Teamshares IPO: $60M EBITDA, 92 Companies, Zero Exits

Transcript

What Alex and I did is that we worked, first of all, really closely together on the bankruptcy of Hostess Brands. The manufacturer of Twinkies and Wonder Bread, and that was really fun. As AI becomes so leveraged in a lot of places, first, how is it changing what you look at, what you buy, things like that? AI is absolutely a part of team shares in multiple dimensions. Yeah. Right, it's accelerating the back office stuff. Our bank recs, right, for our year-end audit, that was a six-week process three years ago. It takes minutes now. So I think that the narrative around private equity is wrong and out of date. It still harkens back to the vulture days of breaking up companies and firing tons of people. Roll ups do fire a lot of people. All of a sudden it became a third derivative AI play. Yeah. I mean, you can't make this stuff up. Yeah. But literally people are buying HVAC companies for 12 times even though. When we get more or less. Dave and Fred plus Sam and Jess. Put it all right to the test. More or less. Hello and welcome to a very special edition of the More or Less podcast where you only have one less. But I'm here and I'm very excited to be having a conversation with Mike Brown of Team Shares. Mike and I got to know each other seven years ago when we put our first check. And I think in the history of the company, although he can correct us into Team Shares. That's right. Yeah. First. First institutional investor. First money. And so there's some non-institutional. First institutional money. A couple of angels. Yeah. First. First institutional investor. Fair enough. So now I'm talking to you on the eve of you guys being publicly listed seven years in. Congratulations. [SPEAKER_02] Thank you. It's exciting. So I wanted to take the time, Mike, just because it's a momentous moment or checkpoint in a long journey, both in the journey to this point and the journey forward. Just to check in and I thought it'd be fun to reminisce and tell the whole story of how on earth we got from where we were seven years ago to where we are today. And then get into where we're going, if that's cool. Sounds great. Amazing. So first, take me and everyone listening back to the earliest days here. Even before you and I started chatting, when you were just starting to think about doing team shares or what it would be or the opportunity. Totally. Yeah. So even just a very quick origin story before that. Right. So Alex, one of the three founders of the company, Kevin, who's our CTO, Alex is our president, and then I serve in the CEO seat. So we met together in investment banking. They were analysts putting together presentations and spreadsheets. I was an associate turning VP, also doing that type of stuff. And so it doesn't get much more glamorous. It's extraordinarily glamorous. But Kevin realized that he'd made a career mistake and he left after his first year as an analyst and he joined General Assembly as the fourth employee. Right. Actually, when it was still a co-working space, it hadn't pivoted to EdTech. Which is how I got diligently to the company early on, because Brad, who founded that, is a good friend. Totally. Exactly. So he joined when it was still a co-working space and the thesis was that he'd meet a company. And General Assembly itself was reaching product market fit in EdTech in real time. And so he was their first product manager. He eventually learned to code and he's a great designer. So he's a renaissance tech person. We stayed in touch as friends. Right. What Alex and I did is that we worked, first of all, really closely together on the bankruptcy of Hostess Brands, the manufacturer of Twinkies and Wonder Bread. And that was really fun because all the partners at our firm didn't really want to go spend time in Kansas. Right. Right. And so we got to go for two years working on this bankruptcy, working really closely together, learning from the CEO and CFO. And that was how our partnership and friendship really started to develop. And then we eventually realized that we'd love to go and buy a small business together. And so that process started in 2013 when I left. I resigned in good standing the day I'd made vice president and went on to buy a business called Alt-Type Electric. And I was going to run it. Alex and Vessel and I, a couple of friends and family as well. And moved out to Western Canada to run it. And made the transition from spreadsheet people to operators and from Wall Street M&A to Main Street M&A. And really, I never went to business school. So that was my MBA. Right. [SPEAKER_03] So, yeah. [SPEAKER_03] Talk to me about that. I mean, that's such a momentous thing. Again, there are people on Wall Street, especially these days, they're always talking about this. But you guys, many years ago went out and actually did this. Right. I went from being spreadsheet junkies to operating a small business. What were the most shocking realizations doing that? What did you have to learn? [SPEAKER_02] Totally. [SPEAKER_02] I mean, as a bigger picture, I know you're not the biggest fan of Y Combinator, but there's some really good writings about. How Paul Graham's done some essays about how real innovation comes from becoming an expert in a space because you're so enthralled with it. [SPEAKER_03] Yes. Right. [SPEAKER_02] And that part I agree with. And that's exactly what happened. Right. So we just went in. There was no. We weren't trying to build a public company. [SPEAKER_03] What did you have to learn? Totally. As a bigger picture, I know you're not the biggest fan of Y Combinator, but there's some really good writings about how Paul Graham's done some essays about how real innovation comes from becoming an expert in a space because you're so enthralled with it. [SPEAKER_03] Yes. Right. And that part I agree with. And that's exactly what happened. Right. So we just went in. There was no. We weren't trying to build a public company. We were inspired by Berkshire Hathaway. We thought that was really cool. We thought compounding was interesting. [SPEAKER_03] Of course you were. You were bankers. Every banker is inspired by Berkshire Hathaway. [SPEAKER_02] Well, but yes, but I actually think that Berkshire is the anti-banking company. But anyway, setting that aside. So yeah. So we went out there and day one, it was a rude awakening, right? The first day they were like, oh, Michael, we have a safety decision for you to make. I'm like, what is safety? Right. I have no idea what a safety is. And I realized, oh, I'm running a construction company now. Right. And so it was really cool because I got out there and I viewed it as a blank sheet of paper. This was at the time, it was 5 million of revenue, 500K of EBITDA, 15 employees, four people in the office, 11 people in the field. Right. And two owners that were retiring and I moved out there. My first job, I was insecure at the time. I called myself VP of finance. I bought the company, I called myself VP of finance. I didn't sit in like the owners or whatever. I just did spreadsheets and tried to learn from the former owners. We're still running the business for six months and then, okay. And then we're like, hey, got my hands around the business cycle, right. I think it takes six months and you're doing everything from payroll to invoicing, everything, nitty gritty stuff. And then the business has three divisions. Right. One is light manufacturing. One's projects, one's service. And so we had to figure out how to do a transition of two owners, not one, but two business partners who were intimately involved in the business, make some key early hires, retain everyone, build trust, and then start to work on how do we take this great, relatively small business, first of all, sustain it, but then start to try and grow it and improve it. And so I did things like identify in the light manufacturing business, just picking up on things from talking to people like, oh yeah, if we go to a publicly traded supplier and we ask for OEM pricing, we can save 30% on our input costs. I'm like, well, let's set up a meeting. Right. And so I just viewed it as a blank sheet of paper. We would go and we implemented ERP and negotiated pricing and hired. We'd have these other things. The company would do work in the oil sands region and they're like, oh, we could do 10 times the revenue, but we can never get a hotel room up there. I'm like, let's rent a condo. Right. It was really cool, white sheet problem solving. And so that was the first few years. And then it was like, okay, what next? And what became natural was to keep buying more of these businesses again, using our money, our own money, friends and family, that kind of thing. And eventually over the course of 2013 to 2018, we had bought and integrated six electrical maintenance firms. Right. And Alex jumped in in 2015 to start running the business as well. Right. As the first sort of equal active, equal financial partners, right, from the start, but sort of equal leaders. Right. And then we figured out pretty quickly that he was much better at running the businesses day to day and really integrating all these different companies and getting the people to get along. I was not as good at that. Right. And it was not where my interest lies. And so what we decided to do is just like, why don't you keep integrating and improving these companies? Why don't I go work on the more scalable version of what we're doing? Right. Yeah. And that took a couple of years, but that was what became TeamShares. And I think at the time we originally thought that we had more of a marketplace style idea. Yeah. At the time we were called Exit Place. Right. Yeah. I remember that. [SPEAKER_02] Right. [SPEAKER_03] That was the first pitch you gave me. That was the first pitch. And actually when we first met, just for memory here, I think we were like, hey, I've met one of your colleagues. I think it was Alex Marcos. Right. And then we were going to do a meeting with you and then we realized we were pivoting in real time. We're like, hey, we actually discovered that Exit Place is not the right model. It's not the company we want to build, et cetera. And the eureka moment was that look, this is a supply demand equation. They're just never going to be enough buyers for these businesses. Right. There's a huge opportunity to help try