#194: Hanna Kassis (Babylon Asset Management) — Business Financing, Private Credit, and Growth Capital

Hanna Kassis [00:00:00]:
We grew up thinking the golden rule is treat others the way you wanna be treated, which is that's a golden rule. But the golden rule is he who holds the gold rules.

Jeffrey Stern [00:00:11]:
Let's discover what people are building in the Greater Cleveland community. We are telling the stories of Northeast Ohio's entrepreneurs, builders and those supporting them. Welcome to the lay of the land podcast where we are exploring what people are building in Cleveland and throughout Northeast Ohio. I am your host, Jeffrey Stern. And today, had the real pleasure of speaking with Hana Kasise, entrepreneur, licensed CPA, and attorney. Hana began his career in Youngstown in 2008 by running Tim Ryan's congressional campaign until 2011. This experience planted the seeds of autonomy and independence that would later inspire his entrepreneurial journey. After the campaign, Hana attended law school in Chicago, initially planning to become a tax attorney.

Jeffrey Stern [00:00:59]:
However, his path shifted and while still in law school, Hana founded Oryx Capital Markets, which he secured seed funding for from Dan Gilbert's Bism and eventually raised $50,000,000 from a global asset management firm along with a $50,000,000 line of credit from East West Bank, ultimately to build an online ad revenue exchange providing on demand liquidity access. In 2022, Hana exited Oryx by selling the majority of his shares to his investor group and began lending and investing with other alternative lenders. He also acquired the former Whistle and Keg, now known as Whistle Taproom, a game day destination bar and restaurant in downtown Cleveland. Most recently, Hana launched Babylon Asset Management in 2022, where he has invested in nearly 200 alternative loans and helped 36 companies raise debt capital through his advisory work. All in, Hana is responsible for 1,500,000,000 of capital deployments into other companies. Hana was actually one of the first people that I met in Cleveland, and it was a real pleasure to finally have him on the podcast. So with that, please enjoy my conversation with Hana Kasis after a brief message from our sponsor. Lay of the Land is brought to you by John Carroll University's Boulder College of Business, widely recognized as one the top business schools in the region.

Jeffrey Stern [00:02:20]:
As we've heard time and time again from entrepreneurs here on Lay of the Land, many of whom are proud alumni of John Carroll University, success in this ever changing world of business requires a dynamic and innovative mindset, deep understanding of emerging technologies and systems, strong ethics, leadership prowess, acute business acumen, all qualities nurtured through the Buhler College of Business. With 4 different MBA programs of study spanning professional, online, hybrid, and 1 year flexible, the Bowler College of Business provides flexible timelines in various class structures for each MBA track, including online, in person, hybrid, and asynchronous. All to offer the most effective options for you, including the ability to participate in an elective international study tour providing unparalleled opportunities to expand your global business knowledge by networking with local companies overseas and experiencing a new culture. The career impact of a bowler MBA is formative and will help prepare you for this future of business and get more out of your career. To learn more about John Carroll University's Buller MBA programs, please go to business.jcu.edu. The Buller College of Business is fully accredited by AACSB International, the highest accreditation a college of business can have. This conversation is many years in the making. We first connected back when I actually moved to Cleveland and Start Mart, the co working space in Tower City when it was still operational location.

Jeffrey Stern [00:03:52]:
And then through many walks of life, obviously, Lee Zappas, you know, a true maven of Cleveland is also at the heart of, you know, us reconnecting here. But you've obviously been on quite a journey since with lots of fascinating stories along the way. I feel like every time you and I meet you, share some crazy business story. So, I'm excited to be able to go through some of those with you today.

Hanna Kassis [00:04:15]:
Awesome.

Jeffrey Stern [00:04:16]:
So, I think there's a there's a lot to cover here, and I'm excited to get into some of the stories that you have in store for us. But I'd love to do a bit of stage setting. You know, your background spans law, spans accounting, spans finance, and I think your path from attorney and CPA to finance and entrepreneurship is quite interesting and and actually pretty unique as far as past entrepreneurship go that I've seen. And so I'd love to just start with how that multidisciplinary foundation set the foundation, shaped your approach, and, you know, with that, what kind of pushed you to make the entrepreneurial jump?

Hanna Kassis [00:04:53]:
Yeah. Sure. I felt like I've always been entrepreneurial. You know, part culture, part family, lot lot of my dad, aunts or, uncles, cousins, they all kinda work for themselves along the years. Not so much in the start up sense, just business owners. Right?

Jeffrey Stern [00:05:08]:
Yep.

Hanna Kassis [00:05:09]:
Just carving your own path. I went to law school originally to be a tax attorney. I studied the county. I always wanted to go to law school. My dad said, well, what if you study political science? What's your fallback gonna be? So at the time, I was in high school, that's when the Enron scandal happened. So I said, accounting seems like a career I'll never go hungry in. So studied accounting. In order to become a CPA, I had to take a 5th year of school.

Hanna Kassis [00:05:33]:
So I studied financial economics at ISU, And then went to law school. I worked for Tim Ryan for a few years, which really actually I I ran his campaign in 2008 through 11, and that gave me such a taste of independence. I remember when I first started, I used to call my boss, or I'd call up Tim and, you know, hey, what should I do here? And then finally, one day he said to me, I trust you. I put you in there for a reason. Figure it out. And that that having always been entrepreneurial and having that very independent role, kinda was like, I gotta taste of that freedom. I was like, this is great if I can make money. So I go to law school to be a tax attorney, and then I end up coming up with a business idea that I really wanted to pursue, which ultimately turned into OrecX.

Hanna Kassis [00:06:14]:
And so Yeah. That was kinda for me, I graduated and was like, I have a couple customers. I still wanna take the bar as an insurance policy, but I really wanna try my hand at this. So I called my dad and I had his blessing. He said, yeah. Do it. Just take the bar at some point so you have something to fall back on. You know, my parents are always like risk mitigation for my career and stuff, which I really appreciate.

Hanna Kassis [00:06:34]:
And, and that that was pretty much it. I never looked back on a career. I I'm a licensed attorney and CPA, but I've never practiced either one.

Jeffrey Stern [00:06:42]:
So what was Rx? Where did that inspiration for this business idea come from?

