April 8, 2025 • 59 mins
In this podcast episode, Joe Fier and Jon Staenberg explore the emerging landscape of search funds, a transformative and under-the-radar investment opportunity. As they discuss the impact of the "silver tsunami" and technological advancements, Jon highlights the potential for this small business aquisition to drive entrepreneurial growth. Reflecting on lessons from industry giants like Warren Buffett, Jon shares insights from his career journey and emphasizes the importance of constant reinvention to thrive in today’s rapidly evolving business environment.
What is a Search Fund?
Jon Staenberg explains that a search fund is a unique investment model where individuals or teams raise capital to search for and acquire a business. This model allows individuals, often fresh out of business school, to purchase companies with strong potential and lead them to growth and success. The concept was initially taught at schools like Stanford and Harvard, and its popularity is spreading across the globe.
The Rise and Benefits of Search Funds
Jon highlights the growing trend of baby boomers retiring and the opportunity it presents for buying businesses. Small businesses with established market presence and potential for improvement are ripe for acquisition. This situation creates a "silver tsunami" of opportunities. Search funds target companies within the $2 to $5 million EBITDA range, making them accessible yet highly profitable investments.
Jon's Path to Creating Agate Hound
Jon shares his journey into creating Agate Hound, his fund that supports search funds. He emphasizes the importance of investing in funds that have a well-thought-out playbook, ensuring systematic success in acquiring and managing businesses. For him, it's crucial to have passionate entrepreneurs, buy the right businesses, and have a strong support network.
The Role of AI and Modern Technologies
Artificial Intelligence (AI) plays a significant role in Jon’s current ventures. AI helps showcase the potential of technology in transforming and running businesses more efficiently. AI can aid in everything from making business processes smoother to offering innovative solutions and creative ideas for business growth.
Investing in Boring but Profitable Businesses
Jon believes in investing in so-called "boring" businesses, like pool cleaning companies or accounting firms. These businesses might not be flashy, but they provide steady income and reliable returns. Search funds capitalize on these opportunities, bringing fresh energy and modern strategies to well-established enterprises.
Jon’s Motivation and Future Plans
Jon remains focused on growing the search fund model, seeing it as a valuable asset for investors seeking solid, long-term growth. He sees his role not just as an investor but as a mentor, helping new business leaders to navigate through acquisitions successfully.
Getting Involved with Search Funds
For those interested in the world of search funds, Jon recommends starting with educational resources like the Stanford primer on search funds. Numerous books and podcasts can also provide valuable insights.
Connect with Jon Staenberg
- Ask Jon questions 24/7 with his Delphi Clone
- Learn more about Jon's Search Fund Agate Hound Fund
- Grab a bottle of Jon's wine before it's gone at Hand of God Wines
- Shoot Jon an email at jon@agatehound.fund or jon@handofgodwines.com
Overall Reflections and What’s...
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Did you know that there's atsunami of small businesses about
(00:03):
to change hands and most peoplearen't even looking, not even aware
of this trend in opportunity, butare you ready to catch the wave?
That's why I brought in myfriend and seasoned veteran
and investor Jon Staenbergto break it all down for us.
(00:24):
Jon.
I'm happy we're doingthis, my friend.
Thanks for taking the time.
Thank you.
I, I am truly excited.
We've been talking aboutdoing this for a little while.
Here we are.
This is the perfecttime, the perfect day.
Let's do it.
it is.
It is.
And you, uh, yeah, there's somecool stuff we've been making on
the side too to support what you'redoing and, you know, through setting
up, I mean, everybody here onthe podcast probably knows about
(00:46):
Delphi already, so hooked you upwith one of those, you know, and
Been great.
I love, I love it because I'mout there telling people AI
is changing the world and thenthe show people and use it and
get them introduced to it and.
It and it continues toget better and better.
And so it's really been fun to, tohave that supplement me 24 by seven.
(01:07):
We will talk about it.
I, I'm curious howyou've been using it.
'cause I'm always, everybody'susing it and thrown out
there in different ways.
But I really wanna dive into thiswhole concept that you've kind
of, I don't know if you wouldsay it reinvented your career,
but it came later in your career.
Huh?
Search
I, I think I, I think itis of sorts reinvention.
I. I've been reinventing mycareer from the beginning of my
(01:29):
career because I don't, I don'tthink, for me anyway, for who I
am and for what I like and forhow I see the world I, and how
quickly the world is changing.
What, what they used to say.
Like my, my grandparentshad one career, right?
They did it for 30 years, andmaybe my parents had a couple
(01:51):
of careers, and now I thinkabout my teenage daughter.
How many careers is she gonna have?
She will have a career.
Maybe she won't have a career.
I don't even know, right?
But, but I've always followed thesame general path, which is find
something that seems like it hasoutsized potential returns where
(02:14):
I can be learning every single dayand constantly be learning where
I'm surrounded by people who arefull on, passionate about their job.
Yeah,
And do something thatmaybe isn't obvious.
I like that.
Yeah.
that's, and so you know that
outrageous.
Returns people and just,just kind of undercover.
(02:37):
Yeah.
Learning.
right?
Inspiration,
Yeah.
right?
It's, and when I went to Microsoft,I didn't, I didn't know I was
gonna, you, if you had asked me ata business school, you know, are you
gonna go work for a tech company?
Like that wasn'teven a thing, right?
I win because the people therewere mind blowingly intelligent
(02:57):
and challenging, which iswhat I like to be around.
And then venture capital, it'sfunny to think, when I did Venture
Capital 30 plus years ago, Ihad to explain what it was like.
That's hilarious today, right?
Like of course, venturecapital, but literally,
Yeah.
I, I don't know why thisthought just came to me.
(03:17):
It's like when I went toBurning Man before people
knew what Burning Man was.
Right
You
then you were like, they're like,
Yeah.
That's
and it's funny, and now I'mdoing this new ca, not new,
but relatively under the radarasset class called search funds.
(03:40):
The people in the searchfund world are kinda like,
shh, don't tell anyone.
It's really good.
We don't want a lot of people in it.
And I wanna tell everyonebecause I think it's.
One of the greatest entrepreneurialengines in the world, and
it is the time for it withthe baby boomers aging out.
And with ai, we can talk alot about that, but here I am,
(04:01):
no one had ever done a fundto funds for the asset class.
And if you look at mature assetclass like Venture Now or hedge
funds or high, you know, big privateequity, they all have fund to funds.
And so I thought.
This gets me right backdoing what I love doing.
Kind of being early, kind ofseeing out there a little bit
(04:24):
and working with great people.
There's a lot of things.
Yeah, a lot of angles.
So like, I mean, you grew upin what, uh, in um, Nebraska,
Yeah.
Warren Buffet.
Warren Buffett fan from what?
Early days or
Early.
Well, he was a neighbor.
Oh, really?
Even cooler.
the neighborhood.
Wasn't next door, but wewould go to his house.
Really?
Yeah, we went for the 4th of July.
(04:44):
My mom and his wife were very close,but he wasn't Warren Buffet then.
He was just,
some guy.
I called Warren.
So, but, but yeah, I mean, but, butI was a devotee, if you will, early.
Like, everything hesaid made sense to me.
(05:06):
Um, and.
The only unfortunatething is my parents didn't
buy the stock earlier.
Hold onto it late.
So,
just listen to.
right.
But it did.
It shapes who I am today.
It shapes how I thinkabout the future.
It shapes how I invest and not just,not just on the money side, but the
(05:30):
authenticity and the integrity andthe, and how you treat people and.
How you work with people.
All of that's part of whatWarren and Charlie were about.
right.
Yeah.
so, but I would say he waskind of one who really made
value investing a real term andsomething people understood.
(05:51):
I think what I'm doingin low end private equity
investing is value investing.
You know, buying goodcompanies at fair prices and
have great people run 'em.
Not complicated.
I like to call it good boring.
I mean, it's great.
Yeah.
You, it's, it's not going to, youknow, it's not, I mean, it could
(06:12):
be feel like a shiny object tosome people, you know, if you like
boring stuff, which is awesome.
But yeah, it's
Well, let me just say, it's alwaysfunny you, you know, in a perfect
world, you go to a cocktail partyand you get to tell everybody, you
just created the coolest new AIrobot and everybody gathers run.
When I go to the cocktailparty and say, we just bought
(06:33):
a pool cleaning company.
They go, I'm going to the bar.
Yeah, talk to that guy over there.
Yeah.
That's right.
I mean like AI is fun, youknow, and, and we're both
in it in our own ways.
And like you said,it's very challenging.
You know, it was just hangingout in San Francisco the other
week with Delphi and the foundersand team, and I was like, man,
(06:54):
there's just like a whole differentway of thinking and the vibe.
I mean, I know you went toStanford and spent a lot of
time out there, but yeah, it'sa different feeling, you know?
And then.
Well, it's funny, I wassaying to someone yesterday
that venture decades ago.
Was more like the vibe I'm in now.
(07:14):
It wasn't, I gotta go shoutto the world and we didn't
have the platforms toshout to the world, right?
And everything was aboutattention grabbing.
It was, let's go be superentrepreneurs and create
something that's so cool thatwe're gonna sell a lot of it.
It wasn't what I considered tobe kind of a different game today
(07:36):
of can I. Create this cool pitchdeck to raise the most money to
somehow throw spaghetti againstthe wall, make it stick, and then
walk away with lots of money.
And that's like the goal.
Yeah,
And it, it feel.
Now that's not true foreveryone, you know, but much
more than it used to be.
(07:57):
And even, and even, I'll call'em the kids, even young adults
who are going into it, orthey take a different mindset.
I'll go for six months.
My options look likethey're doing well.
Great.
Otherwise I'm moving on.
Ah, yeah, yeah,
Right.
That's a different mindset, right?
I'm, I'm now, you know, back inthe day it would take a couple
million bucks and you'd have tospend two years writing code.
(08:21):
Literally, like, think about that.
Like Cody's being written like that.
We, we really, it was allengineers in the beginning
Yeah.
just to get a viable product.
It's, uh.
a long time,
A long time.
A lot of money, a lot of,you know, hard disk drives,
Yep, yep.
Big ones.
right?
And that was actuallypart of the defensibility,
(08:43):
Hmm.
Yeah.
right?
Because not everybody,everybody knew there couldn't
be too many competitors,
It's like, no, who'sgonna wanna do this?
Or can, yeah.
right?
Or like who's got the moneyto buy all those servers?
And so, but so I likebeing around that ethos.
Of this, you know, search funds areone kind of low end private equity.
(09:06):
I should just for, for definitionsake, for setting a, yeah,
let me just say when, when I'mtalking about this, I am talking
about we invest in companiestwo to $5 million in ebitda.
Mm-hmm.
So maybe they're 15 to$40 million in sales.
(09:26):
Okay.
And they are not.
Generally tech companies,they might use some tech.
Now everybody's using tech, butgenerally they're not trying to
be a 10 to a hundred x return.
I mean, you mentioneda pool company, right?
Oh, I get meter readers,street cleaners, plastic
parts, you know, you name it.
(09:48):
And um, and, and whatever smallbusiness you can think of.
Right.
That's, that's reallywhat we're, um.
That's what we're buying.
And,
and it's in our first fund, whichwe closed last year, we're gonna
have 200 of these types of companies
(10:08):
Wow.
Okay.
across 150 industries
Got
across North America.
So, but if you just, it's funnyif you drive down the street,
you walk down the street.