and help these businesses overcome succession, have a permanent ownership model, bring employees in. I think it was Alex Marcos. Right. And then we were going to do a meeting with you and then we realized we were pivoting in real time. We're like, Hey, we actually discovered that Exit Place is not the right model. It's not the company we want to build, et cetera. And the Eureka moment was that this is a supply demand equation. There's just never going to be enough buyers for these businesses. Right. There's a huge opportunity to help these businesses overcome succession, have a permanent ownership model, bring employees in. That's great for retention. It's great for growth. It's great for people. It's great for shareholders. It's obviously table stakes in venture capital, table stakes in private equity, table stakes in public companies. People get stock. Right. Yep. And our thesis was, let's bring this into a small business economy. Let's buy and transition these businesses into a Berkshire inspired holding company. And then start with one and try and scale towards thousands. And then let's use technology to address the many repeatable processes, have great financials, have great data. And even over the super long term, actually trying to create financial products, right. Which we've done some early stages of. So that was team shares. And that was, 2019, I think was when we met. And I remember you called me the day we came home from the hospital with Edward, our youngest son, and said, we want to invest. And I was like, great. And then I think you're like throughout evaluation range. You're like, let's be in the middle. Let's go. [SPEAKER_03] Things that were surprising, at least to me as an investor on the outside, along the way in the journey. [SPEAKER_03] The first I remember was very early on, you had this thesis that you had to build the marketplace yourself and you weren't going to use brokers. [SPEAKER_03] And then you realize there are plenty of these businesses out there that you can just work with brokers. [SPEAKER_03] You didn't need to compete with the whole brokerings. Totally. Right. [SPEAKER_03] And that was a really interesting evolution. [SPEAKER_03] And the second evolution I remember, and this is a little bit what you're talking about here was, I remember the initial idea being, well, all these businesses have number twos and they'd love to own the business. [SPEAKER_03] Right. [SPEAKER_03] And it turns out that that wasn't quite right. [SPEAKER_03] Right. [SPEAKER_03] When you got into really studying the business. [SPEAKER_03] So first of all, are those two recollections of those two important? Yeah. Yeah. So the core idea of team shares has been pretty similar, but there's a lot of execution tweaks that have happened along the way. So the first idea was that we thought that there would be a value crop to going direct. When you guys invested, the main question was really, okay, what's the distribution model? What's the go to market we're going to be. Right. And we thought, because in the early days we thought, oh, well, the fees that you pay when you buy a business are really high. So to give the audience a sense, if a business is bought for a million dollars, the transaction fee may be a hundred thousand dollars. Yeah. And this is paid by the seller closing. If you buy a business for $5 million, it could be, you know, it could wait, what did I say? No, no, that's right. For a million dollars to be a hundred K. Right. And it could be 500 K. [SPEAKER_03] Yeah. [SPEAKER_03] So it's about 10%. [SPEAKER_03] I mean, it could be 10%. It starts just like 10%, right. But it starts to slide as you get, yeah. It shows I got an element of mouth, but the issue is that that kind of for sale by owner, Fizbo and the home market, it's a false value prop. There's a reason why people pay those fees. So that was sort of on the seller side. There's a reason why people pay those fees, you kind of only, it's even harder than selling a home. Right. So Fizbo should work and it's never worked. Maybe someone will figure it out, but when I say it hasn't worked, it has not worked at scale. Right. [SPEAKER_03] Like there's no sort of real, which is, I mean, look, it's even that's true in the home marketplace as well. That's what I'm saying in the home market. [SPEAKER_02] I'm saying Fizbo in home. Yeah. [SPEAKER_03] Yeah. Fizbo in home. [SPEAKER_03] Yeah. [SPEAKER_03] Yeah. Yeah. Fizbo in home should work. And I'm sure there've been successful middle market Fizbo things, but there's no Remax Fizbo. Right. So that should have been a warning sign that there's a reason why it sort of hadn't worked. But people need that expertise. They need the help. And then there was our perspective on it too. So from our perspective, it takes so long and you only buy a business once. So the person needs to be ready to go. Right. Right. And so if you're going to do this at velocity, right? That's why a Stanford search fund takes two years and one in three Stanford searchers doesn't close the transaction. Two years. why it hadn't worked. But so people need that expertise. They need the help. And then there was our perspective on it too. So on our perspective is that it takes so long and you only buy a business once. So the person needs to be ready to go. Right. Right. And so if you're going to do this at velocity, right? That's why a Stanford search fund takes two years and one in three Stanford searchers doesn't close the transaction. Two years. They're about the same type of businesses we buy every month. Right. Yeah. So that was one bit. And then the leadership piece. So it ended up being a hybrid solution where we thought again, as we set off and we were realizing real time, wow, there's real product market fit here. And we were assembling elements of how to go and do this thesis. And we tested each one of those elements. And you thought about how full stack it is now complies. And team shares is a full stack that is very simple to understand as an investor. What we've had to build both online and offline is meaningful. Right. [SPEAKER_02] And so we were trying to think about how do you simplify the business? [SPEAKER_02] And we had had a good experience promoting people from within as we bought and integrated the six companies. Yeah, we did it. [SPEAKER_02] That was fine. [SPEAKER_02] We'll do that. [SPEAKER_02] And I think we did that in the first four and we had mixed results. [SPEAKER_02] Right. [SPEAKER_02] And I think we found that maybe sometimes you need to hire someone. Maybe sometimes you don't. And we went through a lot. [SPEAKER_02] That's probably where most of the iterations were the first three years. [SPEAKER_02] The default we landed on is that in the smaller businesses, up to a million or two, they're not generally someone who's ready to take on the financial responsibility for running the business. [SPEAKER_02] Yeah. [SPEAKER_02] And that's why externally four out of five, three to five businesses, we need to hire an external president from the, now that the right hand, who's the director of ops or general manager, they also get to step up in responsibility. [SPEAKER_02] And if that president were to ever leave, they're the natural successor in the future. [SPEAKER_02] But what we found was that it was actually just too much to ask to take on the next role while they already have a full-time operations role to then be in charge of all that. [SPEAKER_02] So those are two of the main evolutions since the day one, three page deck version of team shares. Fair enough. So you've gone out now and remind me how, what's the business count? [SPEAKER_03] How many businesses have you bought at this point? 90, 92 and about 60 million of consolidated EBITDA from the segments, from all the companies. [SPEAKER_03] So from that, I mean, so you bought a lot of businesses now, right? [SPEAKER_03] Now you're on your way to buying a lot more. [SPEAKER_03] I'm curious, if you think about what you would have told yourself seven years ago as you're getting going 90 businesses in, what are some of the lessons learned from the 90. Yeah. Well, aside from the details of teachers, one is to just be patient. And I think we were both trying to really move assertively and build, but everything takes longer than you think it's going to take. Right. That's a good generic thing I would tell myself. I wish I knew from inception that the slightly larger, we've talked about this publicly that we focus now on half a million to 5 million of EBITDA businesses. I actually think where we started was in the long left tail, like 2 million of revenue, 200K of EBITDA businesses and employees, that type of business. Yeah. These are more like 25 to a hundred employees. Right. So we started there because that was what we could afford. It's just what our thesis was. And that's what we had bought before. And I think when we were doing it in low scale, when Alex and I were buying and running these businesses, it was pretty consistent. Yeah. When we started doing it at scale and we went, as you remember, we launched our first, the pre-seed stuff, right, was in 2019 and then we launched with our first acquisition doing one per month in one queue of 2020, right, as COVID was starting. So and then we paused for the rest of the year and then we did one more end of 2020 and then 20 acquisitions. [SPEAKER_03] Right. In 2021. That's when we started scaling. Right. [SPEAKER_02] Yeah. [SPEAKER_02] So as we started doing that with that size range of company, kind of two to three million of revenue, 10 employees, 200K, 300K of EBITDA, there was a wide variance of outcomes. [SPEAKER_02] Yeah. So you could actually build a venture. I'm just talking about portfolio theory. These are subsidiaries or team shares that are not portfolio companies, but you could build a quote venture style portfolio around the 200K kind of EBITDA company that size of profile. That's not what we're trying to do. We're trying to have real consistency, predictable financials, compounding. And so I think that is one thing. And then I'd say the other thing I think was, I don't know. I obviously wish we knew the leadership model from inception. Right. Because there was a lot of iteration there, but that one's more just knowing that XYZ stock went up 10x last year and you wish you knew that. That size of profile. That's not what we're trying to