Hanna Kassis [00:06:46]:
Oh, it's funny. So I went out. I had a constitutional law final, in my 1st or second semester of law school. And I I just remember we

Jeffrey Stern [00:06:56]:
all went out and party.

Hanna Kassis [00:06:57]:
And I remember I came home and I was on something on the Internet where I saw that Khloe Kardashian's Twitter account was worth, like, 25,000,000. Now this is back in 2012 before influencers were like a thing.

Jeffrey Stern [00:07:09]:
Right. Right.

Hanna Kassis [00:07:11]:
And so I thought it would be really cool. And then there was a company called Sponsored Tweets, if you remember that. They would they were kinda like the intermediary between big brands and Twitter accounts. And so if you recall on Twitter, whenever there was an advertisement, the very last three digits of the tweet would be hyphen SP, meaning it was sponsored. And that was that tipped you off that it was an advertisement. So I went down the rabbit hole and I found out that Khloe Kardashian was making, like, 13,000 a tweet at the time, but her account was worth, like, 25,000,000. So in my mind, I said, well, being a finance guy, math guy, I'm like, that makes no sense. That's, like, way overvalued.

Hanna Kassis [00:07:47]:
But, like, what if what if we could value it somehow? So I set up a company called Social Networking Exchange, which was an opportunity for, you know, influencers online, whether they're celebrity in real life or not. Now there's no difference, but at the time there was. It was an opportunity for them to come and sell shares in their Twitter account. And let's just say Khloe sold half. So now she gets call it 12,000,000, 12 and a half 1000000. Now every time an advertiser sponsors, she gets half because she owns half, but then the investors get the rest. And and that's kinda how it started. And I'm talking to attorneys, and they're they're quoting me, like, 250 to $1,000,000 for securities laws and all.

Hanna Kassis [00:08:27]:
You know, as a first time startup founder, you're like, man, this is like an insurmountable hurdle. And then I was I met with one attorney, a friend introduced me in Chicago, and he goes I was explaining it to him. He goes, oh, well, you could do this, like, with, like, websites and smartphone apps and YouTube, and instantly the light bulb went off. And I thought, you know, those are more real crystallized businesses that probably have a capital need. So I went I went home and rebranded to Oryx, which stood for online ad revenue exchange, and we just held ourselves out as funding anyone who makes money from a digital ad. By the time I graduated, I had 6 or 7 clients. And then through the Youngstown Business Incubator connection, I don't know if you remember Jim Costler.

Jeffrey Stern [00:09:06]:
Yeah. Of course. Sat down with him.

Hanna Kassis [00:09:07]:
He goes, you need to talk to Dan Gilbert. And at the time, I'm not a huge sports fan. And at the time, I said, who's Dan Gilbert? And they're like, he has this accelerator. You should talk to him. I pitched and I was in that last cohort of BISM. I raised $25 and another 100 from from BISM. And just kinda kept rinsing and repeating. Use that capital to do more deals, and then I met private investors through the BISM connection, all x Wall Street, use that capital to fund more deals, and then they took us to a hedge fund asset manager, humongous asset manager out of New York City raised $10,000,000 line of credit in 2017.

Hanna Kassis [00:09:40]:
We got a bump to 50 in 2019. And then at the end of 2020 off the heels of COVID, we raised 50,000,000 in bank debt from East West Bank. And so business is doing really well. I exited as you know in 2022. And, I still own a piece of the business, and it's I still do a lot of deals with them through Babylon, but it it was like the great absolute greatest learning experience in my life.

Jeffrey Stern [00:10:03]:
Well, I would love to hear about what some of those learnings are. I love the origin and evolution of it. That whole general idea of of fractionalized ownership, of social media accounts is actually like, if you think about where we are now, a model that was quite ahead of its time.

Hanna Kassis [00:10:19]:
Yeah. Quite ahead of its time, and still no one's done it. Yep. You know, my noncompete's over. So I I still get the edge. I still get the edge, you know, because there's so much money in that space now. More more so than there was 12 years ago.

Jeffrey Stern [00:10:30]:
You know? Much more so. Yeah. Yeah. So take take us through some of, some of the learnings along the way there.

Hanna Kassis [00:10:36]:
Well, one of the biggest learnings was don't be so hung up on your initial idea. Like, I was so obsessed with this influencer idea in Sonix. And then when that light bulb went off in in my head with that with that attorney, you have to just be willing to do whatever moves the business forward. Like, a lot of businesses get hung up on on owner ego, founder ego. No. This is the idea. This is what we're doing. But it's like really the market.

Hanna Kassis [00:11:02]:
There was much more demand for what I was offering with website owners and smartphone apps than there was with influencers, social media influencers. So we offered like a future type of revenue program where we were given chunks of money upfront and then collecting all their revenue for a fixed period of time. And then a lot of people would say, oh, it's like receivables factoring. I'd say similar, but not so much. But then I found out about a competitor in California. And, again, I pivoted. Like, the lesson is, they say the definition of wisdom is strong opinions loosely help. If you're proven wrong, move on.

Hanna Kassis [00:11:33]:
Right? If the market doesn't validate your initial idea and there's demand for something similar but slightly different, let go and follow what the market's telling you. Right? Lot of businesses fail because the people are holding on to that idea too hard.

Jeffrey Stern [00:11:51]:
I mean, it rings true. It's it's one of the, you know, perennial bits of wisdom from even just the the podcast itself certainly in in my own entrepreneurial experience. But the idea that a business was founded on is rarely the idea that the business succeeds with. Exactly. And the founders that make it through are the ones that fell in love more with the problem than with their their own idea itself.

Hanna Kassis [00:12:14]:
Yeah. That's a that's a great way to put it, man. So that was when I saw real growth was when I started doing factoring, which is basically just buying the receive accounts receivable versus some type of forward financing where you're taking a bet on the future. And the business just grew from there. That was it. That was 2015 when I switched to factoring. And then one of my advisors from back home in Youngstown said, you know, we had been raising a ton of money. People thought we were not saying, like, hey, you wanna buy these future revenue streams from digital ads? And people laughed us out of the room, you know, laughed me out of the room.

