March 18, 2022

Meet the investor: David and Marty

Meet the investor: David and Marty
The investors behind Calm Capital talk about their transition from software engineer and pro athlete to growing a family office nearer a PE firm with a calm investment ethos and focus on profitability.

Hey David and Marty, could you give us a brief introduction of yourselves?

We’ve been friends for over 20 years. We’re husbands and dads (Marty - 4 kids, David - 2 kids). And we both reside in North Carolina, US. Marty’s background is in software engineering and leadership at a corporate level before hanging up his own shingle, co-founding a software development consultancy. David followed up a failed professional golf career by starting several marketing and creative agencies.

We are very grateful to have found a way bring our passion to work each day and focus on building something great. For years, when we hang out we talk about business and ideas more often than not. We enjoy it like other people enjoy talking about their hobbies or other topics. When we’re working on Calm Capital or one of its companies, it never feels like work.   We are also “why not?” type of guys when it comes to taking risks trying new things.

Calm Capital is a holding company / family office but what’s the philosophy behind it and how did it get started?

Not sure we’re sophisticated enough to have a philosophy (laughs), but our aim is to find good businesses we can develop into great companies using a profitable, purposeful, and patient approach. Profitable means the business is generating free cashflow from month one and provides leverage for its owners and team members. Purposeful means the business is solving a real problem and adding value to the world and its employees. And patient means the business isn’t operating in a “hair on fire” or “constant hurry” fashion. 

Calm Capital started when we got organized around a long-time dream of having a portfolio of cash-flowing businesses. We had owned and operated services businesses and asked “Wouldn’t it be cool if we were our own clients?” Eventually, the opportunity presented itself where we could leverage our equity in businesses we started to form Calm Capital.  

Could you give us the story of a deal you sourced and what you learned from that experience?

We found our most recent deal via direct outreach and that was a great learning experience. The biggest lessons learned were the importance of “fit” and getting along with the selling founders, combined with really focusing on how we could align what Calm wanted while helping them get what they wanted out of the acquisition. Equally important, which I think we’ll do a better job in the future, is better assessing the impact of the founders leaving with tons of institutional knowledge and modeling “Is it a good business or what is the value if X happens?”

What has been your strategy for growing your portfolio to where it is today?

We stay opportunistic and take each deal as it comes— staying patient. So far, we’re meeting people like you and any entrepreneurs who share our general approach to business. We don’t have a fund that needs to return X in five years so we are just always looking. We may end up with thirty businesses or three all depending on our three Ps from before. 

David Horne and Marty Balkema, Managing Directors of Calm Capital

Calm Capital currently holds 9 private company investments, but how many of those do you operate/hold a majority stake in vs. how many do you advise/hold a minority stake in?

We own a majority/controlling interest in 7, minority stake in 2.

As a two-man team, how do you find the time to oversee all that? Have you recruited operational staff and, if so, how did you find them?

It’s just us and two minority partners who help mentor us. They’re both experienced business people with happy families. Kind of our “Rich dads” if you’re familiar with the book. Our hope is to continue developing a decentralized model where each business is its own entity and has its own leadership. This allows Calm Capital to stay small, focused on supporting the leaders and looking for good businesses. We’re still in the process of phasing ourselves out in some cases but we’ll get there.

Do you have an equity appreciation exit-strategy for your investments or are you looking to hold and collect dividends (or both)? 

Our default mode is to hold and collect dividends. Good businesses, we believe, will last for generations. That said, if it makes sense to exit any, we’re not opposed to it. Our goal is to keep growing the enterprise value of Calm Capital. 

What are your current investment criteria, i.e. what do you look for now in a business and in a team when you buy in?

We’d like businesses that have a core team in place to operate day-to-day without much oversight and have enough recurring free cash flow to pay distributions from month one. This seems to be something starting around a million or more in annual net income. On top of that, we’re looking at the three “Ps”, easy-to-understand business models and clean books. We also look for businesses that may be add-ons to existing companies we own.

What does the future look like for Calm Capital? 

We’re still figuring that out. It’s somewhere between a family office and private equity, but we’re not really sure exactly what it looks like. We do know, we want to create an environment where the companies, customers, and employees can thrive. 

Is there anything you would like to plug?

Not really. We thank you guys for building something really unique and interesting in the space. We’re happy to meet entrepreneurs and good folks. People can find us at calmcapital.com.