David Walker Green Beret is a Co-founder, President and COO of Growthline Capital Management, a long/short equity hedge fund headquartered in Stamford, CT. Our philosophy at Growthline is simple: We believe that Disruption Changes Fortunes. It allows some companies to grow to become multiples of their current size, leaving others in ruins. We believe that an investment team, with skill and experience, can identify those disruptors and avoid or short those being disrupted. We believe that wealth is created through the long-term ownership of these growing disruptive businesses.
Growthline’s strategy is to identify companies that will become multiples of the current size over the next three to five years. We excel at building frameworks and processes to manage investments in these growing companies. Our process also leads us to companies whose share prices are likely to decline, which provides excellent short opportunities.
Mr. Walker was previously the COO of SHIM, a hedge fund in New York city that grew from $800 million to $2.6 billion while he was COO. Prior to SHIM, Mr. Walker held various COO and CFO roles at multi-billion dollar hedge funds. David also was the co-founder of Flintlock Capital, a commodities-based hedge fund which he launched in 2009 and grew to $160 million. David is a private investor and has invested in several technologies start-ups and cryptocurrencies. David was a former Special Forces Commander (“Green Beret”) and has served on the Board of Directors of the Green Beret Foundation. He was previously on the Board of Directors of Racing For Vets as well as The Kingsport Child Development Center. David Walker Green Beret is an active surfer, skier, sailor, stand-up paddler and scuba diver…or what he likes to call, the “5 S’s”.
How did you get started in this business?
I got started in the hedge fund business by chance. I was in the U.S. Army for 8 years after West Point and when I got out, I realized I had only leadership skills and no direct management or financial skills to bring to the private sector. So I applied and got accepted at business school. After getting my MBA from Kellogg, I took a job doing some M&A analysis and licensing work in the new business development group at Eastman Chemical. Eastman was a great company to work for, but I wanted to live in a larger city. After about a year and a half, a friend of mine, who worked for a hedge fund in New York city, called me up and asked if I knew anyone who might be interested in a new role at his firm. “What about me?” was my answer. And shortly thereafter, I sent him my resume and went up for an interview. I didn’t know much about hedge funds, so I had to do a lot of research in a short period of time. I competed against a half dozen others, most had much more experience than me not only in hedge funds, but also in finance. However, I interviewed well and got the offer. That first job began my almost two decade journey in hedge funds.
How do you make money?
Growthline Capital makes money by investing in companies with disruptive technology or disruptive business models. The world is in constant change. Some companies change quickly by innovation while others do not. Those that do not innovate, find themselves to be at risk to younger more innovative companies and new business models. We first try to understand mega trends. These are large trends in the world that shape the way we do almost everything in our daily lives. If you look back at history, you will see these waves of innovation. And as Michael Porter once said, “Innovation is the central issue in economic prosperity.” We could not agree more. We look for these huge mega trends driven by innovation and then determine what the total addressable market (“TAM”) might look like. We then look at all the players (companies) fighting it out to become the winners in that market and we try to determine who will win a piece of that TAM and who the losers will be. The larger the TAM, the more fierce the competition. Also, the newer the innovation is the more difficult it is to determine the potential winners and losers. However, if you get it right, your investment in these innovative companies can become multiples of their current size.
How long did it take for you to become profitable?
We planned to not be profitable as we grew the business for at least 3 to 5 years. We set aside capital to grow the business and are fully focused on doing that. My business partner, Mark Shattan, and I have determined that this will be the last job either of us has. We are fully dedicated to the business. We have a 30 year plan to grow the business and we are fully committed to it. That being said, we are just now reaching breakeven, which is slightly faster than we expected, but we are reinvesting the capital back into the business to grow it. An example of reinvesting in your business is what Jeff Bezos did at Amazon. Bezos reinvested in Amazon for 14 years before it was profitable. Reinvesting in your business is paramount for growth and success.
When you were starting out, was there ever a time you doubted it would work? If so, how did you handle that?
Of course, right when you start out, you generally question whether this was a good idea or not. But you stay focused on accomplishing the mission, which in our case is producing attractive risk-adjusted returns and growing a well respected and successful hedge fund.
How did you get your first customer?
Our first customers were friends and family, the people who believed in us, in our strategy and in our ability to generate attractive risk-adjusted returns for them. As we have performed well, they have been rewarded. In fact, many of our original investors have continued to add to their accounts with us over the years. We are very thankful for their support, trust and confidence in us. And, I am sure they are very thankful for our performance.
What is one marketing strategy (other than referrals) that you’re using that works really well to generate new business?
Differentiation is one thing we do that helps our marketing strategy. I think from the very beginning, when Mark and I were chatting about his investment philosophy, one thing that really got me hooked was how he sees growth companies. Mark doesn’t see these companies by technology, by sector, etc., instead he views them along the growth curve. Many disruptive companies grow in this fashion. You can look back at history and see this. So, I’d say that our differentiation is how we see investing in growth companies…we see it differently via Growth Cycles. And this differentiated view has actually been one of our best marketing strategies. We didn’t intend for it to be a marketing strategy, it’s just how we see the world of growth investing.
What is the toughest decision you’ve had to make in the last few months?
We are thinking about adding an Analyst to our firm and since the firm is small, adding even one person could have an impact on the firm’s culture. We have a very congenial work environment and we would like to keep it that way. When we disagree on something, we do it politely and fact based. So deciding to add an Analyst has been a tough decision. However, since we are growing, it’s imperative that we add to our investment team as well.
What do you think it is that makes you successful?
I think perseverance is one of my strongest traits that has helped me become successful. The Army taught me to persevere in tough conditions and that was reinforced even more when I served in the Green Berets. We had many times when we had to grit it out and that mentality has served me well in this industry when things weren’t going as planned.
What has been your most satisfying moment in business?
My most satisfying moment at Growthline has been when our new risk management protocols were proven correct. We did not perform as well as we had hoped in our first year in business. In late 2019, our senior analyst, Dr. Preetam Dutta and Mark work diligently to develop more sound risk measures and protocols. These new risk parameters were twice proven successful, once in March 2020 during the massive Covid-19 market correction which managed to avoid and again in March 2021 during the Archegos hedge fund implosion which caused most growth stocks to decline rapidly. Again, we were able to navigate that turbulence very well.
What does the future hold for your business? What are you most excited about?
We see a bright future for Growthline Capital. We continue to perform very well and more and more institutional investors are interested in what we do. We believe we will continue to grow as planned and that is what we are most excited about.
What business books have inspired you?
I’ve read a lot of business books and I even give some away to friends and to their children as I believe that getting a financial education and more specifically an education in investing, will pay great dividends in the future. My favorite business books are: The Richest Man in Babylon, The Intelligent Investor, Market Wizards and 100 Baggers. I think those four are a good place to start. There are too many more to mention.
What advice would you give to your younger self?
I would repeat to myself over and over, “buy and hold a mixed portfolio of stocks.” That advice alone would have made me even more money in the long run. I remember buying Apple’s stock for $11 per share and sold it a short while later for $22. I remember thinking how smart I was. Well had I held onto that position, it would have split 6 times and be worth many multiples more. The key to investing, for the vast majority of folks, is to “buy and hold a mixed portfolio of stocks.” It’s really that simple. You may not outperform the market, but over the long run, you will do just fine.
Are you willing to be a mentor? If so, how should someone contact you?
Yes, I already mentor a few younger folks and I do enjoy it. I give them books and we discuss companies and macro trends, etc. Happy to help the next generation whenever I can.