Hanna Kassis [00:12:44]:
I had a a cofounder in the very beginning, and so it was really just myself for most of those years. They laughed us out of the room, and one of my advisors said, why don't you take your life savings? Why don't you do a few deals, use that track record to raise money from an investor, and just rinse and repeat? And so that's what I did. I sold my car. I had a 4th 2006 Ford Fusion, and I had about 12 grand in my 401 k from working for Tim Ryan. I was able to scrounge up like 19,000, and that was it. That's how I started the business. And then I used that track record to raise from from Bizdom. I used the Bizdom track record to raise from the private ex Goldman guys.

Hanna Kassis [00:13:16]:
I used that track record to raise from the asset management firm, and then we use that track record to raise from the bank. The proof is in the deals. Right? One of the lessons I learned was a lot of Cleveland investors, especially like non coast investors, they'd say, well, where's your technology? And I'd say, well, I don't see the sense in building technology until I've proven out the model. Now the business has a ton of technology. Right? Like Fintech is kind of a misnomer because there's an old saying one of my investors told me when I first started. When I told him I didn't have technology because I wanted to prove it out, he said, you're doing it the right way. There's an old saying on Wall Street, waiters wait, painters paint, lenders make loans. Just get money on the street, then build your technology.

Hanna Kassis [00:13:58]:
And that's exactly what I did. It was a slower growth, but a lot of the startups that popped up over the years trying to do what we did never were able to stake their flag, and they've all moved into a different area of financing. So slow and steady wins the race. It wasn't like the glamorous startup that I thought it would be, you know, with big valuations, but it is one hell of a business today.

Jeffrey Stern [00:14:20]:
How did you think about differentiation as you made your way through that process? What allowed you to ultimately succeed and gain the share that you did and the traction as a I mean, by 2020, you know, a real institutionalized business?

Hanna Kassis [00:14:33]:
It was a flexible solution that we offered relative to a lot of companies that offer what we offer for different industries. So a lot of companies require minimums. They require you to sell a basket or finance a basket of accounts receivable versus just one offs, which we were doing. The opportunity, it's unbelievable. You know, Dan Gilbert has a quote that says the inches are all around. Meaning like every little piece matters. So when I first got these deals, I would go to a traditional financing company and say, hey, Google owes this guy 500 grand and he wants to sell the receivable. He needs money.

Hanna Kassis [00:15:05]:
And they'd say, well, where is his invoice to Google? I'd say, well, Google self invoices. They're so big. They they self invoice on behalf of their customers, and they'd say, I don't know. We can't understand that. All we did was integrate with APIs, and we grabbed that data and we created an invoice for our own purposes. And it was as financeable, that's not a word, but we use it in my industry. Yeah. That screenshot of a Google portal was as financeable as an invoice itself as if the customer sent it to Google's accounts payable department.

Hanna Kassis [00:15:37]:
So a lot of factoring companies couldn't wrap their head around what I was doing, so that's when I said I'll do it myself.

Jeffrey Stern [00:15:42]:
Pulling on that quote, the lenders gonna lend.

Hanna Kassis [00:15:46]:
Yeah.

Jeffrey Stern [00:15:47]:
Did you have a a greater vision for what the business would become, or was it really just, you know, let's execute and just grow it over time?

Hanna Kassis [00:15:57]:
I was still in love with the Sonex idea. It just never evolved out of there because we had a product market fit. It's like product and market. You kinda go like this. And then once you snap into place, that's really just build on that foundation. That's kinda what we do.

Jeffrey Stern [00:16:11]:
In reflection, what are some of the other most salient lessons and and learnings from your time building, Lorex?

Hanna Kassis [00:16:19]:
I would say number 1 is and and I give this advice to everybody is slow down your decision making. If you think you're ready to make a decision, wait another 24 hours. Right? If the pressure's on that much, maybe it's not for you. Right? So I I like to be more methodical and deliberate with my decision making. I do believe in intuition, and I'm very, like, right minded, But you also have to be able to whole brain thinking. If you feel a certain way, you gotta kick it into the left side of your brain to see if it makes sense. And then once you're done with that, you gotta kick it back to the right side of the brain to see if it still feels right. So being able to, like, self reflect and say, is this a good decision? Take your time with the decision.

Hanna Kassis [00:17:00]:
And then also, I would say, careful who you choose as capital partners. I lucked out, but I've I talked to a lot of people along the way where I'm like, man, that could have been bad. So you have to do the underwriting. Like, a lot of capital partners will underwrite your business, but you have to do the underwriting on the capital partners.

Jeffrey Stern [00:17:16]:
Take us through the the transition. You know, ultimately, you you've exited the business, still an owner in in it. You know, we'll talk about Babylon. But what was that process like? And, I I remember we we connected a few times during to then around it and a lot of excitement.

Hanna Kassis [00:17:33]:
You know, it wasn't the transition or exit that I thought it would be. Before I dive into that, I wanna just make an important note to a lot of entrepreneurs out there that might be listening. Internal buyouts, which is how I exited the business, selling it to my investor group, is the number one way entrepreneurs cash in on their business. You don't get as much because it's a private sale. Right? But it's a path of least resistance to get a sale. And so I actually had 2 transactions that really stuck out over the years. The first one, and this is not to disparage anyone. This is business.

Hanna Kassis [00:18:06]:
Like, just I I don't have any ill will, but the first one was when my current investors were gonna buy out the BISDEM position. Yes. And with the balance, it was like a 120 or something, and one of my investors made an offer for 50 just to buy everything off of BISM because they were shutting down if you remember. I don't know if that was before you came to Cleveland. And so my investor said, don't let them find out who we are. I said, why? He said, because of hold up value. If they find out that we're wealthy investors, they're gonna try to get more out of the transaction. Somehow or another, they found out who was on the other side of the transaction.

Hanna Kassis [00:18:40]:
Because when it comes down to the legal work, you do your due diligence and you find out who you're transacting with. Well, they came back and, like, tripled the price on my investor. And I'm like, what the heck? I'm like so close to raising all this money. The business was really in its infancy. We had a few customers.

Jeffrey Stern [00:18:54]:
Yeah.

