The Ultimate Investment Club for Entrepreneurs

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Here's how it works: In a roundtable investment meeting with a dozen managers of the firm's real estate funds, Landman's associates give updates on their property investments around the country. Landman fires back general questions about hurricane damage, job loss, market saturation, and competition. But when the topic turns to potential investments in various markets in the South, he insists some members of the group contact their clients with special expertise in the region. "Let's get them on this as quickly as possible," he says. Later, in a meeting convened to discuss a huge equity fund investment in assisted-living facilities and geriatric daycare, Landman asks various deputies to contact specific clients so the firm can get a better sense of what CMS might be able to add to the daycare business. A thumbs-up from these clients, or a strategy for making the facilities spit back a better return, would mean the difference between going forward or tabling the project.

Such an approach drives home the point that CMS's value proposition is not merely something the firm offers its clients; it's something its clients offer one another. As Bernie Marcus points out, CMS's trump card is its clientele. The firm knows that its clients are as smart, and usually smarter, than anyone in the CMS office.

Still, if CMS's decision to limit clients to entrepreneurs essentially translates into a mercenary decision to add value to the firm, CMS's second peculiarity--the decision to make philanthropy a driving force--is arguably more complicated. One explanation goes like this: CMS's two top executives, Silberberg and Solomon, long involved with philanthropic activities themselves, have an authentic desire to sow their ideas with employees (who are urged to volunteer with community projects), fellow partners (who are forced to dedicate to charity 10% of their gross income share), and like-minded, deep-pocketed entrepreneurs (who are invited to attend conventions on charitable giving). While true, all this merely helps explain why CMS does good, not why CMS has done well.

As Silberberg notes, philanthropy has served CMS as an "indicator" of a client the firm would like to work with. And while it may be counterintuitive, there seems little question that CMS's success is due in part to its decision to limit clients and give money away. In Philadelphia, a relatively conservative business community where family connections can be more useful in reaching the upper echelons than raw talent, the firm's emphasis on exclusivity and philanthropy have set it apart. Thus CMS partners sometimes make reference to entrepreneurs who end up on their "LTS list" instead of their client list. "LTS," says Silberberg, "means life's too short."

Bernie Tenenbaum, a private-equity investor who used to run the entrepreneurial studies program at the Wharton School of Business and knows CMS well, explains that by doing good deeds, the firm built value for its clients: "They were able to break into a club, servicing a very narrow niche, by demonstrating both charitable leadership and personal commitment," he explains. Tenenbaum likewise remarks that philanthropy has had great utility for both CMS and the client base it serves. The first-order impact of a successful entrepreneur is wealth creation, he says; the second is philanthropy--the desire to have an impact on society. "I think what the CMS guys have done is tap into that desire for their clients to make a difference," he explains, "to create a legacy that outlasts themselves." Many of the CMS clients contacted for this story agree. Harold Toppel, for instance, who founded and later sold the Pueblo International chain of super stores, tapped the firm's philanthropic expertise when he and his wife decided to set up an after-school mentoring program. They didn't know how to go about it until CMS sent an adviser to Toppel's home in Florida. "Without CMS's help," Toppel says, "we wouldn't be where we are with that program."

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