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Founder's Story
The Investor Who Left the Rat Race to Build a $100M Fund—with Zero Noise | Ep 225 with Sam Chipkin the Founder & CIO of 5AM Capital
00:21:51
Sam Chipkin, after leaving Wall Street for Bondi Beach, rebuilt his investing playbook around clarity, patience, and focus. In this episode, he unpacks how simplicity—not chaos—drives sustainable success, and why 5AM Capital’s conviction-led approach is outperforming in a noisy world.
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- [00:01]
A
So, Sam, it was great just chatting about when somebody feels that they're in a chaotic state, like Wall street in New York City, moving to somewhere like the beach, like Bondi beach in Australia, which seemed like two completely different places, could shape their entire business. What was that experience from you? Because I think a lot of people are in what they would call the rat race and they want to get out of that and they want to move to a place that might be more quiet but still really inspires them and gets the juices going for business.
- [00:33]
B
Yeah. So it's a good starting point. Thanks. Thanks for having me, Daniel. So I spent almost a decade in New York working in global finance. And that was everything you'd expect, a fast paced, demanding field of really talented people. And it was also really formative. I met my wife there, she's Australian too. And while, while we both loved New York, I think we had this so quiet understanding that Australia would be home one day and we weren't like really sure exactly when, but we, we did know that when it came time to raising a family, we, we wanted to do it in, in proximity to, to nature, to community. A place where life could be a little like slower and more grounded. So I moved back from New York in 2014, a bit of 10 years ago and you know, before we had kids and my three kids all been born in Australia. And I think looking back and so the point that you raised there is that the decision to move sort of set the foundation for our, not just about family life, but then for 5m capital being, being away from this like constant market chatter, the daily noise of Wall street and the financial media and you know, the 24 hour news cycle and the, you know, being here created the space to think a bit differently in Bondi. As I'm saying, you know, we're not commuting through Midtown, jammed into, you know, a subway like sardines. And you know, with the CNBC on, you know, the sort of interactive skyscraper, I'm walking the coastline. I'm spending time with my family and community and thinking deeply. And then this becomes a key differentiation about long term capital allocation. And I think that distance, both physically and mentally, it helps keep focused on what really matters for us in our investment strategy. Backing enduring businesses, managing risk really carefully, compounding wealth thoughtfully through decades. And, and we've tried to build five and capital to, to reflect that philosophy.
- [02:52]
A
Recently we had a doctor on that was talking about how stress was like the number one factor of causing aging for people, like their biological marker and their Biological age. I imagine Wall street has to be one of the most stressful jobs or places. At least, you know, that's what I see on tv. That's what I hear. But what did you learn when you were in that type of environment that you brought into business that has helped with success?
- [03:21]
B
I think stress, particularly at the wrong point in your life when you're not in a way to be able to cope with it can be, you know, really problematic and you know, cause real issues for, for people. I think stress at the right time in your life can be really beneficial. And for me it was, I think it, it sort of allowed me to, to push myself also. You know, a decade spent there is, is almost, you know, more than a couple of decades of experience elsewhere. And so I wouldn't, I wouldn't change that for anything. I think also, you know, I was probably working, you know, double shifts equivalent for most other jobs. You know, it, it brings you up the, the curve drastically. You're, you're, you know, in the flow of really important dynamics, working with, with great people. So, you know, learned a lot from competencies, learned a lot from, you know, that they're like building my own sense of perspective on intrinsic valuations and managing dynamics. But I think as I start to approach, you know, family life, I, I knew that I needed to change, change a little bit. You know, there's a lot that I learned from my, my time in New York. Happy to go into different aspects. What. One thing that did I think really impact our philosophy was that in my, in my sort of first decade I've had a couple decades of investment experience, but in the first decade it was investing in unlisted businesses. So owning the whole of a business and these were typically monopolistic things like airports or telco towers. And so you know, you had to bring a real rigor to the approach because you're holding these assets for a long time and you couldn't just sort of unwind an incorrect decision. You had to think, think, you know, carefully about the, the cash flows, the durabilities, the long term profile. And so you know, that, that was very formative in, in parts of the philosophy that, that we've got at 5 and capital where we invest in monopolistic businesses in the listed space or the, the, the public equity markets. But we're, we're bringing that sort of unlisted mindset where we're identifying great, great businesses and happy to sort of go through the, you know, the, the network effects of scale, the economies of scale, the the ip, the things that we look for. But you know, the point is that you know, we take a very deep research, analytical. We don't own 100 companies, we just own 25. When you study them inside out. And if we wouldn't feel comfortable owning the whole business for like 10 plus years, we, we don't want to own a single share of it. And you know that that strategy has, has helped deliver some, some great returns, results for our clients, results for us. 30% annualized in my prior CIO role before setting up 5 hand capital and then 19% annualized since setting up 5 hand capital. And you know, I think a lot is attributable to that mindset of like the, the discipline only investing in a business when we really understand it, you know, that the long Runway for compounded growth and that, that mindset of, of bringing that sort of unlisted to the listed space. It gives us conviction when volatility hits where, and you know, there's you know, Trump tariffs and trade wars and headlines where we're able to you know, know really clearly like what we own, why we own it. And, and that clarity helps us avoid some knee jerk reactions that plague most public market investors.