do. We're trying to have real consistency, predictable financials, compounding. And so I think that is one thing. [SPEAKER_02] And then I'd say the other thing I think was, I obviously I wish we knew the leadership model from inception. [SPEAKER_02] Right. Because there was a lot of iteration there, but that one's, it was more just, it's like knowing that XYZ stock went up 10x last year and you wish you knew that. You can't really know that. We could not have known the exact leadership model without going through all the little iterations and micro mistakes. [SPEAKER_02] So that one, I'm like, hey, that was a journey that was worth it. Well, let's talk about the leadership model because I find this totally fascinating. You know, when I graduated college, I didn't do banking, but I did banking lightweight. I'd call it Bain and Co. Right. [SPEAKER_03] For a few years. [SPEAKER_03] Consulting. [SPEAKER_03] Oh, dirty. You were probably the last era of consulting before it really changed. I think it was peak, peak old school consulting. [SPEAKER_03] I mean, honestly, the consulting people I worked with at Bain, you know, a year ahead of me in my class or whatever in New York, it's a killer group of people. [SPEAKER_03] Right. [SPEAKER_03] And so, you know, you can talk about what the work was, but at the end of the day, I don't know how it's evolved. [SPEAKER_03] I mean, I still see Bain people popping up, but there's no question there was a killer group that came through those pipelines when I was around. [SPEAKER_03] But I'm really curious, because we've talked about this before and you've seen so much now. [SPEAKER_03] You know, one of the things I thought was exciting in the business was you said to me one day, you said, look, what we're finding is that there's an enormous demand for really smart kids, right, who are ready to go. [SPEAKER_03] They're green in a lot of ways, but they don't want to go to consulting and banking anymore. [SPEAKER_03] They like the idea of dropping into small businesses, having more ownership control, et cetera. [SPEAKER_03] Can you tell me the story of that and your discoveries around that and where it works and where it doesn't? Our lens on everything, right, to understand the framework was the Toyota production system. It was all about applying technology and people, right? And how do you keep making things repeatable? We looked at this as a tech enabled factory. And how do you make everything really, really, really repeatable and tech enabled? [SPEAKER_02] And so for us, when you inspect, the leadership component of building our team shows, we said, okay, what are going to be, as we scale, how are we going to be able to predictably and repeatably bring in successful, high quality leadership candidates every month, right? And the places that are natural to look and think through that are, you know, firms like consulting firms and on campus business school recruiting because there are, you know, for people who are less familiar, a repeatable funnel of people graduating. There's a repeatable class of people. [SPEAKER_03] They all look the same. They all look the same, but there's, even you think about the cycles, right? The graduation bit is obvious for people who don't know big three consulting. It is literally you have a two to three year contract and then you leave. So there's a repeatable cycle. The issue was in that. And again, we went back and we looked at when Alex and I were running these businesses, we came from a bank and we were very young. We were in our mid to late twenties and we were generalists. We were not industry experts at all. And so we're like, oh yeah, we figured it out. Other people can too. And the results were very uneven. And so the sourcing was very predictable and repeatable. The financial outcomes from those early hires were not right. There was a wide divergence. So we learned that, okay, when we worked a couple of years in and had now enough data points, you know, 20 or 30 data points, that okay, there is a set of playbooks, but each company is going to be a little different. Sometimes it really can be an internal promote, right? It's a little more rare. It's one in five, but when it works, it works really well. [SPEAKER_03] Yeah. And then you figure out what's the right backfill hire there. And then if you're going to hire externally, it needs to be on average an industry specialist. It's someone who's local. It's someone who's been in the industry. It's someone who's had P and L responsibility. Yep. And I think one of the things that we understood, so there were elements of the learnings that we didn't quite hire the right group in the beginning. We didn't have the right characteristics. That generalist model didn't hold up all the time. But what we did in the process is we actually were able to bring, we were able to build an incredible demand for the role. Yeah. So when we have a team shares president opening, we have generally at least 50 applicants. Sometimes we get hundreds of applicants for a single opening. [SPEAKER_03] Yep. And there are people. And so then, when you get down to five finalists, right, the one person who's picked, you know, there'll be another couple other people that maybe they were not quite the right person for that job, but then you've got four other people in Cleveland ready to go for the next companies. So there's a real flywheel to the whole leadership model. [SPEAKER_02] So when we have a team shares president opening, we generally have at least 50 applicants. [SPEAKER_02] Sometimes we get hundreds of applicants for a single opening. Yep. And there are people. And so then when you get down to five finalists, right. [SPEAKER_02] And the one person who's picked, right. [SPEAKER_02] They, there'll be another couple other people that maybe they were not quite the right person for that job, but then you've got four other people in Cleveland ready to go for the next companies. [SPEAKER_02] So there's a real flywheel. [SPEAKER_02] Yeah. [SPEAKER_02] To the whole leadership model. And then of course, then internally, it's a really interesting value prop because you've had P&L responsibility. You've run a company. You've obviously, you're, we think coming into this a great leader and you get to see how they perform. And now you get to be the leader and have the ultimate task of financial accountability. And then if you do well, right. Then there's a chance to continue to grow and it's not out. You're not running company out there on its own as a single isolated business. There's almost an internal YPO. You're on president's organization, right. Where we have annual get togethers and Slack community and it's very vibrant. And so I think we always had the community YPO vision from the beginning, but I think we just had to find the right model. And we do. And now over 80% of our president hires work out, which we think for hiring leaders, is a very strong track record. [SPEAKER_03] Yeah. [SPEAKER_03] And I mean, it talks about it because it's such a fascinating model on the talent side for me, because I can totally imagine you're young or you know, you want one of these roles. [SPEAKER_03] The old version was the GE thing, right? [SPEAKER_03] Where you go and you rotate through a few departments and you don't really have full responsibility, but you have to see a lot. Yeah. A rotational program. Yeah. [SPEAKER_03] Now your version is no. You can actually have real full P&L responsibility. [SPEAKER_03] You can own, you can look at the full stack. [SPEAKER_03] You can be a true, you can learn true entrepreneurship in a lot of ways, but then you're not necessarily stuck if you're an ambitious person running one electrical company in Milwaukee forever, right? [SPEAKER_03] There is the ability to move around and move up to do more businesses, et cetera. So yeah, we've been able to develop a great group out. I'd say the majority of presidents are running a business that they will run. If they're doing well and they're filled and we think they're doing well, the team on the ground thinks they're doing well. There's people that have been in seat already for six years and there's great, there's companies that we buy that are GDP plus growers, right? Yeah. [SPEAKER_02] And there's companies we buy where the EBITDA growth potential is literally 10X. Yeah. Right. And so there are lots of presidents running businesses that have a very significant growth potential just in that first business they take on. There's others that may be buying more, they're not buying, so they're jumping into businesses that Team Shares has bought for them to be the day-to-day leader. And they're gifted, but the humans or EQ elements and the financial performance elements, but the business itself, there's capacity to run multiple businesses in the same industry. Right. Yeah. That's what we call a group president. And then for the people that are really financially inclined, maybe the people management side of it is less their thing, so we have a role there called industry lead. And they're almost a super CFO or a big equivalent of an industry PM. Right. Yeah. And their job is to be all over the numbers and really understanding every lever of the business. And of course there's a flywheel for them helping us underwrite new businesses in that industry. Right. So that's what we found is that we have a career path for everyone, because running one business, there's businesses that we bought at 1 million of EBITDA that we think will become meaningful middle market. [SPEAKER_03] Yeah. [SPEAKER_03] I mean, it's amazing. [SPEAKER_03] It's also, I mean, we were talking before about YC, there is a YC flavor to this as well. [SPEAKER_03] Right. [SPEAKER_03] Which is you build up this community, right, of really switched on people who really do have business building and leadership experience in these types of things to help you evaluate things, to help you, you know, there's so many opportunities and community around that. Well, the other thing, yeah. So there's the canon of knowledge and all that stuff, both from YC and the founders, right. And that's the same thing we think about Team Shares, that the parent company is almost the state department, or we think of the presidents as the ambassadors running the embassies and there's a healthy relationship between the two. [SPEAKER_02] It's all Team Shares, but that's