SaaS Acquisition Stories w/ Sieva Kozinsky - Founder of Enduring Ventures

Foreign.

I am with Cieva Kaczynski from Enduring Ventures. Sierra, thanks very much for joining me. How you doing today?

Yeah, my pleasure. Thanks for having me, Andrew. I'm, I'm doing great. I'm up in Lake Tahoe this weekend. I'll be here working remote all week.

Nice. Well, hey, I want to jump right in and I've been seeing just you on Twitter dropping these awesome threads. I've truly enjoyed them. How did you get into all this? How did you get into buying and selling companies? And maybe a better first question is what is Enduring Ventures and how did all this start? Man?

Yeah, well, I'll start on the Enduring Ventures question. So Enduring is a long term holding company. What we do is we buy cash flowing businesses at reasonable prices and we pair them with great operators and we run them and we hold them as a portfolio forever. That's our plan. We frankly took a page out of Warren Buffett's book and how he structured Berkshire Hathaway in the early days and as closely as possible. We've tried to model our business after that model. There's not a lot of holdcos out there. Um, but we love it and you know, we love kind of the diversity of thought and the diversity of businesses that we own as well. Um, and as far as like how I got into it, I have always been an entrepreneur or founder. So for the last 15 years, I've started a variety of businesses. I used to run a venture capital fund. Most recently I had, I had built a network of clinical trial sites. So basically we paired with private practice physicians and we helped large pharmaceuticals run clinical trials in the offices of these doctors. So as a marketplace model. And our customers were like Pfizer and Novartis and Inova Derm and they would pay us 10 to $20,000 per patient to recruit a patient. We would split that with the doctor. So it was a great business. I ended up selling it. And I think, you know, that plus my time at business school opened my eyes to what you can build if you're acquiring companies as opposed to founding them. I had always been the founder. I'd always started from zero. You know, one person alone in a garage or working with a friend out of our bedroom at first and then building up that company, sometimes raising a little bit of capital. But I think through that experience, as well as just meeting people from the M and A world and just being inspired by Warren Buffett, I learned that you could acquire a business, a really well established company with a great brand. And in our case we do. So from retiring owners, usually you could buy the business, you could place a leader or you could promote management and you could really help that business grow and sometimes modernize and really hold it as a portfolio. And you don't have to go from that kind of zero to one phase. You can really start with a business that's fully functioning with a team in place and a brand. And I think there's something really attractive about that for us.

Yeah, well, you're definitely doing something right. So I was looking at your portfolio and we were talking about this before we started recording, but you own such a diverse group of businesses. What was like, can you walk me through the first business that you acquired? Like, what was the business? What were you feeling? You know, I got a, I got a sense that maybe like you just jumped in and you just said, I'm doing this. And then obviously you've acquired businesses after that. But what was the first business? And how'd that go?

Yeah. So rewinding it to the beginning, Xavier and I, who've been long term friends, we met when we were running different companies. We stayed in touch for many years.

I really, I love that dude. He's, he's awesome.

So he's really incredible. He's just such a great human. He's just like a genius in the way that he thinks and the way that he works. And he's also just like one of the kindest, fairest people I've ever interacted with. So I feel super blessed to be working with him all the time. We had been friends, you know, I really respected him from afar. And then when he hired a CEO at his previous business and wanted to leave, we decided that we were going to work together. And the first rendition of Enduring Ventures or our first kind of pitch to our friends and family who'd invested a little bit of capital in us, is that we're going to buy boring, quote unquote, you know, not kind of sexy tech.

Is that how you pitched it where you're like, hey, we're going to buy some boring ass businesses? Like, are you excited about this? Like yeah.

Yes. Yeah. That's exactly how we pitched it. Most of our friends are like tech founders or tech investors. So they're way over extended investing in tech. But they are aware that there's all these great cash flow companies, all these blue collar businesses that generate a lot of cash. They're familiar with the Berkshire story. So for them it was a diversification. It was a way to invest in a plumbing company without having to run it themselves. So that's exactly how we pitched it. We also pitched the concept that I think a lot of people are familiar with, which is that the baby boomer population is retiring. It's the largest population in the US and that means that there are millions of businesses that need to be sold, really high quality businesses, which means people like us can have our pick and really pick the businesses that we feel fit our model and fit our pricing structure. So that was our pitch from day one. We are now owners of 12 businesses. Two of them or three of them actually are tech companies. We also have a venture studio. So we've started a couple businesses. But 90% of what we do is we buy businesses that are generating cash flow from retiring owners. That's really most of what we do. So to your first question or to your question, the first business that we bought was more opportunistic and was less along our original thesis. We had been looking for businesses to buy for like six months at the time. We had a few different industries that we're particularly keen on. One of them was broadband, which we did end up buying businesses in. But our first business actually just fell in our lap. We have been longtime users of upcounsel and I know you're familiar with the brand and the company.

Yeah, I love, I refer you guys all the time.

I appreciate that. Thank you. And for those who aren't aware, UP Council is a marketplace for legal services. So instead of hiring an expensive law firm, you can go to upcounsel, place a job, and really high quality lawyers that have been reviewed by others will bid on your job. And usually you'll say, you know, I had been using it before we owned the business and I had saved anywhere between 50 to 70 off what a normal legal bill would be. So we got a notification or I received an email just like any other customer that said upcouncil is shutting down as from the CEO. At the time, they had raised somewhere around 20, 25 million dollars from some really great VCs. But I think they didn't achieve the kind of escape velocity that maybe it would require to go on and continue raising capital after that. Things like Airbnb and Uber. And it's a pretty common story. You know, they had built a really incredible business, they built an incredible brand and a great technology platform. They really had an amazing cto, but they just didn't get through kind of to. They didn't really cross the chasm to that next level. So unfortunately they were shutting it down and we reached out to them in order to see, hey, is there an opportunity for us to buy this business to kind of carry on your legacy? You've obviously built something really useful here because both me and my business partner have used it, and it sounds like you've used it as well. So we did work something out with the founders. We bought the business on a very friendly structure, I think, to both sides, frankly, given the situation. And that was our first business that we bought. And I'm happy to talk about the ones after that because they were a little bit more. More planned. But that one just kind of fell. Fell onto us from the skies.

Nice. That's a great business that I can definitely vouch for.

And.