[00:00:28] Jay: Hi everyone. Welcome to The First Customer Podcast.

My name's Jay Aigner. Today I am lucky enough to be joined by Sean Heberling. He's the CEO and founder of Marion Street Capital. Sean, how are you buddy?

[00:00:38] Sean: Very well today. It's a beautiful fall September day.

[00:00:42] Jay: oh, it's so nice. it's just the best. I was just out there. I wanna be out there again. Marion Street Capital sounds like the place where Monopoly money goes when it grows up. What is the origin story of the name I need to know?

[00:00:54] Sean: Ah, okay. So this is a fun one. Glad you asked this one. Jay. Marion Street is not, has nothing to do with Marian or lower Marion on the main line,

where I spent many years about life. it. Is located, it's a street located within the city of Rochester, New York. I grew up in the city of Rochester, New York before leaving to go to Villanova University, which is how ultimately I wound up on the main line now in Center City, Philadelphia.

but I chose the name Marin Street for a few reasons. Number one, a little bit of copycat in there. I spent 20 years in the hedge fund industry, lots of hedge fund. Magnets that I had aspired to become and failed miserably doing so, named their funds after streets. So, you know, copycat there. but as it pertains to the current business, Marin Street is the street on which I devised a number of kid entrepreneur schemes.

So think of, okay, I had a newspaper route. and this was within a city, so pretty efficient, you know, the little delivery radius. Lots of fun, paperboy stories. I had lazy peers around me also with newspaper roots, whose parents had to feel complaints about newspapers, you know, missed collections, all sorts of, you know.

Kid transgressions associated adult responsibilities. I bought their newspaper routes. I did like little m and a 

then I would hire those kids back to run the roots, but only on like part-time schedules that I felt they could handle. So I'd hire lots of my friends to run these route, and then I kind of sat on top of the roots alongside that.

There was no non-compete as paperboy. So I started my own newspaper. My grandmother had taught me calligraphy. So literally I had my friends, helping me like create these newspaper articles with a very like hyper local 

sort of oriented toward my little newspaper route radio. and I was strategically placed.

Calligraphy ads in these newspapers for all sorts of odd jobs. and then I would go to the homes of people that called me, and sell odd jobs to them. Raking yards, you know, cleaning out basements, washing cars, you name it, right?

[00:03:25] Jay: Wow.

[00:03:26] Sean: Pet stuff. and then again, I would hire my friends to actually do these jobs.

So I had a whole, you know, entrepreneurial. Thing. Go on Ry and it just lent itself very nicely to, the current business model.

[00:03:42] Jay: Do you have any, do you have a copy of your newspaper? Still anywhere?

[00:03:47] Sean: I'm sure my parents have

[00:03:48] Jay: You have to have one 

[00:03:49] Sean: I think they've strategically sent me, pictures of them at like inopportune embarrassing times.

[00:03:56] Jay: good. Good for them. Sounds like you have good parents. So you grew up in Rochester, New York. do you think anything from either your family or that location led you to being such a prodigal pro, however you say that word, prodigal, entrepreneur at that age? I mean, that seems pretty advanced for like a kid to start thinking in that route.

Like where did you get that from?

[00:04:18] Sean: Yeah, so. Honestly, I feel like my poor parents felt as if they were cursed, having a firstborn with these sort of innate tendencies. Honestly, I don't really think I got it from anywhere specific. I was just born with like a certain amount of drive. I, we did grow up kind of poor. and so I remember feeling.

A fair amount of drive associated with, Hey, all these other kids have these nice BM back bikes. I would like a bike, but I sort of knew like I was not appropriate to ask my parents to find a purchase. So everything was sort of motivated by how do I acquire this?

[00:05:06] Jay: Interesting. Okay. Well, I don't know if we've had anybody on, I mean, we've had the paper route story, but I don't know, like a paper route empire. as a kid, that's pretty impressive.

[00:05:15] Sean: it, it was funny, Jay. I mean, I think I made more money from that, those years, specifically like 11 to 14 than I did all through high school. Certain, probably a little bit of college. I started pressure washing business in college that printed money for a summer. but then I remember.

Getting into a compensation, my first compensation negotiation, as a full-time employee, my first job outta school. And I remember showing my direct supervisor a spreadsheet proving that I made more as a kid from my paperwork per hour than I did working, you know, this 80 hour a week job.

[00:05:58] Jay: And there's so much mystique around hedge fund stuff. Explain it like I'm five, like, what did you do in that space? And just like demystify it a little bit and

make it more common. Common man. 

