Jon Staenberg: How Small Business Acquisition is Driving the Economy!

Did you know that there's a tsunami of small businesses about to change hands? And most people aren't even looking, not even aware of this trend in opportunity. But are you ready to catch the wave? That's why I brought in my friend and seasoned veteran investor John Stannenberg to break it all down for us.

Marketers have never been so spread thin. You know, like, with all this stuff happening, technology is going crazy. It's really tough to really focus and get creative and. And create great content or connect with the customers like we used to, or even prospects. So, you know, you're trying to launch a bunch of content campaigns, you're generating leads, you're trying to score the leads, you're nurturing them so much more, but you really don't have enough time to even breathe, let alone do the best marketing out there. But HubSpot is trying to fix that for you. They have a new AI. It's built into the system called Breeze. So it actually combines their marketing hub and the content hub with all these different cool features that help you automate and, you know, remix your content into a whole bunch of different types, score your leads in a better way, and actually have a nice look at the analytics and everything that's going on in your business. So I would recommend to stop spreading yourself out so thin and start making some big moves with HubSpot. You can try it out for yourself. Go visit HubSpot.com marketers to learn more. I want to pause for a moment and shout out another podcast on the HubSpot Podcast Network, your audio destination for business professionals. This one's called OG Mentors. It's hosted by Julie Mayer and Jimmy Edgerton. And these two, they're a pretty cool duo. Where one is, you know, Jimmy is a lot more on the loose side. I would say that Julie brings it in and keeps us focused on mentoring and movement. And so these folks, they. They focus on mentoring and exploring ways on how to augment and refresh, kind of like the way that mentoring is applied. And they have these principles that they weave into their episodes and they. They give a bunch of practical tips and they lace it with a whole bunch of humor as well. It's always cool when there's a cool duo happening there. So if you're in the mentoring space or if you have a, you know, leadership space, relationship guidance and things like that, that's what the podcast is made for. So you'll get a lot for it. It's great for entrepreneurs, marketers, sales professionals. They love the show as well, it's a great one. I've checked it out and I recommend it. So go listen to OG mentors wherever you get your podcasts. Hey, before you get into the episode, I urge you to hit pause and go check out the AI Digital Mind. It's like a digital twin of this podcast and a whole bunch of other content I've released. Go to hustleandflowchart.com aijoe that's hustleandflowchart.com AI Joe. You can literally chat with this podcast with me and my guests in text, audio, and video for free if you want one of these made for yourself. If you're Interested, go to hustleandflowchart.com interest and we make these things out, so enjoy. Let's get to the episode. John, I'm happy we're doing this, my friend. Thanks for taking the time.

Thank you. I'm truly excited. We've been talking about doing this for a little while. Here we are. This is the perfect time, the perfect day. Let's do it.

It is. It is. And you. Yeah, there's some cool stuff we've been making on the side, too, to support what you're doing and, you know, through setting up. I mean, everybody here on the podcast probably knows about Delphi already, so hooked you up with one of those, you.

Know, and been great. I love. I love it because I'm out there telling people AI is changing the world and then show people and use it and get them introduced to it, and it continues to get better and better. And so it's really been fun to have that. Supplement me 24 by 7.

We'll talk about it. I'm curious how you've been using it, because I'm always everybody's use it and throw it out there in different ways. But I really want to dive into this whole concept that you've kind of. I don't know if you would say it reinvented your career, but it came later in your career, huh?

I think it is, of sorts, reinvention. I've been reinventing my career from the beginning of my career because I don't think, for me anyway, for who I am and for what I like and for how I see the world and how quickly the world is changing. What they used to say, like, my grandparents had one career, right? They did it for 30 years. And maybe my parents had a couple of careers. And now I think about my teenage daughter. How many careers is she gonna have? She will have a career. Maybe she won't have a career.

Probably not.

But I've always followed the same general path, which is find something that seems like it has outsized potential returns, where I can be learning every single day and constantly be learning. Where I'm surrounded by people who are full on passionate about their job and do something that maybe isn't obvious.

I like that.

Yeah, that's outrageous.

Outrageous returns people and just, just kind of. Yeah.

Learning, right? Inspiration.

Yeah.

Right. It's. And when I went to Microsoft, I didn't, I didn't know I was good. You, if you had asked me out of business school, you know, are you going to go work for a tech company? Like that wasn't even a thing. Right. Yeah, I win because the people there were mind blowingly intelligent and challenging, which is what I like to be around. And then venture capital. It's funny to think when I did venture capital 30 plus years ago, I had to explain what it was. I guess hilarious today, right? Like of course, venture capital.

But of course. Yeah.

I don't know why this thought just came to me. It was like when I went to Burning man before people knew what Burning man was.

You actually went though, right?

That's hard to read. That's funny.

