Buyers and Builders
00:03:35 · Mikk, Felix Jander
[00:03:35] S0: let's get into this. How was the you mentioned, okay, you were looking at VC firms, tech startups, then search funds and then eventually roll ups. So what was the process and the thesis there? [00:03:48] S1: Alex and I, we were coming out of this venture bubble, right? Contravo was VC financed I think by Project A, Creandum, some other larger funds I don't recall. And so that was kind of where we came from. So obviously we started ideating also around that but at some point we figured like dude we actually are not so much into this like hyper growth and finding product market fit and also this kind of hiccup growth so to say yeah you hire a lot then then you size down again because of the burn rate and then you go again with the next funding round and so on. So we wanted to do something more profound something even more boring so to say so we didn't go after something fancy right and that's how we got more involved with German Mittelstand so SMB businesses and especially search funds. And back in the days I was talking a lot to Tobias Reber who also was one of the first search funders in Germany. Then together we started looking more into smaller segments because we even figured with these 2 or 3,000,000 EBITDA companies it's a crowded space as well you have like small cap private equity funds family offices and the likes going into it and that's how we went into smaller segments and then started developing around okay let's consolidate something yeah and build up a group of companies.
00:03:48 · Felix Jander, Mikk
[00:03:48] S1: Alex and I, we were coming out of this venture bubble, right? Contravo was VC financed I think by Project A, Creandum, some other larger funds I don't recall. And so that was kind of where we came from. So obviously we started ideating also around that but at some point we figured like dude we actually are not so much into this like hyper growth and finding product market fit and also this kind of hiccup growth so to say yeah you hire a lot then then you size down again because of the burn rate and then you go again with the next funding round and so on. So we wanted to do something more profound something even more boring so to say so we didn't go after something fancy right and that's how we got more involved with German Mittelstand so SMB businesses and especially search funds. And back in the days I was talking a lot to Tobias Reber who also was one of the first search funders in Germany. Then together we started looking more into smaller segments because we even figured with these 2 or 3,000,000 EBITDA companies it's a crowded space as well you have like small cap private equity funds family offices and the likes going into it and that's how we went into smaller segments and then started developing around okay let's consolidate something yeah and build up a group of companies. [00:05:08] S0: What are your thoughts of, okay, acquiring companies, reaching out to people? Let's talk more about the human side and what were you actually doing when it comes to sourcing, writing those letters and overall the sourcing phase of you building this roll up?
00:05:24 · Felix Jander
[00:05:24] S1: So when we first started, we had like a list of 60 niche segments like boring niche industries in German. So we had things from orthopedics to logopedics but yeah also to occupational medicine. So we were looking into different small niche segments. And so the first let's say two weeks or three weeks was more like broader outreach. So we did some cold calls yeah and and after narrowing down this long list of 60 segments to let's say three four five segments that we found specifically interesting and then we got deeper into it and then we started out reaching specifically to associations in the market. There's like these SMB associations where we started reaching out to the presidents of these associations. Then we also started just cold calling owners of businesses so we get kind of feeling for financials, how they think about valuations. We also started just meeting some of them and we were pretty much honest. So our pitch was look, we're two guys from Berlin, we're entrepreneurs, we want to start something in your industry. We're still not completely sure about how it's going to look like, but we might build up a group of companies. Are you interested in talking for half an hour? And that got us like 10 meetings. That's how we got a feeling for how many companies are there in the market, how their financials and margins, how willing are they to sell at what price and so on and so forth. So that was like the weeks three to 10 let's say.
00:06:52 · Mikk
[00:06:52] S0: When it comes to the actual outreach, did you just sat down and set like specific goals? Because myself, like a lifelong salesperson. And when I was just doing an podcast episode with Ramsey, the co founder of Evergreen, they've done so far 160 acquisitions. And they said that when they first got started, he reached out to those individuals who have who has been doing outsourcing for living. And they really got the process down to the number, how many calls they have to do. And then it's very easy. You just wake up in the morning, you have your breakfast and you just go to the office and you just start calling and meeting with those businesses. Did you have any sort of data you were going after or you were just
00:07:38 · Felix Jander
[00:07:38] S1: Actually trying we did. Get Yeah, actually we did. So after like I mean what I now mentioned is like the first let's say twelve weeks yeah or ten weeks where we started with ideation and deciding for market. After that we had pretty much settled on let's look deeper into occupational safety and medicine And that was also the phase where we kind of we set a goal where we sat down and said look if we want to be successful in this and especially at fundraising we need two to four deals in like twelve months in time. And so we sat down and calculated a conversion of 1% I think and calculated like how many letters and how many contexts do we need to make in order to achieve this number of deals in twelve to eighteen months. And that's actually how we did it. We send out like the first few batches were like three to 400 letters. So meaning 1% conversion is like three to four deals. And that's also what we did. So we put a of work into these letters because you only have kind of one chance of contacting them first. Together with working students and interns we let them research like literally anything about the company. So we crawl their website, we try to find newspaper articles and so on that when we wrote the letter it was very specific. Look you opened two new locations this year. That's very impressive or it's very interesting you have five employees in occupational medicine and you grew your part of employees in occupational safety that might be a good fit to us. Very specific to the information why this specific company was relevant and I think that in the end also made it so successful. So after repeated outreach we over the years this is now a bit blurred number we had up to 80% reply rate depending a bit on the cohort which is super rarely seen. Mean myself I come from sales and there a good reply rate and cold outreach was like 2030% max. So 80% was unseen but it's also proof of how diligently we were writing to these entrepreneurs and how diligently we were also following up on it. So every time we were in let's say Karlsruhe we called up this one guy who was in Karlsruhe and told him look we're there we have spontaneously time for some coffee, can we meet? So that's also part of the work which goes into that reply rate obviously. But to your actual question, yes we did.
00:10:03 · Felix Jander, Mikk
We sat down and we set us a target like two to four years within twelve months and that's how we calculated backwards how many letters and outreaches we want to do. [00:10:14] S0: 80% that's remarkable. [00:10:15] S1: But that's only after three years right? It's not in year one so it adds up over time. Then you write on christmas cards and so on and then every time you write, you get another response, obviously. You should just not be too annoying. Don't know how you did it in sales. [00:10:32] S0: No, sometimes you are annoying, but I think if you put in the effort, people appreciate that. The answer will be no, but they will appreciate that. [00:10:37] S1: Yeah. And I think also if you notice that people are kind of at that point where you get on the nerves, yeah, you should also let them alone. Yeah. Not push further once they told you, look, it's not the right time. Then give them half a year and then ask again if there's a good reason for asking again but that's also something I think we sometimes we do better sometimes we do lesser at but most of the time we kind of responded to that and let them alone for some time. [00:11:07] S0: And during the same time, did you do the same type of outreach to investors as well? Or how did you put it all together eventually?