- [07:22]
A
I imagine knee jerk reaction is, you know, the definition of 20, 25 so far when you think about what makes a successful company. So if you're looking at a company and you say these are the factors that make it successful or this is a company that has potential, what are you looking for?
- [07:41]
B
So, so we're really focused on long term durable, high quality businesses and, and to have conviction over the long term you, you need to have a very like strong sustainable competitive advantage. And a lot of that then falls under what we, you know, loosely refer to as monopolies. It's sort of funny. Monopolies often get bad rep, but in the right reputation, but in the right, you know, category with the right dynamics, they can be incredibly beneficial for their customers, their employees, their shareholders, sort of the whole trifecta as long as sort of that the North Star is aligned correctly and it can create great outcomes for everyone over an extended period of time. What we look for is businesses that dominate their categories not through brute force but through unique competitive moats, things like strong network effects where they've got, you know, the supply and the demand meeting and they're able to sort of hold court in the, in the center of that scale economies whereby you know that their sheer infrastructure, you know that the logistics chains, their entire systems provide such benefit that they can then offer things More cheaply and you know, more accessibly than, than their other competitors. And it creates like a self fulfilling dynamic where it's still good for the customers, you know, IP regulatory positioning, something of irreplaceable value where you know, it's very then difficult to dislodge this, these great businesses and, and they can earn a very high return on capital for, for a very long period of time, you know, such that you know, the competition, you know it is, is almost irrelevant because of these great structural advantages.
- [09:45]
A
Would you look at these founders or C Suites? Because I heard I, I know it's different than maybe other types like VC investing or things like that, but I know from them they always say they're really investing in the founders which you know might be totally different. But when you look at either the founders or C suite because these might be much larger companies, what do you think or what do you see in terms of traits that these people possess that maybe other companies that haven't reached publicly traded or reached anywhere near the revenue markers that these companies are reaching?
- [10:21]
B
Oh look, it's a really good question. So we're definitely on, not the VC side, we're on the lattice side where the businesses have great unit economics and profitable VC companies almost by their definition aren't investing in profitable businesses. We like, we like cash flows, we like seeing the strength of that business being unleashed. But many of them within our portfolio do have very strong founders or founders that have been very important in setting the North Star the overall dynamics for the business trajectory. And that's, that's really, really important for us. And I think one of the most defining characteristics there is patience. They're not just looking for an immediate short term win, they're looking for great long term outcomes building over decades, potentially, potentially more. There's so many great examples on know the bigger end of, you know, people are well celebrated like Jeff Bezos where you know that they were reinvesting everything back into the business to make it better for their customers. They had this like customer obsession from day one and they didn't care about like the short short term. They're thinking about how do you build the business to the best it can be over an extended long period of time. We've got other ones in Europe where it's like networks of laboratories where these you know, family founders have been building really disciplined ways looking to strengthen, not taking, you know, undue risk. And when it's got that founder mentality it's, it can be really, really different compared to you know, some Businesses where there's just a, like a hired CIO who then tries to feel that they need to make their stamp on the business. And they do some, you know, destructive M and A or something just to try and feel like they're making a change because it needs to happen in their tenure, their short 10 years. CEO know we like founders that have that incredibly long perspective and that aligns with how, with our thinking.
- [12:34]
A
So I don't know exactly how, what is the mindset of an investor in terms of what is the return or how, how does a return even work? So with what you're doing, you as the investor, what are you hoping to gain? And then what does an investor gain when they invest? And the reason why I ask is like you're saying, I know that different types of investors, some are looking long term, some only want an exit, you know, someone different, you know, a variety of reasons. But for you, when you're looking to invest, what is it? What is important that you understand, you know, you'll return your money or whatever that looks like for you. How do you, how do you.