And now I'm doing this new, not new, but relatively under the radar asset class called search funds. The people in the search fund world are kind of like, shh, don't tell anyone. It's really good. We don't want a lot of people in it. And I want to tell everyone because I think it's one of the greatest entrepreneurial engines in the world and it is the time for it. With the baby boomers aging out and with AI, we can talk a lot about that, but here I am. No one had ever done a fund of funds for the asset class. And if you look at mature asset class like venture now or hedge funds or big private equity, they all have fund to funds. And so I thought this gets me right back doing what I love doing, kind of being early, kind of seeing out there a little bit and working with great people.

So there's a lot of things. Yeah. A lot of angles. So like, I mean, you grew up in what, in Nebraska, right?

Yeah, yeah, yeah.

Warren Buffett fan from what early days or what?

Well, he was a neighbor.

Oh really?

Yeah, in the neighborhood. Wasn't next door, but we would go to his house.

Really?

Yeah, we went for the 4th of July. My mom and his wife were very close. But he wasn't Warren Buffett then. He was just some guy I called Warren.

But yeah, I Mean, but I was a devotee, if you will, early. Like everything he said made sense to me.

And you know, the only unfortunate thing is my parents didn't buy the stock earlier, hold on to it late.

So just listen to Warren. He's got a good idea, right?

But it did. It shapes who I am today, it shapes how I think about the future. It shapes how I invest and not just, not just on the money side, but the authenticity and the integrity and the how you treat people and how you work with people. All of that's part of what Warren and Charlie were about.

That's right.

But I would say he was kind of one who really made value investing a real term and something people understood. I think what I'm doing in low end private equity investing is value investing, you know, buying good companies at fair prices and have great people run them. Not complicated. I like to call it good boring.

I mean, it's great. Yeah, it's not going to, you know, it's not. I mean it could be. Feel like a shiny object to some people, you know, if you like boring stuff, which is awesome. But yeah, it's probably not going to make the biggest headlines.

It's always funny, you know, in a perfect world, you go to a cocktail party and you get to tell everybody you just created the coolest new AI robot. And everybody gathers around. When I go to the cocktail party and say, we just bought a pool cleaning company, they go, I'm going to the bar.

Yeah, to that guy over there.

That's right. I mean like, AI is fun, you know, and we're both in it in our own ways. And like you said, it's very challenging, you know, just hanging out in San Francisco the other week with Delphi and the founders and team and I was like, man, there's just like a whole different way of thinking and the vibe. I mean, I know you went to Stanford and spent a lot of time out there, but yeah, it's a different feeling, you know.

Well, it's funny, I was saying to someone yesterday, that venture decades ago was more like the vibe I'm in now. It wasn't I gotta go shout to the world. We didn't have the platforms to shout to the world. Right. And everything was about attention grabbing. It was, let's go be super entrepreneurs and create something that's so cool that we're gonna sell a lot of. Wasn't what I considered to be kind of a different game today of can I create this cool pitch deck to raise the most money to somehow throw spaghetti against the wall, make it stick and then walk away with lots of money. And that's like the goal.

Yeah.

And it feels now that's not true for everyone, you know, but much more than it used to be. And even, and even I call them the kids, even young adults who are going into it, they take a different mindset. I'll go for six months. If my options look like they're doing well, great. Otherwise I'm moving on.

Ah, yeah, yeah.

Right. That's a different mindset. Right. I'm now, you know, back in the day it would take a couple million bucks and you'd have to spend two years writing code, literally dedicating everything to it. Code is being written like that. We really was all engineers in the beginning.

Yeah.

Just to get a viable product.

It took a long time.

A long time. A lot of money. A lot of, you know, hard disk drives.

Big ones.

Right. And that was actually part of the defensibility.

Yeah.

Right. Not everybody. Everybody knew there couldn't be too many.

Competitors who's going to want to do this?

Right. Or like who's got the money to buy all those servers. And so, but so I like being around that ethos of this. You know, search funds are one kind of low end private equity. I should just. For definition's sake, for setting. Yeah. Let me just say when I'm talking about this, I am talking about we invest in companies 2 to 5 million dollars in EBITDA, so maybe they're 15 to 40 million dollars in sales. Okay. And they are not generally tech companies. They might use some tech now everybody's using tech. But generally they're not trying to be a 10 to 100x return.

I mean, you mentioned a pool company. Right.

And meter readers, street cleaners, plastic parts, you know, you name it.

And whatever small business you can think of. Right.

Yeah.

That's really what we're, that's what we're buying. And it's in our first fund, which we closed last year. We're going to have 200 of these types of companies.

Wow.

Across 150 industries. Got you across North America. So. But if you just. It's funny if you drive down the street, you walk down the street. I did this yesterday with someone, I said, you see that, that post? Somebody's making it.

Uh huh. Yeah.

That light, somebody's making it. And the things in that light, somebody's making it. The bolts holding up that pole. And you don't, you know, everything. Everything.

And a lot of it's from a small manufacturer. And by the way there has to be people who install that. There have to be people who do the warranty work on that.

Like, yeah, everything.

America's really good at this stuff. That's the thing. I travel a lot, and part of the reason I travel is just to get perspective. I've been close to 100 countries.

Most people are itching to get into this country. Why? Because they go, if I work hard and follow the rules, I can get ahead. That generally is not true in the rest of the world.