how we kind of think about the two roles. [SPEAKER_02] The other thing that came out of YC that probably wasn't planned from the beginning, but was planned from the beginning from Team Shares and it's still very nascent, but I think could become very meaningful over time. [SPEAKER_02] Because if you remember YC, how a lot of those startups got their first customers, they sold into other YC companies. [SPEAKER_02] Sure. [SPEAKER_02] Right. [SPEAKER_02] Different context here, of course, but we own a mattress manufacturer and we own furniture retailers. [SPEAKER_02] the embassies and there's a healthy relationship between the two. It's all team shares, but that's how we think about the two roles. The other thing that came out of YC that probably wasn't planned from the beginning, but was planned from the beginning from team shares and it's still very nascent, but I think could become very meaningful over time. [SPEAKER_02] Because if you remember YC, how a lot of those startups got their first customers, they sold into other YC companies. [SPEAKER_02] Sure. [SPEAKER_02] Right. [SPEAKER_02] Different context here, of course, but we own a mattress manufacturer and we own furniture retailers. [SPEAKER_02] Yeah. [SPEAKER_02] Right. [SPEAKER_02] So you could imagine, and when we buy businesses, we don't underwrite into that growth, but there's a Canadian holding company, I think called the Irving group or something. [SPEAKER_02] And they're famously trying to buy within the group. [SPEAKER_02] And so those things are super nascent, but we have a box company and they try and do as many of the boxes across the network as possible. So that's the talent side. I mean, talk to me about the technology side. Yeah. And especially as AI becomes so leveraged in a lot of places, like first, how is it changing what you look at, what you buy, things like that. And then really interestingly, how do you think about with the points of leverage with the presidents, with the businesses of applying centralized technology versus letting them do their own thing, et cetera. Totally. [SPEAKER_02] Yeah. [SPEAKER_02] Great. [SPEAKER_02] Okay. So I think let's start with actually just the durability of the businesses. Yeah. So we've always, the tech disruptions change year to year, but that's something that we've always started off with. One of three questions I asked myself is, will this business be around in 50 years? Right. So before people, whatever, since ChatGPT, people have been talking about AI, but before that there were all kinds of things. Right. So we've always been really focused on durable businesses that we think, you don't have a crystal ball, but we really think that we ask these really banal questions. Like, do we think people eat cheeseburgers in 50 years? Yes. It sounds like such a stupid question, but we start with that. And they're like, okay, well, they may also be eating impossible meat burgers too. Okay. This can evolve. [SPEAKER_02] Right. [SPEAKER_02] So we start with these reason to exist, right to exist. Why does this business exist questions? And I was thinking about, I think most people would go and try and buy a pickleball company. We would rather buy a tennis oriented company because I personally just believe that it's more likely that tennis will endure for 200 years than something that could be more of a fad. [SPEAKER_03] So that has a point. [SPEAKER_03] Also tennis is just a better sport, but yes, point taken. Correct. Yeah. But the point is, I'm not trying to pick on pickleball. It's more just, we don't like fads. We like things that we think are evergreen businesses that are going to be around forever. Yeah. Okay. And so that helps you endure through technological change and say, okay, so we don't think that there's a revenue challenge today for any business that team shares owns. Like literally not one. In fact, AI is, and has been for multiple uses. We don't try and overreach on this, but AI is absolutely a part of team shares in multiple dimensions. Yeah. Right. Like it's accelerating the back office stuff. Yeah. Like our bank recs, right, for a year end audit. That was a six week process three years ago. [SPEAKER_02] It takes minutes now. [SPEAKER_03] It's amazing. To do a bank reconciliation for an audit company. Our tax returns are longer than Berkshire Hathaway. Yeah. Right. There are almost a hundred subsidiaries in this company. Right. Right. So the natural place for us to build our own stuff there was really in the accounting, right, and the financial reporting and performance and tasks and all that stuff. Right. We don't build software if good software exists. So anything to do on the marketing or revenue growth side, we just install it. Now, where team shares builds its own software at the platform level is around transactions and that's around financial performance, cash flow management, all this stuff. So the underlying companies, right, like they'll be on NetSuite or QuickBooks Online or whatever their accounting system is. And then if it's pretty rare for most of these companies to be on a modern API centric operating system, say Toast or Service Titan, but they'll go on to that within the first year. [SPEAKER_02] Yeah. And then we're able to conform all the financials to US GAAP. Right. Dry topic, but an important thing for us as a soon to be public company. Right. And then have really great operating data and then layer analytics on top of that. So that's what allows us to move cash around by standardizing the banking, standardizing the financial performance, having all the types of financial analysis and operating KPIs that would be table stakes in a venture backed company, in a private equity company, in a public company and bring that down to small business. Right. And then on the transaction side up front, it's all the sourcing, 75,000 leads per year of actually for sale businesses, the valuations, the LOIs, the legal documents. So there's a human process. Right. And then have really great operating data and then layer analytics on top of that. So that's what allows us to move cash around by standardizing the banking, standardizing the financial performance, having all the types of financial analysis and operating KPIs that would be table stakes in a venture backed company, in a private equity company, in a public company and bring that down to small business. Right. And then on the transaction side up front, it's all the sourcing, 75,000 leads per year of actually for sale businesses, the valuations, the LOIs, the legal documents. So there's a human process. And that's why I've always started with the Toyota production system. We need to meet owners. We need to hire presidents. We need to have relationships with the companies. Right. Yeah. But it's the industrialization of all the repeatable processes and data visibility. Yeah. [SPEAKER_02] And it's really even now we're into the point where the data engineering team [SPEAKER_02] is helping us identify so much across the board. [SPEAKER_02] So anyway, it's one of those things that's super exciting. [SPEAKER_02] And obviously any software oriented company, you're building [SPEAKER_02] more software faster as well too. [SPEAKER_02] So fair enough. Yeah. [SPEAKER_03] And how do you think about, I mean, there are now, I mean, even for the last several [SPEAKER_03] years, right. [SPEAKER_03] There's been a boom in rollups of all sorts. Right. And the rollup story has gotten even more intense recently and bigger, right. With accounting firms or whatever. People think that they're doing this. You guys are fundamentally far broader and more generalist in your approach. Right. And so I guess I wonder, when you think about how that especially changes the software [SPEAKER_03] picture of where there's leverage and where there's not and how you think about it, [SPEAKER_03] I assume that part of the story is there isn't really a box production rollup [SPEAKER_03] to do easily. [SPEAKER_03] Right. [SPEAKER_03] And so you catch all the things that are less similar, right. [SPEAKER_03] Which means there's a certain types of software to do. [SPEAKER_03] I also just wonder, are there places where you think that the people who are trying [SPEAKER_03] to do pure play rollups and pay the premium for that in terms of accounting firms [SPEAKER_03] or pool cleaning or whatever it's going to be where they're misaligned or missing [SPEAKER_03] the boat in terms of what you can and can't do with software? Yeah, I think that. So first of all, as you know, I run team shares along with our colleagues and parent William and Edward and try and be at a decent house. I don't pay attention to what's going on. I've got my hands full. So we just do what we do. Right. So I don't even know the other parties out there. But what I would say when I hear people ask me these questions is, because we have bought integrated companies, right. Integration of small businesses, integrating large public companies is hard, right? Yeah. Yeah. Integrating small businesses might be harder. Yeah. I don't know. It might be harder. Well, it's really harder per dollar. Right. So I think that if you look at some of those things, what's actually going on is they're buying the revenue and firing all the employees. Yes. That's not what team shares does. Okay. Team shares buys businesses with 25, 50, a hundred employees. [SPEAKER_02] Everyone gets stock. [SPEAKER_02] People are staying. [SPEAKER_02] People are happy. [SPEAKER_02] It's a very high satisfaction rate. [SPEAKER_02] So team shares. [SPEAKER_02] Right. [SPEAKER_02] And then everyone gets to see the numbers. [SPEAKER_02] Everyone has to grow. [SPEAKER_02] So what I think people will find is that integrating disparately runs well, because if you just take accounting firms, if you take five different accounting firms that are small business in nature, how they're run is so different. Just on the software side, the standard operating procedures and stuff. So I think that people will find that integrating because bolt ons are very hard to integrate. But I think also the other thing is that's why we've always been, because even before some of these more recent things come along, there's always rollups, rollups are 50 years old, right? That's not a new thing. I think that the work, first of all, to create Sarbanes-Oxley style numbers, a lot of work, and that's hard to do. And I