[00:06:16] Sean: let's start from like the legal definition. Legally, there is no such thing as a hedge fund. What a hedge fund really is a loophole in a specific securities law that allows

the general partner of an investment partnership to go out and solicit a certain number of limited partners who meet certain income and or. Net worth criteria to invest their money. That's basically, that is the legal definition of a hedge fund. Now, in practice, what that became is a whole series ecosystem, financial architecture, for investing rich people's assets into all sorts of.

Different asset classes, public stocks, public bonds,technically probably real estate and private equity, though you don't usually. Here are those associated with the term hedge fund. Hedge fund is usually associated with, securities traded through exchanges, like public stocks, public bonds, futures, maybe commodities,derivatives, like, credit default swaps, those sorts of things.

but the overall objective of these things is to make their investment partners more money.

[00:07:41] Jay: Okay. All right. I don't know if my five-year-old would be able to follow that, but that's fine. I get it. I think I could FI mean, I'm much, I'm not much higher than he is, but, no, that's good. That makes sense. so how wrap all that up? Why, how and when you started Marion Street?

[00:07:55] Sean: All right, so the ha or the win, May 1st, 2019. The why is I had left the hedge fund industry. It had matured. First, it became less lucrative for me. Then it just became. Not fun at all. and now there are maybe a dozen firms that kind of dominate the industry. so I left and I started teaching college finance.

I taught at my alma mater Villanova for six years, four years undergrad, two years grad. while I was teaching a bunch of people in or in and around me. Suggested that I consider building a business from scratch. It's really something I never wanted to do because I thought I had better than an average inkling as to how hard it was I had.

Purchased and turned around and sold a couple of businesses. but eventually the voices won out and I decided to give this a go. I tell people I made maybe five phone calls and what the people on the other end of those phone calls made very clear to me was that they wanted somebody with my background to connect capital with companies that needed capital.

So that's the path. On which I started treading and I trial and errored a number of different business models, all kind of trying to solve typical broker dealer problem, where a company that needs money goes to a broker dealer, says, Hey, can you help raise this? they say, sure, we're gonna charge you, you know, a percentage of the money we raise.

And then either they raise some money or they raise no money. I don't think in any cases they raise. All the money. there, there probably are a few of those that I just haven't seen. so we built a model that I felt represent a better probability of success, and we got some momentum with that. alongside that, Our biggest impeded, we realized our biggest impediment to being able to successfully find capital for a company that needed it was its pace of revenue growth. So we spun up a product in conjunction with one of our clients who had built his career building sales organizations for SaaS companies. We spun up a service offering aimed at accelerating revenue for these companies to make them more investible.

[00:10:27] Jay: yeah, that's interesting. Well, I, you know, we're talking today because I met one of your incredible team members, Andres, shout out to Andres, just one of the nicest, most genuine dudes I've met. how did you build the team? When did you build the team? You know, when did you go like, okay, this is something that like, just have legs and like how, when did it start to feel real and when did you start to build that team?

[00:10:52] Sean: I got pretty lucky, so to speak, out of the gates. So of those five phone calls I made. each of those five phone calls turned into five referrals, and pretty soon I had two paying clients right out of the gate. one of which, transformed into a channel partner that probably sent us about a million dollars worth of business over the first five years.

and with the first two clients, I realized, Hey, I don't wanna spend 12 hours a day. Building spreadsheets while also hunting for additional customers, because you're not gonna build any sort of business with just two customers. So I hired two of my students at that time as summer interns. and. Both of them were still in the job hunt process.

So I told them, look, you know, why don't you guys start as interns if during the course of the summer we can figure out how to turn this into a full-time thing. I'd be happy to compete with your other offers. So fast forward to the end of the summer. I. Had momentum. one of the interns was offered a full-time position by Goldman Sachs.

I told her there's, look, I said I was gonna compete, but I really don't think there's any point to me trying to compete with Goldman Sachs. I really think you should take that. Job. the other intern did get an offer from KPMG. I chose to compete with that offer and he joined as my first full-time employee.

six months later, we then added an intern who ultimately became my second, full-time employee. nine months later, actually six months later, we went looking for someone we could hire full-time, from Villanova on their graduation cycle. And that's how we met Andres. Andres joined us in the middle of 2021.

