Make sure to start with Part 1 of the Reza Satchu here: Reza Satchu: Kevin O'Leary with hair and Part 2 That time I called Reza Satchu's mom.
Here's a part of the Reza Satchu story that you will never learn from the official profiles. The time he spent in a small town in Nevada. In mid-August 2000, Reza Satchu, his brother Asif and SupplierMarket CEO Jonathan each closed on a relatively modest property in Incline Village on the Nevada side of Lake Tahoe. Days later, their sale of SupplierMarket to Ariba for "almost $1 billion" would close. Reza’s home cost $427k. Why would three East Coast twenty-somethings about to close on the deal of their life want property in a place with a population of a few thousand people? Weren’t they going to be important executives at Ariba, which is based 4 hours away in Palo Alto? There could be all kinds of reasons for wanting a home in Incline Village - it’s a beautiful place. Maybe the Satchus had an aunt living there they are close to. But if you held a gun to my head, I would point out that liquidity events eventually attract taxes. Even for Reza, who held the smallest stake, on paper that was valued around $15 million at the time of closing. Their acquirer was based in California, a notoriously high tax jurisdiction. Neighbouring Nevada has no state income taxes. Incline Village is right on the border between the two states. The Wikipedia entry for Incline Village mentions that the town is viewed as a tax haven. Reza would sell the property within two years and Asif would sell within three years. Maybe their aunt passed away, I don't know. I would be curious to know how much time limelight-loving Reza spent in Incline Village.
I can't readily find what Reza did between 2001 and 2003. But I don't think either of the brothers stayed very long with Ariba. By 2003, Reza started his next major venture, self-storage company StorageNow. He took on Kevin O'Leary as a minority partner, giving 13% of the company for $500k. Can you reconcile why a guy with a near-billion dollar exit needs $500k three years later from Kevin O'Leary of all people?
After graduating from McGill in 1991, Reza had worked for a decade-plus in the US. When he returned to Canada in the early aughts, he has said he was not impressed by the station his friends had attained in life. But Reza found a solution that would enable him to rub shoulders with this country's business elite. As a first step, he talked his way into teaching a course at the University of Toronto. This course was very well received by students. It was smart of Reza to compete with professors. Enterprising students know that if they invite some bigwig to speak on campus, they will get some valuable exposure to that person. This is how Eddie Lampert got a job at Goldman Sachs for example. But Reza has found a way to extend this maneuver well into middle age. His teaching eventually morphed into startup accelerator Next Canada. The Next initiative is a networking platform that has the support of a who's who in Canadian business. For example, the launch party was hosted at the home of Galen Weston with Jimmy Pattison in attendance. (Reza had recruited a Weston niece, Claudia Hepburn, as a co-founder of Next). Over the years, members of the Weston family and their foundation have given millions to Next.
Reza's self-storage venture with Kevin O'Leary appears to have been a legitimate success - with an exit at $110m by 2007. By the time Reza launched Alignvest in 2011, his network was much better. Alignvest founding partners had committed to invest over $230 million of their own money with Alignvest on a discretionary basis with long-term lockups. An arrangement that continues to this day - the founders pay full fees and are locked up till 2024. They must be kicking themselves, but it's very respectable, in a captain going down with his ship kind of way. Of course, I prefer captains who reach their destinations.
One Alignvest co-founder is Lee Lau, who is also the co-founder of ATI Technologies, the graphics card giant that was sold for $5.6 billion in 2006. For some reason, KY Ho is the name that sticks in my mind in relation to ATI, but apparently Lee Lau was the largest shareholder. Lee Lau is loaded! His former home was a 40k sq ft Bridle Path mansion. It came with an indoor tennis court, a bowling alley and a cinema. Smart of him to downgrade in preparation for all the crappy deals he would make with Reza. He once held a charity event with Warren Buffett as a guest of honor. Despite this, it says in his bio that he's a fan of alternative investments. The siren song of magical "alternative investments"! Owning an equity interest in a profitable operating company gives you the infinite upside of human ingenuity. Long-term, timberland, wine, a bridge or debt can't hope to compete with that. I would have thought that Lee Lau is well placed to understand that given his ATI experience.
Here’s how the Alignvest website looked like in 2013:
So they seeded a hedge fund called Greyson Capital with $30 million. Try to find any signs of Greyson today. I’ll get to KGS eventually. As for Alignvest Private Debt, I don’t think it exists anymore. It had been run by the founder of that high cathedral of capitalism, Callidus Capital. (Newton Glassman was not the founder of Callidus, he acquired it from Sam Fleiser. I don’t know anything about Sam Fleiser’s record, only how Callidus ended.) Alignvest had a billion AUM by 2015. I think that’s $200m now. By the way, I read somewhere that enjoying schadenfreude was inversely correlated with self-esteem. But you'll be pleased to know that paper never won any prize.
Finally, here's a classic braggadocio quote from Reza:
"SupplierMarket was scheduled to go public at a ridiculous price—this was 2000—and my brother and I, who had all our money in this, thought we had hit the top of the market. It was only after we threatened to quit that our board agreed to sell it to Ariba for $925 million."
If he did identify the top, I don't know why he's swapping one piece of paper for another. And take a look below at how the company's own website back in 2000 presented Reza. It just doesn't seem credible that the board - of which he wasn’t a member - was scared by the resignation of an EVP who had joined the company a few weeks prior, who's the 10th person listed in this roster.
And at the risk of beating my arguments to death, notice how the website designated CEO Jon and brother Asif as “founders”, an honor not accorded to Reza.
Read the final piece of the Reza Satchu saga: Reza Satchu-ration.
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