In this episode of the My First Million podcast, hosts Sam Parr and Sean Cannell profile Mark Leonard, the reclusive founder and CEO of Constellation Software, a $31 billion public company that has quietly built a massive empire by acquiring small, niche‑market (vertical) software businesses. Leonard’s background is largely unknown—no public photos, sparse biographical details, and a quirky self‑described résumé that includes roles like bouncer and wind‑energy researcher. The conversation explains how Constellation’s strategy differs from traditional private‑equity roll‑ups: it targets very small companies (often $2‑$4 million in enterprise value), holds them for the long term, and lets the existing management run the businesses. By focusing on vertical software—applications tailored to specific industries such as golf‑club management, healthcare, public transit, and legal practice—Constellation enjoys high recurring revenue and low churn. The hosts discuss the firm’s impressive financial trajectory (from a $5 billion market cap with $1.2 billion in sales to a $31 billion valuation), its disciplined acquisition cadence (10‑20 deals per year), and its unique executive compensation model that mirrors Berkshire Hathaway: senior managers receive a large after‑tax cash bonus, which they must use to purchase company shares held in escrow for four years, aligning incentives with long‑term value creation. Leonard’s annual letters, likened to those of Warren Buffett and Jeff Bezos, reinforce a simple, consistent principle‑based approach that the hosts view as a key to the company’s success. The episode also touches on the challenges of finding capable operators for such a decentralized portfolio, underscoring the importance of thoughtful incentive design.
Chapters
guy's like a Satoshi Nakamoto of boring businesses.
So Sean put this on here as Billy of the Week. His, his name is Mark Leonard. You want to explain the background?
We sometimes do this Billionaire of the Week. So the Billy of the Week is Mark Leonard, Constellation Software. So I had heard about this from a few people because, uh, they do something that, you know, we've had Andrew Wilkinson on here and he buys internet businesses and sort of has this conglomerate of sort small internet business that he's collected that are now, you know, let's call it $100 million worth or maybe a little more, a little less. And that's a fantastic success. So this guy Mark Leonard did that like he's Andrew's daddy, you know, like he, his company's worth $31 billion. What they do is they buy software companies and they roll them up sort of and they're, they try to be a perpetual owner. So they're not like, they're not private equity where they're doing a leveraged buyout and trying to flip, you know, cut it, skin it and flip it or whatever. They tried to just own the thing for a long period of time and have the cash flows. And so what I like about this guy, what I thought was cool, was this guy's like a Satoshi Nakamoto of boring businesses. So he— nobody knows shit about this guy. You can't find a photo of him.
Wait, what's that reference? Is that the Bitcoin guy? Yeah, you just don't know a lot about him. All right.
Yeah. So this guy, you can't find photos of him. He doesn't do public appearances. He doesn't really talk. He writes his annual letter. And, you know, but so I was reading like kind of the definitive thing about him because I wanted to learn. And it's like, all we know is this guy's born in 1956, maybe in South Africa, maybe in England. And I was like, what the fuck? We don't even know where this guy's from. And, you know, he wrote on his bio, he's like, he was a VC. But before that, he said, I was a banker, evaluator, a mason, a gravedigger, a dog handler, a bouncer, a sapper, and a wind energy researcher. I particularly enjoyed the bouncing, but an early retirement was necessary. So I love it that I don't know anything about this guy, but what he gave me, I love. Um, and I think half of those are like a joke, but here's their business. So they buy in the early on, they buy, they bought businesses that were, you know, $2 to $4 million acquisition targets.
So very small acquisition, which is, which is on paper, you would say that's asinine. Why on earth would you ever do that?
Yeah. Chump change, you know, okay. You know, small ball, but small balls turn into sort of big league returns. And so, you know, this data is out of date now because when the article I was reading was like, hey, this guy has, you know, done really well. They did last year, they had $1.2 billion in sales, 20% margins. They're doing 10 to 20 acquisitions a year. And at that time, the market cap was $5 billion. I looked at it while I was reading the article. It's now $31 billion.