Right. It's true. Restrictions or whatever. Yeah.

Just cultural resources, like there's a whole bunch of reasons.

Yeah.

Graft this country. We don't need to make America great again. We just got to make sure the middle class and small business crush it. And they are.

Yeah.

And what we have is hundreds of thousands of.

65 year olds whose kids, unlike the previous generations, are not interested in taking over.

Right.

And so they have to exit. They have to find. They don't just have to sell their company. That's part of it. They have to do it in a way that 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'm going to the beach and I used to bring a teaspoon of sand and now I bring a bucket of sand, but I'm still at the beach. You know what I'm saying?

Yeah, yeah.

The opportunity set is that big.

Yeah. That's wild. And you're right, because this is. I've had some previous chats here talking about the retiring folks right now. And like you said, silver Tsunami, it really is in all industries. And maybe you could list, like, what are some of these industries that you see being opportunities.

Joe.

It's so broad. I mean, but 150, you said. Yeah, but I mean, it's. It's literally going down the street and looking at the companies doing those things. It's med spas, it's dental clinics, it's accounting firms, it's bookkeepers, it's machine shops, it's car repair shops. It's the company that brings horses, literally horses in from out of the country. There's like six of them. You gotta know what you're doing there.

It's everything.

And it's just like, like you said, it's a tsunami. And I don't think a lot of people are even thinking about it. Obviously you said, yeah, they're trying to retain the employees, the workers there because. And obviously the owners, partly because it's it's relationship. Sure.

Right. I mean, it's for years, it's reputation, it's brand, it's these relationships. I mean, that matters.

Yeah, yeah.

But what's interesting is there's now several podcasters and good promoters that are out there. You know, in my day when I was growing up, it was no money down. You can buy real estate all day long. And as you know, there was some truth to it, but there was also some things that they never really told you. Right.

Probably a lot. Yeah.

And. And, you know, about, you know, 1 or 2% actually did it, learned it, figured it out and what was working and what. And did great. Most people didn't. Those guys made their money off selling tickets to the seminars. Right. Right now you have a bunch of people going. They're saying the same thing I am, which is the Silver Tsunamis here, kids don't want to take it, blah, blah. And they're saying, you should go buy a business. And so I have a lot of friends now saying, I'm going to go buy a business. And I roll my eyes. It's so hard.

Yeah. It's not flip the switch and go.

Yeah. It's messy. People lie, they misrepresent, they don't keep. Great book. I mean, there's a thousand.

They change their mind.

They're people.

Yeah, they're people.

So what we do is we only invest.

Where there's a system in place, a system that thinks about all the things that could go wrong and puts guardrails in. That's what search funds are. That's what. There are institutional funds out there that have created following kind of a search fund playbook, but there aren't very many. And we believe that you got to. If you want the. If you really want to create the outsized returns that we have seen historically, you got to do it with this playbook or something similar to this playbook. There are variations on it. People are coming up with new models, but the sole guy who says, I'm going to keep my day job and on the weekends I'm going to go to a broker and see if I can buy a company.

Good luck.

Good luck. Good luck.

So you have your own fund agate.

Yeah. Aga Hound and Cool name, by the way. And I know you have a story behind it, so I do want to hear it. So. Yeah, I guess. Yeah. I want to 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 others here, as we're listening, watching, going through this like you're getting some, not like, okay, I get what John's putting down here. How could they get involved in whatever fashion that looks like?

Thankfully, if they're willing to spend a little bit of time, and I don't mean a lot, it's pretty easy to get up to speed to a certain level, at least the basics.

Cool.

I will say, having done this for six years, having gone to 15 search fund conferences, I'm still learning, I'm still understanding how it all works. But at a most basic level, let me say how it works and I'm going to use search funds and I'm using that somewhat generically, I believe search fund as a proxy for a well thought out playbook to buy low.

PE, sort of like 2 to 5 million dollars. When you hear private equity, that's generally speaking, funds that buy 10, 50, 100, $500 million EBITDA companies.

Got it.

We are purposely playing below them because we know we can buy inexpensively and on average we buy four times EBITDA. But then we are selling eight to 10 to 11 times EBITDA because private equity, we're getting it ready.

Got it.

Farm league for the major leagues.

I like it.

And they'll pay up. They've seen that this one worked. They'll pay up. So we earn that right. But let me go back to how can people learn about it? Your question, if you go and look, it was invented at Stanford and Harvard Business Schools. If you Google or email me at agathound Fund, if you look for the two Stanford papers, the Stanford Primer on search funds. Take you 15 minutes to read it. It'll explain all the pieces and I can go into a little bit of it. And then the Stanford study. Stanford has updated the financial returns every two years for the last 40 years of every search fund ever done. And by the way, the number is 35% net returns. I literally know of no other asset class that's better over that period of time.

No.