Hanna Kassis [00:18:55]:
So I hit a stopping point. I didn't know what to do. So one of my investors, I called up another investor and he goes he's like, you are the business. Just threaten to blow it up, but you gotta be prepared to walk if you're gonna do that. He said, you know, call him up and say, you guys are holding me up. There's nothing here. You're shutting down your fund, and I'm gonna call cranes and tell him how badly you treat your companies. And that's that's something I would never do, but, you know, so that scared them.

Hanna Kassis [00:19:18]:
The next day we closed the deal, and I was able to transition into those new investors. So, you know, fast forward, that was 2016, 2015. Fast forward to 2022, I was burned out. I was my business, I got out of my business like many business owners. Like, I bought a business because the sellers wanted to get out, but my business was stuck. We were competing with SBA. It was a very hard time as an entrepreneur. We were competing with 30 year deals at 1%.

Hanna Kassis [00:19:44]:
It's the cheapest money ever. That's like borrowing from the discount window. Right? I took a zero salary. Our COO took a zero salary in order to keep our staff employed. We had done almost a1000000000 in transaction volume. We purchased 2 140,000,000 some assets with 0 losses. And so we caught ourselves in a position in the summer of 2020 where we were, like, chasing down deals, and our growth was basically the same. We we basically lost a year.

Hanna Kassis [00:20:10]:
We were the same size as we were summer of 2019 is summer of 2020. And so our competitor had sold for, like, $80,000,000. And so I got approached by a bunch of investment bankers and said, hey. We're you know, you're on our radar. This is a good transaction in the industry. We were a little too small, but what it did was it opened up my eyes to, like, how my business was valued and what it was actually worth. Mhmm. And I thought this is very interesting.

Hanna Kassis [00:20:35]:
So I started having a bunch of conversations, and I put together a plan for myself personally and said, I'm just gonna go hard in the paint for 18 months and then sell this thing. Right? So I told my investors that, and they made me an offer. They said, look, we love the business. We'll give you the exit you're looking for. So I had an offer from 1, the asset management firm. And in the very last minute, I said, I accept these terms. They sent me a totally different deal. It's a very common move on Wall Street called retrading.

Hanna Kassis [00:21:04]:
I've never done it to someone and I never will. I I don't like that method of business, but I got retraded and I said, fuck it. Excuse my French. You guys are gonna work for me. I'm just gonna go do something else and I'll own the equity and everyone will work for me and maybe I'll get something out of it, maybe I won't. Well, then I I got a counter offer from my partner at the time. Deal dragged on for 6 months. They couldn't agree on anything.

Hanna Kassis [00:21:26]:
I was at my wits end with it. So the investor who gave me the advice to call up wisdom and threatened to blow it all up, I called him up and I said, hey, if you guys can't decide on this, this is nobody's company. I'm gonna walk. I'm gonna get on LinkedIn. People are gonna follow me. I have the entire Rolodex. I am the sales team. You know, what do we wanna do here? Within 2 or 3 days, we closed.

Hanna Kassis [00:21:50]:
So, you know, you have to be I think I had mentioned we talked about it before. You have if you're gonna do that, you have to be prepared if someone's gonna call your bluff. You just have to. I was ready to walk. I was ready to walk. I wanted to get on with my life. So I was able to get out of the business, still own 8% of it. From there, I was able to I was able to get married.

Hanna Kassis [00:22:12]:
I was able to finally get a mortgage. I couldn't get a mortgage just because of the way the whole business was structured as an entrepreneur. I'm sure many people listening to this are familiar with that dilemma. And then I was able to buy another business and start another business. So for me, it was like a very good transition. By no means was it like I have I could retire by no means. But for me, it was like a very good transition point. And the number one thing that I got out of it wasn't the money.

Hanna Kassis [00:22:35]:
It was the knowledge of what not to do next time.

Jeffrey Stern [00:22:39]:
I mean, I have to ask, knowing that you've since embarked on a new chapter in in your journey, what are you doing differently now that you knew better since having the whole Rx experience?

Hanna Kassis [00:22:53]:
So my marketing funnel is just, like, I think, second to none for my business. We turn on the email dial, and we get deals in. It's that simple. So I I was able to take that entire, like, 7 or 8 years of iterating on a marketing system and implement it day 1 in my new business. So that was probably the most important. 2 was what works and what doesn't. I had knowledge of what works and what doesn't. So a lot of the stuff that I had done at Oryx, I I kind of abandoned and figured out this is probably a better way to do it.

Hanna Kassis [00:23:23]:
And then it's also finding the right people. Like, I've interviewed so many people for for Babylon, and we were a team of 5 now, and it's like but I've interviewed way more people trying to find the right people, and you ask certain questions that try to so I feel like I'm a lot better with people. I'm a lot better with marketing. It's just as as time goes on, you just wanna always strive to get better. Beginner's mind. Right? You never know enough. You have to approach things with a beginner's mind. But knowing how to turn the dial on marketing, knowing what marketing channels work, I think was the most valuable because that's really the way to grow the business the fastest in my opinion.

Jeffrey Stern [00:23:56]:
So what is Babylon?

Hanna Kassis [00:23:59]:
So Babylon Asset Management was just a an LLC I had set up to begin investing. I'm thinking of a rebrand, you know, candidly, but the it started off as Babylon Asset Management because after my exit, I had to invest. I don't want my capital sitting there, right, in an era they had just started raising interest rates, but I still don't want my capital sitting there. So what I did was I approached a bunch of lenders very similar to my old company, Oryx. Oryx is not technically a lender, but I I use that term very loosely. So I approached him and said, hey. I wanna invest with you in deals. And so I started investing with other lenders.

Hanna Kassis [00:24:34]:
I was giving my capital, and I still am, to other lenders. And so it was just my own personal capital, raised a little bit of money from some entrepreneur, high net worth entrepreneurs, nothing serious. You know, we just we invest in deals. But then when Silicon Valley Bank collapsed, I was in an era where I was like, okay. Babylon Asset Management, I'm investing. Let me go get a job with a law firm or an investment bank. But, you know, I I just honestly, Jeffrey, I can't tie my I can't tie my hands down once you've had that entrepreneurial freedom no matter how much you pay me. I'd rather make less and be free than sell my soul.

