A Q&A with Matt Jung, Founder of Orange Dot Ventures LLC
Aend of 2019, Search for Comfort LLC co-CEO Matt Jung has begun preparing to leave the company he ran for 26 years with business partner and co-founder Chip George.
A consummate entrepreneur, Jung acknowledged that hiring a new senior executive for Comfort Research, a Grand Rapids-based manufacturer and marketer of bean bag chairs and pool and patio furniture, would free up his time and energy to devote to other projects.
Jung used the early days of the COVID-19 pandemic to figure out his next chapter. He “eventually got into” venture capital, private equity and participated as an investor in private companies for about 18 months.
“None of them were very fulfilling for me, so it wasn’t much fun,” Jung said. MiBiz. “I had this business coach I was talking to and he really pushed me to say, ‘Why don’t you start writing what you don’t want? “”
This process led Jung on a journey that helped him focus on what would become Orange Dot Ventures LLCa fundless private equity firm he founded to invest in scalable direct-to-consumer product companies.
After securing backing from 10 West Michigan investors and injecting some of his own capital, Jung closed deals Aug. 1 for Wilma Schurmann, a mid-to-high-end skincare line, and Simplesa Nutrition, a manufacturer of nutritional supplements for people with ALS. and Parkinson’s disease.
Terms of the deals, which involved a Miami-based vendor, were not disclosed. Grand Rapids-based law firm Miller, Johnson, Snell & Cummisky PLC and accounting firm Echelbarger, Himebaugh, Tamm & Co. PC advised on the case.
Jung spoke to MiBiz about his entrepreneurial approach to private equity investing and his strategy to create a broader platform of consumer products companies.
After narrowing down your investment objective, how did you go about finding deals?
You’ll laugh at this: the way I started getting business flow was that I put together a brochure. I wrote down exactly what I was looking for and sent it to every broker I could find, brokers I spoke to years ago and new ones too. Once I started doing this, it created a flow of business for me.
I was able to look at many companies that met these criteria and ended up finding these two companies, which actually had the same owner. He had bought both companies over the years, one in 1997, the other in 2015, and ran them from Miami.
How many prospects did you consult before you took a serious interest in these companies?
I had four letters of intent that were accepted and I sent out a dozen, maybe 15 letters of intent. I looked at hundreds and hundreds and hundreds of companies to make it happen.
What common obstacles have arisen with some of these perspectives?
Certainly part of that is evaluation expectations. Some of them are when they would be consumer direct product companies, maybe they didn’t fit my model as well as I would like. Part of it was brand orientation. Part of it was product orientation. As you dig a little deeper into the product: is there a defensible gap? Do they really have something good? How old is the business? Many of these direct-to-consumer companies have only been around for two or three years, so it’s sometimes very difficult to judge. Did they just ride a wave of COVID as people moved more and more to the internet, or do they really have something unique and special that people are looking for?
Are you considering moving any of these operations to West Michigan?
I’m really looking to have virtual businesses. Wherever I am with a laptop, that’s where the business is. Everyone works from home or their home office, or some have their own small offices if it’s a third-party partner we work with. Over time, I want to build a small operations team that will handle operations, as I look to stack other direct-to-consumer companies in the future.
It doesn’t matter if it’s electronics, skincare, cosmetics, supplements or whatever: creating a product and selling a product are the same thing, especially when you work in this direct-to-consumer space. Your supply chain, your operations, your marketing teams, your customer service team, your accounting team: all of these resources can be shared, reducing costs for each of them.
Why did you choose to find investors for these specific transactions instead of raising funds to help create a platform of direct-to-consumer products?
I didn’t fundraise and that was my strategy with those first two. I wanted to get it right, get it going, and then over time I would look to fundraise. I have no idea if I would ever do that; it all depends on what makes sense. But to begin with, I didn’t want to be beholden or feel obligated to put that money to work. I’m trying to take it slow. I have no pressure on me other than my own to do extra business.
In the future, what kind of deal flow do you hope to achieve with Orange Dot?
Last spring, I set a goal of having three to five of these direct-to-consumer companies under management within the next 18 months. It gave me a good start in that direction. I’m very excited to get into it from a marketing and product development perspective. That’s what fills me so much and that’s what’s exciting about business: trying new ideas, coming up with new products that people love, people enjoy, people use.