And that's a good start. That's a really good start. There's podcasts on this, there are books on this, and it doesn't take too much to finally. Oh, I see what they're doing. I see how they're creating a mentoring group for the CEO. I see how they're using bank debt. I see how they're using seller financing. I see the criteria for the types of companies they're buying. I see how they put a board together. I see how they hire. I see what they do in their first 90, blah, blah, blah, blah. Okay. But it's a playbook. I keep saying that you've got to have a great entrepreneur as a CEO, you gotta be buying the right kind of business at the right price. And then you need the guardrails of a really good support system around you. And it takes all of that to be successful.

And when you say system around you, is that, is that the company itself or actually around you? Okay.

I mean, I mean, no. It's the people that are investing with you who are adding value on your board. It's the EOS or EOS type system, you know, entrepreneur operating system that is being used. It is.

It's your advisors, your mentors, your coaches, your teachers. All of that has to come into play.

Because this stuff is hard and messy. And in the search fund model, just to go only slightly deeper, we're taking straight out of business school graduates, 32, 33, 34 year olds who have never run a company.

But we're putting them into and training them how to use the system.

Wow. Got it. So you're literally inserting people, new folks, like literally fresh out of graduate school.

They're hungry, they're greedy, they've learned the program and they have people they can count on as part of the journey that are aligned with them. Alignment, alignment, alignment. Venture doesn't have alignment anymore. So many of these asset classes don't have an alignment. Most fund managers aren't aligned with their LPs. This has created unbelievable alignment with the investor, the seller, the CEO.

When you have alignment, you're going to get a lot more done when everybody's going up the hill pushing at the same direction.

Absolutely.

And this really has created a very structured way to do that. Now search funds use the straight out of business school program been extremely successful. But we also invest in other models. We think people who are seven years out of business school have a little more experience that can work. We're in a fund that does that. We're in another fund that takes 50 to 60 year olds who've had careers, but they've never maybe run something or maybe they ran something, they just want to keep doing it. Who haven't? So there's, there's. But all the models we invest in all have an overreaching playbook. They help them find companies, they help them buy companies, they help them run the companies. Yeah, I want all of that as part of my overall model before I'm investing. I had a guy call me today who goes, this is a great company. I mean I. But I won't even say what it was. But it was. He wasn't doing it full time. He was just talking about the financials. He'd never run anything thing. And that deal might work out, but that's not going to be my bet.

Right. You want the full. The full thing, like everything I.

Look, as Warren Buffett always said, you don't have to swing. Investing's great. It's not like baseball. Right. You can. You can wait for your pitch.

That's right. Yeah.

Right. And. And if you like fastballs, you should. You should ask for a fastball.

Just lean on that.

Or slow balls. We just want a big fat one. And we know the characteristics.

Yeah. So that's why you could do this at scale. Because that was gonna be. One of the questions is like, okay, you just. You said 200 companies in your last fund.

And again, we're investing in funds. So it's an overall portfolio.

Yep.

And honestly, there aren't that many of these companies that are getting acquired in the types of funds I'm describing, and they're hard to get into. Access. I mean, the reason I created this fund is I was having, as an individual, hard time getting in. And so I knew if I had created a little bit of scale, that I could go to some of the best funds and say, hey, I've got a 2, 3, 4, $5 million check. Would that be interesting to you?

Right.

I am the biggest investor in my own fund. Speaking of alignment. Because I did this because I wanted to have exposure to it in my overall portfolio. And also, this is what I want to do every day. I want to talk to these entrepreneurs. I want to see if I can be helpful.

Yeah, I want to.

I wanted my pat. I'm still passionate about tech. I did tech for 30 years. I want to be thinking, how can I help them think about AI tools?

There you go. Actually use it as a tool to expand. Yeah, for sure.

Right. How can I add value to the ecosystem?

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 good. Of course they're gonna run their companies better than I ever could. Their experts as managers. I'm not. But I'm also going to think about, well, how can I help too? And we're doing a bunch of things. I'm thinking about AI. I'm helping them get AWS credits that they need. I'm helping them get credit cards that make sense for small businesses. We're putting together a charitable pledge program so we can all be thinking about giving back, too and share the community around that. So these are things I'm thinking about as I want to think about. How can I add value?

That's cool. And it's more fun, too. And it's obviously it's gonna. I mean, it's all about having fun. And I know you're all about that. We'll talk about some of the other.

Hey, hf. You thought it stood for Agate Hound Fund.

I did.

Always have fun.

Ah, look at you. I like it.

