‘Real’ Husband Of Beverly Hills Dishes Up Details Of His Day Job

Jun 7 2011 | 9:32am ET

Before Russell Armstrong became a supporting player in a reality TV show (his wife Taylor is one of the stars of The Real Housewives of Beverly Hills, the sixth iteration of the “Housewives” franchise on the Bravo cable network) he was a financier specializing in early-stage private equity.

And he still is—leading to his characterization on the show as the (in his words) “workaholic asshole husband.” (“By the end of the season,” he says, “I’m sitting there watching it on TV thinking, ‘You’ve got to be kidding.’”)

They say any publicity is good publicity, but reality show fame has proved a double-edge sword for Armstrong: on the one hand, there’s the relentless media scrutiny, which has included revelations about his bankruptcy (about which he says “I probably got overly leveraged during the dot.com era and I tried to work it out the best I could but eventually, it just took its toll.”), a couple of lawsuits lodged against him in the ‘90s (a spokeswoman says one was dismissed and the other settled for “a small sum.”) and a conviction for tax evasion (to which he pled guilty in 1995, receiving five years’ probation).

On the brighter side, he says his business was up “900%” last year. “I can’t attribute that all to the reality show,” he told FINalternatives during a recent phone interview, “but I can tell you I don’t think it was entirely the economy recovering either.”

Armstrong figures only 3% of the American population watches the show and says in his business life, most people don’t bring it up. Although he did have a meeting with a nattily dressed, 70-year-old businessman who wrapped things up by asking, on behalf of his wife, “What did you do with that puppy?” a reference to a puppy given to Armstrong’s daughter who proved allergic to it. Says Armstrong, “I thought, ‘Wow, that’s a pretty broad audience.’”

Armstrong’s day job is founder and managing director of Beverley Hills-based Crescent Financial Partners, a private merchant banking firm that specializes in providing capital to what he terms the “orphans” of the finance world—companies too big to borrow from local banks but too small for Wall Street. Such companies, he says, have a “tremendous need” for funding and capital and are “really underserved.”

Armstrong is currently excited about tech (particularly cleantech) and beverages (especially ‘functional’ beverages—sports drinks, energy drinks, enhanced water, soy drinks, etc.—in which he sees “enormous opportunity.”) He’s also bullish on Brazil, which he describes as being “where China was 10 years ago.”

Crescent sees about 100 companies per month, mostly as a result of referrals. Having been on the receiving end of so many fundraising pitches, Armstrong says he’s learned a thing or two and offered these tips to would-be investors in his market niche:

1.  Avoid the Fire Drill

“Many early-stage operators are unrealistic about the time-line to grow their business and I often hear, ‘If I don’t have funding by Friday, I’ll lose a certain contract or I’ll go out of business.’ And, in most cases, it’s just simply not the case. What I do is, I often wait beyond this pre-set deadline to see how management handles challenges. Good operators will almost always solve these short-term crises, if you let them, as opposed to solving it for them.”

2.  Avoid Unrealistic Expectations

“Like I said earlier, capitalizing on early-stage ventures takes time and lots of planning. I recently looked at a company that was seeking $10 million in capital and their business, on its best day, was only valued at maybe $3 million to $3.5 million. So, there was an example of someone who had very unrealistic expectations. Last year I looked at a startup, it was a technology startup in the cleantech space, which is pretty exciting, but their forecasted revenues for the first year, if you can believe this, were $1 billion, so that meeting was over in about five minutes—it just gives you a clear sign that management doesn’t really know what they’re doing. Most business owners overly value their business and as a rule of thumb, I never overpay for a business, especially in this market, because many times when I look at a deal—unlike five or six years ago when there would be five or six competing bidders at the table, more often than not today I’m the only bidder at the table.”

3.  Avoid Very Mature Markets

“Avoid very mature markets and look for high-growth opportunities or high-growth markets…ticket sales, or travel and leisure, or restaurants, commodity-type services—accounting, convenience stores, manufacturing—those are businesses that I avoid…they’re commodities, they don’t yield high multiples, they’re hard to sell. High-growth markets would be things such as clean tech, introducing technology to energy, technology that creates efficiencies—you know, the whole world is now about being more efficient. Some really explosive sectors are healthcare [and] petroleum-related businesses, and not necessarily those related to fuel…petroleum is used in almost everything we use today, so there are a number of ancillary businesses that are just exploding. And software, software is really driving the world today.”

5. Know Your Market

“Many entrepreneurs go into new ventures and they don’t really understand what it’s going to require to bring that product to market or to grow the product once you get to market. One sector that we do a lot of work in where people greatly underestimate the requirement of capital is the beverage industry. The beverage industry is an enormous sector and there’s unlimited demand for good beverages but you have to pay to play in that space…If you’re going to launch an alcoholic beverage, you’re going to need even more money. To launch a new spirit product, if you’re going to do [it on] a national scale, is probably $20 million. I looked at a tequila company two weeks ago—a very special tequila—but they launched the product with $1 million and now they’re out looking for $2 million and the reality is at that rate they’re going to dilute themselves out of the company by the time they get to maturity because it’s $15 to $20 million to launch that type of product…Technology: you better do your research. If you don’t have a superior offering, number one, it can be easily duplicated and number two, there’s probably many other people out there doing it that maybe you don’t know about.”

6. Know Your Competition

“I can’t emphasize this more strongly. I’ll just give you one example: I get approached quite often with new search technologies and you would be amazed at how many times I’m told that this new search technology is going to displace Google. And it’s just not likely…You really better know your competition and just have reasonable expectations, because even if you did have a better search technology, you certainly don’t have the capital that Google has. And I see well-funded inferior products and services lead their category and industry all the time, just because it’s hard to compete with a company that well capitalized.”

Last but not least, says Armstrong, if you get the chance to appear on a popular reality TV show, you might want to take it. You may not like the way you’re portrayed but as a learning experience, it’s apparently second to none:

“It’s not every day you wake up and you’re on the number 1 TV show on cable,” says Armstrong, “It’s been kind of like getting an MBA in entertainment for me.”

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