I did this yesterday withsomeone, I said, you see that,
that post, somebody's making it.
Uh huh.
Yeah.
see that light, somebody's makingit, and the things in that light,
(10:33):
somebody's making it, the boltsholding up that pole, and you
don't, you don't think everything.
Uh, and a lot of it'sfrom a small manufacturer.
And, and by the way, every, therehas to be people who install that.
There have to be people who do thewarranty work on that, that like,
Yeah.
that's all right.
(10:54):
And Amer America's reallygood at this stuff.
That's, that's the thing.
I travel a lot and partof the reason I travel is
just to get perspective.
I've been close to a hundred countcountries we're most people are
itching to get into this country.
Why?
'cause they go, if I work hard andfollow the rules, I can get ahead.
(11:16):
That generally is not truein the rest of the world.
Right, that's true.
Restrictions or whatever.
Yeah, just,
CU cultural women.
I mean like there's awhole bunch of reasons.
Graft.
I mean,
Mm-hmm.
this country, we don't needto make America great again.
We just gotta make sure the middleclass and small business crush it.
And they are.
(11:38):
Yeah.
And what we have is hundredsof thousands of 65 year
olds whose kids, unlikethe previous generations.
Are not interested in taking
Right.
And so they have to exit.
They have to find, they don'tjust have to sell their company.
(11:59):
That's part of it.
They have to do it in a waythat preserves the legacy,
takes care of the employees.
And so people are like,well, there's more money
coming into your sector.
Yeah, that's like saying I'mgoing to the beach and I used
to bring a teaspoon of sand andnow I bring a bucket of sand,
but I'm still at the beach.
(12:21):
You know what I'm
Got you.
Yeah.
Yeah.
The, the opportunityset is that big.
Yeah.
That's wild.
And, and you're right, becausethis is, and I've, I've had some
previous chats here talking aboutthe, the retiring folks right now.
And like, and like you
Yes.
Silver tsunami.
it, it really is in,in all industries.
And maybe you could list like,so what are some of these
industries that you, thatyou see being opportunities?
(12:44):
It's so broad.
Joe.
Joe, it's so broad.
I mean, but I, I mean, I can list.
A 50 you said.
Yeah.
Yeah.
But I mean, it's, it's literallygoing down the street and looking
at the companies doing those things.
It's med spas, it's dentalclinics, it's accounting firms,
it's bookkeepers, it's uh, machineshops, it's car repair shops.
It's, uh, the company thatbrings horses, literally horses
(13:07):
in from out of the country.
There's like six of 'em.
And you gotta know whatyou're doing there.
I mean, there, it's everything.
Whew.
It's just like, like you said,it's a tsunami and I don't think
a lot of people are even thinkingabout it, obviously, you said Yeah.
They're trying to retain theemployees, the workers there
because, and, and obviously
(13:27):
Well, because there's,partly because it's,
it's relationship, right?
I mean, it's, it's a, it'sreputation, it's brand,
it's these relationships.
I mean, that matters.
yeah.
but what's interesting is there'snow several podcasters and good
promoters that are out there.
(13:48):
You, you know, in my day when I wasgrowing up, it was no money down.
You can buy realestate all day long.
And as you know, there wassome truth to it, but there
was also some things thatthey never really told you.
Right?
a lot.
Yeah.
And, and.
About, you know, oneor 2% actually did it.
(14:08):
Learned it, figured it out, and whatwas working and what, and did great.
But most people didn't.
They, they, those guys madetheir money off selling
tickets to the seminars.
Right?
Right.
Now you have a bunch ofpeople going, they're saying
the same thing I am, whichis the silver tsunamis here.
Kids don't wannatake it, blah, blah.
And they're saying, youshould go buy a business.
And so I have a lot of friends nowsaying, I'm gonna go buy a business.
(14:32):
And I roll my eyes.
It's so hard.
Yeah.
Yeah.
So we're,
and and go,
yeah, it's messy.
People lie, they mis reset,represent, they don't keep
great bo I mean, there's a athousand re they change their
mind, you know, like a th They're
Yeah.
people both.
(14:53):
So, yeah.
what we do is we only invest.
Where there's a system in place,a system that thinks about
all the things that could gowrong and puts guardrails in,
that's what search funds are.
That's what, uh, there areinstitutional funds out there
(15:17):
that have created followingkind of a search fund playbook,
but there aren't very many.
Interesting.
we believe that you got to, if youwant the ch, if you really wanna
create the outsized returns thatwe have seen historically, you've
gotta do it with this playbook orsomething similar to this playbook.
(15:38):
There are variations on it.
People are coming up with newmodels, but the the sole guy
who says, I'm gonna keep myday job, and on the weekends
I'm gonna go to a broker andsee if I can buy a company.
Uh, good
Good.
Good luck.
Good luck.
so you have your own fund Agate.
I get has.
Yeah.
(15:58):
Agate Hound.
And cool name, by the way, and,and I know you have a story behind
it, so I do want to hear it.
And so, yeah, I, I, I guess, yeah.
I wanna understand, okay.
Search funds as a whole,how you're playing in it
as well with your own fund.
And then also Yeah, just how othershere as we're listening, watching,
going through this, like, you'regetting some knot, like, yeah.
Okay.
I get what Jon's putting down here.
How could they get involvedin whatever fashion that looks
(16:21):
thankfully if they're willing tospend a little bit of time, and
I don't mean a lot, it's prettyeasy to get up to speed to a
certain level, at least the basics.
I, I will say, having donethis for six years, having
gone to 15 search fundconferences, I'm still learning.
I'm still understanding how itall works, but in a, at a most
(16:43):
basic level, let, let me say howit works and I'm gonna use search
funds and I'm using that somewhatgenerically, I believe search fund
as a proxy for a well thought outplaybook to buy low, uh, uh, pe,
Uh,
sort of like two to $5 million pe.
(17:03):
But when you hear privateequity, that's generally
speaking, funds that buy 10.
50, a hundred, $500 millionEBITDA companies, we are purposely
playing below them because weknow we can buy inexpensively.
And on average we buyfour times ebitda.
(17:26):
But then we are selling eight to 10to 11 times EBITDA because private
equity, we're getting it ready.
We're a farm league for the major
I like it.
Okay.
And they'll pay up.
If they've seen that thisone worked, they'll pay up.
So we do.
We earned that.
Right?
But, but lemme go back to howcan people learn about it?
(17:49):
Your question, if you go andlook, it was invented at Stanford
and Harvard Business Schools.
If you Google or email me atAen Hound Fund, if you look for
the two Stanford papers, theStanford Primer on search funds.
It'll take you 15minutes to read it.
(18:09):
It'll explain all the pieces andI can go into a little bit of it.
And then the Stanford study,Stanford has updated the
financial returns every twoyears for the last 40 years of
every search fund ever done.
And by the way, thenumber is 35% net returns.
(18:29):
I, I literally know ofno other asset class.
That's better overthat period of time.
no.
Um, and.
That's a good start.
That's a really good start.
There's podcasts on this.
There are books on this
Yep.
it doesn't take too much to finally,oh, I see what they're doing.
(18:51):
I see how they're creating amentoring group for the CEO.
I see how they're using bank debt.
I see how they'reusing seller financing.
I see the criteria for the typesof companies they're buying.
I. I see how theyput a board together.
I see how they hire.
I see what they do in their firstnine, blah, blah, blah, blah.
(19:12):
Okay?
But it's, it's a playbook.
And I keep saying that you've gottahave a great entrepreneur as a CEO.
You be gotta be buying the rightkind of business at the right price.
And then you need theguardrails of a really good
support system around you.
(19:33):
And it takes all of that.
To be successful?
When you say a system aroundyou, is that, is that the
company itself or actually around
No, I mean, I mean, no, it's thepeople that you are investing
with, you who are adding value,
who are on your board.
It's the EOS or EOS type system,you know, entrepreneur operating
(19:58):
system that is being used.
It is.
Uh, it's your advisors,your mentors, your
coaches, your teachers.
All of that has to come into play
Got
because this stuffis hard and messy.
And in the search fund model, justto go only slightly deeper, we're
(20:19):
taking straight outta businessschool graduates, 32, 33, 34 year
olds who have never run a company,
Uh,
but we're, but we'reputting 'em into.
And training them howto use the system.
Wow.
Got it.
So you're literally insertingpeople, new folks, like literally
fresh out of graduate school and
(20:41):
They're hungry, they're gritty.
They've learned the program andthey, and they have people they
can count on as part of thejourney that are aligned with them.
Alignment, alignment, alignment.
Venture doesn't havealignment anymore.
So many of these asset classesdon't have an alignment.
Most fund managers aren'taligned with their LPs.
(21:04):
This has created unbelievablealignment with the investor,
the seller, the CEO, the align.
When you have alignment, you'regonna get a lot more done when
everybody's going up the hillpushing at the same direction.
And that, and, and this really hascreated a very structured way to
(21:26):
do that Now, search funds, use thestraight out of business school
program, been extremely successful,but we also invest in other models.
We think people who are sevenyears outta business school,
we'll have a little moreexperience that can work.
We're in a, we're ina fund that does that.
We're in another fund thattakes 50 to 60 year olds.
(21:50):
Who've had careers, but they'venever maybe run something
or maybe they ran something,they just wanna keep doing it.
Who haven't a so there's, there'smo but all the models we invest in
all have an overreaching playbook.
They help 'em find companies,they help 'em buy companies,
they help 'em run the companies.
(22:10):
I want all of that as part of myoverall model before I'm investing.
I had a guy call me today.
Yeah.
He goes, this is a great company.
I mean, I, but I wouldn't evensay what it was, but it was,
he wasn't doing it full time.
He was just talkingabout the financials.
He'd never run anything andthat deal might work out, but
(22:33):
that's not gonna be my bet.
Right.
You want the full,the full thing, like
I want the, I look as WarrenBuffet always said, you don't
have to swing investing's.
Great.
It's not like baseball.
Right.
You can, you canwait for your pitch,
that's right.
right?
And, and if you likefastballs, you should, you
should ask for a fastball.
(22:55):
So
I, I, we like fastballsor slow balls.
We just want a big fat one, andwe know the characteristics.
Yeah, so that's why youcould do this at scale.
'cause that was gonna be oneof the questions is like, okay,
you just, you, you said 200companies in your last fund.
Well, and again, we're investingin funds that invest, so it's
an overall portfolio and, andhonestly, there aren't that
(23:20):
many of these companies that aregetting acquired in the types of
funds we're I'm describing, andthey're hard to get into access.
I mean, the reason I createdthis fund is I was having, as an
individual, hard time getting in.
And so if I, I knew if I hadcreated a little bit of scale
that I could go to some of thebest funds and say, Hey, I've
(23:42):
got a 2, 3, 4, $5 million check.
Would that be interesting to you?
Right.
I am the biggestinvestor in my own fund.
Speaking of alignment.
Because I did this, becauseI wanted to have exposure to
it in my overall portfolio.
And also this is whatI want to do every day.
(24:04):
I want to talk tothese entrepreneurs.
I wanna see if I can be helpful.
Yeah,
I want to, I want to, my pa,I'm still passionate about tech.
I did tech for 30 years.
I want to be thinking, how can Ihelp them think about AI tools,
there you go.
right?
How could I.
to expand.
Yeah, for
Right.
How can I add valueto the ecosystem?
(24:25):
Yeah.