I'm gonna pause this really fast and shout out a podcast that you should go follow. It's called the Science of Scaling. It's hosted by Mark Roberge and it's brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Now, the reason why I like this show is that each week Mark Roberge, the host, sits down with leaders in business and talks about scaling properly. So I like Mark because he is in the trenches. He is the founding CRO of HubSpot, senior lecturer at Harvard Business School. He's a co founder of Stage 2 Capital, and he's diving into the secrets strategies, all these tactics of how to properly grow with people that are doing it right now. What I found is most companies, when they're growing, they either do the wrong things to grow or they do the right things in the wrong order. And that's what I gathered from these episodes. So it's a great way to straighten all that up. So go listen to Science of Scaling wherever you get your podcasts. I'm going to do a quick shout out one more time for the thing I talked about, the top of the episode, which is the AI version of me and of this podcast and my YouTube videos and all these things. It all lives within this AI platform. I used Delphi AI AI to create it and I want you to use mine. It's totally free. Go to hustleandflowchart.com AI Joe that's hustleandflowchart.com AI Joe. Test this thing out. It's crazy. You could type with it, talk with it, you can even use video. And you can look up anything from this podcast. You can ask a question about your business life, any scenario. It kind of learns about you with the information you give it. It's rad. You will love it. And also there's a lot of people who are asking, how do I get one of these? How do I build it out the cool thing is my team and I have been building a ton of these every single day. I've used the platform Delphi for two years. I'm actually one of their advisors because I was one of their first users and gave them a ton of feedback. I love it, but we build these things. So if you want to use it for lead generation, for, you know, you have all this content as an expert, author, coach, type person, we can put that into this digital brain and make it interactive. You could use it for customer service, internal training for your team, for your organization. Lots of uses. If you would like one of these, I can pass over an exclusive deal. There's no one else that's, that's offering this out there. I work closely with Delphi as one of their partners, agency partners, to build this out. So hit me up. Type hustle in flowchart.com interest into whatever browser. Again, that's hustle and flowchart.com interest and hit me up. Let's build this thing together. All right, back to the episode. I mean, and that's what it seems like 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.

I think this leads to a question. How do you, how do you select the companies to work with? I'm sure there's a whole bunch of criteria.

My main selection criteria, because we invest in the funds, is thinking about how I ask that question to them. How do you select. And the nice thing about the search fund playbook or the playbook that the funds we're investing in are using is the general criteria.

A fragmented industry. We like that because you can create one company doing well, maybe you can add on or bolt on.

No one company is dominant, so you're not going to get crushed by them. You don't want too much customer concentration risk because if you lose that customer, it could be very bad. We generally don't do a lot of companies that are subject to government regulation. Cause that can change, as we know.

But we're looking for companies that have proven product market fit.

Have growing profitability kind of in the size we talked about.

And at that point we do our background checks and we make sure the numbers. That's it.

It's something that can last for a while. Like you said, it has last is.

Going to last, right?

Yep.

But you know that that accounting firm in Topeka or the, you know, flood, the flood restoration company In Oklahoma City. They're going to be around. They've been doing it, you know, technology brought it up. Right. And.

Their competition for that plumber, for whatever is probably some other aging out guy.

So you get the network who.

So your competition. We're putting this 34 year old in who's like, let's go, let's go, man. Yeah, I got AI, I got spreadsheets. I'm not using a fax machine. I've just been through the best management program. I'm going to 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 your competition or people that may be doing well and have a couple homes and a boat.

Yeah.

Golfing a couple days a week.

Not bad. Yeah, good.

Right.

Hang out with that guy.

Competition. If I want to take things to.

The next level, I like it. I think the thing that rings true the most is like you literally have so much support for the new. The CEO that's coming in and the team they're bringing in, the advising. I mean, especially going into a whole new space.

If you think about it, no successful company.

Is an island. Every single. I mean, think about all the support that a CEO gets. Even at Microsoft. They have coaches, they have board members, they have advice. Right. Why shouldn't you bring that to this too? We know it works. YPO started the thing called the forum, Right? The YPO Forum. Why? Because you do better when your peers are sitting there objectively holding you accountable, objectively giving you feedback.

This is not rocket science. We know it works. It's a best practice.

I'm just like, why is this not more. I mean, it's not more known, but it will be soon.

It will be known, but it's hard to do.

Yeah.

And again, the opportunity set is so big right now.

Yeah.

But you got to do it right. And like anything, you know there are good brokers and bad brokers. Right? Right. So you got to know which ones, which ones do you like working? Which ones do you trust? All the funds we invest with have been doing this for a long time. They have their trusted peeps. Right. They know who they like to work with and who like to work with them and who's going to give them the inside scoop. All of that builds up to this result.

Yeah. That's interesting. So how's it been going with. So you closed the first round, your first fund. And we can talk about a gate too. A gate. Ha ha.

Yeah. A gate to good Funds.

Yeah. See, I was like. Because I had the visual of this gate still, for whatever dang reason.

But yeah, because your model, obviously it's working. So you're doing what, the second one now?

And we are. In a few weeks.

In a few weeks. Okay, gotcha. So I guess.

Yeah, but I think so if I was. I don't know where you're going with that question, but let me go for it. For me, we focused entirely on search funds in the first one. And what I realize now, having done a lot of this and living it day to day, is that it's not just the search fund model that's going to work. That's a great model. That's a flavor of this playbook of entrepreneurship. Acquisition model.

There you go.

I think about entrepreneurs who want to go acquire and run and the model for low npe. And that's really what we do. That's a mouthful. So I need, if anybody listening has a good moniker for that, I'd love it.

But that's what we're doing. And that's both obviously a great place to play, but perhaps not as obvious in that it's a hard thing to do.

