Let’s get straight to the point here:
Cost of Capital – Episode 1 – The Idea:
Cost of Capital – Episode 2 – The Fundraising:
Overview & Executive Summary
Since all these episodes are videos, I’m going to give you the “Creator’s Commentary Track” in text here – we may also go back and do the same on each video itself.
Episodes 1 and 2 kick off the series and bring up the issue that pretty much any Associate in private equity will be faced with: how do you find good investments?
In real life, of course, the answer is rarely “from coked-out bankers at a club about to be rejected by models.” But investment ideas do often come from talking to others in the industry and hearing about what bankers are pitching.
And you also usually find at least a few companies that might be interested in doing a deal, as opposed to only one questionable one that may or may not want to sell.
But the issues that come up here do come up in real life as well, even if they’re dramatized here:
- Yes, there is a “David” at almost every firm. There’s almost a 100% guarantee that you’ll run into someone who enjoys being unreasonable for no reason other than to make himself look better.
- There is pressure on Associates to source investment ideas at many firms, especially anything outside the mega funds – and yes, some places do track how many companies you call.
- CEOs are often conflicted about whether to stay or move onto something new and potentially better. Maybe the timing doesn’t line up quite as well as it does here, but this business of getting “soft” job offers happens all the time.
- Yes, executives change their minds all the time about whether to sell the company or not, whether or not a deal will go through, etc. – this is why deals die, come back to life, die again, and so on.
The bankers depicted here are a little over-the-top, and that’s the intention: Todd and Leonard are sort of like C-3PO and R2-D2.
In real life, cocaine usage is not that common or as out in the open, though previous coverage might have suggested otherwise.
Would a private equity firm actually hire a new Associate (Martin) who doesn’t know what the hell is going on?
Yes and no… you definitely see “mistake hires,” but they’re more common at large banks where the recruiting process speeds by and there isn’t enough time to do proper “due diligence.”
These hires are somewhat less common in PE because recruiting is very thorough and can last for months.
And why would a PE firm hire someone who’s seemingly incompetent? Good question… keep watching?
Behind the Scenes
There were several scenes here that were cut and/or modified for various reasons – in Episode 1:
- Todd and Leonard at the Club – This was originally a longer scene where we got to see them go hit on the blonde girl, but we had to cut it due to technical issues – the footage just didn’t look that good and the scene itself didn’t turn out well on camera.
- Jason Calling Companies Montage – I originally envisioned this part as more lighthearted and more like something out of Entourage, but it came out looking more serious. Part of what David did at the end of this scene was moved to the first scene between them instead.
- David and Jason at the End – Originally this was supposed to take place in a parking lot and there was going to be a sign with “Up” in one direction and “Out” in the other direction. Yes, I am so clever – we had to change this around due to difficulties locking down the location.
In Episode 2:
- Opening Scene – The actors ad-libbed some of this (yes, I’m looking at you, Todd, licking something off the seat…); originally part of this was going to take place in a moving car but it was too difficult to shoot with limited time.
- Board Room Scene with Martin – Originally, we were going to have more interaction between him and the Partners and show how nice they were to him despite his incompetence – but it didn’t work well on screen so it was cut.
- David and Robert in the Massage Parlour – The setting was changed multiple times here. At first we wanted to do this on a golf course, but the location and weather were problematic.
If you want to see how these scenes were going to play out originally, click here to go to the dedicated Cost of Capital page and sign up for the mailing list.
Later this week we’re going to send out the scripts for Episodes 1 and 2 – so you’ll get to read the “uncut” version and see how everything was going to play out originally.
References to Other Finance Books / Movies / TV Shows
There were several in these first two episodes. “Surprise me, astonish me,” Equities in Dallas, Californian Pension Funds… and maybe more?
You can go back through them and scour for these references.
They come up a lot, especially in later episodes.
Maybe we’ll even send you a free bottle if you catch the most references…
Cost of Capital – The Entire Series: