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Founder's Story
The Brutal Truth About Starting a Fund—And Why Most Don’t Make It | Ep 244 with Patrick William Founder of Rixon Capital
00:16:08
Patrick William, founder of Rixon Capital, shares how he built a high-performing private credit fund from scratch—without institutional backing—by betting on discipline, storytelling, and total conviction. His journey reveals the untold challenges of raising capital, the psychology behind successful investing, and why “no Plan B” might be the smartest decision a founder can make.
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Transcript30 lines
- [00:00]
Daniel
Foreign curious on starting a fund. What were some of the challenges that you went through when you were just up and coming and getting this thing going?
- [00:12]
Patrick
Yeah, thanks. Yeah. Well, the biggest challenge and the biggest realization was how difficult it is to raise money because you turn up with some. The analogy someone used was it's an airplane with two engines and we focus on one, which is product. I've got a great product, I've got a great niche, I've got a great story. You forget there's another engine that needs to run which is actually raising money. And that's the hardest part when you're starting a brand new fund. Convincing people to hand over their hard earned capital.
- [00:39]
Daniel
How did you get that going? I imagine I know I've always wanted to start a fund. I know everyone I know is like, oh, I want to start a fund. But it seems very complex because you have one side you need to get money and the other side you need to deploy it.
- [00:55]
Patrick
That's right. There are two ways of doing it. There's the sensible way, which is you get a really big family office or a large institutional fund, they'll take 10 to 70, 80% of your business and they'll help you launch. We did it the hard way. So we got a group of motivated people together, throw in whatever money we could, shared our Rolodexes, and then I just started cold calling that. We started with $3 million raise in October 2022, which really does not pay the bills. But you know, gradually over time, as you build that track record, investors begin to recognize, you know, the story you're telling actually makes sense because they can see the results.
- [01:36]
Daniel
I've always wanted to know, how does somebody that has or manages a fund make money?
- [01:42]
Patrick
The two core revenue streams. So the first, which is the most substantial is the management thing. So we get, you get a percentage. So we do 1.5%, but it can range from 0.5 to a few percent of all the funds under management. So you know, if we had a hundred million dollar fund at 1.5%, it's one and a half million dollars a year in revenue. So that keeps the lights on and ensures everyone's paid. And then there's a performance fee you get for outperforming your hurdle. So the performance FEES are generally 20% of the outperformance. But that outperformance tends to be material. So we, if we're getting paid a performance fee, we burned it.
- [02:20]
Daniel
What do you look for when you're going to deploy the money and how does that work in terms of ensuring that you're obviously doing it to the best places, but knowing there's always some sort of risk when it comes to, I imagine, putting money into anything.
- [02:36]
Patrick
The two aspects to that. So first is your rule book. We've got in Australia, we use what we call it information memorandum. So that's what investors get in the rule books. Tells investors, if you invest in this fund, this fund will do X, Y and Z. So we're an asset backed strategy. So all our loans must be first ranking, senior secured, tangible asset backed and pay monthly cash interest. So that's our guideline. Then we've got a very senior credit underwriting team. They filter through all the potential borrowers and looking for some money and they use their expertise to filter out people who qualify and people who don't. And then we take it to an independent investment committee and they basically beat us up over an hour and a half to make sure we considered all the pros and cons, particularly the cons of a potential borrower. And if we've convinced them, they sign off and then we fund the loan.
- [03:30]
Daniel
If somebody is starting a fund today, I want to start a fund about AI. If I'm going to start a fund about AI. And I know the fund might be different models than what you're doing, but what are like two or three things I need to ensure that I am really doing my own due diligence in terms of if it's even something right for me to even pursue this.
- [03:50]
Patrick
Yeah. As I like to tell investors, let me have the sleepless nights for you because you're an investor, you're a general manager at Walmart, you're a surgeon, you're a entrepreneur, you've got your lane, you know, you're busy at work, you've got your own stresses. Do you really want to be running due diligence on 2030 investments every week? Or you pay me a 1% management fee. A, I do the work. I've got a team that is exceptional at doing this. And number three, the point you just made, you're diversified across 15 to 25 positions. So you're getting all this benefit in return for what is actually a very marginal fee. So it's a very sensible trade off.
- [04:32]
Daniel
Thank you for explaining that. This is like a something I've always wanted to learn more, but it's like unless I talk to someone such as yourself, then I don't really know much about the industry. I've never really raised money or raised capital. How do you see just Capital raised, changing now that the cost of creation can go way down. For example, you can build an app, you can build an MVP in three hours using software that cost you $40 versus before, you know, you'd have to raise 30 grand to do just the MVP. And, and I think even cost of acquisition, maybe, you know, maybe it's going up in the sense of there's more touch points, but then it might also be going down because you can just launch a campaign in five seconds and you can use chat CBT to create the copy and the ads and stuff. How are you seeing just this changing the landscape of fundraising?
- [05:27]
Patrick
Look, fundraising for a small fund tends to be very personal, so that technology aspect is very helpful. But at the end of the day, investors want to see a face, shake a hand, have a conversation with someone and build a relationship. So AI, I think at this point helps with the back office stuff, preparing documents, refine, you know, cross checking data. But when it comes to relationship building, it's still very much the human element has a lot of value.
- [05:55]
Daniel
I guess we'll see what happens when we, when we, when they're so human, like in their, in a robotic state, we might not know, you know, who's, who's a human and who's not. I want to hear more about your story. So you were born in Malaysia, obviously you're now in Australia. What was the journey like?
- [06:14]
Patrick
So I went to university, I moved from leisure to Australia to go to university and then I was hired by an Australian investment bank, Macquarie Capital, to work in the mergers and acquisition team in Singapore. So I did SAPI visual coverage in the tech media and telco space for three years. Towards the end of that time they sent me over back to Sydney to work in at hq. And you know, the short story is I never left. I met my wife here and she didn't like the weather in Malaysia. So Australia was going to be my new home. So I worked in M and a for another 10 to 12 years. The M and A shop I worked for, towards the tail end, set up a funds management business and that's when I made the transition. The cultural differences and it's also the taxation system. So in Asia, for instance, in a lot of Asia there is no tax on capital gains. So people love the equity markets, they love capital growth because it's effectively tax free, whereas in Australia there is a substantial tax. So an income fund versus a capital fund competes on a different, on a different level.
- [07:20]
Daniel
What are you excited about when it comes to, let's say, Asia Pacific, Southeast Asia. I don't know if you're still following up with like what's happening in Malaysia, but everyone I know in, in Southeast Asia, for example, there's so much entrepreneurial excitement, it's insane. And I always enjoy obviously going to the neighbor in Singapore. Always so many events about business and such. But is there anything that excites you or anything that you're looking at maybe for either Asia Pacific or Southeast Asia?
- [07:49]
Patrick
Yeah. Specific to our fund.
- [07:52]
Daniel
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- [09:05]
Patrick
It's definitely to raise capital from there because the target market of Asia is people have done really, really well in these entrepreneurial ventures. There's a lot of money in that market and effectively tell people, look, I know you can make, you know, a 30% return, all these little investments you've got in various sectors, but there's always a spot in your portfolio for something boring, safe and income generating. And that's where you should come.
- [09:29]
Daniel
What's the allocation that people typically do when it comes to like this? What you're saying is like the more the boring, maybe more steady and then you have obviously different risk levels. But what do you normally see people do for the percentage of their portfolio?
- [09:45]
Patrick
Good question. And percentage, I think it comes to where you are in your life cycle. So if you're closer to retirement, we'd get close to 50 to 75% of someone's portfolio because it's an asset backed strategy and it's, they're using us for income, but if it's a younger person, they tend to use us just for that income. Yeah, it pays for the cost of the trusts or private school fees. So the median investment is half a million dollars. So that generate, that'll generate 5 to $6,000 of monthly income with our fund. So some investors say, as you say, pays for private school fees. We've got one investor in the gold course that says it pays for her Maserati list.
- [10:23]
Daniel
I mean, if you can get a free Maserati, you know, if you get your not free, but if you can get a Maserati paid for, I mean, that's better than paying for the Maserati, right? That is, that is quite fascinating. I mean, I know, you know, there's other returns that I've heard people say, you know, 5 to 10% of something, like you get to a certain age and you just want to continue with something steady and lower your risk factors when it comes to the majority. But when you look at just entrepreneurism or entrepreneurial spirits of people, what do you, when you, when you think of what makes a great successful CEO, what is one trait that either has been there for you, been there for people that you've known, partners, however you want to spin it, but what is one trait that you find like, okay, every successful entrepreneur has this one trait, Mindless self belief.