think that's a lot of reason why people that typically do rollups, they get in and get out in the private market. Yeah. Right. They just buy a bunch of stuff. They're playing a multiple arbitrage game, public companies, right? Like Danaher, Constellation Software, Berkshire, all the great programmatic acquirers, you're playing a different game. You're owning that cash flow for life. The incentives are different. You're not doing short term incentives, you're doing long term incentives. And the standard of the financials is totally different than the private markets where you can have really aggressive ad backs, right? Then there's the case of, the reality is that rollups come and go. Yeah. [SPEAKER_02] Right. [SPEAKER_02] And so we've seen this, we saw it in 2020 with landscaping. [SPEAKER_02] It was one of the only things with revenue growth in 2020. [SPEAKER_02] We stayed away. [SPEAKER_02] Yeah. [SPEAKER_02] Let it cool off. [SPEAKER_02] We bought a few HVAC companies early on, right? [SPEAKER_02] What two? [SPEAKER_02] Two of 90, right? All of a sudden it became a third derivative AI play. [SPEAKER_02] Yeah. I mean, you can't make this stuff up. Yeah. Yeah. Right. And so we've seen this, we saw it in 2020 with landscaping. It was one of the only things with revenue growth in 2020. We stayed away. Yeah. Let it cool off. We bought a few HVAC companies early on, right? What two? Two of 90, right? All of a sudden it became a third derivative AI play. Yeah. I mean, you can't make this stuff up. Yeah. But they literally people are buying HVAC companies for 12 times EBITDA. Yeah. These are businesses that are project based businesses, right? Yeah. And now you're saying chapter seven liquidations of private equity backed HVAC. And so we purposely have always been diversified. We're structural, our acquisition manager is structural. And we do not deliberately want diversification, both for economic cycle management, but also just so that we're not going to be subject to the whims of a single industry. If even you look at something like Constellation Software, it's one of the most amazing public companies. Yeah. [SPEAKER_03] I remember you've told me before, it's the only stock you would buy. Very few people. [SPEAKER_02] There's only three or four stocks that we own at any given time, but Constellation is amazing. [SPEAKER_02] Very few people know Constellation Software, maybe because it's Canadian, but it went public at a $500 million valuation. I think it at some point hit 80 billion in market cap. And it's been clobbered over the last six months because of the AI perception threat. [SPEAKER_02] And look, they're hopefully stoic enough that they're not bothered by that. [SPEAKER_02] They're going to just keep on trucking. [SPEAKER_02] But that sucks when you just have this existential shock happen in the single, if you're a single industry strategy is great until it's not. That's what I would say about that. [SPEAKER_03] Yeah. [SPEAKER_03] Fair enough. [SPEAKER_03] So okay. [SPEAKER_03] So let's talk a little bit about the future. [SPEAKER_03] Because again, it's been a hell of a journey so far. [SPEAKER_03] You're at 90 plus businesses, you know, it's you've learned a ton, you have your engine running. [SPEAKER_03] You're going to be a public company very soon. [SPEAKER_03] That's exciting. Yeah. Super exciting. [SPEAKER_03] Where does it go? Yeah. So let's break it down into short term over the next two years, and then long term. So we put out a forecast, right, to go from 19 million of corporate EBITDA. [SPEAKER_02] So there's segment EBITDA, right? So it's roughly 60 million. But then after our parent overhead of 90 people that propel the machine towards thousands of companies, it's 19 million of EBITDA on a performer basis last year, 2025. So the plan is to get to 100 by the end of 2027. So 5x growth over the next two years. [SPEAKER_02] That I think is already a pretty good starting point for growth. But everything we've done has really been to set up the business to be able to grow in a very sustainable and repeatable way. And we put out there publicly that our ambition is to, over the long term, help thousands of businesses be a part of TeamShares. So I just personally, I'm 42. This is incredibly fulfilling, intellectually fulfilling, great people we work with. We think it's good for small business owners. We think it's good for small business employees. We think it's good for small businesses themselves, to be a part of TeamShares. And it's an interesting thing is a little bit that even though people would never ever in a million years compare TeamShares to Amazon, culturally, it is actually just from the entrepreneurial perspective, it's one of the mother sauces of TeamShares. It is what I mean by this is that we're never done innovating. We're going to continue on this very focused path over the next two, three, four years, and really continue to stick to that knitting and build market trust and work towards issuing over the long term bonds, that's the end sort of financing goal for futures, and a range of tools. I think most companies that go public, it does not directly help the business grow, but you can take something like Kinder Morgan, direct benefit acquisitions, acquisition financing. Okay, so back to the Amazon bit. TeamShares internally is a very innovative culture, right? The question we ask all the time is what if we just. The premise of what if we just is asking radical questions, just change a variable. The biggest transformative breakthroughs come from that question. And so I think that over the ultra long term, in 20 years, I don't even want to describe the things that we could go and do because they're just going to sound crazy in the way that if you went back to the early days of Amazon and described Amazon today back then it would sound nuts. But there are so many other adjacent businesses that we can build in a really tangible way over the long term. But over the short term we are really focused on growing the business, hitting our plans, making our stakeholders happy, creating shareholder value, and continuing to grow. [SPEAKER_03] Let me push on that though because the Amazon thing is interesting. Amazon, you guys are in some ways the opposite of Amazon, right? Because you produce EBITDA and you're very focused on that, right? And so I guess the question for me is when you think about the guardrails. Obviously when you're building something big, there's a big thesis broadly around small businesses, the future of them, etc., right? And I would argue some would say the problem is in most problems the middle drops out. So you're going to have the behemoth platforms of the world, you know, we'll see in a few days where SpaceX is on that list, etc. Yeah, and then you're going to have a ton of small businesses, right? And very little in the middle, right? As a potential configuration. So you guys are going to be the champions of and the platform for a lot of small businesses. [SPEAKER_03] is when you think about the guardrails, obviously when you're building a big, there's a big thesis broadly around small businesses, the future of them, etc., right? And I would argue some conversation you'd say that the problem is in most problems the middle drops out. So you're going to have the behemoth platforms of the world, we'll see in a few days where SpaceX is on that list, etc. Yeah, and then you're going to have a ton, a ton, a ton of small businesses, right? And very little in the middle right as a potential configuration. So you guys are going to be the champions of and the platform for a lot, a lot of small businesses. Yeah, I guess how do you like, there's so much you could do with it. How do you think about, and I understand the short term is just plow money back, grow, get access to cheaper capital, prove you can keep making it productive, etc. But how do you put guardrails on a thing where you really could do anything? Yeah, so I think first of all, it all comes down to really good capital allocation, which is a discipline that we really pride ourselves on. There's multiple core competencies to the team, right? Everything ranging from acquisitions, operations, technology, right? And capital allocation is a thing that people think about a lot in the venture community, but I think even amongst public companies there's a range of how much companies focus on it, and that's something we're very focused on. [SPEAKER_03] Well, this is a classic Will Qistism. Will's my partner, and Will, which is basically CEOs are just capital allocators. Yeah, well, yeah. And actually, our lead investor, David Drew, he actually wrote a book on capital allocation. It's a really good book. But okay, so already today, just to talk about how we think about this today, our primary capital allocation is to new acquisitions, right? And then our secondary is to organic growth where capital would help further accelerate growth with really good paybacks, one to two years. So that's a good example, like opening a new location if it's a unit-based business. [SPEAKER_03] Right, so and internally, sorry, I want to hear the whole story, but just because it's an interesting one, like internally, is that literally like one of your presidents? Like they come up with like, here's my wish list and what I'm effectively what I can do, and you guys allocate centrally what gets approved or not approved? So that's a bit where, again, there's three or four mother sauces to Team Shares, that's a bit where we drew from the Berkshire principles of decentralized leadership, centralized capital allocation. So by default, all cash flow comes up and employees benefit because of the dividends, all that. But cash flow comes up and then to invest back for growth, that's a reallocation decision. And there's a separate reinvestment committee that's Alex, our CFO, and a few other folks, right? So yeah, so but it's competing for the same, you know, returns on equity, right? So I think it's about having the same discipline, right? And doing things that are germane to what you're doing, yeah, right? So I could make a case over the ultra long term that incubating businesses at one times EBITDA is germane to what we do. It's not something we're doing right now, yeah, but I could make the case of a long term, right? When you get to a point where you say, hey, actually, because there's a point