Hanna Kassis [00:25:08]:
And so when I saw Silicon Valley Bank collapse, a lot of people reached out to me just knowing I was in the finance business, and I thought, man, this is a great way to spend my time. So Babylon Asset Management is 2 divisions now. It's an advisory where we actually help businesses raise debt. And then as a syndicate, we invest in those deals. And that's very important in the industry to avoid moral hazard. A lot of guys broker the deal and they don't invest in it. And a lot of guys lend the deal, but they don't find it, and they have to pay the fees on it. So what we do is I I basically built a lending company without any of the, operations of a lending company.

Hanna Kassis [00:25:41]:
I don't have to worry about servicing, legal, contracts, any of that stuff. I source the deal. We source the deal. We underwrite the deal. We help place it with the right lender, and then we invest in the deal because we never wanna send a good deal to a bad lender or a bad deal to a good lender. So really just a private credit firm. That's really the only way to describe it.

Jeffrey Stern [00:26:03]:
Lay of the Land is brought to you by Impact Architects and by 90. As we share the stories of entrepreneurs building incredible organizations in Cleveland and throughout Northeast Ohio, Impact Architects has helped 100 of those leaders, many of whom we have heard from as guests on this very podcast, realize their own visions and build these great organizations. I believe in Impact Architects and the people behind it so much that I have actually joined them personally in their mission to help leaders gain focus, align together, and thrive by doing what they love. If you 2 are trying to build great, Impact Architects is offering to sit down with you for a free consultation or provide a free trial through 90, the software platform that helps teams build great companies. If you are interested in learning more about partnering with Impact Architects or by leveraging 90 to power your own business, please go to ia.layoftheland.fm. The link will also be in our show notes. Let's talk about credit for a bit. I think a few lines of of questioning that that I have, but one is just, you know, highest level.

Jeffrey Stern [00:27:11]:
You know, you've witnessed significant changes in the in the private credit market, you know, over the the past few decades now. Yep. Where are we? And, like, to me, it seems lenders have been pulling back, you know, and how how do you position Babylon, again, like, in the spirit of differentiation from conventional banks, alternative lenders, and just, you know, your assessment of where we are in a bit of how we got here?

Hanna Kassis [00:27:38]:
Yeah. So the real big thing is exactly what I explained in the sense that we are a syndicate. So we are investing in the deals we source. So a lot of brokers don't necessarily have the borrower or the lender's interest in mind. They're more focused on fees. By putting our money where our mouth is, we basically give that assurance to the lender, but we also give the assurance to the borrower. Right? Like, it goes both ways. And then also being an entrepreneur and understanding these entrepreneurs that I'm dealing with, there is an inherent sense of compassion and empathy for what they're going through.

Hanna Kassis [00:28:14]:
And that's just because I've been there before, and a lot of capital providers have never been there before. Right? So, yeah, you're a capital you're a capital provider. You've been there before. So you probably can understand when you're talking to someone once raised capital or they're going through some hard times, you you've been there before. Right? You have that compassion.

Jeffrey Stern [00:28:31]:
There's empathy.

Hanna Kassis [00:28:32]:
And it bleeds through subconsciously or consciously, but mostly subconsciously, the the clients can feel that. Right? And when you're always putting their interest first, that's our differentiator. Other than that, Jeffrey, it's just a way for me to earn fees as an entrepreneur. I am working on another potential financing company. It's under wraps. It's still a ways away. But for me, there's more to it than what I'm doing now. This is just a way to spend my time.

Hanna Kassis [00:28:58]:
It's it's a good business. It's a really good business. But, you know, I still have this technology Fintech type opportunity because I see gaps in the market. The beauty of my job is that I could see what lenders are offering or willing to do. And a and a lot of times, I'm like, wait. Well, this seems like a good deal. You know? This structure would be interesting. So that's it's a way for me to uncover potential opportunities as well.

Hanna Kassis [00:29:19]:
Right.

Jeffrey Stern [00:29:20]:
No. I'd imagine, you know, having overseen north of 1,500,000,000 In deal volume. Yeah. In transactions. Where do you see it going? What role do you wanna play in it?

Hanna Kassis [00:29:32]:
That's a great question. I see it going everything's full circle. Right? Like, back in the 19 eighties, there was a capital raising model called permanent capital. And it's really where like, Carl Icahn did it. You could buy a publicly traded fund of Carl Icahn's fund. He raised a certain fixed amount of money back in the eighties. He's been deploying that money for years, and he just pays the interest on it, or he just pays a yield on it every every year. And I think investors investors don't always like rolling in and out of funds.

Hanna Kassis [00:30:03]:
They don't like being liquid. They like to be able to deploy their money or keep their money on the street. And similarly, from a borrower's perspective, the burden on cash flow when you're paying interest only versus an amortized deal is significantly less. So I think there is a big push into permanent capital, which is basically like pref equity. Right? You just get paid off the top. You don't have to worry about rolling in and out of funds. And for the borrower, it's good because they don't have to amortize a loan out that eats their cash flow. They're just paying the interest only or whatever this whatever the yield is.

Hanna Kassis [00:30:38]:
And not only that, but lenders now that they anticipate rates going down are trying to lock in their yield. So I personally see things like the, you know, the HELOC home equity line of credit. I'm seeing opportunities in the BLOC business equity line of credit. Regardless of who your investors are, who your lenders are, there is an opportunity to lend the companies in charge of interest only. And I could tell you, of the inquiries we get at Babylon, a lot of people want interest only, and there's also a humongous wave of m and a coming. I had 3 calls this week about potentially sourcing debt for an acquisition. And that's like that used to be, like, maybe 1 in 20 the last 2 years. It's it's probably 3 and 10 now.

Hanna Kassis [00:31:23]:
I mean, it's, like, unbelievable how many people are looking to add on a strategic bolt on to their business. So we we are we have a full time staff right now strictly focused on acquisition financing, and that's a potential segue into m and a m and a for us. But I think where the market's going is permanent capital, like 5, 10, 20 year deals, maybe not yet, but soon. And then also there's gonna be a lot of m and a activity on the horizon.