I'm not gonna say I'm not,I don't have the personality
to go, okay, here's my bets.
Go do whatever you want.
I mean, I'm gonna, of coursethey're gonna run their companies
better than I ever could, butexperts as managers, I'm not.
But I'm also gonna think about,well, how can I help too?
(24:45):
And we're doing a bunch of things.
I'm thinking about ai.
I'm helping 'em get AWScredits if they need it.
I'm helping 'em get creditcards that make sense
for small businesses.
We're putting together a charitablepledge program so we can all be
thinking about giving back too, andshare the community around that.
(25:06):
So these are things I am thinkingabout as I wanna think about.
How can I add value?
That's cool.
And it's more fun too.
And it's obviously, it's going to,I mean, it's all about having fun
and I know you're all about that.
We'll talk about some of the
A HF, you thought it stoodfor Agate Hound Fund.
Always have fun.
Ah, look at you.
I like it.
(25:27):
I mean, and that's what it seemslike this is built for, like
you said, your hands are dirty.
At least you choose to do that.
You know, you're not just hands off,you know, raising a bunch of money.
And then deploying it somehow.
But, um, is, I thinkthis leads to a question.
How do you, how do you selectthe companies to work with?
You know, like, is there, I'm surethere's a whole bunch of criteria,
my main selection criteria,because we invest in the
(25:50):
funds, is thinking about howI ask that question to them.
How do you select?
And the nice thing about the searchfund playbook or the playbook
that the funds we're investingin, are using is the general
criteria, a fragmented industry.
We like that.
'cause if.
(26:10):
You can create one companydoing well, maybe you
can add on or bolt on.
No, no co No one companyis dominant so you're not
gonna get crushed by them.
You don't want too muchcustomer concentration risk.
'cause if you lose thatcustomer could be very bad.
We generally don't do a lot ofcompanies that are subject to
government regulation 'causethat can change as we know.
(26:34):
Uh, but we're looking for companiesthat have proven product market fit.
Have growing profitability kindof in the size we talked about.
And at that point, you know,we do our background checks
and we make sure the numbers.
That's it.
I mean,
(26:55):
It's something thatcan last for a while.
Like you said, a
what has lasted going to last.
Right.
But you know, that, that accountingfirm in Topeka or the, you know,
flood, the flood restorationcompany in Oklahoma City.
They're, they're,they're gonna be around.
They've been doing it, you know,technology's not gonna right.
(27:16):
And their competition forthat plumber, for whatever is
probably some other aging out guy
who isn't who.
Yeah.
So your competition.
We're putting this 34-year-old inwho's like, let's go, let's go, man.
(27:36):
I got ai, I got spreadsheets.
I'm not using a fax machine.
I've just been through thebest management program.
I'm gonna implement that.
I got people coaching me on this.
It's a different energy.
It's a different skill set.
It's a, it's, uh, your competitionare people that may be doing well
and have a couple homes and aboat golfing a couple days a week.
(27:58):
Not bad.
Yeah,
Good.
Right?
But I love that as my competition.
If I wanna take thingsto the next level.
Hmm.
I like it.
I, I think the thing that ringstrue the most is like, you're,
you're, you literally have somuch support for the new, the, the
CEO that's coming in and the teamthey're bringing in the advising.
I mean, especially goinginto a whole new space.
(28:19):
Yeah.
if you think about it, nosuccessful company is an island.
Every single, I mean, thinkabout all the support.
That A CEO gets even at Microsoft,they have coaches, they have board
members, they have advice, right?
Why shouldn't youbring that to this too?
(28:39):
We know it works.
YPO started the thingcalled the forum, right?
The YPO forum.
Why?
Because you do better whenyour peers are sitting there
objectively holding you accountable,objectively giving you feedback.
It, this is not, thisis not rocket science.
We know it works.
It's a best practice.
(29:01):
I'm just thinking.
I'm like, why is this notmore, I mean, it's not
more known, but it will be
it it will be known, butit's hard to do people.
It's, I just, I, and again, theopportunity set is so big right now.
Yeah.
but you gotta do it right.
And like anything, you know, they'regood brokers and bad brokers.
(29:24):
Right, right.
So you gotta know which ones,which ones do you like working?
Which ones do you trust?
All the funds we invest with havebeen doing this for a long time.
They have theirtrusted peeps, right?
They know who they like towork with and who like to work
with them, and who's gonnagive 'em the inside scoop.
Yeah.
All of that buildsup to this result.
(29:46):
Yeah.
That's, that's interesting.
So how's it been going with, uh,so you closed the first round, you
know, your, your first fund and youknow, we can talk about a gate too.
A gate.
Ha ha.
Yeah.
A gate to good funds.
Yeah, see I was like, becauseI had the visual of this gate
still for whatever dang reason.
Um, but yeah, like, 'causeyour, your model obviously
(30:09):
it's, it's working.
So you're doing what?
The second one now and
are in a few weeks.
in a few weeks.
Okay, gotcha.
So I guess, yeah.
But, but I think, so if I was, Idon't know where you're going with
that question, but let me, butit brought up something for me.
We, we focused entirely onsearch funds in the first one.
Yep.
And what I realize now, havingdone a lot of this and living
(30:34):
a day-to-day, is that it'snot just the search fund
model that's going to work.
That's a great model.
That's a flavor of.
This playbook of entrepreneurshipacquisition model,
like I think about entrepreneurs whowanna go acquire and run and, and
(30:57):
the model that, that for low NPE.
And that's really what we do.
That's a mouthful.
So I need, if anybodylistening has a good, uh,
moniker for that, I'd love it.
Uh, but, but that's whatwe're doing and that's both.
Obviously a great place to play,but perhaps not as obvious in that.
(31:20):
It's a, it's a hard thing to do.
Well
Right.
that, that's, that's why when you'resaying, I, God, why is it more,
more people are going to do this
I think you nailed it though.
There's a lot of components andthere's, like you said, there's a
playbook, but that means there'sa system that it's people too.
It's not, you can't do it alone.
I mean, I guess youcould try part-time, but
good luck with that, you
(31:40):
Well, think about it.
The other thing, like, I'mgonna say something that's
obvious when I say it.
You go in and you buy acompany that's 20 years old,
you are replacing the CEOfounder and who are you?
Every, you, you walk inon day one and people are
looking at you like, who?
Who's this guy?
Yeah, for sure.
Does he or she have my back?
(32:01):
Do they know my skills?
Are they gonna change everything?
You gotta build the trust.
You gotta take a culture,continue to improve it.
But that's, I, I'll tell you, I wentto business school with some of the
best and brightest, uh, less thanhalf my class has that skillset.
I don't have that skillset.
It takes a certain type of person.
(32:22):
What I love is that the peoplethat we're working with, I
actually sat with 20 CEOswho have acquired yesterday,
Wow.
and this was a random questionthat came up, but I thought,
I'm gonna ask this question.
How many people here had somekind of paying job by the
time they were 12 years old?
Every hand went up.
(32:42):
Wow.
Okay.
Early entrepreneurs or
Yeah.
Or they just understood work.
Maybe they were forced.
Some were entrepreneurial,some needed in their families,
but they understood early whatit meant to put hard work in,
to get a payoff from that andhave to work with people and.
(33:05):
You know, kids today, and I amsorry to be that guy, but a lot of
kids today just aren't interestedin that hard work paying a due.
So the people we work with, notexclusively, but generally are
often first generation immigrants,grew up in some very small
village and some remote place.
(33:27):
Maybe none of their familywent to college, but they did.
Right.
Or someone who was inthe military who learned.
A system,
Discipline or system.
Yeah.
right?
Or someone who grew up in afamily where a small business was
discussed around the dinner table.
So you're comfortable with that.
'cause some people, this isreally a risky thing to do.
(33:48):
I mean, the CEOs we workwith, they're all in, no,
they're I, I mean reallyfrom an equity standpoint,
from their, they have to be.
And so that also isa piece of the model.
it's people selection,it's, it's knowing they
prove themselves.
Yeah.
huge.
(34:09):
And so the funds we investin, we talk a lot about that.
Yeah.
But one of the nice things isusing the funds that do the search
fund model, a lot of the fundsteach the class, so they get
to source their best students.
Even better.
Okay.
It's built into the whole thing.
(34:30):
Yeah.
The
system as it should be.
I mean, you're, you'resupporting the students who
are grinding and paying a lot
through time and money.
and so yeah, there's almosta, a different mentality.
Yes, people wanna make money,but there is this coaching,
mentoring, teaching piece of itthat we all, everybody I know
(34:51):
in the search fund community andbeyond enjoy that piece of it too.
It is not just for money.
It's about feeling likewe're part of a team.
We're really driving towards a goal.
Tangible, tangible.
Yeah,
That's a big piece of it.
it makes sense.
And, and like this showedup what you said 30
(35:13):
years as you were already
40,
40, 40 years.
So the backstory is I went toStanford Business School and I just
coincidentally had a professor.
Who invented search funds, butthey weren't called search funds.
Then.
In fact, the name search fundsis so confusing to people.
They changed it.
The class is now calledETA Entrepreneurship
(35:35):
through Acquisition,
Ah, okay.
but Irv is such an amazing guy.
And six years ago as I waslooking at venture capital
thinking, I don't know that Ilike venture capital and I don't
know that venture capital likesme, meaning like, I'm not sure.
I wasn't sure how to.
Do it anymore, andthere's so much noise and
(35:56):
misalignment, blah, blah, blah.
I just went, Irv, I'm,I'm not ready to retire.
And I remember you did thosethings called search funds.
They've done incredibly well.
I think I'm gonna start to do those.
And then he was willing to talkto me through a, a period of, of
follow ups and I said, why isn'tanyone doing this fund to fund idea?
(36:19):
He said, somebody should.
You should do it.
Wow.
That just like that.
Yeah, it was just like that.
And you know, it's likeI got into the wine.
So it's funny, I, you know, my,one of my side life stories was 18
years ago, I went to Argentina andI ended up meeting a classmate and
drinking a bunch of great wine.
(36:39):
And, and on the, almost on thespot said, why isn't anyone doing
high-end malbeck from Argentina?
And so he, my.
My, my partner Santiagosaid, you should,
I love it.
The start of every group is
yeah.
Well, yeah, and, and so that's how,I mean, honestly, that's how me
(37:02):
getting into search funds happen
Yeah.
I'm having more fun.
I'm having it is, I, it's, I wakeup in the morning thinking about it.
I go to bed thinking about it.
I love sharing the story about it.
I, you know, I'm completelybiased, but I don't know why.
(37:23):
If you've got some money, youdon't have exposure to it.
I now have created a way forpeople to have exposure to it.
I mean, look at family officesor high net worth individuals.
I think you've gotyour stock market.
You've got maybe your tech, yourventure, you've got your real
estate, maybe you have crypto.
(37:44):
But here's this thing which I'mjust calling low end private equity.
It's not correlated to that.
It doesn't go down.
It's had outsized returns.
Okay.
Maybe 20% a year isn't sexy,but I think it's really sexy.
I mean,
is pretty damn sexy.
you the magic ofcompounding interest.
(38:05):
One of the great eight magics of the
right.
world.
I mean, so I just like,part of me is just funny.
When you look at the worldand you go, it's obvious.
We start looking at themath too, and then it's
Oh my God.
No.
I know.
There was a guy this weekend whenI was at this conference, he said,
well, I just think about math.
He goes, you know how manypeople here know at eight to
(38:26):
the fourth power is 4,096?
And, and you forget that ifyou compound, it's, it's crazy.
It grows very fast or
it.
It does and what doesn't.
If you think 15% a yearisn't sexy, go out 40 years.
Mm-hmm.
Mm-hmm.
I'm telling you to tell myteenage daughter, save now.
(38:47):
Just keep saving
even if you, you know, be.
And so that's what I'm doing.
That's where I'm at in my life.
I don't need the ahundred Xs at this point.
Sure.
They're fun, they'reexciting, and so is going to
Vegas, but you know, right.
Like
At least you knowyou're getting at there.
Yeah.
Right.
Well, and that's, I thinkthat's the cool, that's, yeah.
(39:08):
The reframe maybe when it comesto investing, especially with when
the word fund comes, comes around.
Yeah.
Typically it's correlated to VCs.
Honestly, I don't know ifeveryone totally understands
even the fund concept becauseit's, it's not like it's just,
uh, advertised for everyone,
No, it's true
you gotta kind of knowthe right folks, right.
You, you do.
(39:29):
Um, and there arevariations on a fund, but.
You know, in our case, what wesaid is, let us be stewards.
Let's let us figure out within thisasset class the best investors.
Let us make sure that we'retracking them, helping them,
(39:50):
reporting on them, keepingthem honest, if you will,
Yeah.
and you don't haveto think about it.
We'll do all that work for you
Yeah.
from the financial work.
To the selection, to thecuration, to the, um, ongoing
management, to the value add.
That's what we do.
(40:12):
And, um, and it, what it leads toin our case, is a very diversified,
almost index fund, like, orETF, like portfolio of small, of
great small American business.
Like you said, 150 differentagent, uh, industries.
That is in the first one you
Right, right.
(40:32):
And second one will too.
But, but we're just, we're like,if you believe in American small
business, this idea is probably apretty interesting way to do it.
Mm-hmm.
Mm-hmm.
I, I, I mean, so I. People listeninghere at like where, how are you
having these conversations, I guess,and obviously we mentioned Delphi.
(40:53):
That was one of the reasonswhy you even reached out to
Yeah, they should let, they shouldtalk to me on my Delphi, uh, avatar,
Seriously, that's Yeah.
a hound fund.
I, I guess you'llhave show notes maybe.
Um, and people can, um, youknow, I've got an email on
there if they wanna reach out.
I've got a number of papersand podcasts and, and
(41:14):
resources on our website.
Um, I can recommend books.
It's, it's, it's, it's not hidden.
We, there's a lot of information.
It's really fun to get into.
The best part for me is hearingthe stories of the entrepreneurs.
I.
Well that's why I was gonnalike you have in, it's kind of
like why I have this podcast.
I get to learn new things.
(41:35):
I get to.
Ideally it's giving value to, toeveryone who's, you know, yourself,
but also listeners and watchers.
Uh, but it, it keeps me fresh.
And it's like this, yeah.
You're constantly, oh, wow,that's a new problem to solve.
Or that's a, that's abusiness doing, like
creating a immense value.
Let's, let's make it create more,
(41:55):
Well, let's, let's makeit create more, but also.
I think people are overwhelmedwith the change that is
happening and is coming.
Hmm.
How do you.
and what I mean bythat is tariffs today.
Tariffs tomorrow.
Who knows?
Uh, globalization.
De-globalization, right?
(42:16):
Jobs.
No jobs, right?
I mean, it is.
We are in the midst ofprobably the greatest change
in the history of our world.
Certainly in business.
We've never seen anything like that.
And so how do you, you know,in the 1960s or seventies,
you said, I'm buying a house.
I know it's gonna be worth more.
(42:37):
I don't know that today,
Right, right.
but what I do know is that forthe next 10 years or so, American
small business is gonna be solid.
what, what, why do you Yeah,like what's the, what's
the story in your head?
Like, what's that thing thatthat makes you so confident?
Because these servicesare essential services.
You're still goingto need a plumber.
(42:58):
You're still going toneed a pool cleaner.
If you have a pool, you'restill gonna need your teeth.
Like
It's just investing inthe roots of everything.
Yeah.
The foundation.
the basics, right?
It's really not sexyat all, but it is sexy.
Yeah.
When you're like, thisneeds to happen, so.
And you've got thisgreat transition.
(43:19):
Hmm.
You've always had some transition.
There's never going tobe a transition like
this one in our lifetime.
Again,
That's true.
Population numbers.
Just say it
demographics,demographics, demographics.
Yep.
Yep.
That's wild.
And so, you know, from all yourtravels, a hundred plus countries,
you said, you know, America beinglike this unique bubble that Yeah.
(43:42):
If you're here, like are thereopportunities like this you see in
Yeah.
Oh, so that's a reallyinteresting, so let me tell
you a little bit about that.
So, 14 years ago, two schools taughtsearch, ETA, this, this thing.
We're talking about twobusiness schools, Stanford,
Harvard, today, 25.
(44:02):
Business schoolsteaching six continents.
There are schools and see, so it's,I had last night on the train ride
home from the airport, spoke tothe first woman, she, she's the
first searcher, happens to be a
Mm-hmm.
in Taiwan.
No one had ever used thismodel to buy in Taiwan.
(44:23):
There's a couple in India,there's a couple in Japan.
Europe has certainly gotten bigger.
There's several businessschools in Europe, so the
Ads Canada, it's quite large.
Mexico, Spain.
So yes,
it's the demographics aretrue throughout the world,
Yeah, it's just, again,it's a playbook, right?
It's the model, which ironically,yeah, you're, uh, you're Delphi
(44:44):
well, explains that really well,actually, I was typing, I was just
like, okay, some of these terms.
So this is a hint to anyonelistening and watching.
We will link, uh, yourDelphi and go to town because
there's, it's incredible.
Yeah, the amount of, and Iknow what we put into it.
It was a lot of direct.
we put in like 300 plus documentsand videos and, right, right.
(45:06):
Which is amazing.
It, it is, and I gotta thankyou because that's not, everyone
creates these as, as robust.
That doesn't haveto be your content.
It's stuff that you would referenceand point people, people to.
Anyway.
Stuff I've been learning about.
I mean, it's the same sourcematerial that's taught in
the business school is taughtin these classes that the
podcast I've been learning.
(45:26):
So yeah, it's just nice way toaggregate it and, and you can go,
you, you can go in any directionwith the avatar and the Delphi.
And it's really fun.
I actually love showing people.
I even, I even go, you know,someone said, I asked your favorite
wine, and it said Your wine.
I said, yeah,
As it should.
(45:48):
Really nice Malick.
Yeah.
Well do I guess like inall these, I don't know.
Yeah.
'cause I'm curious about thewhole vineyard thing too.
Like does this happen oftenwhere you're just like.
I'm gonna start another businessor like through this fund
or, you know, fund of funds.
Sure.
I mean, no, I mean, the truth ofthe matter is I am an entrepreneur.
(46:08):
I like, I like starting things.
I like being at thebeginning of things.
And it's more where I look atthe world and I say, nobody
else was gonna have Santiago,this incredible wine maker.
The, the land in Argentina was rich,luscious, amazing vineyard land.
(46:29):
That was one, 100th.
The cost back then of Napa.
So they're the arbitrage by, right.
Um, it, I don't wanna sayit was always a dream of
mine, but it's, I love it.
I love, I went to Napa beingat Stanford, uh, a lot.
I like the beauty of, I like the,I'm a foodie, I like the culture,
(46:51):
I like the people involved.
All of that combined.
In my mind, I'm always sayingif I put this with this, with
this, and you know, it's funny,I did the wine by the way.
I have to, uh.
What do you got?
You got a little bit.
Ah, there you go.
Hand of God or
God for those, forthose soccer fans.
(47:11):
Uh, might know, might know a goodArgentine reference around that.
Um, but, but what I was doing isI was saying, how do I combine
a bunch of my passions becausewe're only so many hours in a day.
Only so many minutes in our life arewe doing the things that really hit
a bunch of buttons at once for us.
(47:32):
That's what I always try and do.
And so the wine did a little bit,the, the wine, it turns out, and by
the way, we're, I'm selling the winebusiness after 18 years, so your
listeners, if there's any left, geta big discount if they email me.
Okay.
Well you
for for sure, we only
be going after this.
40 cases left or something, but,but what I did with my wine is
(47:56):
I used it as a way to createcommunity in private equity.
I've done a thousand winedinners using my wine creating
community, which has led todeal flow and ideation and
other people connecting.
So my, what I'm always tryingto do is combine the life
(48:19):
experience into something that'smore solid from one, it's the
one plus one equals three.
That's right.
Yeah.
Yeah, yeah.
And why not?
Like you said, we're, we're allliving this life our own way.
We have the choice, so.
Always have fun, of course, asis the motto right there in your
chest, but at the same time, yeah,it just incorporate everything.
Especially being an entrepreneurand most, if not all
(48:42):
listening and watching areso we all have the choice.
We have the ability to createthese lives, so why the hell not?
Why are you selling it?
I'm curious.
Oh, why am I selling, right?
Yeah, no, it's good.
So I'm keeping a littlebit, I'm building a house.
Um, but first of all, someonemade me a great offer.
Can't go wrong there.
(49:02):
Yeah.
and I honestly wanna focus onacquisition entrepreneurship
more than anything else.
I'm not gonna lie at my age,carrying the boxes is not
quite as easy as it used to be.
I'm looking, I'mback from Argentina.
And, and let's look at the worldlike, let's look at the world.
(49:22):
The world changed 18 years ago.
There wasn't, uh, legalcannabis, there wasn't micro
breweries, micro distilleries,non-alcoholic alternatives.
True.
The, the, the competitionfor vice, if you will,
has quadrupled, lit,literally quadrupled.
(49:42):
And that's hard.
It's noisy.
it's a good point.
Yeah.
And, and, the other thing is.
I hate to admit this,I'm getting older.
I don't enjoy drinkingas much as I used to.
I
just turned
40 and I'm alreadyfeeling that same way.
right?
So I mean, I used to love itand I'm like, eh, I might have a
(50:02):
glass or maybe I won't tonight.
And it's hard to go to yourown wine tasting, say I'm
not gonna have wine pack,
I'm drinking water juice.
Yeah.
but, but I mean it's just,look, it was a good run.
It was a great run.
I'm so glad I did it.
Met great people along the way.
Community.
You build community like,
and that's it.
And I, and I knew that rightwhen we first chatted and you
(50:24):
told me about the dinners, andI think I missed it by a week
when I went to San Francisco.
I was bummed, but
we have more coming up.
We'd love, we wouldlove to host you.
Cool.
Thank you, Jon.
Yeah, this is, I mean, it'sinfinitely fascinating because
honestly, I kind of purposelywent into this without knowing
all the details of searchfunds and just what's possible.
Definitely.
Your, your Delphi helped answera bunch of questions for me, but
(50:46):
I'm gonna go to it even furthernow, and I. Yeah, I mean, and
I'll make sure all the links, soyou listening, watching, it'll be
wherever description, show notes.
Yeah.
And check out Jon's, uh, his Delphi.
But how do they contact, I guessshout out your email and your
Yeah, Jon@agatehound.fund orJon at hand of god wines.com.
(51:07):
Either ones works and, uh, youknow, I, I am anytime, well,
anytime with my avatar for sure.
Yes.
but but this is super fun.
I, I, as you can tell, I'mpassionate about this and,
and, I think it's, it's really.
Fun when the light bulb goes off forpeople when I'm talking about it.
(51:28):
Because you know, when you'reout trying to explain something
and you're, you're suggestingpeople might want to invest,
there's always gonna be reluctant.
Like, how could it be that good?
Or why would it, uh,how can you know?
Lots of objections.
Sometimes they tell you theobjections, sometimes they don't.
But when they finally go,oh, okay, I got, I got it.
(51:48):
Yeah.
That's, that's very gratifying.
Got it.
Well, that's, and I wouldurge, yeah, everyone go to
go to Jon and that's JON.
So make sure you're not, notthrowing an H in there, in
that e email, but have thevoice conversation with Jon.
It sounds just like you.
It's awesome.
And that's what I'mgonna honestly go do.
And just like, you know, 'causein terms of investing, you know,
(52:08):
there's a lot of places to putour money and I'm not gonna say
tell you exactly where, where toput things, but, you know, Jon's
a pretty damn sexy option, youknow, in, in what you're doing.
And.
Thanks.
Thanks, Joe.
It's so fun.
Will you and I are gonna, we'regonna keep, keep, keep doing
this and just help each other andlet's keep sharing good ideas.
And if I can be helpful, letme know and let's always, and
(52:30):
let's always have fun, man.
Uh, that's what it's all about.
So a HF.
Thank you.
All right, Jon.
Have a good one.
Thank you.
All right.
Ciao.
Did you know that there's atsunami of small businesses about
(00:03):
to change hands and most peoplearen't even looking, not even aware
of this trend in opportunity, butare you ready to catch the wave?
That's why I brought in myfriend and seasoned veteran
and investor Jon Staenbergto break it all down for us.
(00:24):
Jon.
I'm happy we're doingthis, my friend.
Thanks for taking the time.
Thank you.
I, I am truly excited.
We've been talking aboutdoing this for a little while.
Here we are.
This is the perfecttime, the perfect day.
Let's do it.
it is.
It is.
And you, uh, yeah, there's somecool stuff we've been making on
the side too to support what you'redoing and, you know, through setting
up, I mean, everybody here onthe podcast probably knows about
(00:46):
Delphi already, so hooked you upwith one of those, you know, and
Been great.
I love, I love it because I'mout there telling people AI
is changing the world and thenthe show people and use it and
get them introduced to it and.
It and it continues toget better and better.
And so it's really been fun to, tohave that supplement me 24 by seven.
(01:07):
We will talk about it.
I, I'm curious howyou've been using it.
'cause I'm always, everybody'susing it and thrown out
there in different ways.
But I really wanna dive into thiswhole concept that you've kind
of, I don't know if you wouldsay it reinvented your career,
but it came later in your career.
Huh?
Search
I, I think I, I think itis of sorts reinvention.
I. I've been reinventing mycareer from the beginning of my
(01:29):
career because I don't, I don'tthink, for me anyway, for who I
am and for what I like and forhow I see the world I, and how
quickly the world is changing.
What, what they used to say.
Like my, my grandparentshad one career, right?
They did it for 30 years, andmaybe my parents had a couple
(01:51):
of careers, and now I thinkabout my teenage daughter.
How many careers is she gonna have?
She will have a career.
Maybe she won't have a career.
I don't even know, right?
But, but I've always followed thesame general path, which is find
something that seems like it hasoutsized potential returns where
(02:14):
I can be learning every single dayand constantly be learning where
I'm surrounded by people who arefull on, passionate about their job.
Yeah,
And do something thatmaybe isn't obvious.
I like that.
Yeah.
that's, and so you know that
outrageous.
Returns people and just,just kind of undercover.
(02:37):
Yeah.
Learning.
right?
Inspiration,
Yeah.
right?
It's, and when I went to Microsoft,I didn't, I didn't know I was
gonna, you, if you had asked me ata business school, you know, are you
gonna go work for a tech company?
Like that wasn'teven a thing, right?
I win because the people therewere mind blowingly intelligent
(02:57):
and challenging, which iswhat I like to be around.
And then venture capital, it'sfunny to think, when I did Venture
Capital 30 plus years ago, Ihad to explain what it was like.
That's hilarious today, right?
Like of course, venturecapital, but literally,
Yeah.
I, I don't know why thisthought just came to me.
(03:17):
It's like when I went toBurning Man before people
knew what Burning Man was.
Right
You
then you were like, they're like,
Yeah.
That's
and it's funny, and now I'mdoing this new ca, not new,
but relatively under the radarasset class called search funds.
(03:40):
The people in the searchfund world are kinda like,
shh, don't tell anyone.
It's really good.
We don't want a lot of people in it.
And I wanna tell everyonebecause I think it's.
One of the greatest entrepreneurialengines in the world, and
it is the time for it withthe baby boomers aging out.
And with ai, we can talk alot about that, but here I am,
(04:01):
no one had ever done a fundto funds for the asset class.
And if you look at mature assetclass like Venture Now or hedge
funds or high, you know, big privateequity, they all have fund to funds.
And so I thought.
This gets me right backdoing what I love doing.
Kind of being early, kind ofseeing out there a little bit
(04:24):
and working with great people.
There's a lot of things.
Yeah, a lot of angles.
So like, I mean, you grew upin what, uh, in um, Nebraska,
Yeah.
Warren Buffet.
Warren Buffett fan from what?
Early days or
Early.
Well, he was a neighbor.
Oh, really?
Even cooler.
the neighborhood.
Wasn't next door, but wewould go to his house.
Really?
Yeah, we went for the 4th of July.
(04:44):
My mom and his wife were very close,but he wasn't Warren Buffet then.
He was just,
some guy.
I called Warren.
So, but, but yeah, I mean, but, butI was a devotee, if you will, early.
Like, everything hesaid made sense to me.
(05:06):
Um, and.
The only unfortunatething is my parents didn't
buy the stock earlier.
Hold onto it late.
So,
just listen to.
right.
But it did.
It shapes who I am today.
It shapes how I thinkabout the future.
It shapes how I invest and not just,not just on the money side, but the
(05:30):
authenticity and the integrity andthe, and how you treat people and.
How you work with people.
All of that's part of whatWarren and Charlie were about.
right.
Yeah.
so, but I would say he waskind of one who really made
value investing a real term andsomething people understood.
(05:51):
I think what I'm doingin low end private equity
investing is value investing.
You know, buying goodcompanies at fair prices and
have great people run 'em.
Not complicated.
I like to call it good boring.
I mean, it's great.
Yeah.
You, it's, it's not going to, youknow, it's not, I mean, it could
(06:12):
be feel like a shiny object tosome people, you know, if you like
boring stuff, which is awesome.
But yeah, it's
Well, let me just say, it's alwaysfunny you, you know, in a perfect
world, you go to a cocktail partyand you get to tell everybody, you
just created the coolest new AIrobot and everybody gathers run.
When I go to the cocktailparty and say, we just bought
(06:33):
a pool cleaning company.
They go, I'm going to the bar.
Yeah, talk to that guy over there.
Yeah.
That's right.
I mean like AI is fun, youknow, and, and we're both
in it in our own ways.
And like you said,it's very challenging.
You know, it was just hangingout in San Francisco the other
week with Delphi and the foundersand team, and I was like, man,
(06:54):
there's just like a whole differentway of thinking and the vibe.
I mean, I know you went toStanford and spent a lot of
time out there, but yeah, it'sa different feeling, you know?
And then.
Well, it's funny, I wassaying to someone yesterday
that venture decades ago.
Was more like the vibe I'm in now.
(07:14):
It wasn't, I gotta go shoutto the world and we didn't
have the platforms toshout to the world, right?
And everything was aboutattention grabbing.
It was, let's go be superentrepreneurs and create
something that's so cool thatwe're gonna sell a lot of it.
It wasn't what I considered tobe kind of a different game today
(07:36):
of can I. Create this cool pitchdeck to raise the most money to
somehow throw spaghetti againstthe wall, make it stick, and then
walk away with lots of money.
And that's like the goal.
Yeah,
And it, it feel.
Now that's not true foreveryone, you know, but much
more than it used to be.
(07:57):
And even, and even, I'll call'em the kids, even young adults
who are going into it, orthey take a different mindset.
I'll go for six months.
My options look likethey're doing well.
Great.
Otherwise I'm moving on.
Ah, yeah, yeah,
Right.
That's a different mindset, right?
I'm, I'm now, you know, back inthe day it would take a couple
million bucks and you'd have tospend two years writing code.
(08:21):
Literally, like, think about that.
Like Cody's being written like that.
We, we really, it was allengineers in the beginning
Yeah.
just to get a viable product.
It's, uh.
a long time,
A long time.
A lot of money, a lot of,you know, hard disk drives,
Yep, yep.
Big ones.
right?
And that was actuallypart of the defensibility,
(08:43):
Hmm.
Yeah.
right?
Because not everybody,everybody knew there couldn't
be too many competitors,
It's like, no, who'sgonna wanna do this?
Or can, yeah.
right?
Or like who's got the moneyto buy all those servers?
And so, but so I likebeing around that ethos.
Of this, you know, search funds areone kind of low end private equity.
(09:06):
I should just for, for definitionsake, for setting a, yeah,
let me just say when, when I'mtalking about this, I am talking
about we invest in companiestwo to $5 million in ebitda.
Mm-hmm.
So maybe they're 15 to$40 million in sales.
(09:26):
Okay.
And they are not.
Generally tech companies,they might use some tech.
Now everybody's using tech, butgenerally they're not trying to
be a 10 to a hundred x return.
I mean, you mentioneda pool company, right?
Oh, I get meter readers,street cleaners, plastic
parts, you know, you name it.
(09:48):
And um, and, and whatever smallbusiness you can think of.
Right.
That's, that's reallywhat we're, um.
That's what we're buying.
And,
and it's in our first fund, whichwe closed last year, we're gonna
have 200 of these types of companies
(10:08):
Wow.
Okay.
across 150 industries
Got
across North America.
So, but if you just, it's funnyif you drive down the street,
you walk down the street.
I did this yesterday withsomeone, I said, you see that,
that post, somebody's making it.
Uh huh.
Yeah.
see that light, somebody's makingit, and the things in that light,
(10:33):
somebody's making it, the boltsholding up that pole, and you
don't, you don't think everything.
Uh, and a lot of it'sfrom a small manufacturer.
And, and by the way, every, therehas to be people who install that.
There have to be people who do thewarranty work on that, that like,
Yeah.
that's all right.
(10:54):
And Amer America's reallygood at this stuff.
That's, that's the thing.
I travel a lot and partof the reason I travel is
just to get perspective.
I've been close to a hundred countcountries we're most people are
itching to get into this country.
Why?
'cause they go, if I work hard andfollow the rules, I can get ahead.
(11:16):
That generally is not truein the rest of the world.
Right, that's true.
Restrictions or whatever.
Yeah, just,
CU cultural women.
I mean like there's awhole bunch of reasons.
Graft.
I mean,
Mm-hmm.
this country, we don't needto make America great again.
We just gotta make sure the middleclass and small business crush it.
And they are.
(11:38):
Yeah.
And what we have is hundredsof thousands of 65 year
olds whose kids, unlikethe previous generations.
Are not interested in taking
Right.
And so they have to exit.
They have to find, they don'tjust have to sell their company.
(11:59):
That's part of it.
They have to do it in a waythat preserves the legacy,
takes care of the employees.