- [11:18]
Patrick
If you believe in yourself and you believe in what you're going to do and you stick with it, and that's what that belief allows you to stick with it, you'll come good. By and large, you know, our example is, you know, we thought we'd start with tons of investor funds coming in and tons of $3 million, but I knew it was a great product. I knew that what we were doing was different and special and we just stuck with our guns. And so with time, people recognize what you do and you will come good.
- [11:47]
Daniel
I think we're all impatient. I was just talking to my wife about how we just launched this software like two weeks ago. And I'm like, you know what? Normally I would just give up, Patrick. I'm like, forget it, it's not moving fast enough. Shiny object syndrome, right? Like, I have no patience. But, you know, you just said it before. You start in the beginning, it wasn't huge, but you knew that eventually you'll get there. How do you continue with that patience knowing that it Is, you know, and not an overnight success.
- [12:18]
Patrick
There's a quote by, I think it's, I think names Ferdinand Cortez, the conquistador, who turned up to South America and they landed and they had a choice, you know, we could chicken off, we can get copied and go back to Europe, or we could go into this unexplored jungle and all the risk that come that comes with it. And his famous words were, burn the boats. And he had burned the boats, and there was no plan B. And that's exactly how we built the fund. There was no plan B. So it was going to succeed or it was going to succeed. And that allows you to have laser focus. So you might have a bad month, you might have a bad quarter, but if you haven't got a plan B, you'll stick with it and surprise, surprise, if it is a good idea, it will work.
- [13:03]
Daniel
No, I'm glad you say that. I think a lot of the most successful people that we've had chances to talk to would have said the same thing. It was all or nothing. That was it. There was no plan B, C, D, E, F. Either this made it or it didn't make it. And then they lost everything. Do you find this to be almost like the reason why most people probably would not make it as an entrepreneur? Not that they can't do it, but the, the reason why they wouldn't continue and make it is because most people don't have that ability to say, this is it, I'm going all in. It's one thing when you work for a job and you know you'll get paid and maybe at some point you get fired, but your business, you may never get a paycheck, you may never make any money, yet you're going to put out all of this, this, you know, work and energy. How do you feel about that in terms of. Do you think this is a reason why maybe a lot of people don't get. Don't try and be an entrepreneur?
- [14:02]
Patrick
Yeah, I think you. That you bang on. On that. The biggest challenge. And so I've come from financial services. And the worst part about a career in finance is it pays too well for very little risk. So why would someone, you know, why would some investment banker give up his job when you know he's got a good income and he's looking after his family? I think that was Jeff Bezos's story. He was an investment banker, and his boss told him, why not? You're doing this, you know, you got this great job, you got a big bonus that turns up every year. And he said, I've got bigger dreams. Far out. He's done. All right.
- [14:34]
Daniel
He'd probably have a much smaller yacht if he continued. That's what I'm guessing, you know, definitely wouldn't. His wedding would have been much smaller, I'm sure. Patrick. No, this, this has been great. Appreciate your time. If people want to get in touch with you, they want to find out more information about the fund, everything that you're doing.
- [14:52]
Patrick
How can they do so our webpage is a great starting point. So it's Rickson R I X O N Capital. That's it. No dot com, not no AU log on there. All our details available. I'm the founder and managing greater and portfolio manager. I speak to all, all investors. $30,000 or $11 million investment. I'm the guy you speak to and I'm the guy who'll answer your questions. So it's very personalized, which we like.
- [15:19]
Daniel
Well, Patrick, this has been great. Rickson Capital. You have what I would say rated number one mustache of 2025. You can add that ward to your website, by the way, in case people can't see you. I know it's part of your, your signature look. We talked about this earlier. I like that. I've been thinking about that since we talked and having. You really need to have some sort of separation between you and everyone else in the world. Like the look that whether you dress a certain way. I was talking to someone recently, they're like, I dress. I dress in these type of clothes because when I go to an event, I stand out. And so I enjoyed what you said. I just can't grow a mustache. It's just not really possible. But I really enjoyed the conversation, learned a lot. And thank you for joining us today on Founder Story.
- [16:07]
Patrick
Thanks so much for your time. Daniel.