that the whole true Berkshire, true Constellation is like your free capital of far seeds, the amount you can do, right? Right, and what did Berkshire? Berkshire famously went bigger, bigger, bigger, bigger, bigger. Now they buy like railroads. Okay, that is not our strategy. Our strategy is not to work towards buying American Airlines, right? Yeah. We think that the SME space, right? Like if we've done a seven million dollar EBITDA, will we do a 10? Probably eventually, right? But the litmus test that has to fit the union economics and each business we buy is not financial material, right? So if that's your core competency, if that's your core focus, right? Then you could imagine over the medium term or certainly over the long term that actually it become some of those things have to be buy versus build, yeah, right? Yeah, of like, hey, if you could start this business for one or two times EBITDA in a really risk-adjusted way, and we're not talking about venture risk, we're talking about a digital billboard company, just to make it up, right? Like something like the market exists, but we noticed that South Carolina is under-saturated, right? Like, just making it up, right? That's something that feels germane. You know, these business owners, right? They have massive liquidity bets. A lot of them don't have wealth planning and tax planning. I think that there's a number of ways you could execute that, right? Those are things that are germane. There's a whole what I think you called it the private economy, yeah. In fact, there's a whole list we've done really nascent early tests with, you know, business insurance and health insurance, taking over those products. Yep, we'll continue to do those. And so I think that those things are just super germane to what we're doing, yeah? So we're not free form diversification, like let's start a biotech, you know? No, it's a tight target. Do you want to own all businesses forever that you acquire? We think so. We think that there's a very clear shareholder answer to that, and we think there's a very clear answer for the business itself, and then there's the promises we're making, yeah, to the stakeholders. So just to take those in order, so a lot of people ask this really thoughtful question, and they're surprised by the answer because people say, oh, you're buying it five times you could totally sell to a local competitor for, you know, or to PE, right? And like, okay, well, let's walk through the map, right? So you buy something at five times. Local competitor made, remember the beginning problem is there's not enough buyers and it's really hard to sell a small business. But we'll just ignore that, ignore that, yeah? So let's say the competitor is able to sort of muster up six times even to buy the business, right? Yep, and bet the farm on their company, right? Well, why would you do that? The business, you know, the market will value Team Shares however it does, but typically public companies are valued way in excess of six times, even, right? Right, so you will be harming shareholder value, yeah, and you'd be losing hundreds of years of cash flow. Yes. Then there's the business itself. So I think that the narrative around private equity is wrong and out of date. The narrative around private equity still harkens back to the vulture days of breaking up companies and firing tons of people. Roll-ups do fire a lot of people, right? Like that's a core premise of an industry roll-up, okay? Single low cons, sort of like highly concentrated 10, you know, portfolio companies, there's generally net job creators. I think the issue with private equity is twofold. The returns are really bad now, yep, and so that's again the capitalist argument. The returns are terrible now. Generally, the median fund, there's obviously ours, right? So it's almost it seems like it's become venture-like, or you've got a top decile that's really good and Out of date the narrative around private equity is it still harkens back to the vulture days of breaking up companies and firing tons of people. Roll-ups do fire a lot of people, right? That's a core premise of an industry roll-up. Okay, single low cons, highly concentrated portfolio companies. There's not, there's generally net job creators. I think the issue with private equity is twofold. The returns are really bad now. Yes. And so for that's again the capitalist argument. The returns are terrible now. Generally the median, the median fund, there's obviously hours, right? So it's almost it seems like it's become venture-like or you've got a top decile that's really good and then everyone else is underperforming the S&P. Right. Then there's the health of the business. You sell a business to PE with 10 million of EBITA and you sell it again at 25 and you sell it again at 75 and then 100 and 200. So you can have business that are for sale three, four times, and that means the day you close the transaction the company is already for sale. Yes. That's not healthy. Yeah. That is not healthy. It's so much worse than house flipping. Yeah, house flipping might happen once, right? Like someone transforms a home, they renovate it and they sell it for more. And so I just think that that is just not a healthy thing for a company. It creates a lot of uncertainty. It creates really short-term thinking. Yes. So and so again, look, so we've just always tried to be really rational and practical and try to think about things as neutral. But like that's our perspective. There's a reason private equity exists. It's a reason why PE exists. It does create value for endowments and all that stuff. But it's not good investing and we don't think it's healthy for companies. So no, we don't think it's, we think permanent ownership is good for team shares shareholders. We think it's good for the businesses themselves. Don't be for sale. And these are the promises that we're making when we go and you know, look an owner in the eye that we're going to buy the business, we're going to bring in the employees and there's going to be employee share ownership. But it's going to have a permanent ownership model and we're very proud of it. [SPEAKER_03] But all those things line up together. Yes. Fair enough. Fair enough. So there's last question for you, which is again you're about to be public, which is exciting. Yes. What's the first thing you do? Have a good night's sleep. It's been a while. Yeah, it's been, I mean, yeah, it's been, so seven years, but we sort of launched six years ago with the first acquisitions. And I think it's been, and then of course before that, I left my job in 2013. So I think I feel like I've been on a long run right since 2013 and there's long run ahead of us too, right? Yes. And so very motivated and fulfilled and excited by that journey. But I think we want to sort of also recognize, look, we've done something that is one or two percent of venture-backed companies go public, right? And so we're extraordinarily proud as a company and we've done this in pretty challenging circumstances. There's been economic headwind du jour or policy uncertainty for the last two or three years, right? So I think the first thing is to just have a good night's sleep and a weekend with the family, right? And then go and execute our plan. I know it sounds like a boring answer, but boring is sometimes good. Team Shares is just focused on continuing to do what we do. And we don't really look out at what other people are doing. We just focus on what we're doing. [SPEAKER_03] Fair enough. Well, it's been a really fun journey to be on with you and watch you since the early days and get the updates on. And congrats to you and the team for making it happen. It's going to be really fun to watch and I'm excited to see what the next 20 years brings. You guys are marathoners, right? No, we're excited. I think it's cool. I've found my dream job and recognizing to keep re-earning the right to be one of the leaders of the company. But very excited about what's ahead and I think that we can continue to do what we're doing for decades to come. [SPEAKER_03] I love it. Mike, thanks for taking the time. This is fun. This is our first ever special edition, More or Less. I hope you enjoyed it. We'll do more with awesome people doing awesome stuff. Thank you. [SPEAKER_03] See you. [SPEAKER_00] If you enjoyed this show, please leave us a virtual high five by rating it and reviewing it on Apple Podcast, Spotify, YouTube, or wherever you get your podcast. Find more information about each episode in the show notes and follow us on social media by searching for @MoreOrLess, @DaveMorin, @LessonAt, @JLesson. And as for me, I'm @BritC. See you guys next time. And then have really great operating data and then layer analytics on top of that. So that's what allows us to move cash around by standardizing the banking, standardizing the financial performance, having all the types of financial analysis and operating KPIs that would be table stakes in a venture backed company, in a private equity company, in a public company and bring that down to small business. Right. And then on the transaction side up front, it's all the sourcing, you know, 75,000 leads per year of actually for sale businesses, the valuations, the LOIs, the legal documents. So there's a human process. And that's why I've always started with the Toyota production system. We need to meet owners. We need to hire presidents. We need to have relationships with the companies. Right. Yeah. But it's the, it's the industrialization of all the repeatable processes and data visibility. Yeah. And it's really, I mean, even now we're into the point where like the data engineering team is helping us identify so much across the board. So anyway, it's, it's one of those things that's super exciting. And obviously like, you know, like any, any software oriented company, like you're building more software faster as well too. So fair enough. Yeah. And how do you think about like, I mean, there are now, I mean, even for the last several years, right. There's been a boom in rollups of all sorts. Right. And the rollup story, I mean, he's gotten even more intense recently and bigger, right. With like accounting firms or whatever. People like think that they're doing this. You guys are fundamentally far broader and more generalist in your approach. Right. And so I guess I wonder, like, when you think about