Well. Right.

That's why when you're saying, why is it more. More people are going to do this.

I think you nailed it, though. There's a lot of components and there's. Like you said, there's a playbook, but that means there's a system, then it's people too. It's not. Can't do it alone. I mean, I guess you could try part time, but good luck with that.

You know, think about it. The other thing, like I'm gonna say something that's obvious when I say it. You go in and you buy a company that's 20 years old. You're replacing the CEO, founder, and who are you? Every you. You walk in on day one and people are looking at you like, who's this guy?

Yeah, for sure.

Does he or she have my back? Do they know my skills? Are they going to change everything? You got to build the trust. You got to take a culture, continue to improve it. But that's. I'll tell you, I went to business school with some of the best and brightest. Less than half my class has that skill set. I don't have that skill set. It takes a certain type of person. What I love is that the people that we're working with. I actually sat with 20 CEOs who have acquired yesterday.

Yeah. Wow.

And this was a random question that came up, but I thought I'm gonna ask this question. How many people here had some kind of paying job by the time they were 12 years old? Every hand went up.

Wow. Okay. Early entrepreneurs or something, or they just understood work. Work.

Yeah, Maybe they were forced. Some were entrepreneurial, some need it in their families, but they understood early what it meant to put hard work in, to get a payoff from that and have to work with people. And, you know, kids today, and I. Sorry to be that guy, but a lot of kids today just aren't interested in that hard work. So the people we work with.

Not exclusively, but generally, are often first generation immigrants, grew up in some very small village in some remote place. Maybe none of their family went to college, but they did.

Or someone who was in the military who learned a system.

Discipline or system. Yep.

Right. Or someone who grew up in a family where small business was discussed around the dinner table. So you're comfortable with that because some people, this is really a risky thing to do.

Sure.

The CEOs we work with, they're all in.

No, they're.

I mean, really, from an equity standpoint.

They have to be. Right?

They have to be. And so that also is a piece of the model.

So it's people selection, it's. It's knowing their huge, huge.

And so the funds we invest in, we talk a lot about that.

Yeah.

But one of the nice things is.

Using the funds that do the search fund model, A lot of the funds teach the class, so they get to source their best students.

Even better. Okay. It's built into the whole thing. Yeah. The system as it should be. I mean, you're supporting the students who are grinding and paying a lot.

Right.

Through time and money. Yeah.

And so, yeah, there's almost a different mentality. Yes, people want to make money, but there is this coaching, mentoring, teaching piece of it that we all, everybody I know in the search fund community and beyond enjoy that piece of it too. It's not just for money. It's about feeling like we're part of a team. We're really driving towards a goal. Tangible, tangible, tangible. That's a big piece of it.

It makes sense. And like, this showed up what you said 30 years, as you were already in 40 years.

So the backstory is, I went to Stanford Business School and I just coincidentally had a professor who invented search funds, but they weren't called search funds then. In fact, the name search funds is so confusing to people, they changed it. The class is now called eta. Entrepreneurship through Acquisition.

But Irv is such an amazing guy. And six Years ago, as I was looking at venture capital, thinking, I don't know that I like venture capital and I don't know that venture capital likes me. Meaning I'm not sure, I wasn't sure how to do it anymore. And there's so much noise and misalignment, blah, blah, blah. I just went, irv, I'm not ready to retire. And I remember you did those things called search funds. They've done incredibly well. I think I'm going to start to do those. And then he was willing to talk to me through a period of follow ups. And I said, why isn't anyone doing this fund to fund idea? He said, somebody should. You should do it.

Wow, that. Just like that?

Yeah, just like that. You know, it's like I got into the wine. It's funny. One of my side life stories was 18 years ago, I went to Argentina and I ended up meeting a classmate and drinking a bunch of great wine and almost on the spot said, why isn't anyone doing high end Malbec from Argentina? And so my, my partner Santiago said, you should.

I love it. Started every great business.

And so that's how, I mean, honestly, that's how me getting into search funds happened. And I'm having more fun. I'm having. It is I wake up in the morning thinking about it. I go to bed thinking about it. I love sharing the story about it. You know, I'm completely biased, but I don't know why. If you've got some money, you don't have exposure to it. I now have created a way for people to have exposure to it. Yeah, I mean, look at family offices or high net worth individuals. I think you've got your stock market, you've got maybe your tech, your venture, you've got your real estate, maybe you have crypto. But here's this thing which I'm just 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, it's pretty.

The magic of compounding interest. One of the great eight magics of the world. I mean, so I just like part of me is just funny. When you look at the world, you go, it's obvious.

We start looking at the math too. And then it's logging.

Oh my God. No, I know. There was a guy this weekend when I was at this conference, he said, well, I just think about math. He goes, you know how many people here know at 8 to the 4th power is 4096. And you forget that if you compound. It's crazy, right.

It grows very fast.

It does. And what doesn't? If you think 15% a year isn't sexy, go out 40 years. I'm telling you to tell my teenage daughter, save now. Just keep saving.

