Buyers and Builders
00:15:51 · Mikk, Cyrus Hessabi
[00:15:51] S0: Okay. And if we sum up your journey so far, number one, engineer, then sales, then VC, and now private equity, Shore Capital Partners. [00:16:02] S1: Right. Engineering, Keith, was my educational background, but yes. Correct. [00:16:07] S0: And what is your role now? And how have been the first weeks, months? What have you been doing? And what's the plan for the next, say, six to nine months? [00:16:20] S1: I work on a team at Shore that supports searchers, so people who are looking to acquire business. There's two kinds of searchers that, you know, I would work with. One is searchers looking to, you know, go after a roll up strategy, doing a buy and build strategy in, know, various niche services sectors, typically businesses between 1 to 10,000,000 of EBITDA in an attractive fragmented services sector with, you know, ideally some supply demand bottlenecks, you know, various demand drivers. You know, we can get into how to how we kind of divisions these things, but that's kind the high level. And of course, some traditional search as well, which doesn't necessarily have to be a roll up, but more kind of buying an attractive business and growing it through other means.
00:17:06 · Mikk
[00:17:06] S0: Hey, another quick pause from the podcast. AI is great, but every single business still needs a newsletter. And if you're running a company and you don't have time to do all that, you should maybe outsource this. And that's where today's sponsor comes in. Spacebar Studios. They write weekly, monthly newsletters. They do all the research. They put together all the content and they hit send. And the best part, they are masters at growing the list. And currently they are running a very special offer where you will get 10,000 subscribers in the first ninety days or you don't pay. So if this is interesting, go and talk to David and Brandon. They are the founders of Spacebar Studios. Again, proud sponsor of this podcast. If you want to have a call with them, go to spacebarstudios.co/ inquire and book a pre call with them. Now back to the episode. And now as it's still pretty fresh roll for you, what would you say those early because you've seen so many different industries, there are not too many people with background like yourself and you having this many people have this gap in between of those different industries. You don't have it because you understand and you are this bridge. So my question to you, what advantages do you feel it gives you all your previous background now when it comes to backing those searchers who maybe want to acquire different businesses in this one to ten million EBITDA range?
00:18:49 · Cyrus Hessabi
[00:18:49] S1: I think there is everything in the trade off, right? There's some advantages and some disadvantages. So if we keep it on the advantages, I think the main advantage is probably, and probably will be allowed unconsciously every day, but it's probably just like a broader set of references that you can draw from when you think about how, you know, what how to execute on a great deal, you know, or what are the different value creation areas when we're considering backing an opportunity and, you know, looking through its growth avenues, looking through its transformation avenues, basically looking at a SWOT, you know, look at a SWOT matrix, right? Strength, weakness, opportunities, threat. I think it just helps you cover more points in that matrix overall. You know, I think for a lot of the businesses I'm looking at today, the AI risk is significant for some of them, right? And I think it helps to have had some experience thinking about, you know, what exactly is the bridge from, you know, narrative to reality, either if someone is pitching an AI value creation path or if someone... Or if we're trying to assess the true threat that AI might might pose. Like, for example, you look at a health care staffing business, and you might think, oh, AI is gonna come tomorrow because AI is so good at matching people. But then you have other considerations, right? Like, do people really wanna adopt it? Net of all things. Does it integrate with kind of existing software suites and the difficulty around that? Or, you know, what what would... How much data do you actually need to train this to have a proper matching? What are the consequences if your matching doesn't work? I mean, I'm kind of giving you an example on the fly here. My point is it helps to have had, like, this sort of background for that situation, given its relevance. Right? And then for example, I think the other thing I'd say is, I think a lot about sales, and like how to build a winning sales organization, how to, you know, what drives people to buy. You know, think you generate your IRR every time one of the company's salespeople is in a room and select, right? That's literally how you generate your top line. So just thinking about that, but I think there's also disadvantages, right?
00:20:59 · Cyrus Hessabi, Mikk
Because sometimes it means you're over complexifying thinking about many things that might be too far out of scope or, you know, I think at some point depth triumphs over breadth on some things. So I think it's it's kind of a balanced stick, but I certainly like having that bridge background because I think it's defying you for so long now. [00:21:18] S0: You mentioned this AI risk. I think it's interesting. Maybe we can go more specific, because thanks to your experience, you see things which many other investors who back searches don't see. So what else? You mentioned one thing is the healthcare staffing industry. What else? What do you see? You look at different companies, different industries. You see like, okay, here is a big, like, could be a red flag in the future. [00:21:44] S1: Yeah, for sure. So you're thinking about what, where is the biggest AI risk in terms of job growth? [00:21:50] S0: You have people coming to you with with deals, some things under LOI, for example, and you immediately see that, okay. It's too risky. And you go back to your team saying, okay, guys. We should maybe skip this one and and move forward because of x, y, and z. Maybe you can give some examples, or how do you think, how do you view these opportunities?
00:22:09 · Cyrus Hessabi
[00:22:09] S1: But, you know, I'll tell you this. I don't know that many examples where we said no because of AI risk per se. AI is usually... I don't mean to be cheesy or kind of, you know, setting a narrative, but the I think in many cases, it's more a consideration and an opportunity set versus a risk per se. It's more, okay, this is how... This is what we should probably implement in this business to keep it competitive and and even do better versus, okay, okay, don't go there because we're asking to replace everyone, you know? Unless you go into some specific businesses, but they have already underlying poor economics, right? I don't know, you look at a low margin call center, we might think, okay, labor's in, you know, there's too much labor intensity, or some people have tried automating their call centers like Klarna, and then they have to bring back humans. So I have some, you know, there's maybe these types of considerations, but more often than not, the AI piece, we're looking at something like, I don't know, I was looking at some, like marketing automation services. I think there you have a lot of AI opportunity as well, right? Matchmaking, campaign generation, Copilot for creativity. I think more often than not, it's can you easily leverage a solution that exists off the shelf and bring it to the business? Much like in the past, PE firms might think, you know, what's kind of the best ERP or the best CRM I should implement in my business? Here's kind of what is the best AI strategy I should bring in versus saying completely backing out of industry just because of that. Yeah. That's just from my my own experience, my memory today. I'm sure I'm sure there's industries that missing in my examples.
00:23:46 · Mikk
[00:23:46] S0: But what else when it comes to it's interesting that you said that you see those opportunities, many maybe won't again, because based on your experience, has there been any deals or, yeah, deals coming to you where you see immediately that, Okay, this is it's like screaming how good of an opportunity it is if we implement AI in what they do on day to day basis. And that will be the value add.