how that especially changes the software picture of where there's leverage and where there's not and how you think about it, like, you know, I, I assume that part of the story is there isn't really a box production rollup to do easily. Right. And so you, you catch all the things that are less similar, right. Which means there's a certain types of software to do. I also just wonder, like, are there places where you think that the people who are trying to do pure play rollups and pay the premium for that in terms of like accounting firms or pool cleaning or whatever it's going to be where they're kind of misaligned or missing the boat in terms of what you can and can't do with software? Yeah, I think that. So first of all, I just, as, as you know, like, I like run team shares along with our colleagues and parent William and Edward and, you know, try and be at a decent house. I don't pay attention to what's going on. I've got my hands full. So like, we just, we just do what we do. Right. Uh, so I don't, I don't even know, like the other sort of parties out there. But what I would say when I, when I hear people ask me these questions is like, okay, because we have bought an integrated companies, right. Integration of small businesses, like integrating large public companies is hard, right? Yeah. Yeah. Integrating small businesses might be harder. Yeah. I don't know. Like it might be, it's. Well, it's really harder per dollar. Right. So I think that if you look at some of those things, what's actually going on is they're buying the revenue and firing all the employees. Yes. That's not what team shares does. Okay. Team shares buys businesses. With 25, 50, a hundred employees. Everyone gets stock. People are staying. People are happy. It's a very high satisfaction rates. So team shares. Right. And then everyone gets to see the numbers. Everyone has to grow. So what, what I think people will find is that integrating disparately runs well, because if you just take accounting firms, if you take five different accounting firms in that are small business in nature, how they're run is so different. Just set the software side, just like the standard operating procedures and stuff. So I think that people will find that integrating because bolt ons are very hard to integrate. But I think also the other thing is, is that that's why we've always been, because even before some of these sort of more recent things come along, like there's always roll ups, roll ups are, you know, 50 years old, right? Like no one, like, that's not like a new thing. I think that the work, first of all, to sort of create like, you know, sort of Sarbanes-Oxley style numbers, a lot of work, and that's, that's hard to do. And I think that's a lot of reason why people that typically do roll ups, they get in and get out in the private market. Yeah. Right. They're just like, hey, buy a bunch of stuff. They're playing a multiple arbitrage game, public companies, right? Like Danaher, Constellation Software, Berkshire, all, all the great sort of programmatic acquires, you're playing a different game. You're owning that cash flow for life. The incentives are different. You're not doing short term incentives, you're doing long term incentives. And the standard of the financials is totally different than the private markets where you can have really aggressive ad backs, right? Then there's the case of, look, the reality is that roll ups come and go. Yeah. Right. And so we've seen this, we saw it in 2020 with landscaping. It was like one of the only things with revenue growth in 2020. We stayed away. Yeah. Let it cool off. We bought a few HVAC companies early on, right? What two? Two of 90, right? All of a sudden it became a third derivative AI play. Yeah. I mean, you can't make this stuff up. Yeah. But like, you know, they literally people are buying HVAC companies for, for 12 times EBITDA. Yeah. These are businesses that are like project based businesses, right? Yeah. And now you're saying chapter seven liquidations of private equity backed HVAC. And so, so we purposely have always been diversified. We're structural, our acquisition manager is structural. And we do not, we deliberately want diversification, both for like economic cycle management, but also just so that we're just not going to be subject to the whims of a single industry. If, even if you look at something like Constellation Software is one of the most amazing public companies. Yeah. I remember, I remember you, you, you've told me before, it's the only stock you would buy. Very few people. There's, there's only like three or four stocks that we sort of own at any given time, but like Constellation is amazing. Very few people, like it's shocking how many people don't know Constellation Software, maybe because it's Canadian, but it went public at a $500 million valuation. I think it at some point hit 80 billion in market cap. And it's been clobbered over the last six months because of the AI perception threat. And like, I mean, look, they're hopefully stoic enough that they're, you know, sort of not bothered by that. They're going to just keep on trucking. But like, that sucks when you just have this, like this existential shock happen in the single, if you, being a single industry strategy is great until it's not. That's what I would say about that. Yeah. Fair enough. So, okay. So let's talk a little bit about the future. Because again, it's been a hell of a journey so far. You're at 90 plus businesses, you know, it's, it's, you've learned a ton, you have your engine running. You're going to be a public company very soon. That's exciting. Yeah. Super exciting. Where does it go? Yeah. So let's like kind of break it down into sort of short term over the next two years, and then kind of, you know, like long term. So, you know, we put out a forecast, right, to go from 19 million of corporate EBITDA. So there's like segment EBITDA, right? So it's just a roughly, you know, 60 million. But then after our parent overhead of 90 people that, you know, propel the machine towards thousands of companies, it's 19 million of EBITDA on a performer basis last year, 2025. So the plan is to get to 100 by the end of 2027. So 5x growth over the next, you know, two years. So that, that I think is already a good pretty starting point for growth. But everything what we've done has really been to set up the business to be able to sort of grow in a very sustainable and repeatable way. And we put out there publicly that our ambition is to, over the long term, help thousands of businesses, you know, be a part of TeamShares. So I just personally, you know, I'm 42. This is incredibly fulfilling, like intellectually fulfilling, great people we work with. We think it's good for small business owners. We think it's good for small business employees. We think it's good for small businesses themselves, right, to be a part of TeamShares. And it's an interesting thing is a little bit like, even though people would never, ever in a million years compare TeamShares to Amazon, Well then, culturally, it is actually just from the, at least from the like entrepreneurial, it's one of the mother sauces of TeamShares. It is what I mean by this is that we're never done innovating. We're going to continue. We're going to continue on this very sort of focused path over the next two, three, four years, and really continue to just stick to that knitting and XQL build market trust and work towards issuing over the long term sort of issuing bonds right that's the end sort of financing goal for futures right and a range of tools i think most companies that go public it does not directly help the business grow but you can take something like kinder morgan direct benefit acquisitions acquisition financing okay so back to the amazon bit team shares internally is a very innovative culture right like the question we ask all the time is what if we just the premise of what if we just is like asking radical questions just change a variable the biggest transformative breakthroughs that come come from that question and so i think that over the ultra long term i think in 20 years like i don't even want to describe the things that are things that we could go and do because they're just going to sound kooky in the way that like if you went back to the early days of amazon and described amazon today back then it would sound nuts yeah but there are so many other adjacent businesses that we can build in a really tangible way over the long term but over the short term we are really focused on growing the business hitting our plans making our stakeholders happy creating shareholder value and just continuing to grow so let me push on that though because the amazon thing is interesting amazon you guys are kind of in some ways the opposite of amazon right because you produce ebda right and you're very focused on that right and like so i guess the question for me is like when you think about the guardrails obviously like when you're building a big you know there's a big thesis broadly around small businesses of the future of them etc right and you know i i would argue some conversation you'd say that the problem is like in most problems the middle drops out so you're going to have the behemoth platforms of the world you know we'll see in a few days where spacex is on that list etc yeah and then you're going to have like a ton a ton a ton of small businesses right um and very little in the middle right as a potential configuration so you guys are going to be like you know the champions of and the platform for a lot a lot of small businesses yeah i guess how do you like there's so much you could do with it how do you think about and i understand the short term is just plow money back grow get access to cheaper capital prove you can keep making it productive etc but how do you put guardrails on a thing where you really could do anything yeah so i think first of all um it all comes down to really good capital allocation which is a discipline that we really pride ourselves on again there's like multiple core competencies to team shares right everything ranging from acquisitions operations technology right and capital allocation is a thing that people you know i think in the venture community people think about a lot but i think even amongst public companies there's a range of how much companies focus on it and that's