think about post-investment, your role, and what is, again, we talked earlier about if your partner's going to do what they say they're going to do. What did you say you were going to do that they liked so much? 

Jason Illian: Yeah, so you mentioned it in the question, like they didn't want an investor, they wanted a partner. And we came in saying, yeah, we can put in capital, but we actually want to help you build your business. And through the kind of diligence and getting to know you stage, what we really learned is they need a CEO. They need a CEO and a team around them to handle the business aspects of what Dude Perfect has become. These five dudes, they're on camera all the time. If they go to the Masters, the top NBA and NFL and all those guys are stopping them to talk to them. If they go anywhere, they're being stopped. And then they're on camera 24/7 because that's what they do. So, who's running the business aspect? So the first thing that we're doing right now is we're in the process of helping them put together a management team that aligns with their vision and values and can be part of this long-term. So that's step one. Step two is just helping them ruthlessly prioritize everything that they have on their plate. Because when things come in, it's just like shiny objects. We should chase after this and do that with ESPN and da, da, da, da. And some of it's great, but is it aligned with your long-term vision? So, helping them kind of ruthlessly prioritize. And then also, the third piece is like also giving them the freedom to do what they do best. Meaning who would have guessed this could have started with trick shots? Like if I had brought you a business plan that says we're going to build a multi-billion dollar business, it's going to start with throwing a basketball off of a building, you would have been like, get out of my office. But that's what they've done. Because it wasn't about the basketball, it was about community and fun and sports. And so you have to give that creative genius some freedom. And so we're just pouring fuel on that fire, saying, if you're thinking about paying the electric bill or how you get your team to Florida for the shoot, you're not focusing on what you do best, which is being creative. So, we're like, you guys be creative, and we'll get out of the way, and we won't be in charge of calling them girl dudes or whatever because we suck at the marketing. You do that. And so those are kind of the steps we're thinking. Build the team, help them prioritize, pour fuel on what they do best, and then get out of the way. 

Chris Powers: Okay. To the extent you can share, and maybe these are just broad applications that could be used for a lot of the creator economy, but what are ways that they could make money or businesses like this could make money that your average Joe, like me, that just buys some real estate and collects rent would never think about? What are some unique ways to make money? 

Jason Illian: Yeah, so a couple examples. So, if you know Mr. Beast, he's got one of the largest audiences in the creator economy. He makes most of his money selling chocolate bars, Feastables. And who would have guessed? Like what right does Mr. Beast have selling chocolate bars? Like what does he know about chocolate? But what he's realized is I have this massive audience that we talk to every day. It doesn't even feel like marketing to them. So whatever I sell them, they're going to want to buy. He just happened to choose chocolate bars. For the dudes, they're in sports. So, think of all the types of sports drinks and memorabilia and products that they can create, which they barely scratched the surface. And so, you can make almost more money there than you can on the videos themselves. Another thing is like, well, most of the dudes' videos today have been about the dudes, but we're getting all sorts of incoming from pro sports teams saying, hey, could we- they wanted their videos, they put a rocket in a football, and they threw it like 300 yards. And they're like, oh, who can throw it? Who can catch it? And you know all of us as dads were like, I could so do that. Because it looks cool. Well, some of the pro sports teams were like, hey, what if we gave you our receivers and it was a competition to like throw it and have the pro receivers, like get the helmets off the players. Because we live in an economy and a culture where we want to get to know the athletes. Like the story means a lot. And so, there's an opportunity to work with all these pro sports teams in ways that, yeah, we've shot, we have a coming shoot with Steph Curry, and we've done stuff with Luca before, but we could do 20 times that working with pro teams. And so, there's a lot of those opportunities, and those are all monetizable, of course, to create a jersey that's Steph and Dude Perfect together, all sorts of fun stuff. And at the end of the day, I have three kids. They all love Dude Perfect, and they don't- the next generation doesn't come in and turn on cable TV. In fact, they don't know what that is. They come in and they turn on YouTube, or pop up YouTube or TikTok, and they find the dudes. And so, it's a different world than what we grew up in and the dudes are primed to be in that space. 

Chris Powers: Unbelievable. I don't know enough, but it appears to me just in the way they're talked about, do people actually follow the individual dude or it's just kind of like Dude Perfect's the brand and obviously these guys are famous, they've been on camera millions of times, but do the customers actually fall in love with any one of the dudes, or is it like this collective that you just more fall in love with Dude Perfect? 