[00:12:53] Jay: yeah, and I, he's just the nicest guy I ever, I love him. so, you know, you mentioned some things that you guys learned. You know, along the way and like maybe picking up a new line of business or, you know, just doing things differently. with all the stuff you had seen, you know, being around some purchases and turnarounds into. Why do you think that you still have to live some of the experience before you find the right answer in business, even though you and I both are not doing anything different than anybody else has done on planet Earth, who's had a business for the last 2000 years or whatever, right? Like we were all doing the same shit.

We're buying something for less and selling it from like, that's what we do. It's what everybody does. Who owns a business? Why do you think. It took you living those experiences to kind of digest it enough to make a plan to counter it.

[00:13:43] Sean: Okay. I love this question. So. Pattern recognition is a huge piece of both business and investing, right? and knowing what the patterns look like are fantastic. I think that gives you a bit of an edge in terms of turning the probabilities of business success in your favor as opposed to someone that you know, has no idea, has never seen the patterns, and has to figure it out.

But then there's this other side of business, which is. At some point, it's going to get really hard. There. There, there's, I've talked about this book, the Dip recently. It was referred to me a bunch of times recently. Seth Goodin, is the author. I really like the book because the book, sort of extols the virtue.

Knowing when to quit. We as a culture, and you know, the way our society glamorizes entrepreneurialism, you're kind of conditioned to, we will not quit. Right? Well, there are times you probably should quit. and the book argues that. Look, I, you can't be number one. You can't, and I used to say, as a professor, you can't get an A in everything, right?

So you wanna choose your spots where you can get an A, where you can excel, where you can give your chance to be number one. And you know it's going to get hard on that path. You can't tackle all these paths parallel. So you've gotta, as a business owner, you've gotta choose your battles. and. The power recognition alone isn't going to give you the inner motivation to make it through those difficult parts.

So when you encounter those difficult situations, I feel like the most successful entrepreneurs are the ones that are best at taking a step back, figuring out. Hey, is this a battle that's worth fighting? And if it's not, either figuring out who you can give that battle to for whom that battle, you know, fits with that person is, or just walking away from the battle and realizing that, Hey, I'm preserving resources to fight this other battle that's more important to me.

So I kind of feel like. Having lived through that multiple times and having, and now understanding it, that's the reason why successful entrepreneurs never have all the answers. Never.

[00:16:25] Jay: Right. That makes sense.

you've been around a lot of businesses, successes and failures. What's the biggest reason why you've seen them fail?

[00:16:34] Sean: oh, okay. Another great question and it rhymes with my answer to the first question. So, one of the favorite, this is actually on a podcast, one of my favorite podcast interview questions of all time. was a host interviewing the guy that ran Microsoft's venture business for at least a decade. It was probably somewhere between 10 and 20 years.

British guy by background, and they asked him. Sort of complimentary question, which is what are the traits, that an entrepreneur needs to have to be successful? And, his answer was fascinating. So he said, look, we, you know, we're Microsoft. We try to study this quantitatively six weeks to Sunday. And at the end of the day, I, it was pretty indisputable the traits that were the most deterministic.

Relative to predicting an entrepreneur's success were two very qualitative characteristics. Number one was their persistence. That willingness not to quit, like the main right, Hey, I'm gonna make this company successful. number two was very interesting to me and to whom. Everybody I've told this story is about it.

Yeah. Similarly interesting. Number two was the willingness to be ruthless when the situation called for it. So I look, I, you know, there's times you have to cut staff there. There's times you need to fire customers. There's times you need to make a decision go or no go, and some, you know, litigious action.

There's all sorts of other really hard decisions you have to make that. We don't like making as humans or even as entrepreneurs, and definitely not as you know, you know, people. but you know, there are going to be occasions when you're put in a situation where you need to make one of those hard decisions.

[00:18:34] Jay: No, I like that. I like those too. so who, I mean, you don't have to name names, but who was your first customer and you

got it for the first 

[00:18:41] Sean: Yeah.

[00:18:41] Jay: but who was your first one?

[00:18:43] Sean: So the first one, I, it was actually a tie because the two of them came about really at the same time. So, one was a consumer electronics company that was buying secondhand smartphones in bulk, doing a little bit of light refurbishment to them and then reselling them. To, large buyers that had an appetite for those think like schools.

Think like, businesses with, you know, in the field staff that didn't wanna buy the latest, greatest iPhones. think some government agencies, a lot of foreign buyers too, probably, resellers who would turn 'em around, sell 'em through secondhand retail shops. that was one of the two. First customers, they were growing, you know, a hundred percent year over year, and making these deals for secondhand smartphones on the fly.