- [13:14]
B
We're really focused on compounded, durable, repeatable risk adjusted returns, you know, some stability to it. We want to do this over a, a long period of time. This isn't a strategy where, you know, VC can be a bit like, you know, let, let's pick 10 and you know, even like way more that, you know, let like a lot of them are going to go bankrupt and then you're hoping that one or two shoot the lights out and then that sort of returns overall for everything. And it's like quite a, you know, like maybe portfolio aggregated. I'm not trying to like land that environment at all. It's just very different to the way that we think about it where you know, we expect all of our businesses to contribute. You know, maybe some of them not as, as compounded as quickly as others because some of them might have reached some stability already, whether it's like an airport or an online classified or an essential B2B business software or a testing and certification business, all these different monopolistic modes. But where we're looking for what we would say is teens plus returns. So each year the value of your investment with us grows at more than teens and we can do that through cycles that's going to create terrific compound of wealth for our clients. It's this balance of what we say is capital preservation and capital generation. And I think that's. Now there's sort of something for, for us there. I Think, you know, when we think out like what do we want to be doing out over 10 years? We want to know we're ambitious absolutely as a team, but we're very like risk tolerance really focus where we've got all of our own investable capital in the fund, we've got capital of our respective families or our teammates have invested their own capital. So you know, we're very much aligned. You know, it's, you know this alignment isn't a marketing slogan. It's, it's a, it's a lived reality and I think that changes that behavior. We treat risk differently. We're not optimizing for just total size of like growing to a behemoth where we're asking ourselves is this investment good enough for, to protect and grow the wealth of the people that we care deeply about, you know, our families and our, and our clients that are incredibly important to us. So we've also got now and been going for about three years. We've got about 100 million under management and you know that that's been some good trajectory off the back of some really good returns and good top ups by committer clients and we've got a firm cap at 750 million. Because it's not that we like lack ambition because there's some very, very large funds out there. And you say why are you trying to be boutique and small? It's because from our perspective we believe that performance and scale have a tipping point that beyond a certain size, the flexibility to how you invest, stuff starts to erode and, and would rather be the best in class boutique than like a, a massive sprawling asset manager. We've got like very deep personal relationships with, with a select number of our clients. We care deeply about, you know, the, the, the, the team and our culture where we're thinking in generations, not quarters. Sort of back to your point of you know how you're thinking. It's not just like you do an outstanding job this quarter. We're talking about over the long term where it's like about transparency, accountability, consistency. And our team is tight knit. We challenge each other, we trust each other. We're sort of pulling in the same direction and I think the culture doesn't scale that easily. And that's sort of the point. We want to just make sure that we get these great consistent returns for our capital base over an extended period of time without getting to a point where we, where you know, we're seeing with many others where they almost get too big and they you know, start to then Almost implode. We want to stay within that sweet spot.
- [17:36]
A
That could be an amazing lesson. Right. I know a lot of people that saw some very fast success but their business ended up imploding because of that versus maybe a little bit slower and steady. And I'm just shocked that a lot of these other models even exist. Like you said you might, they might have to invest in 100 companies and only one hits, hoping knowing that 99 will never go anywhere. It always fascinates me. But what besides this lesson of, you know, going at this rate to ensure success and not, you know, growing too big? Is there another lesson where you look back? It could even be in your personal life that you would say every founder, every executive needs to hear this.
- [18:19]
B
Oh, look, I think that, that, that's a good, a good question. One that I, you know, done did some research before starting but I still wasn't quite prepared for it. And I think that's probably. Well, you've got to have patience and tenacity. You sort of knew that. But one of the things that really hit me particularly, particularly going from a, a large corporates and, and you know, like you know, Wall street type dynamics where you know, there's lots of back office and ops and everything to, to do, you know, a lot for you and, and when you're going out and building a business, all of a sudden you realize how many hats you have to wear at any, you know, point in time and, and that's, you know, that's sort of difficult. Like yes, intellectually I sort of knew that starting a firm will be demanding and, but I just, I think I really underestimated how, how fragmented my intention would be. You know, one moment it was like deak in investment analysis and then the next I'm choosing like what type of accounting systems we need for our group and then managing compliance and then onboarding staff and evaluating like tech solutions and, and all of that whilst trying to like reach out and build a client base from, from scratch. And that mean that constant, constant context switching, you know, being pulled in so many different directions. It's some more taxing than I expected. But, but fast forward three years, we're in a very different place now. We've got a very strong foundation, systems that work, a lean and high quality team and a culture that's deeply aligned. So as, as someone approaching and building a business, you know, there's always going to be distractions and there still will be, you know, but now I'm sort of fortunate that we've got the right infrastructure, rhythm and scale to build the business with focus and integrity. But you know, it was a lot harder and you know, still continues to be harder than, you know, I'd anticipate it.
- [20:20]
A
That's an amazing point. We do think, oh, I just want to do, I just want to do sales or marketing. But you don't realize you have to do all of that and then you have to do customer service and then you, you have to send emails and you have to do many things that you never thought you would have to do and you have to do all of it until you can obviously hire team. And I mean that's a whole nother complexity there. But Sam, this has been great. If you want to get in touch with you and they want to find out more, how can they.
- [20:49]
B
Our website's a good starting point. 5amcapital.comau and you know, we have lots of materials that we're happy to share with people, some good information on our mailing list. You know, we're happy to connect with people globally. You know, absolutely. We've got an international client base. You know, part of the, the name there, 5am capital where up, up early. It's the time to think clearly but also then you know, connect with global parts of the world. So please feel free to reach out.
- [21:26]
A
People always tell me you work a lot because I'm always working at 5am but they don't realize that I stopped working in the day then I but I love to work at 5am So I appreciate that and I can appreciate the name. By the way, Sam, this has been great having you today and thanks for joining us on Founders story.
- [21:44]
B
Thank you, Daniel. Thanks for having me.