And so people are like,well, there's more money
coming into your sector.
Yeah, that's like saying I'mgoing to the beach and I used
to bring a teaspoon of sand andnow I bring a bucket of sand,
but I'm still at the beach.
(12:21):
You know what I'm
Got you.
Yeah.
Yeah.
The, the opportunityset is that big.
Yeah.
That's wild.
And, and you're right, becausethis is, and I've, I've had some
previous chats here talking aboutthe, the retiring folks right now.
And like, and like you
Yes.
Silver tsunami.
it, it really is in,in all industries.
And maybe you could list like,so what are some of these
industries that you, thatyou see being opportunities?
(12:44):
It's so broad.
Joe.
Joe, it's so broad.
I mean, but I, I mean, I can list.
A 50 you said.
Yeah.
Yeah.
But I mean, it's, it's literallygoing down the street and looking
at the companies doing those things.
It's med spas, it's dentalclinics, it's accounting firms,
it's bookkeepers, it's uh, machineshops, it's car repair shops.
It's, uh, the company thatbrings horses, literally horses
(13:07):
in from out of the country.
There's like six of 'em.
And you gotta know whatyou're doing there.
I mean, there, it's everything.
Whew.
It's just like, like you said,it's a tsunami and I don't think
a lot of people are even thinkingabout it, obviously, you said Yeah.
They're trying to retain theemployees, the workers there
because, and, and obviously
(13:27):
Well, because there's,partly because it's,
it's relationship, right?
I mean, it's, it's a, it'sreputation, it's brand,
it's these relationships.
I mean, that matters.
yeah.
but what's interesting is there'snow several podcasters and good
promoters that are out there.
(13:48):
You, you know, in my day when I wasgrowing up, it was no money down.
You can buy realestate all day long.
And as you know, there wassome truth to it, but there
was also some things thatthey never really told you.
Right?
a lot.
Yeah.
And, and.
About, you know, oneor 2% actually did it.
(14:08):
Learned it, figured it out, and whatwas working and what, and did great.
But most people didn't.
They, they, those guys madetheir money off selling
tickets to the seminars.
Right?
Right.
Now you have a bunch ofpeople going, they're saying
the same thing I am, whichis the silver tsunamis here.
Kids don't wannatake it, blah, blah.
And they're saying, youshould go buy a business.
And so I have a lot of friends nowsaying, I'm gonna go buy a business.
(14:32):
And I roll my eyes.
It's so hard.
Yeah.
Yeah.
So we're,
and and go,
yeah, it's messy.
People lie, they mis reset,represent, they don't keep
great bo I mean, there's a athousand re they change their
mind, you know, like a th They're
Yeah.
people both.
(14:53):
So, yeah.
what we do is we only invest.
Where there's a system in place,a system that thinks about
all the things that could gowrong and puts guardrails in,
that's what search funds are.
That's what, uh, there areinstitutional funds out there
(15:17):
that have created followingkind of a search fund playbook,
but there aren't very many.
Interesting.
we believe that you got to, if youwant the ch, if you really wanna
create the outsized returns thatwe have seen historically, you've
gotta do it with this playbook orsomething similar to this playbook.
(15:38):
There are variations on it.
People are coming up with newmodels, but the the sole guy
who says, I'm gonna keep myday job, and on the weekends
I'm gonna go to a broker andsee if I can buy a company.
Uh, good
Good.
Good luck.
Good luck.
so you have your own fund Agate.
I get has.
Yeah.
(15:58):
Agate Hound.
And cool name, by the way, and,and I know you have a story behind
it, so I do want to hear it.
And so, yeah, I, I, I guess, yeah.
I wanna understand, okay.
Search funds as a whole,how you're playing in it
as well with your own fund.
And then also Yeah, just how othershere as we're listening, watching,
going through this, like, you'regetting some knot, like, yeah.
Okay.
I get what Jon's putting down here.
How could they get involvedin whatever fashion that looks
(16:21):
thankfully if they're willing tospend a little bit of time, and
I don't mean a lot, it's prettyeasy to get up to speed to a
certain level, at least the basics.
I, I will say, having donethis for six years, having
gone to 15 search fundconferences, I'm still learning.
I'm still understanding how itall works, but in a, at a most
(16:43):
basic level, let, let me say howit works and I'm gonna use search
funds and I'm using that somewhatgenerically, I believe search fund
as a proxy for a well thought outplaybook to buy low, uh, uh, pe,
Uh,
sort of like two to $5 million pe.
(17:03):
But when you hear privateequity, that's generally
speaking, funds that buy 10.
50, a hundred, $500 millionEBITDA companies, we are purposely
playing below them because weknow we can buy inexpensively.
And on average we buyfour times ebitda.
(17:26):
But then we are selling eight to 10to 11 times EBITDA because private
equity, we're getting it ready.
We're a farm league for the major
I like it.
Okay.
And they'll pay up.
If they've seen that thisone worked, they'll pay up.
So we do.
We earned that.
Right?
But, but lemme go back to howcan people learn about it?
(17:49):
Your question, if you go andlook, it was invented at Stanford
and Harvard Business Schools.
If you Google or email me atAen Hound Fund, if you look for
the two Stanford papers, theStanford Primer on search funds.
It'll take you 15minutes to read it.
(18:09):
It'll explain all the pieces andI can go into a little bit of it.
And then the Stanford study,Stanford has updated the
financial returns every twoyears for the last 40 years of
every search fund ever done.
And by the way, thenumber is 35% net returns.
(18:29):
I, I literally know ofno other asset class.
That's better overthat period of time.
no.
Um, and.
That's a good start.
That's a really good start.
There's podcasts on this.
There are books on this
Yep.
it doesn't take too much to finally,oh, I see what they're doing.
(18:51):
I see how they're creating amentoring group for the CEO.
I see how they're using bank debt.
I see how they'reusing seller financing.
I see the criteria for the typesof companies they're buying.
I. I see how theyput a board together.
I see how they hire.
I see what they do in their firstnine, blah, blah, blah, blah.
(19:12):
Okay?
But it's, it's a playbook.
And I keep saying that you've gottahave a great entrepreneur as a CEO.
You be gotta be buying the rightkind of business at the right price.
And then you need theguardrails of a really good
support system around you.
(19:33):
And it takes all of that.
To be successful?
When you say a system aroundyou, is that, is that the
company itself or actually around
No, I mean, I mean, no, it's thepeople that you are investing
with, you who are adding value,
who are on your board.
It's the EOS or EOS type system,you know, entrepreneur operating
(19:58):
system that is being used.
It is.
Uh, it's your advisors,your mentors, your
coaches, your teachers.
All of that has to come into play
Got
because this stuffis hard and messy.
And in the search fund model, justto go only slightly deeper, we're
(20:19):
taking straight outta businessschool graduates, 32, 33, 34 year
olds who have never run a company,
Uh,
but we're, but we'reputting 'em into.
And training them howto use the system.
Wow.
Got it.
So you're literally insertingpeople, new folks, like literally
fresh out of graduate school and
(20:41):
They're hungry, they're gritty.
They've learned the program andthey, and they have people they
can count on as part of thejourney that are aligned with them.
Alignment, alignment, alignment.
Venture doesn't havealignment anymore.
So many of these asset classesdon't have an alignment.
Most fund managers aren'taligned with their LPs.
(21:04):
This has created unbelievablealignment with the investor,
the seller, the CEO, the align.
When you have alignment, you'regonna get a lot more done when
everybody's going up the hillpushing at the same direction.
And that, and, and this really hascreated a very structured way to
(21:26):
do that Now, search funds, use thestraight out of business school
program, been extremely successful,but we also invest in other models.
We think people who are sevenyears outta business school,
we'll have a little moreexperience that can work.
We're in a, we're ina fund that does that.
We're in another fund thattakes 50 to 60 year olds.
(21:50):
Who've had careers, but they'venever maybe run something
or maybe they ran something,they just wanna keep doing it.
Who haven't a so there's, there'smo but all the models we invest in
all have an overreaching playbook.
They help 'em find companies,they help 'em buy companies,
they help 'em run the companies.
(22:10):
I want all of that as part of myoverall model before I'm investing.
I had a guy call me today.
Yeah.
He goes, this is a great company.
I mean, I, but I wouldn't evensay what it was, but it was,
he wasn't doing it full time.
He was just talkingabout the financials.
He'd never run anything andthat deal might work out, but
(22:33):
that's not gonna be my bet.
Right.
You want the full,the full thing, like
I want the, I look as WarrenBuffet always said, you don't
have to swing investing's.
Great.
It's not like baseball.
Right.
You can, you canwait for your pitch,
that's right.
right?
And, and if you likefastballs, you should, you
should ask for a fastball.
(22:55):
So
I, I, we like fastballsor slow balls.
We just want a big fat one, andwe know the characteristics.
Yeah, so that's why youcould do this at scale.
'cause that was gonna be oneof the questions is like, okay,
you just, you, you said 200companies in your last fund.
Well, and again, we're investingin funds that invest, so it's
an overall portfolio and, andhonestly, there aren't that
(23:20):
many of these companies that aregetting acquired in the types of
funds we're I'm describing, andthey're hard to get into access.
I mean, the reason I createdthis fund is I was having, as an
individual, hard time getting in.
And so if I, I knew if I hadcreated a little bit of scale
that I could go to some of thebest funds and say, Hey, I've
(23:42):
got a 2, 3, 4, $5 million check.
Would that be interesting to you?
Right.
I am the biggestinvestor in my own fund.
Speaking of alignment.
Because I did this, becauseI wanted to have exposure to
it in my overall portfolio.
And also this is whatI want to do every day.
(24:04):
I want to talk tothese entrepreneurs.
I wanna see if I can be helpful.
Yeah,
I want to, I want to, my pa,I'm still passionate about tech.
I did tech for 30 years.
I want to be thinking, how can Ihelp them think about AI tools,
there you go.
right?
How could I.
to expand.
Yeah, for
Right.
How can I add valueto the ecosystem?
(24:25):
Yeah.
I'm not gonna say I'm not,I don't have the personality
to go, okay, here's my bets.
Go do whatever you want.
I mean, I'm gonna, of coursethey're gonna run their companies
better than I ever could, butexperts as managers, I'm not.
But I'm also gonna think about,well, how can I help too?
(24:45):
And we're doing a bunch of things.
I'm thinking about ai.
I'm helping 'em get AWScredits if they need it.
I'm helping 'em get creditcards that make sense
for small businesses.
We're putting together a charitablepledge program so we can all be
thinking about giving back too, andshare the community around that.
(25:06):
So these are things I am thinkingabout as I wanna think about.
How can I add value?
That's cool.
And it's more fun too.
And it's obviously, it's going to,I mean, it's all about having fun
and I know you're all about that.
We'll talk about some of the
A HF, you thought it stoodfor Agate Hound Fund.
Always have fun.
Ah, look at you.
I like it.
(25:27):
I mean, and that's what it seemslike this is built for, like
you said, your hands are dirty.
At least you choose to do that.
You know, you're not just hands off,you know, raising a bunch of money.
And then deploying it somehow.
But, um, is, I thinkthis leads to a question.
How do you, how do you selectthe companies to work with?
You know, like, is there, I'm surethere's a whole bunch of criteria,
my main selection criteria,because we invest in the
(25:50):
funds, is thinking about howI ask that question to them.
How do you select?
And the nice thing about the searchfund playbook or the playbook
that the funds we're investingin, are using is the general
criteria, a fragmented industry.