Jason Illian: Yeah, so what I've found, and I don't know if this is the case, this is a non-scientific approach, I'll just tell you what we've learned, is that all the families and kids always call them just the dudes. We love the dudes. But when you start talking to them, then we'll say, well, which dude do you like? And they're like, well, I love Tyler because he's the rage monster. Or I love Kobe and Corey because the twins are just funny. They have their reasons for liking each one of them. Each one of them has its, each guy has his own personality. Which is actually one reason I think Dude Perfect's done so well is each guy's different. Like, they operate as a unit and as a team, almost like a family, but they have different skills. And when you put them in a room, I mean, I had dinner with them last night, you put them in a room, you could just film dinner and we would enjoy this. These guys are hysterical. And they'll argue everything from like whether you should re-home your dog to whether or not the Cowboys will be any good before we die. And they'll argue all of it in one thing. And it's fun. These are the type of guys that you want to have as your neighbors. And that comes across on camera. It's not fabricated. These aren't Hollywood celebrities. They're your buddies. And I think that's why kids resonate with them. And I think that's why parents do too. 

Chris Powers: I have a guilty, I wouldn't say guilty, it's just where it's going, but I'm a big golfer and obviously watch a lot of PGA Tour. Never watched Live, sorry to the Live fans, but it's just like not that interesting. But I'll tell you what I have watched, like Bryson DeChambeau started his own deal and he does these things called like Break 50. He did one with Trump, he just did one with Daily where they tee off from the Reds and they try and break 50 in a scramble. Or they'll just like go play rounds of golf and you're just kind of watching them play golf. And there's something there, and maybe it's just the authenticity of it that it's not like- obviously it's produced, but not at the major level, and you're just watching some guys play golf. Then there's Good Good, there's- and all these and they're just out like playing random rounds of golf with people, and it's unbelievable how many views they do and how much attention it gets. 

Jason Illian: Yeah, well, the dudes love golf, as you know. And they did All Sports golf at Augusta. Which by the way, when they did that video, you’ve got to remember, nobody touches that golf course. Like, snipers take you out if you're anywhere near there. And then all of a sudden, these guys are kicking a soccer ball down the fairway. And so they've made those things fun. And to your point, golf is a, first of all, it's a tremendously frustrating sport that looks like it should be easy, but it's also a great relationship sport because you have time to talk and build relationships and have fun doing it. And the dudes love golf. And so, any chance they get to go play golf, whether it's in Terry Eby in New Zealand or whether they're playing here in the States, they're going to take it. And some of it's not only just for them, but do they take another celebrity along or do they do something to build a relationship? It's been special to them. And I think that piece will even become bigger in the next phase of life. 

Chris Powers: I still think we're scratching the surface with these companies becoming the most wide viewed visible companies and this kind of legacy stuff is dying. I mean, even the other night you saw Elon and Trump get on, which regardless of what you think about it, they got a billion views just talking and they showed pictures of them like doing the interviews. They both just had like a cell phone in front and they're talking into it, and that got more views than every single major mainstream media put together. And now we're looking at Dude Perfect getting more views than probably the World Series and the Super Bowl. I don't know for sure, but you get where I'm going. 

Jason Illian: Yeah. Well, I think there's just something authentic about it. And I also think it's a little bit of distrust of the media of like they all have an agenda in some way, shape, or form. So they're like, I want less layers between me and the people, whatever the people are on the other side. And when you see people that are just authentic and real and having fun, you're like, how do I connect to that? And you don't mind whether that's on your phone or on the screen or the big screen or whatever. You just want to be involved in that. You want to be part of that tribe and community. 

Chris Powers: Yep. What's the difference between a tech- would you consider them a technology-enabled business or a technology business? 

Jason Illian: Yeah, I mean, they're definitely a technology-enabled business that's becoming more tech-oriented every day. When they first started, they were like, sweet, we hit shots, we got a million views, that's awesome. Now it's more of like, hey, we know each view on every video, we know how long people are watching videos, we understand when they're dropping off. All that data becomes valuable because you want to add value to people. And so if somebody's watching for five minutes and then they watch for seven, the first question is like, hey, what just happened? Why'd they start going longer? Because we want to add value to people. And I also don't think people want to be sold to. They want the opportunity to participate. And I think the dudes do a good job of saying like, hey, this is what we do, and these are the products and goods and services that are part of our lives. And if you want to participate, great. But if you don't, that's okay too. But it's not a commercial. You don't see them up there saying, and this was brought to you by Tide. That's not who they are. And while they could have made a lot of money doing that over the years, they just said that's not authentic. People don't want that from us. And so, they've chosen a path of like let's integrate the products and services and people into this in a more seamless way that just like, yeah, we use this stuff, so we're happy to talk about it, but not in a way that's real salesy to you. 