So they really wanted somebody with good command of math business understanding, you know, exposure to fast growing startups. Definitely, someone who was connected to capital, they wanted someone with those characteristics. Helped manage this growth, number. Two or a tie for number one was a platform, that connected individual consultants with businesses that wanted consultants.

So I started doing some work for them. and then also through that, getting an opportunity to meet some of the businesses that wanted consulting help. And so when I met Juan. That I felt was a good match for what I was already doing, that I would, you know, try to plead my own case.

[00:20:33] Jay: Got it. Okay. And so who, how has your customer changed since then? Who's your customer today versus who it was back then?

[00:20:41] Sean: So the customer I. Think has gotten more defined. There's still a tremendous amount of variety. So we describe our ideal customer profile as a company that's currently generating between one in $10 million a year in revenue that has a very aggressive CEO or founder. we describe ourselves as a management consulting firm whose mission is helping innovative companies.

Generating between one in $10 million a year in revenue, grow 10 x or more within three to seven years by sourcing them investment capital and by accelerating sales. so we've talked about trying to narrow it down by industry. Historically, SAS has been a number one. healthcare has been number two, investment firms have.

recently moved into the number three position. Think like first time venture. First time private equity. first time real estate, private equity funds, real estate developers, those sorts of firms. But then it gets really varied, really fast experimental entertainment, consumer electronics.

Basically the common theme is they start this size. They want to get 10 x that size. They've got an aggressive founder who's real willing to stay the course for that three to seven years. And we try to do a good job educating them upfront. Like, Hey, this is gonna mean like you're probably gonna have a board overseeing you at some point if you don't already.

You're gonna have your comp, you know, your base salary comp to like median performers within your peer group. There's gonna be, you know, a pretty structured bonus and equity plan, all these sorts of things.

[00:22:22] Jay: Interesting. Okay. Well, I have a lot of other questions. We're up against it. we'll have you on for a second. Sure. I feel I could tell this to everybody 'cause I like to tell, I love to learn great stuff from great people. So, we'll have to do this again. I have one more question for you.

[00:22:35] Sean: Non-business related, just Sean, b and Sean. Nothing finance, nothing business. Don't tell me you wanna have the best business in the world. I'll, I promise.

[00:22:42] Jay: I was getting a lot of those. if you could do anything on earth and you knew you wouldn't fail, what would it be?

[00:22:51] Sean: I might try sailing around the world.

[00:22:52] Jay: There it is. See, that's, see that's the perfect answer. That's a great answer. It's something you could do that you're probably hesitant to do because you might die or you might run out of whatever, and it's a long trip and it's scary. but in this scenario, you can't fail. So you get to do something you wanna do.

Are you, have you sailed before? Are you a sailing guy?

[00:23:11] Sean: Yes, so I have sailed a number of times. I have not tried traversing an ocean.

it's on the roadmap for the, actually what's on the roadmap the next five years is get myself into a position where I'm comfortable, plunking down a fair amount of money, for my own somewhat sizable sailboat that would be able to traverse any ocean.

[00:23:37] Jay: You gotta wear that suit though. That's a sweet suit for a captain. Like that would be pretty, that would be pretty sweet to see you on deck with that, with the big old steering wheel. I could see that. all right, Sean, you're awesome. If there's anything that somebody heard today, they wanna reach out to you directly, how do they get in touch with you?

[00:23:54] Sean: that's easy. So SEAN, at Marion Street, capital M A R I O N street capital.com.or just go to the website super easy. There's a 8, 8, 8 number. There's contact me. you can 

easily submit that Marion street capital.com. 

[00:24:12] Jay: Beautiful. Well, Sean, you are an inspiration, my friend. I love the story. you know, I think you, you were. Well on your way to, I, and I told you this, I think I told you this story on your podcast, but that guy, Ben Albert from Rochester, New York, told me to own your backyard and kind of be the whatever of, and so I, I took that and abstracted it to, be this, something of somewhere, right? And if you guys are on your way to being the, you know, management consulting firm, especially in the capital space in Philadelphia. So, you know, congratulations on that. Good luck on the journey. We'll be following along and, you know, have a good rest of your week.

We'll talk again soon. All thanks for being on Sean.

[00:24:49] Sean: Sounds great, Jay. I enjoyed it.

[00:24:51] Jay: Appreciate it, brother. Thank you man.

[00:24:52] Sean: Yep, fine. 

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