We like that.
'cause if.
(26:10):
You can create one companydoing well, maybe you
can add on or bolt on.
No, no co No one companyis dominant so you're not
gonna get crushed by them.
You don't want too muchcustomer concentration risk.
'cause if you lose thatcustomer could be very bad.
We generally don't do a lot ofcompanies that are subject to
government regulation 'causethat can change as we know.
(26:34):
Uh, but we're looking for companiesthat have proven product market fit.
Have growing profitability kindof in the size we talked about.
And at that point, you know,we do our background checks
and we make sure the numbers.
That's it.
I mean,
(26:55):
It's something thatcan last for a while.
Like you said, a
what has lasted going to last.
Right.
But you know, that, that accountingfirm in Topeka or the, you know,
flood, the flood restorationcompany in Oklahoma City.
They're, they're,they're gonna be around.
They've been doing it, you know,technology's not gonna right.
(27:16):
And their competition forthat plumber, for whatever is
probably some other aging out guy
who isn't who.
Yeah.
So your competition.
We're putting this 34-year-old inwho's like, let's go, let's go, man.
(27:36):
I got ai, I got spreadsheets.
I'm not using a fax machine.
I've just been through thebest management program.
I'm gonna implement that.
I got people coaching me on this.
It's a different energy.
It's a different skill set.
It's a, it's, uh, your competitionare people that may be doing well
and have a couple homes and aboat golfing a couple days a week.
(27:58):
Not bad.
Yeah,
Good.
Right?
But I love that as my competition.
If I wanna take thingsto the next level.
Hmm.
I like it.
I, I think the thing that ringstrue the most is like, you're,
you're, you literally have somuch support for the new, the, the
CEO that's coming in and the teamthey're bringing in the advising.
I mean, especially goinginto a whole new space.
(28:19):
Yeah.
if you think about it, nosuccessful company is an island.
Every single, I mean, thinkabout all the support.
That A CEO gets even at Microsoft,they have coaches, they have board
members, they have advice, right?
Why shouldn't youbring that to this too?
(28:39):
We know it works.
YPO started the thingcalled the forum, right?
The YPO forum.
Why?
Because you do better whenyour peers are sitting there
objectively holding you accountable,objectively giving you feedback.
It, this is not, thisis not rocket science.
We know it works.
It's a best practice.
(29:01):
I'm just thinking.
I'm like, why is this notmore, I mean, it's not
more known, but it will be
it it will be known, butit's hard to do people.
It's, I just, I, and again, theopportunity set is so big right now.
Yeah.
but you gotta do it right.
And like anything, you know, they'regood brokers and bad brokers.
(29:24):
Right, right.
So you gotta know which ones,which ones do you like working?
Which ones do you trust?
All the funds we invest with havebeen doing this for a long time.
They have theirtrusted peeps, right?
They know who they like towork with and who like to work
with them, and who's gonnagive 'em the inside scoop.
Yeah.
All of that buildsup to this result.
(29:46):
Yeah.
That's, that's interesting.
So how's it been going with, uh,so you closed the first round, you
know, your, your first fund and youknow, we can talk about a gate too.
A gate.
Ha ha.
Yeah.
A gate to good funds.
Yeah, see I was like, becauseI had the visual of this gate
still for whatever dang reason.
Um, but yeah, like, 'causeyour, your model obviously
(30:09):
it's, it's working.
So you're doing what?
The second one now and
are in a few weeks.
in a few weeks.
Okay, gotcha.
So I guess, yeah.
But, but I think, so if I was, Idon't know where you're going with
that question, but let me, butit brought up something for me.
We, we focused entirely onsearch funds in the first one.
Yep.
And what I realize now, havingdone a lot of this and living
(30:34):
a day-to-day, is that it'snot just the search fund
model that's going to work.
That's a great model.
That's a flavor of.
This playbook of entrepreneurshipacquisition model,
like I think about entrepreneurs whowanna go acquire and run and, and
(30:57):
the model that, that for low NPE.
And that's really what we do.
That's a mouthful.
So I need, if anybodylistening has a good, uh,
moniker for that, I'd love it.
Uh, but, but that's whatwe're doing and that's both.
Obviously a great place to play,but perhaps not as obvious in that.
(31:20):
It's a, it's a hard thing to do.
Well
Right.
that, that's, that's why when you'resaying, I, God, why is it more,
more people are going to do this
I think you nailed it though.
There's a lot of components andthere's, like you said, there's a
playbook, but that means there'sa system that it's people too.
It's not, you can't do it alone.
I mean, I guess youcould try part-time, but
good luck with that, you
(31:40):
Well, think about it.
The other thing, like, I'mgonna say something that's
obvious when I say it.
You go in and you buy acompany that's 20 years old,
you are replacing the CEOfounder and who are you?
Every, you, you walk inon day one and people are
looking at you like, who?
Who's this guy?
Yeah, for sure.
Does he or she have my back?
(32:01):
Do they know my skills?
Are they gonna change everything?
You gotta build the trust.
You gotta take a culture,continue to improve it.
But that's, I, I'll tell you, I wentto business school with some of the
best and brightest, uh, less thanhalf my class has that skillset.
I don't have that skillset.
It takes a certain type of person.
(32:22):
What I love is that the peoplethat we're working with, I
actually sat with 20 CEOswho have acquired yesterday,
Wow.
and this was a random questionthat came up, but I thought,
I'm gonna ask this question.
How many people here had somekind of paying job by the
time they were 12 years old?
Every hand went up.
(32:42):
Wow.
Okay.
Early entrepreneurs or
Yeah.
Or they just understood work.
Maybe they were forced.
Some were entrepreneurial,some needed in their families,
but they understood early whatit meant to put hard work in,
to get a payoff from that andhave to work with people and.
(33:05):
You know, kids today, and I amsorry to be that guy, but a lot of
kids today just aren't interestedin that hard work paying a due.
So the people we work with, notexclusively, but generally are
often first generation immigrants,grew up in some very small
village and some remote place.
(33:27):
Maybe none of their familywent to college, but they did.
Right.
Or someone who was inthe military who learned.
A system,
Discipline or system.
Yeah.
right?
Or someone who grew up in afamily where a small business was
discussed around the dinner table.
So you're comfortable with that.
'cause some people, this isreally a risky thing to do.
(33:48):
I mean, the CEOs we workwith, they're all in, no,
they're I, I mean reallyfrom an equity standpoint,
from their, they have to be.
And so that also isa piece of the model.
it's people selection,it's, it's knowing they
prove themselves.
Yeah.
huge.
(34:09):
And so the funds we investin, we talk a lot about that.
Yeah.
But one of the nice things isusing the funds that do the search
fund model, a lot of the fundsteach the class, so they get
to source their best students.
Even better.
Okay.
It's built into the whole thing.
(34:30):
Yeah.
The
system as it should be.
I mean, you're, you'resupporting the students who
are grinding and paying a lot
through time and money.
and so yeah, there's almosta, a different mentality.
Yes, people wanna make money,but there is this coaching,
mentoring, teaching piece of itthat we all, everybody I know
(34:51):
in the search fund community andbeyond enjoy that piece of it too.
It is not just for money.
It's about feeling likewe're part of a team.
We're really driving towards a goal.
Tangible, tangible.
Yeah,
That's a big piece of it.
it makes sense.
And, and like this showedup what you said 30
(35:13):
years as you were already
40,
40, 40 years.
So the backstory is I went toStanford Business School and I just
coincidentally had a professor.
Who invented search funds, butthey weren't called search funds.
Then.
In fact, the name search fundsis so confusing to people.
They changed it.
The class is now calledETA Entrepreneurship
(35:35):
through Acquisition,
Ah, okay.
but Irv is such an amazing guy.
And six years ago as I waslooking at venture capital
thinking, I don't know that Ilike venture capital and I don't
know that venture capital likesme, meaning like, I'm not sure.
I wasn't sure how to.
Do it anymore, andthere's so much noise and
(35:56):
misalignment, blah, blah, blah.
I just went, Irv, I'm,I'm not ready to retire.
And I remember you did thosethings called search funds.
They've done incredibly well.
I think I'm gonna start to do those.
And then he was willing to talkto me through a, a period of, of
follow ups and I said, why isn'tanyone doing this fund to fund idea?
(36:19):
He said, somebody should.
You should do it.
Wow.
That just like that.
Yeah, it was just like that.
And you know, it's likeI got into the wine.
So it's funny, I, you know, my,one of my side life stories was 18
years ago, I went to Argentina andI ended up meeting a classmate and
drinking a bunch of great wine.
(36:39):
And, and on the, almost on thespot said, why isn't anyone doing
high-end malbeck from Argentina?
And so he, my.
My, my partner Santiagosaid, you should,
I love it.
The start of every group is
yeah.
Well, yeah, and, and so that's how,I mean, honestly, that's how me
(37:02):
getting into search funds happen
Yeah.
I'm having more fun.
I'm having it is, I, it's, I wakeup in the morning thinking about it.
I go to bed thinking about it.
I love sharing the story about it.
I, you know, I'm completelybiased, but I don't know why.
(37:23):
If you've got some money, youdon't have exposure to it.
I now have created a way forpeople to have exposure to it.
I mean, look at family officesor high net worth individuals.
I think you've gotyour stock market.
You've got maybe your tech, yourventure, you've got your real
estate, maybe you have crypto.
(37:44):
But here's this thing which I'mjust calling low end private equity.
It's not correlated to that.
It doesn't go down.
It's had outsized returns.
Okay.
Maybe 20% a year isn't sexy,but I think it's really sexy.
I mean,
is pretty damn sexy.
you the magic ofcompounding interest.
(38:05):
One of the great eight magics of the
right.
world.
I mean, so I just like,part of me is just funny.
When you look at the worldand you go, it's obvious.
We start looking at themath too, and then it's
Oh my God.
No.
I know.
There was a guy this weekend whenI was at this conference, he said,
well, I just think about math.
He goes, you know how manypeople here know at eight to
(38:26):
the fourth power is 4,096?
And, and you forget that ifyou compound, it's, it's crazy.
It grows very fast or
it.
It does and what doesn't.
If you think 15% a yearisn't sexy, go out 40 years.
Mm-hmm.
Mm-hmm.
I'm telling you to tell myteenage daughter, save now.
(38:47):
Just keep saving
even if you, you know, be.
And so that's what I'm doing.
That's where I'm at in my life.
I don't need the ahundred Xs at this point.
Sure.
They're fun, they'reexciting, and so is going to
Vegas, but you know, right.
Like
At least you knowyou're getting at there.
Yeah.
Right.
Well, and that's, I thinkthat's the cool, that's, yeah.
(39:08):
The reframe maybe when it comesto investing, especially with when
the word fund comes, comes around.
Yeah.
Typically it's correlated to VCs.
Honestly, I don't know ifeveryone totally understands
even the fund concept becauseit's, it's not like it's just,
uh, advertised for everyone,
No, it's true
you gotta kind of knowthe right folks, right.
You, you do.
(39:29):
Um, and there arevariations on a fund, but.
You know, in our case, what wesaid is, let us be stewards.
Let's let us figure out within thisasset class the best investors.
Let us make sure that we'retracking them, helping them,
(39:50):
reporting on them, keepingthem honest, if you will,
Yeah.
and you don't haveto think about it.
We'll do all that work for you
Yeah.
from the financial work.