Chris Powers: Was it natural for them to say no to all this big money and this big stuff and just stay focused on the core values? Because especially for young kids that are getting thrown a lot of money, I throw myself in there, like I can't imagine at that age, if you'd been tossing that to me, that I could sit there every day, look in the mirror, and be like I'm just going to pass on this for now. That's pretty unique. Did you get a sense that was just easy for them to-? 

Jason Illian: Well, yeah, it's easy in hindsight. I mean, I have a lot of respect for these guys. Their story about when they left their actual jobs to come do this, all of their wives looked at them like they were crazy. And none of them were making enough money to support their family when they decided to do Dude Perfect full time. But where the credit really comes is they said, hey, we're going to have these principles, these family friendly biblical principles, we're going to live by those and we're just not going to alter from it. And that had to be hard over the years, turning down money that would have been impactful for their family. Now they're in a place they get to choose, but it wasn't always that way. They had to go through the hard times, but that's why I think they're really great entrepreneurs, is that they found their principles, they stuck to them, and they realized people really appreciate this. Usually when you have high levels of trust, you have a small audience, but they have high levels of trust with a massive audience. That's just super rare. And Tyler was once asked, just recently in an interview, like, how would you recreate the dudes and what you've done on YouTube today? He goes, you need to start 15 years ago. Like, you literally can't do it today with the algorithm and the way it's done. So the moat around what they've built is tremendous. And I can't think of another brand that has really stuck by its principles the way the dudes have. So full credit to these guys. 

Chris Powers: Okay. I want to just talk about for a second the CEO search. How do you go about finding a CEO for a company like this? 

Jason Illian: The running joke was like nobody's resume prepared you to be the CEO of Dude Perfect. You didn't go to school and think like, one day, I'm going to run the trick shot guys. And so, it kind of goes back to first principles, meaning we want to go find somebody that has experience in the sports media entertainment space, that has that, but it also has to be somebody that shares the values of high integrity, family friendly, and willing to iterate in some of these areas that haven't been done completely. Like so building a new product line like Feastivals or doing the next generation entertainment of is the next Dave and Buster's more Dude Perfect oriented. Or how do we partner with the Cowboys or the Mavericks or any other sports team to do that? So, this has to be somebody that has some experience in that space, so they have those connections. They have to be first principled, high integrity people. And then they also have to, in a sense, be willing to be creative and innovate and work alongside five guys that have spent 15 years doing that. So there has to be a chemistry there of like we can all work together on this because that's their baby. That's what they built. And nobody, you, me, anybody's going to step in there day one and just- nobody wise is just going to take it over. They're going to come alongside and run with them. And through running with them, they earn the right to have more and more say as the CEO. And by the way, no CEO is going to have all of those capabilities. They're going to spike in certain areas and they're going to need to build a team around them that helps them in the areas they're not. And that's why I'm a big fan of when I look at a company and somebody says, well, show me kind of the HR snapshot of all the roles that you need to have. And I said, well, that doesn't really mean anything to me until I know who the leader is and I know their strengths and weaknesses. Then they can put the other roles around them for strengths and weaknesses. And so, yeah, you can put boxes on a piece of paper and say, here's the CTO and CEO and CFO and da, da, da. But if your CEO is really good at something, you may not need a pure COO. You may need something different. And so, I think that's why you need to be thoughtful about every role that you're bringing on and how do they work together. 

Chris Powers: And in a deal like this where that CEO role is super critical to the future of this investment, is it like, okay, we close on the deal, and we launch that search immediately, you put a time window around it? Because I'd imagine there's all these next order decisions that need to be made that can't be made until the CEO's in place. 

Jason Illian: Yeah, so good question. So we closed the deal and we did start the CEO search pretty soon right after that. Then what I would say is the decisions kind of fall into two buckets. One is like, what's the low-hanging fruit tactical stuff that we just need to get done, and we can help you do that? And then what is the more strategic, long-term, we're going to commit more capital to, that hey, the leader needs to be in the chair and make that decision? And could we as a board make a long-term decision? We could, but we want the... 

Chris Powers: CEO bought in on it. 

Jason Illian: Yeah, CEO to own it. And we want the team to own that decision. So we've teed up some of those decisions that are coming, but until the CEO sits in the chair and makes the decision for him or herself, then we're going to let them own that. 

Chris Powers: Do we have an announcement yet?

Jason Illian: We're getting close. We're getting close. So, I think we're weeks away, which is exciting. 

Chris Powers: Okay. What else are y'all looking at? What else would fit the Highmount bucket at this point?