Jeffrey Stern [00:31:49]:
So we we've talked a lot about, I think, the lending side of the equation. But I would love to hear, you know, from the company side of it, given all of the companies you've seen and worked with. What do the best of them do to leverages to leverage your kind of of offering and service to help them drive their own, you know, business revenue growth? And and what do you see companies, you know, exploring financing do well and and do wrong?

Hanna Kassis [00:32:17]:
I'll answer that last question first. The one thing I see companies do wrong is trying to dictate the terms to the capital provider. This is not how it works. You know, Lee Zappas actually told me a good quote, the golden rule. We grew up thinking the golden rule is treat others the way you wanna be treated, which is that's a golden rule. But the golden rule is he who holds the gold rules. So, you know, if if you wanna go dictate terms to Lee, it's not gonna happen. Right? If you wanna dictate terms to a lender, it's not gonna happen.

Hanna Kassis [00:32:49]:
And what borrowers do wrong is just there's or or anyone raising money is that they're so unrealistic about what's available for their business. So that's what they do wrong. You should you should be well aware of what because what you don't wanna do is go into a capital discussion with a potential partner, and you are so off base that they're they're like, I'm out. There's some some capital providers that we know that that if we get a client that is so far off base about what's available for them, we don't even reply to the email. It's just like because we know with enough experience, we know that that's gonna be a difficult client to work with. What they do, right, is just being buttoned up. Right? Like, if we have to wait weeks for your financials, you're not gonna get your financials in time by the time you need the money. You should be buttoned up.

Hanna Kassis [00:33:33]:
You should have a CFO fractional CFO that are affordable and abundant. If you don't have a CFO, go get one. I can't say that enough. I'm fortunate enough where I I could do my own finances now. It's just a for me, it's a resource suck, but I could do it. Right? But I would say what people do right is having being buttoned up with their financials and and documents, having the right team in place. What they do wrong is that they're super unrealistic about what's available, where they try to dictate the terms. And there was another component to that question, the very first part.

Jeffrey Stern [00:34:02]:
Well, the first part was about how should companies think about

Hanna Kassis [00:34:07]:
Oh, using the capital in a a capital efficient way. I always tell companies because private credit's more expensive than banks. If you're looking for private credit to pay your payroll, I'm probably not the answer for you because that's that's not a capital efficient use. Right? The the most successful entrepreneurs are the ones that use it to for inventory, for expansion, for growth. Like, we financed, a big ABA autism clinic out of Michigan. We helped finance locations 4, 5, 6, and now 7. Right? But that's a capital efficient use. He's gonna take out more expensive private credit.

Hanna Kassis [00:34:44]:
But once they deploy that into a new facility, it's immediately cash flowing so that they could service back the debt. So having a the best use is having a capital efficient use for the money. You know, and the difference between capital and money. Please tell me. Capital is for efficient use. Right? You use money for payroll. You use capital for inventory. Big difference.

Hanna Kassis [00:35:09]:
Big difference. Right?

Jeffrey Stern [00:35:11]:
Say more about that.

Hanna Kassis [00:35:12]:
If it's not being used for a productive purpose, it's money. That's a difference. If it's being used for a productive purpose, it's capital. Right? You you invest in land, real estate, inventory, whatever. That is a distinction on our side. We try to always say, like, you know, if you're looking for money, take out a personal loan. If you're looking for capital, we could probably help you.

Jeffrey Stern [00:35:35]:
What, does success mean to you? How do you think about, you know, what's motivating you? What's the impact you're hoping to have, you know, with these businesses? You know, we can introduce here that, you know, you have quite a few other initiatives going on. We we met a few weeks back at Whistle Taproom, you know Yeah. A restaurant downtown that you've opened up. So what you know, how are you thinking about the prioritization of your own time and and what what you're hoping to accomplish?

Hanna Kassis [00:36:01]:
Yeah. Well, I think the definition of success is internal. Right? It's not what other people are doing or have done. It's not what you see on social media. It is being able to set a goal for yourself and achieve that goal, and it doesn't matter what it is. Right? And there's nothing more rewarding than that. You know, if you wanna lose £10 and you but you don't have, like, an 8 pack, you're still successful because that's the goal you set for yourself. The problem is that people define success by outward manifestations versus how do you feel, what do you want, and what did you accomplish.

Hanna Kassis [00:36:33]:
Right? So my definition of success is just if I could still have my family and friends like me and love me, and I have a reputation that precedes me of not being a jerk or a let down or a bad person to do business with, I think that's my definition of success is just being a good person, right? And it would really be how I prioritize my time is I'm deep diving into automations, just leveraging the AI phenomena that's come in and really being mindful about the people I hire. And I'm I'm hiring people and I'm training them and I call it human capital because you don't just hire someone and leave them be. You hire someone, you invest your time into it. Like, I'm it's like a time swap. Right? I give you my time, you give me your time, but I'm I'm teaching you something. And so I've been able to take a lot off my plate by just teaching certain staffers everything I know, delegating, monitoring, and then I'd rather just pay them every week, right, or every 2 weeks and not worry about it. So, that was also a big lesson that I had learned was figuring out prioritizing. You know, I use the prioritization box.

Hanna Kassis [00:37:39]:
I can't remember who came up with it. It was one of the presidents where it's, like, urgent and necessary, not urgent, sufficient. You you have a quadrant of, like I

Jeffrey Stern [00:37:47]:
think it's the Eisenhower matrix.

Hanna Kassis [00:37:49]:
Eisenhower matrix. Yep. The Eisenhower matrix. And then there's another good decision making framework that I I like. Is it reversible?

Jeffrey Stern [00:37:59]:
Is it a one way door?

Hanna Kassis [00:38:01]:
Is it a one way door? Yeah. If it's reversible, don't dwell on it too much. If it's not reversible or if it's reversible with a lot of pain, you might wanna be a little more deliberate with your decision making. You know?

Jeffrey Stern [00:38:15]:
How do you think about Cleveland in your journey and the the role that it's played?

Hanna Kassis [00:38:19]:
Oh my gosh. I love it. I love Cleveland. I'm from Youngstown originally, so I didn't grow up in Cleveland. But part of the Gilbert deal was I had to move here or Detroit. I had a bunch of friends here. My prediction on Cleveland is that it is gonna be the Great Lakes region is gonna be one of the most populous regions in the world in the next 20 years because of all the fresh water we have. And there's 30:30,000 vacant lots in Cleveland I just recently read.

