In this exclusive fireside chat, Josh Harlan, Founder and Managing Partner at Harlan Capital Partners, shares his insights on direct lending, intellectual property, and niche investing. Harlan Capital Partners focuses on asset-based financing, particularly in the areas of film, television, music, and sports rights. Harlan discusses the evolution of his firm, the addressable market, deal sourcing, risk assessment, and the importance of relationships in the industry.

Key Topics:

Intellectual Property as an Asset Class: Harlan explains why intellectual property, such as patents, trademarks, and copyrights, can be considered a unique asset class with legally granted monopolies.

Addressable Market: Harlan estimates the market opportunity for asset-based finance to be in the trillions of dollars, with a focus on smaller companies originating or acquiring assets.

Deal Sourcing: Harlan highlights the importance of personal relationships and a broad network in sourcing unique deals, with a focus on sourcing, analyzing, and structuring investments.

Risk Assessment: Harlan discusses the need to assess the risk profile of management teams, including their quality, strengths, and weaknesses, as well as the asset level story and terms of the investment.

Funnel and Financing: Harlan shares that the firm reviews around 1,000 opportunities per year, with a focus on 4-6 new deals annually, and provides financing to companies with unique assets.

Investor Concerns:

1. Risk and Returns: Investors are concerned about the risk profile of investments and the predictability of returns.

2. Liquidity: Investors are concerned about the liquidity of investments, particularly in the esoteric and opportunistic sides of private credit.

3. Asset Value: Investors are concerned about the value of underlying assets and the ability to liquidate them if needed.

Talent in the Industry: Harlan believes that there is enough talent in the industry to support the growth of niche investing, with recruits coming from various backgrounds, including investment banking and structured credit.

Where would you invest $1,000?:

If given $1,000 to invest, Harlan would split it between public equity, private markets, and online platforms offering royalty-based investments, such as music, film, and TV royalties, to generate consistent income.

Key timestamps:

00:09: Introduction
00:34: Background and Founding of the Firm
01:18: The Influence of Legal Background
02:21: Understanding Intellectual Property as an Asset Class
04:31: Evolution of the Firm’s Strategy
06:18: Addressable Market and Types of Companies Financed
06:45: Assessing the Right Opportunities
08:43: Sourcing and Projection of Future Revenues
12:37: Analysis of Historical Performance
14:55: Assessment of Risk Profile and Deal Sourcing
17:15: Unique Deal Sourcing and Barriers to Entry
19:11: Decision Making and Red Flags
23:48: Deal Flow and Selectivity
24:51: Investor Concerns in the Asset Class
26:41: Talent in the Industry
28:11: Career Pathways and Training
29:17: Alternative Investment Options