Jason Illian: Yeah, so what I would say is- 

Chris Powers: And how are you structured? Are you a fund? Are you deal by deal? 

Jason Illian: Yeah, good question. So we are a fund. So we have our fund, and we also have the flexibility to do things outside the fund as well. So like Dude Perfect, as an example, was outside the fund because we built a long-term hold structure around that so that we could hold it for 10, 20, or 50 years, or we had the flexibility to potentially sell it before then if that made sense to all the owners. Most of the things we do we’re going to do inside the fund, and we also are going to create co-investment opportunities for our investors. So, after being at Koch, I had a chance to see all the biggest funds in the world, whether they're the Tiger and SoftBank, the Sequoias or whatever. And one thing that sometimes happens is when funds get too big, it's a misaligned incentive. If you have $10 billion and you're making 2% management fees, that's a lot of money, whether or not your investors make money. And so, we thought of that a little bit different to say, hey, what if we raise a smaller fund, so that the management fees are lower, I mean, it keeps the lights on, it allows you to pay your team, but then you can create more co-investment opportunities for the families and investors you have. So that's been more of our approach, saying, hey, smaller fund, a few hundred million, but still have it in such a way that you can create cool co-investment opportunities. So we have a handful of deals that we're looking at right now, two or three at the top of the funnel, where companies are 30, 40 million in revenue. One of them was bootstrapped, which has been very cool to see that they did that. And they're looking for growth capital, already profitable and looking for growth capital. We have another company that they started the year at like a $5 to $6 million run rate. They're now at $165 million run rate, and that's been in seven months. So they're growing just incredibly fast. And so, we're trying to unpack like, why, like we just don't have a lot of data because it's growing so fast, trying to unpack like is this a blip or is this like scalable? And so we're very fortunate to have some other great opportunities that we're looking at. And most of these are deals and companies we've been tracking or executives we've been tracking for years. So, at any time, I would feel the best that if 75% of the deals we're looking at aren't officially raising money yet, but we're already looking at them, and the other 25 maybe we didn't know them well. 

Chris Powers: So is it fair to say a good CEO of a company like this is always kind of keeping an open dialogue with potential investors because they know they're going to be raising at some point? 

Jason Illian: Yeah, what I would say is that usually those CEOs, they're keeping some open dialogue, but they're typically out there just working on strategic elements for their company. And we like to run into them when they're doing strategic things, like talking to a big Fortune 500 or trying to get in. And so we're trying to help them do those things, whether we're investors or not. And that's how we build those relationships where they're like, oh, Jason and David and the team, they helped us in this. And so we know them, and as they grow, then we can ask the question, well, if you guys are raising capital, if you're thinking about the next stage of growth, let us know. And that really creates the flywheel effect of finding the best deals. And it used to be like, hey, all the best technology and technology-enabled deals are in Silicon Valley and New York, that's not the case anymore. There's great companies all over the country. And we want to work with those great entrepreneurs, whether they're in Cincinnati, Miami, or Silicon Valley. 

Chris Powers: So if somebody's listening to this and either they're running their own business or they know of a business that they would want you to look at, what would you say, send me something in this box? 

Jason Illian: Yeah, I mean, look for companies that are kind of doing 10 to 20 million in revenue, technology, technology-enabled businesses with good teams. And it doesn't necessarily mean we’ve got to be able to invest in them today, but there would be some way for us to add value to them beyond the capital. Everybody's money's green. So, if you want that, I'm sure there's lots of great people that can just write you a check, but do you really want a team that's going to come and kind of do thoughtful diligence? Like we're going to ask hard questions. We're not going to be the fastest check in the room. We're going to say like, what are you trying to do? Why are you trying to do it? How do we think about that growth in three years or five years? And we're going to walk through that. Now, does that mean there's a little more work on the front side? Yes. But I think it reaps the benefits longterm because you've been thoughtful about the approach. It's kind of like if you weren't thoughtful about getting married or dating, just like the first good looking girl comes to the room like, oh, I should date her, I'm like, that's probably not the best approach. You haven't asked any questions. You don't know if she speaks your language. You need to ask questions. And I think it's the same thing with investing. We got lazy as an industry when there was a lot of money flowing around and people were writing checks in a week, and they weren't doing their diligence, and they were deploying their whole fund in 18 months. That doesn't work long term. That's not thoughtful, principled investing. We want to be thoughtful, principled investors. We need to make sure that we stick to our guns in the same way the dudes stuck to their guns on their framework. 

Chris Powers: All right, Jason, thank you for joining me today. 

Jason Illian: No, this was great, man. Thank you. Good to see you.