To the selection, to thecuration, to the, um, ongoing
management, to the value add.
That's what we do.
(40:12):
And, um, and it, what it leads toin our case, is a very diversified,
almost index fund, like, orETF, like portfolio of small, of
great small American business.
Like you said, 150 differentagent, uh, industries.
That is in the first one you
Right, right.
(40:32):
And second one will too.
But, but we're just, we're like,if you believe in American small
business, this idea is probably apretty interesting way to do it.
Mm-hmm.
Mm-hmm.
I, I, I mean, so I. People listeninghere at like where, how are you
having these conversations, I guess,and obviously we mentioned Delphi.
(40:53):
That was one of the reasonswhy you even reached out to
Yeah, they should let, they shouldtalk to me on my Delphi, uh, avatar,
Seriously, that's Yeah.
a hound fund.
I, I guess you'llhave show notes maybe.
Um, and people can, um, youknow, I've got an email on
there if they wanna reach out.
I've got a number of papersand podcasts and, and
(41:14):
resources on our website.
Um, I can recommend books.
It's, it's, it's, it's not hidden.
We, there's a lot of information.
It's really fun to get into.
The best part for me is hearingthe stories of the entrepreneurs.
I.
Well that's why I was gonnalike you have in, it's kind of
like why I have this podcast.
I get to learn new things.
(41:35):
I get to.
Ideally it's giving value to, toeveryone who's, you know, yourself,
but also listeners and watchers.
Uh, but it, it keeps me fresh.
And it's like this, yeah.
You're constantly, oh, wow,that's a new problem to solve.
Or that's a, that's abusiness doing, like
creating a immense value.
Let's, let's make it create more,
(41:55):
Well, let's, let's makeit create more, but also.
I think people are overwhelmedwith the change that is
happening and is coming.
Hmm.
How do you.
and what I mean bythat is tariffs today.
Tariffs tomorrow.
Who knows?
Uh, globalization.
De-globalization, right?
(42:16):
Jobs.
No jobs, right?
I mean, it is.
We are in the midst ofprobably the greatest change
in the history of our world.
Certainly in business.
We've never seen anything like that.
And so how do you, you know,in the 1960s or seventies,
you said, I'm buying a house.
I know it's gonna be worth more.
(42:37):
I don't know that today,
Right, right.
but what I do know is that forthe next 10 years or so, American
small business is gonna be solid.
what, what, why do you Yeah,like what's the, what's
the story in your head?
Like, what's that thing thatthat makes you so confident?
Because these servicesare essential services.
You're still goingto need a plumber.
(42:58):
You're still going toneed a pool cleaner.
If you have a pool, you'restill gonna need your teeth.
Like
It's just investing inthe roots of everything.
Yeah.
The foundation.
the basics, right?
It's really not sexyat all, but it is sexy.
Yeah.
When you're like, thisneeds to happen, so.
And you've got thisgreat transition.
(43:19):
Hmm.
You've always had some transition.
There's never going tobe a transition like
this one in our lifetime.
Again,
That's true.
Population numbers.
Just say it
demographics,demographics, demographics.
Yep.
Yep.
That's wild.
And so, you know, from all yourtravels, a hundred plus countries,
you said, you know, America beinglike this unique bubble that Yeah.
(43:42):
If you're here, like are thereopportunities like this you see in
Yeah.
Oh, so that's a reallyinteresting, so let me tell
you a little bit about that.
So, 14 years ago, two schools taughtsearch, ETA, this, this thing.
We're talking about twobusiness schools, Stanford,
Harvard, today, 25.
(44:02):
Business schoolsteaching six continents.
There are schools and see, so it's,I had last night on the train ride
home from the airport, spoke tothe first woman, she, she's the
first searcher, happens to be a
Mm-hmm.
in Taiwan.
No one had ever used thismodel to buy in Taiwan.
(44:23):
There's a couple in India,there's a couple in Japan.
Europe has certainly gotten bigger.
There's several businessschools in Europe, so the
Ads Canada, it's quite large.
Mexico, Spain.
So yes,
it's the demographics aretrue throughout the world,
Yeah, it's just, again,it's a playbook, right?
It's the model, which ironically,yeah, you're, uh, you're Delphi
(44:44):
well, explains that really well,actually, I was typing, I was just
like, okay, some of these terms.
So this is a hint to anyonelistening and watching.
We will link, uh, yourDelphi and go to town because
there's, it's incredible.
Yeah, the amount of, and Iknow what we put into it.
It was a lot of direct.
we put in like 300 plus documentsand videos and, right, right.
(45:06):
Which is amazing.
It, it is, and I gotta thankyou because that's not, everyone
creates these as, as robust.
That doesn't haveto be your content.
It's stuff that you would referenceand point people, people to.
Anyway.
Stuff I've been learning about.
I mean, it's the same sourcematerial that's taught in
the business school is taughtin these classes that the
podcast I've been learning.
(45:26):
So yeah, it's just nice way toaggregate it and, and you can go,
you, you can go in any directionwith the avatar and the Delphi.
And it's really fun.
I actually love showing people.
I even, I even go, you know,someone said, I asked your favorite
wine, and it said Your wine.
I said, yeah,
As it should.
(45:48):
Really nice Malick.
Yeah.
Well do I guess like inall these, I don't know.
Yeah.
'cause I'm curious about thewhole vineyard thing too.
Like does this happen oftenwhere you're just like.
I'm gonna start another businessor like through this fund
or, you know, fund of funds.
Sure.
I mean, no, I mean, the truth ofthe matter is I am an entrepreneur.
(46:08):
I like, I like starting things.
I like being at thebeginning of things.
And it's more where I look atthe world and I say, nobody
else was gonna have Santiago,this incredible wine maker.
The, the land in Argentina was rich,luscious, amazing vineyard land.
(46:29):
That was one, 100th.
The cost back then of Napa.
So they're the arbitrage by, right.
Um, it, I don't wanna sayit was always a dream of
mine, but it's, I love it.
I love, I went to Napa beingat Stanford, uh, a lot.
I like the beauty of, I like the,I'm a foodie, I like the culture,
(46:51):
I like the people involved.
All of that combined.
In my mind, I'm always sayingif I put this with this, with
this, and you know, it's funny,I did the wine by the way.
I have to, uh.
What do you got?
You got a little bit.
Ah, there you go.
Hand of God or
God for those, forthose soccer fans.
(47:11):
Uh, might know, might know a goodArgentine reference around that.
Um, but, but what I was doing isI was saying, how do I combine
a bunch of my passions becausewe're only so many hours in a day.
Only so many minutes in our life arewe doing the things that really hit
a bunch of buttons at once for us.
(47:32):
That's what I always try and do.
And so the wine did a little bit,the, the wine, it turns out, and by
the way, we're, I'm selling the winebusiness after 18 years, so your
listeners, if there's any left, geta big discount if they email me.
Okay.
Well you
for for sure, we only
be going after this.
40 cases left or something, but,but what I did with my wine is
(47:56):
I used it as a way to createcommunity in private equity.
I've done a thousand winedinners using my wine creating
community, which has led todeal flow and ideation and
other people connecting.
So my, what I'm always tryingto do is combine the life
(48:19):
experience into something that'smore solid from one, it's the
one plus one equals three.
That's right.
Yeah.
Yeah, yeah.
And why not?
Like you said, we're, we're allliving this life our own way.
We have the choice, so.
Always have fun, of course, asis the motto right there in your
chest, but at the same time, yeah,it just incorporate everything.
Especially being an entrepreneurand most, if not all
(48:42):
listening and watching areso we all have the choice.
We have the ability to createthese lives, so why the hell not?
Why are you selling it?
I'm curious.
Oh, why am I selling, right?
Yeah, no, it's good.
So I'm keeping a littlebit, I'm building a house.
Um, but first of all, someonemade me a great offer.
Can't go wrong there.
(49:02):
Yeah.
and I honestly wanna focus onacquisition entrepreneurship
more than anything else.
I'm not gonna lie at my age,carrying the boxes is not
quite as easy as it used to be.
I'm looking, I'mback from Argentina.
And, and let's look at the worldlike, let's look at the world.
(49:22):
The world changed 18 years ago.
There wasn't, uh, legalcannabis, there wasn't micro
breweries, micro distilleries,non-alcoholic alternatives.
True.
The, the, the competitionfor vice, if you will,
has quadrupled, lit,literally quadrupled.
(49:42):
And that's hard.
It's noisy.
it's a good point.
Yeah.
And, and, the other thing is.
I hate to admit this,I'm getting older.
I don't enjoy drinkingas much as I used to.
I
just turned
40 and I'm alreadyfeeling that same way.
right?
So I mean, I used to love itand I'm like, eh, I might have a
(50:02):
glass or maybe I won't tonight.
And it's hard to go to yourown wine tasting, say I'm
not gonna have wine pack,
I'm drinking water juice.
Yeah.
but, but I mean it's just,look, it was a good run.
It was a great run.
I'm so glad I did it.
Met great people along the way.
Community.
You build community like,
and that's it.
And I, and I knew that rightwhen we first chatted and you
(50:24):
told me about the dinners, andI think I missed it by a week
when I went to San Francisco.
I was bummed, but
we have more coming up.
We'd love, we wouldlove to host you.
Cool.
Thank you, Jon.
Yeah, this is, I mean, it'sinfinitely fascinating because
honestly, I kind of purposelywent into this without knowing
all the details of searchfunds and just what's possible.
Definitely.
Your, your Delphi helped answera bunch of questions for me, but
(50:46):
I'm gonna go to it even furthernow, and I. Yeah, I mean, and
I'll make sure all the links, soyou listening, watching, it'll be
wherever description, show notes.
Yeah.
And check out Jon's, uh, his Delphi.
But how do they contact, I guessshout out your email and your
Yeah, Jon@agatehound.fund orJon at hand of god wines.com.
(51:07):
Either ones works and, uh, youknow, I, I am anytime, well,
anytime with my avatar for sure.
Yes.
but but this is super fun.
I, I, as you can tell, I'mpassionate about this and,
and, I think it's, it's really.
Fun when the light bulb goes off forpeople when I'm talking about it.
(51:28):
Because you know, when you'reout trying to explain something
and you're, you're suggestingpeople might want to invest,
there's always gonna be reluctant.
Like, how could it be that good?
Or why would it, uh,how can you know?
Lots of objections.
Sometimes they tell you theobjections, sometimes they don't.
But when they finally go,oh, okay, I got, I got it.
(51:48):
Yeah.
That's, that's very gratifying.
Got it.
Well, that's, and I wouldurge, yeah, everyone go to
go to Jon and that's JON.
So make sure you're not, notthrowing an H in there, in
that e email, but have thevoice conversation with Jon.
It sounds just like you.
It's awesome.
And that's what I'mgonna honestly go do.
And just like, you know, 'causein terms of investing, you know,
(52:08):
there's a lot of places to putour money and I'm not gonna say
tell you exactly where, where toput things, but, you know, Jon's
a pretty damn sexy option, youknow, in, in what you're doing.
And.
Thanks.
Thanks, Joe.
It's so fun.
Will you and I are gonna, we'regonna keep, keep, keep doing
this and just help each other andlet's keep sharing good ideas.
And if I can be helpful, letme know and let's always, and
(52:30):
let's always have fun, man.
Uh, that's what it's all about.
So a HF.
Thank you.
All right, Jon.
Have a good one.
Thank you.
All right.
Ciao.
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