Yeah, yeah.

Even if you know. And so that's what I'm doing. That's where I'm at my life. I don't need the hundred X's at this point. Sure, they're fun, they're exciting and so is going to Vegas. But you know. Right.

At least you know you're getting that there. Yeah.

Right. So.

And that's. I think that's the cool. That's. Yeah. The reframe maybe when it comes to investing, especially with. When the word fund comes. Comes around. Yeah. Typically it's correlated to VCs. Honestly, I don't know if everyone totally understands even the fund concept because it's. It's not like it's just advertised for everyone, you know.

Yeah, it's true for sure.

You gotta know the right folks. Right?

You do.

And there are variations on a fund. But you know, in our case, what we said is let us be stewards.

Let's let us figure out within this asset class the best investors. Let us make sure that we're tracking them, helping them, reporting on them, keeping them honest, if you will.

And you don't have to think about it. We'll do all that work for you. From the financial work to the selection to the curation, to the ongoing management to the value add. That's what we do. And what it leads to in our case is a very diversified almost index fund like. Or etf, like portfolio of small. Of great small American business.

Like you said, 150 different industries. That is in the first one you did.

Right, Right. And second one will too. But we're just, we're like. If you believe in American small business, this idea is probably a pretty interesting way to do it.

I mean, so if people listening here, like where. How are you having these conversations? I guess obviously we mentioned Delphi. That was one of the reasons why you even reached out to me.

Yeah. They should talk to me on my Delphi avatar.

Seriously, that's. Yeah.

Agathound fund. I guess you'll have show notes maybe.

Yeah.

And people can, you know, I've got an email on there if they want to reach out. I've got a number of papers and podcasts and resources on our website. I Can recommend books.

It's not hidden. There's a lot of information. It's really fun to get into. The best part for me is hearing the stories of the entrepreneurs.

Well, that's why I was. It's kind of like why I have this podcast. I get to learn new things. I get to. Ideally, it's giving value to everyone who's yourself, but also listeners and watchers. But 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 business doing, like, creating a miss value. Let's make it create more.

Let's make it create more. But also.

I think people are overwhelmed with the change that is happening and is coming. Coming.

How do you.

Yeah.

What do you think?

What I mean by that is tariffs today, tariffs tomorrow, who knows? Globalization. De globalization. Right. Jobs, no jobs. Right. I mean, it is. We are in the midst of probably the greatest change in the history of our world, certainly in business. We've never seen anything like that.

Yeah.

And so how do you, you know, in the 1960s or 70s, said, I'm buying a house. I know it's going to be worth more.

True.

I don't know that today.

Right, right.

But what I do know is that for the next 10 years or so, American small business is going to be solid.

Why do you. Yeah. Like, what's the. What's the story in your head? Like, what's that thing that. That makes you so confident?

Because these services are essential services. You're still going to need a plumber.

Yeah.

You're still going to need a pool cleaner. If you have a pool. You're still going to need your teeth.

Like, these are investing in the roots of everything. Yeah. The foundation, the basics. Yeah.

Right.

It's really not sexy at all. But it is sexy. Yeah. When you're like, this needs to happen. So.

And you've got this great transition. You've always had some transition. There's never going to be a transition like this one in our lifetime again.

That's true. Population numbers. Just say it all.

Demographics, demographics, demographics.

Yep. That's wild. And so, you know, from all your travels, hundred plus countries, you said, you know, America being like this unique bubble that. Yeah. If you're here, like, are there opportunities like this you see in other countries?

Oh, so that's a really interesting. So let me tell you a little bit about that.

Yeah.

So 14 years ago, two schools taught search ETA.

Yeah.

This thing we're talking about, two business schools, Stanford and Harvard today 25 is a schools teacher. Six continents there are schools. So it's. I had last night on the train ride home from the airport, spoke to the first woman. She's the first searcher. Happens to be a woman in Taiwan.

Cool.

No one had ever used this model to buy in Taiwan. There's a couple in India, there's a couple in Japan. Europe has certainly gotten bigger. There's several business schools in Europe. So the ads. Canada, it's quite large. Mexico, Spain. So yes, it's. The demographics are true throughout the world.

Yeah. So it's just again, it's a playbook. Right. It's the model which ironically. Yeah. You're. You're Delphi. Well explains that really well. Actually I was typing. I was just like, okay. Some of these terms. So this is a hint to anyone listening and watching. We will link your Delphi and go to town. Because there's. It's incredible. Yeah. The amount of. And I know what we put into it. It was a lot of direct 300.

Plus documents and yeah.

From the source too.

Right, right. Which is amazing.

It is. And I got to thank you because that's not everyone creates these as. As robust. That doesn't have to be your content. It's stuff that you would reference and point people to. Anyway, now I've been learning about.

I mean it's the same source material that's taught in the business schools taught in these classes that the podcast I've been learning. So yeah, it's just a nice way to aggregate it and. And you can go. You can go in any direction with 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.