Hanna Kassis [00:38:45]:
So there's if you own real estate in this area and you hang on to it long enough, I think you're in a good spot. But more than anything, we have the water. And and people don't realize just how industrious and powerful Cleveland is. The greater MSA for the Fed region, I think we our economy is a 130,000,000,000 a year. Hawaii is like 80 or 85,000,000,000. Like, people don't realize that from Elyria to Mentor has a bigger economy than the state of Hawaii. People just don't realize that. You know? And if you're in m and a, if anyone listening is in m and a, then this is probably one of the best areas for transactions because so many little mom and pop manufacturing companies in the lower or micro middle market exist today that were built to support Rockefeller, Carnegie, Vanderbilt, that that triangle of, like, Northeast Ohio and Northwestern Pennsylvania.

Hanna Kassis [00:39:39]:
It's so industrious here. People just don't realize. You look at the number of publicly traded companies in Cleveland. For crying out loud, look at the celebrities at the highest echelon of society from Cleveland. I mean, it's really impressive for a city of its size. I mean, I I could rattle off 30 of the highest music, sports, entertainment, you name it. Cleveland should be very proud, in my opinion.

Jeffrey Stern [00:40:02]:
Tell us about the the Whistle Taproom.

Hanna Kassis [00:40:05]:
Yeah. So Whistle Taproom. So it was funny. I I exited Oryx in March of 22, got married May of 22, bought Whistle July 22. We bought a house September 22. So needless to say, 2022 went from having more money in my life to no money by the end of the year. No. So I knew the old owners, and after I sold Oryx, it was either investor by a job.

Hanna Kassis [00:40:30]:
I had to put my capital somewhere and I wanted to diversify. So I started investing in those deals not a month before Whistle. And I knew the owners, 2 brothers that I grew up with at church. We were actually on my bachelor party, before our marriage, and they were like, hey. We wanna sell the Cleveland location. You know anyone who'd wanna buy it? And so I go, yeah. Yeah. Maybe.

Hanna Kassis [00:40:51]:
Like, I reached out to a bunch of, like, restaurant tours here in town that I know, like, big wigs in town, and they're like, no. Wait. I'm good on a bar downtown. I'd be like, yeah. But it's not like a regular bar. It's self serve. There's no waste. It's very low overhead.

Hanna Kassis [00:41:03]:
You don't need a lot of labor. I'm like, no. I'm good. And then kind of along the way, I kinda sold myself on it. So I called the old owners and said, hey. I'd be interested, have to change the name. And I said, well, I'm not interested because you have some brand recognition. They called me a week later and said, you know what? You're the only guy we'd be comfortable with keeping the name, so let's talk.

Hanna Kassis [00:41:19]:
So that was it. I called my dad, and first thing out of my dad's mouth was, is there any opportunity for waste? I said, no. It's all RFID technology. It's all self poor. There's there's no waste. He goes, okay. Look at it. That was like his first question.

Hanna Kassis [00:41:36]:
You know? Yeah. And there's there's a saying so my my family's from the Middle East. There's a saying in Arabic that says basically, it literally translates in the friend of the drink will never break or the partner of the of the drink will never break. So what that means is if you sell water based drink, coffee, alcohol, or water, you'll basically never go out of business. So liquids is a good business to be in. Yeah. I almost bought a very big coffee shop here in town, and they told they said they found another buyer. The week after I bought Whistle, they hit me up and said, hey.

Hanna Kassis [00:42:11]:
Let's talk. I said, well, I can't do anything now. But

Jeffrey Stern [00:42:15]:
Yeah. I mean, there's a lot of wisdom in that.

Hanna Kassis [00:42:17]:
Yeah. Another reason I bought it was because my my wife had significant experience in the industry. She was working in anti money laundering at the time, and she she hated the rat race. So I thought, okay. This is a good way to park capital. I did a leveraged buyout with the SBA, and, she runs it for the most part. So most of my attention is on Babylon, but I still make sure the sales taxes are paid and I do the marketing. But it's been it's been a great little investment.

Hanna Kassis [00:42:43]:
We we actually doubled sales before we opened up pizza.

Jeffrey Stern [00:42:46]:
Nice.

Hanna Kassis [00:42:47]:
Well, now we're we're anticipating another doubling hopefully from here.

Jeffrey Stern [00:42:51]:
You know, you may as well just give the the plug for it. You know?

Hanna Kassis [00:42:54]:
Yeah. Why not? With Whistle Taproom, we're we're you might have seen us on game day. We're located footsteps from Rocket Mortgage and Progressive Field, and it's become a great spot downtown. We've hosted, I think, on our LinkedIn, you could see all the companies we've hosted. We we've hosted, like, all the big companies, including NCAA when they were in town. We had, I think, Yukon men's basketball in there at one point. We had North Carolina state last year. We're we're anticipating a big march from the NCAA this year.

Hanna Kassis [00:43:23]:
You know, Sherwin Williams, the Cavs, everyone's come in. It's it's a great spot. We try to keep it super clean, and our food is only the highest quality ingredients. So we just launched pizza. We expanded in the old age of Rocco's lunch pizza 6 weeks ago.

Jeffrey Stern [00:43:37]:
Amazing. You've had the pizza? I have. It's it's good stuff.

Hanna Kassis [00:43:40]:
Thank you. Thanks.

Jeffrey Stern [00:43:42]:
It it was hard hard to get a slice downtown. It's nice to nice to have an option.

Hanna Kassis [00:43:46]:
Yeah. Likewise. Yeah. We we appreciate you coming in.

Jeffrey Stern [00:43:48]:
So I wanna kinda round it out here with an untold story because I I I truly you know, knowing we were gonna have this conversation reflecting over the years on and they're they're always just very entertaining. And so I know we're not gonna get to all of them, but leave us with a a parting story reflecting on your entrepreneurial journey.

Hanna Kassis [00:44:08]:
You know, there's one story that sticks out, and the lesson is that you gotta be able to swallow a huge slice of luck. Okay? So I had a deal. It was one of my bigger deals at the time in 2015 at Oryx. It was a huge fashion brand out of, Toronto, like, huge. If I said the name, some listeners might even know it. Turns out the the founder had bought those assets, and he was a bad actor. So what he did was he sold me a receivable from a company that was gonna pay it, but he was also doing he was doing business both ways with that company. He owed them money, but they owed him money as well.

