Scott Miller on Investing “Off the Beaten Path”

We recently had the pleasure of interviewing New York-based value investor Scott Miller.

Scott is the founder of Greenhaven Road Capital, an investment partnership that looks for investments “off the beaten path”. Scott participated in this year’s Zurich Project and shared his thoughts on the topic, “how to build a base of aligned LPs while spending less than 5% of time on marketing”.

The following transcript has been edited for space and clarity.

MOI Global: Please tell us about the genesis of your firm and the principles that have guided you since then.

Scott Miller: Some people like to fish – I like to invest. It doesn’t feel like work for me. I spent ten years working in a non-investment job while beating the market by thousands of basis points per year as a private investor. Finally I decided to leave my “real” job at Acelero Learning, a company I had co-founded, to begin work at Litmus Capital, a hedge fund founded by two of my classmates from Stanford Business School. I thought I was a good investor before I got there, but Litmus really opened my eyes to the Joel Greenblatt-style of special situations investing. Keith Fleischmann had worked for Eddie Lampert at ESL and Dan Carroll had worked for Dan Loeb at Third Point. Litmus had assembled a talented team and was running approximately $200 million at the beginning of 2008. Unfortunately, 90% of the assets were from two investors who could redeem with 60 days’ notice, and they were forced to take advantage of any liquidity and pull their funds when the financial crisis hit. This experience drove home the importance of a stable LP base, and I gained a real appreciation for the importance of the terms on which money is accepted. I also walked away a more complete investor.

2009 was a great time to be an investor, but a horrible time to find an investing job after Litmus. I went back to the company I had helped found, while exploring roles at other funds. For the stock pitch component of the interview process, I pitched a company called Gevity, which I knew well because my company was a customer. I predicted Gevity would be bought out by General Atlantic at a large premium because of some off-balance sheet assets. I got literally everything right about the situation and had timing on my side – in the two months of interviewing, Gevity doubled and was indeed bought out by General Atlantic. When I didn’t get hired, I thought, “It’s time to do this yourself. You love the work, you have the skills, and you have enough money saved to open the doors – why wait for somebody else to validate you?” I then laid the foundation for my own fund—Greenhaven Road.

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