Yeah. As it should. Really nice Malbec. Yeah. Well, I guess like in all these. I don't know. Yeah. Because I'm curious about the whole vineyard thing too. Like does this happen often where you're just like start another business or like through this fund or you know, fund of funds?

Sure.

Do you go down?

The truth of the matter is I am an entrepreneur. I like. I like starting things. I like being at the beginning of things. And it's more where I look at the world and I say nobody else was going to have Santiago this incredible winemaker. The land in Argentina was rich, luscious, amazing vineyard land that was 1/100th the cost back then of Napa. So they're the arbitrage by. Right.

It. I don't want to Say it was always a dream of mine, but it's. I love it. I love. I went to Napa. Being at Stanford a lot. I like the beauty of. I like the. I'm a foodie. I like the culture. I like the people involved. All of that combined in my mind. I'm always saying, if I put this with this, with this. And you know, it's funny, I did the Wyatt, by the way. I have to.

What do you got? You got a little bit. Oh, there you go. Hand of God for those.

For those soccer fans might know a good Argentine reference around that.

But. But what I was doing is I was saying, how do I combine a bunch of my passions? Because with only so many hours in a day, only so many minutes in our life, are we doing the things that really hit a bunch of buttons at once for us. That's what I always try and do. And so the wine did a little bit. The wine, it turns out. And by the way, I'm selling the wine business after 18 years. So your listeners, if there's any left, get a big discount if they email me.

Yeah, okay. Well, you know where my email is going after this?

40 cases left or something. But. But what I did with my wine is I used it as a way to create community in private equity. So I've done a thousand wine dinners using my wine, creating community, which has led to deal flow and ideation and other people connecting. So what I'm always trying to do is combine the life experience into something that's more solid from one. It's the one plus one equals three.

That's right. Yeah. And why not? Like you said, we're all living this life our own way. We have the choice. So always have fun, of course, is the motto right there in your chest. But at the same time, yeah, just incorporate everything, especially being an entrepreneur. And most, if not all, listening and watching are. So we all have the choice. We have the ability to create these lives. So why the hell not? Why are you selling it? I'm curious.

Oh, why am I selling it? Yeah, that's good question. So I'm keeping a little bit. I'm building a house.

Okay.

But first of all, someone made me a great offer.

Can't go wrong.

And I honestly want to focus on acquisition 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.

Looking them back from Argentina and let's.

Look at the world. Yeah, let's look at the world. The world changed 18 years ago, there wasn't legal cannabis, there wasn't microbreweries, micro distilleries, non alcoholic alternatives.

True.

The competition for vice, if you will.

Yeah.

Has quadrupled. Literally quadrupled.

Yeah.

And that's hard. It's noisy.

It's a good point. Yeah.

And the other thing is, I hate to admit this. I'm getting older. I don't enjoy drinking as much as I used to. I drink.

I turn 40 and I'm already feeling that same way.

Right. So, I mean, I used to love it. And I'm like, yeah, I might have a glass or maybe I won't tonight. And it's hard to go to your own wine tasting and say, I'm not gonna have wine.

Drinking water.

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.

Build a lot of community.

And that's it. And I, and I knew that right when we first chatted and you told me about the dinners and I think I missed it by a week when I went to San Francisco. I was bummed.

But hopefully coming up, we'd love, we'd love to host you.

Cool. Thank you, John. Yeah. This is, I mean, it's infinitely fascinating because honestly, I kind of purposely went into this without knowing all the details of search funds and just what's possible. Definitely your Delphi helped answer a bunch of questions for me. But I'm going to go to it even further now.

Please.

Yeah, I mean, I'll make sure all the links. So you listening, watching? It'll be wherever. Description, show notes. Yeah. And check out John's Delphi. But how do they contact? I guess shout out your email and your website.

Yeah. John get Hound Fund or john@handofgodwines.com either ones works. And you know, I'm anytime. Well, anytime with my avatar, for sure.

But this is super fun. I, as you can tell, I'm passionate about this.

Definitely.

And I think it's really fun when the light bulb goes off for people when I'm talking about it.

Yeah. Yeah.

Because you know, when you're out trying to explain something and you're suggesting people might want to invest, there's always going to be reluctant, like, how could it be that good? Or why would it. How can you. Lots of objections. Sometimes they tell you the objection, sometimes they don't. But when they finally go, oh, okay, it clicks. I got it. Yeah, that's very gratifying.

Got it. Well that's and I would urge yeah everyone go to go to John and that's J O N so make sure you know, not throwing an H in there in that email but have the voice conversation with John sounds just like you. It's awesome. And that's what I'm going to honestly go do and just like because in terms of investing, you know, there's a lot of places to put our money and I'm not going to say tell you exactly where where to put things but you know, John's a pretty damn sexy option, you know, in what you're doing. Thanks.

Thanks Joe. It's so fun. Will, you and I are gonna. We're gonna keep, keep keep doing this and just help each other and let's keep sharing good ideas and if I can be helpful, let me know.

Cool man.

And let's always have fun, man.

That's what it's all about. So ahf.

Thank you.

All right, John, have a good one. Thank you.

Sam.