Hanna Kassis [00:44:48]:
So he was monetizing his properties with their platform, but he was also driving traffic with their platform. So he owed them 50 some $1,000, and the receivable was, like, $35,000. I wasn't aware that he owed them $50,000. So I fund him, you know, 80% of the 35,000 or whatever it was. And it was with it was actually with Dan Gilbert's, Bizdom money. And the CFO of that company calls me up. And I had rapport with him and he goes, hey, listen. I I wanna let you know that this guy owes us a bunch of money, and I know that you bought the receivable, but we're gonna pay it to you anyway.

Hanna Kassis [00:45:31]:
But just a heads up, don't buy any more receivables from this guy because we're gonna sue him. And I I literally, like, just telling that story got chills because this guy didn't have to do that. His name was Alan Legator Alligator. And he did not have to do that. He could have just said no. We're typically, if your customer in that situation if Al's customer in that situation owed more than he owed them, he would just offset it, and he would say, okay. You owe me 50. I owe you 35.

Hanna Kassis [00:46:05]:
Now you owe me 15. We'll call it a and so he he didn't cut me out like that. And I don't know to this day why he saved my butt like that. But he saved my and if I had that loss, Jeffrey, I I would have lost all credibility with my investors. So sometimes the most successful people win by the skin of their teeth. Right? And it a win's a win. It doesn't matter. But you have to be able to swallow a big slice of luck in entrepreneurship.

Hanna Kassis [00:46:34]:
That guy saved my butt and I will never forget that. I don't even know what he's doing to this day, but, you know, that's one story that sticks out and I think about how much different my life would be if he didn't call me up and and and say he was gonna pay me. So things like that that stick out. You never never lose a story like that.

Jeffrey Stern [00:46:53]:
Yep.

Hanna Kassis [00:46:53]:
You certainly won't forget his name.

Jeffrey Stern [00:46:57]:
You know? I mean, there's there's a lot to be said for just treating people well and with kindness and paying it forward a bit.

Hanna Kassis [00:47:03]:
He knew I was starting out, and he was a South African guy. He knew I was starting out. I I don't know why he saved my butt, but he did. Mhmm.

Jeffrey Stern [00:47:10]:
That's a great story. Alligator.

Hanna Kassis [00:47:12]:
Alligator. Yep. I was saved by the alligator.

Jeffrey Stern [00:47:17]:
That's right. That's right. Well, I'll ask you, you know, our our traditional closing question, you know, unless you have any other fun parting stories you'd wanna, impart on us. But, you know, it's for a a hidden gem in Cleveland for something other folks may not know about, but perhaps they should.

Hanna Kassis [00:47:33]:
Okay. I love chicken wings.

Jeffrey Stern [00:47:36]:
Oh, yeah.

Hanna Kassis [00:47:36]:
Yeah. I'm a I'm a big fan of chicken wings. I try not to eat them that often, obviously, for health reasons, but big fan of chicken wings, like, down to the critiquing the bone and the skit with sauces and everything. I moved in next to a spot. I live in West Park. I thought it was a strip club. It's called the VIP Lounge. You drive by, you don't know what it is.

Hanna Kassis [00:47:54]:
It just the name sounds like a strip club. Right? Right. They have the best wings in Cleveland. I think they have the best, and people don't know about it.

Jeffrey Stern [00:48:02]:
Yeah. That's a perfect hidden gem.

Hanna Kassis [00:48:04]:
I saw a guy's list of top wing spots in in Cleveland, and it was, like, number 29 on the list out of 30. I'm like, dude, you gotta move that. And I don't wanna hype them up too much because I hate I hate when someone hypes up something for me and it's not that good. But their their wings are good. The bones don't break. They're really tasty, and it's, like, really divey. It's a cool spot, really cool spot. What's your favorite hidden gem?

Jeffrey Stern [00:48:25]:
Oh, well, it's it's impossible now because there's 200 of them. Oh, yeah. And they're all amazing. I mean, I I keep saying it, but I actually have to do it, is I produce the map of all the hidden gems.

Hanna Kassis [00:48:39]:
Oh, that would be cool.

Jeffrey Stern [00:48:41]:
It it's a project that I would like to do.

Hanna Kassis [00:48:43]:
Lay of the land, hidden gems.

Jeffrey Stern [00:48:45]:
Yeah. Because, I mean, there's it's just all of Cleveland to me is is, is representative.

Hanna Kassis [00:48:50]:
I think Cleveland is a hidden gem, man. People come here, and they are so pleasantly surprised. You know? Like, RNC, NBA, NFL, MLB, they've all had national events here. NC, double a, they don't do that in crappy cities. That's what I say to people. You wanna make you wanna make fun of Cleveland? Then tell me how all these organizations are hosting major major events here.

Jeffrey Stern [00:49:13]:
It is pleasantly surprising. It's the perennial phrase, but, yeah, Cleveland in and of itself.

Hanna Kassis [00:49:18]:
The fact that you're still here being a New York City Manhattan guy says a lot about it.

Jeffrey Stern [00:49:23]:
Well, I you know, it's much better than people think it is.

Hanna Kassis [00:49:26]:
Yeah. Right. Hit a gem. Yeah. Well, cool. Enjoy it. Enjoy the VIP wings, man. They're good.

Jeffrey Stern [00:49:33]:
Exactly. Then we'll add that one to the map. Cool. Thank you for coming on, sharing your story.

Hanna Kassis [00:49:38]:
Thank you, man.

Jeffrey Stern [00:49:39]:
If folks had anything they wanted to follow-up with you about, where would you point them?

Hanna Kassis [00:49:43]:
You could just hit me at, transactions at Babylon at assets dot com. Perfect. Just say put lay of the land in the subject line and happy to meet for a coffee.

Jeffrey Stern [00:49:52]:
It's amazing. Well, thank you.

Hanna Kassis [00:49:55]:
Yeah. Thank you, Jeffrey. Great. Stop in anytime, man.