something we're very focused well this is a classic will quistism who's my partner and you know will which is like basically ceos are just capital allocators yeah well yeah and actually our uh our lead investor uh at hero david drew so he actually wrote a book on capital allocation uh it's a it's a it's a it's a really good book but um okay so already today just to sort of talk about how we think about this today is our primary capital allocation is to new acquisitions right and then our secondary is to organic growth where capital would help further accelerate growth with really good paybacks one two years so that's a good example that's like opening a new location if it's a unit-based business right so and internally sorry i want to hear the whole story but just because it's an interesting one like internally is that literally like one of your presidents like they come up with like here's my wish list and like what my what i'm what i'm effectively what i can do and you guys allocate centrally what gets approved or not approved so that's a bit where again there's sort of like three or four mother sauces to team shares that's a bit where we drew from from the berkshire principles of like decentralized leadership centralized capital allocation so by default all cash flow comes up and again employees benefit because of the dividends all that but cash flow comes up and then to invest back for growth that's a reallocation decision and there's a separate sort of reinvestment committee that's alex or cfo and a few other folks right so yeah so but it's competing for the sort of same you know returns on equity right so so i think it's about having the same discipline right and doing things that are germane to what you're doing yeah right so i could make a case over the ultra long term that incubating businesses at one times ebitda is germane to what we do it's not something we're doing right now yeah but i could make the case of a long term right when you get to a point where you say hey actually because there's a point that the whole sort of true berkshire true constellation is like your free capital of far seeds the amount you can do right right and what did berkshire berkshire famously went bigger bigger bigger bigger bigger now they buy like railroads okay that is not our strategy our strategy is not to work towards buying american airlines right yeah we think that that we think that the the sme space right like if we've done a seven million dollar ebitda will we do a 10 probably eventually right but the litmus test that has to fit the union economics uh and each business we buy is is is not financial material right so if that's your core competency if that's your core focus right then you could imagine over the medium term or certainly over the long term that actually it become some of those things have to be buy versus build yeah right yeah of like hey if you could start this business for one or two times ebitda in a really risk adjusted way and we're not talking about like venture risk we're talking about like yeah a digital billboard company just to make it up right like something like the market exists but we noticed that south carolina is under saturated right like you know just making it up right that's something that feels germane you know these business owners right they have massive liquidity bets a lot of them don't have wealth planning and tax planning i think that there's a number of ways you could execute that right those are things that are are germane there's a whole what i think you called it the private economy yeah uh in fact there's like a whole list we've done really nascent early tests with you know business insurance and health insurance taking over those products yep we'll continue to do those and so i think that those things are just super germane to what we're doing yeah so we're we're not we're not like free form diversification like let's start a biotech you know no no it's a tight it's a tight target do you want to own all businesses forever that you acquire we we think so we think that there's a we think that there's a very clear shareholder answer to that and we think there's a very clear sort of answer for the business itself and then there's the promises we're making yeah um you know to the stakeholders so just to take those in order so a lot of people ask this really thoughtful question and they're surprised by the answer because people say oh you're buying it five times you could totally sell to like you know a local competitor for you know or or to pe right and like okay well let's walk through the map right so you buy something at five times local competitor made remember the beginning problem is there's not enough buyers and it's really hard to sell a small business but we'll just we'll just ignore that ignore that yeah so uh so let's say the the competitor is able to local competitor is able to sort of muster up sort of six times even to buy the business right yep and bet the farm on their company right well why would you do that the business you know the market will value team shares however it does but typically public companies are valued way in excess of six times even right right so you will be harming shareholder value yeah and you'd be losing hundreds of years of cash flow yes then there's the business itself so i think that the narrative around private equity is wrong and out of date the narrative around private equity is like it still harkens back to the vulture days of breaking up companies and firing tons of people roll-ups do fire a lot of people right like that's a core premise of like an industry roll-up okay single low cons sort of like highly concentrated 10 you know portfolio companies there's not there's generally net job creators i think the issue with private equity is twofold the returns are really bad now yep and so for that's again the capitalist argument the returns are terrible now generally the median the median fund there's obviously hours right so it's almost it seems like it's become venture-like or you've got a top decile that's really good and then everyone else is underperforming the s&p right then there's the health of the business business and so you sell a business to pe with 10 million of ebita and you sell it again at 25 and you sell it again at 75 and then 100 and 200 so you can have business that are for sale three four times and that means the day you close the transaction the company is already for sale yep that's not healthy yeah that is not healthy it's so much worse than house flipping yeah like house flipping might happen like once right like someone transforms like like a home they renovate it and they sell it for more and so so i just think that that is just not a healthy thing for a company creates a lot of uncertainty it creates really like short-term thinking yeah so and so again like look so we've just always tried to be really rational and practical and you know i guess try and swiss about things as sort of neutral but like that's our perspective like there's a reason private equity exists it's a reason why p exists it does create value for endowments and all that stuff but like it's not good investing and we don't think it's healthy for companies so no we don't think it's we think the permanent ownership is good for team shares shareholders we think it's good for the businesses themselves don't be for sale and these are the promises that we're making when we go and you know look an owner in the eyes that we're going to buy the business we're going to bring in the employees and there's going to be employee uh share ownership but it's going to be have a permanent ownership model and we're very proud of it but all those things line up together yep fair enough fair enough so there's last question for you which is again you're about to be public which is exciting yep what's the first thing you do uh have a good night's sleep it's been a while yeah it's been i mean yeah it's been so it's so seven years but we sort of launched six years ago with the first acquisitions and i think it's been and then of course before that i like i left my job in 2013 so i think i i think i feel like i've been sort of on a you know on on a long run right since 2013 and there's long run ahead of us too right yeah and so very you know motivated and fulfilled and excited by that journey but i think we want to sort of also recognize look look we we've done something that is you know something like one or two percent of venture-backed companies go public yeah right and so we're extraordinarily proud as a company and we've done this in you know pretty pretty challenging there's been you know a economic headwind du jour or policy uncertainty for the last two or three years right so i think the first thing is to you know just sort of have a good night's sleep and sort of a weekend with the family right and then go and execute our plan i know it sounds like a boring answer but like boring is sometimes good team shares is just focused on just continuing to do what we do and you know we don't we don't really look out at what other people are doing we just focus on what we're doing so fair enough well it's been a really fun journey to be on with you and be a watch you if we're being really honest watch you do since the early days uh and kind of get the updates on and congrats to you and the team for making it happen it's going to be really fun to watch and i'm excited to i'm excited to see what the next 20 years brings you guys are you guys are marathoners yeah no we're excited i think it's cool like i've found my dream job and recognizing to keep keep uh re-earning the right to you know be one of the leaders of the company but um very excited about what's ahead and i think that we can you know continue to do what we're doing for decades to come i love it mike thanks for taking the time this is fun this is our first ever special edition more or less i hope you enjoyed it we'll do more with awesome people doing awesome stuff thank you see you if you enjoyed this show please leave us a virtual high five by rating it and reviewing it on apple podcast spotify youtube or wherever you get your podcast find more information about each episode in the show notes and follow us on social media by searching for at more or less at dave morin at lesson at j lesson and as for me i'm at brit see you guys next time