A Letter From Ryan Graves
An investment in knowledge pays the best interest.— Benjamin Franklin
With those simple words, Benjamin Franklin gave us a gift, that if diligently applied, can create infinite value and fulfillment in our lives. We take this gift seriously at Saltwater, starting every conversation with a new company from a position of humility, curiosity, and an understanding that operators have insights that we are privileged to learn from. We help builders build and ensure that the learning, throughout our partnership, never stops. At Saltwater, we operate shoulder to shoulder. We have no corner offices, no ivory towers. We prefer the trenches.
Saltwater is a private holding company that owns and operates a family of businesses.
We started building a venture portfolio that is now 30+ companies making an impact and showing great results. We are lucky to call these founders our friends. Over time, we found it more fulfilling to be deeply involved with our portfolio companies, so we began making larger investments into fewer deals, focusing on slightly more mature, profitable companies, who have achieved product market fit. Given the depth of our involvement and our long-term partnership, we call this model “partner equity.”
As practical investors, we are value-driven, and as practical entrepreneurs, we are values-driven.
People come first. Life is short. We want to spend it with great people who will challenge us and help us grow. We surround ourselves with those who are authentic, honest, intelligent, and who push us to learn and be better every day.
We are pragmatic and long-term focused. Since we don’t have arbitrary investment horizons, we truly partner with entrepreneurs for the long-haul. We’re patient investors focused on building value over time, even when that means years or decades. We believe strongly in the power of patience and compound interest.
Leave the planet better for our kids. We partner with companies that provide attractive returns, not only financially but also to society and the environment. Given nature’s gifts have shaped our life experiences, we feel indebted to protect our oceans, our lands, our planet, and preserve its beauty for future generations.
While our capital is the product of a phenomenal venture outcome, we’ve found we are more ‘Berkshire’ than ‘Benchmark’, though we admire both firms. By taking a majority ownership position in our companies, we can be patient and balance long-term growth with sustainable profitability. As operators turned investors, we are comfortable investing earlier than most private equity firms, and support operators in many environments other investors wouldn’t touch. This approach gives us the opportunity to buy companies at attractive valuations knowing our support in the trenches will add significant value as we scale.
Our experience has shown that companies at this stage can always benefit from improved operations, and the founders who value continual improvement welcome our input. Our decisions typically support whatever path will maximize the probability of a successful outcome. The output of this strategy combines significant value creation and a substantial risk reduction. We like that hard work creates value and see that as a lasting competitive advantage.
We love the trenches and structure our operational involvement into the Saltwater Operating System made up of these 4 pillars:
- Operational Cadence — We build strong companies, starting with a strong heartbeat; the calendar.
- Data Discipline — With financial and operational analytics in place, we ensure timely and informed decision-making. We drive for transparency and simplicity; then, we evaluate, prioritize, execute, repeat.
- Brand Elevation — Customer loyalty through direct ‘relationship’ is key to long-term success in a competitive marketplace; we ensure these relationships start with a clarity of identity.
- Growth Mentality — A company is limitless with the right people and the right attitude; we start with removing barriers of belief.
In many cases, a heavy operational hand is unnecessary. Due to our deep respect for the operator, while we will certainly have a perspective, we practice discretion in implementing our operating system.
Will we only invest in technology companies? Yes. Because we believe all companies are technology companies.
Part of the inspiration to create Saltwater was my first investment into a microbrewery. This company started with a great product, a great brand, and a smart founder. But it wasn’t until a 2-hour walking meeting with the founder that I learned he’d personally coded an analytics tool to predict when an account was going to finish a keg of beer. When the software alerted the sales team that the keg of beer was likely to be finished, the company would pre-empt that and deliver a new keg. They would also internally manage distribution, increasing gross margins by roughly 30% in the process. Oh, and they also internally built the software used to manage distribution activities. Was this a beer company or a tech company? It doesn’t matter. It was a great investment.
After almost a decade driving one of the world’s fastest growing technology companies we have broad operating experience ready to be shared with our partners, supporting them in the inevitable challenges of scale. We build trust through that support, and the patience it takes build an organization that lasts. From the moment we meet a company to the close of a transaction, working with the Saltwater team feels different, and welcomed by owners. We’re atypical. We’re not private equity. We’re not venture capital. We’ve built. Our partner equity investment is welcomed while other investment is often just ‘stomached’. If we do our job correctly, it will start a relationship that starts strong and remains that way for decades.
We chose the name Saltwater because, from an early age, my experiences in the ocean have been a crucial source of inspiration, clarity, and personal growth. Investment and entrepreneurship have enabled that growth to continue by providing opportunities for learning, self-discovery, and adventure for myself and our team, and our partners. Charlie Munger once asked me — with a healthy balance of skepticism and characteristically genuine curiosity — “Why are you investing in companies?” A tough question coming from him. My candid response; “It is the most interesting and most challenging way to keep learning. I love people, and business is people.” Our emphasis and focus on people are what will continue to fuel our team’s success.
Simply, we care. About people, about how businesses work, and we dig in to ensure we’re all growing and improving as we learn every day. We’re careful about how and with whom we invest, and with that combination, we’re building a company that will endure and compound capital over time. Today we are investing our own capital but we believe that we could seek outside capital in time, and we’d welcome the chance to share ideas and opportunities with you.
We look forward to building with you.