And so if you just invested in these guys, they have a $31 billion valuation and only $1.2 billion in sales.
That was the old one when they were at $5 billion market cap. Now they're at $31 billion in market cap. So, you know, if the ratio sort of held, uh, held the same, it'd be whatever, $6, $7 billion in sales. We can, we can see what it is now. But, um, I love that this guy's mysterious. I love—
dude, it's only, it's only, it's $3 billion. Their sales were only $3 billion. It's a lot of money, but that's a— they got a good little—
I wonder, I wonder why it's been on such the run-up, because you can see the stock chart is like, you know, it's going up like crazy, and then they can use that money for, for acquisitions. Um, And this guy, he writes these annual letters that are actually pretty interesting. So like, if you're like me, you— I like to read Bezos's annual letter. I like to read Warren Buffett's annual letters. Um, this guy is a new one I'm adding to the sort of arsenal of annual letters. And he has lots of really interesting sort of views on business, none of which are like totally groundbreaking, but he does something that I think most people fail to do, which is the same thing Warren Buffett does, which is take a very simple principle that everybody would nod their head and agree with and then like actually stick to it and do it for like 40 years. And that's like a winning formula. Most people, you know, nod their head and then go do some other shit and they get their lack of discipline and lack of focus. And so I also like, you know, I was trying to read a little bit more about the company and, you know, they have sort of a focus on what they call vertical software. So they'll go for like within one vertical, sorry, they looked at it, they said, hey, some companies are horizontal, like a Slack. Every company can use Slack as a messaging service, and Slack will be a multi-billion dollar company. But what about all these vertical things that are like better software or specifically tailored software for, uh, you know, what if you're a golf club and you need to manage bookings, tee times, memberships, and whatever else? Every golf club, you will pretty much use whatever the best software is, and they'll pay for it every, every month reliably, and they'll never churn. So they'll buy like that Clubhouse software, they'll buy healthcare software, public transit software, law software. And that's been their focus. I don't know if that's changed over time, but when I was reading about them, they try to consolidate vertical market software, which I thought was a pretty interesting approach. What do you think of this guy?
So I love it. I'm reading about what you have here. So I, I love doing these things and I love that what, what he's doing. And I actually, I'm going to bring up a different point and I don't want to address it. Yeah. Uh, but I wanna, uh, ask your opinion of it in a second, but more so what I'm interested in is, and I, I don't wanna refer to like things I tweeted, that sounds super lame, but I was tweeting earlier about how I hired an operator. So basically Adam Ryan works at the company and he kind of handles a lot of the operational stuff. And I work sometimes down in the weeds, sometimes high up above revision stuff. And, uh, it's hard finding someone who's competent to run a business.
Yes.
And so if this, if this guy, if, if he might have— does it say how many companies he has? It could be like 200, right?
So I don't know if their model is that they keep the existing management or if they replace them. I'm not, I'm not 100% sure what they do. I'm sure there's some, some mix and blend there. Um, one thing I saw that was interesting was, uh, so they, like Berkshire Hathaway, the execs of the companies do not get share options as their compensation, which basically, you know, um, incentivizes you to just boost the share price as much as you can, which is often somewhat short-term. So instead they take, you know, 75% of their after-tax bonus and they can buy shares on the open market. And then those shares are held in escrow for 4 years. So if the shares, if the stock is overvalued because they are sort of temporarily pumping, you know, enthusiasm, energy, or doing buybacks or whatever, they're buying overvalued stock. And so I don't know if this is perfect because Maybe the other thing happens where they actually, you know, when they're about to buy, they sort of, you know, bad news dips the share price temporarily. They could buy it on the discount. So I'm not sure if any incentive system is perfect, but I thought it was interesting that they've thought through how should we compensate everybody and not sort of follow the traditional playbook. So I want to dig in more. I've only just scratched the surface of this guy. I think there's a lot to learn here, but I wanted to bring it up because I think it's very interesting and I like that he's sort of mysterious character. I think that adds to it.
