00:12:44 · Ramsey Sahyoun
[00:12:44] S1: So the first acquisition we did was company, Wolfe Consulting. It's a company we bought on 12/31/2017. That has been a just incredibly successful acquisition. I mean, I think we've grown earnings of the business four times or something like that. And we bought it at a reasonable price. And it's just been like, you can't draw a better first acquisition. We also made some mistakes in the early years, like we a mistake we made in the first year is we tried to roll up a few smaller MSPs under a single platform in a certain region. That was kind of in the middle of twenty eighteen, I think is when we started that. So on one hand, we did this amazing deal with Wolfe Consulting. It was off to a good start. We'd done a few other deals in kind of the decentralized model that went well, but we tried this kind of more of roll up, what people kind of traditionally do, where they integrate these companies under a single brand. But it just went horribly. And we can kind of get into what... You know, why that was. But it it really reinforced our belief in decentralization. We always believed in decentralization, but we got kind of excited by this opportunity to roll up small MSPs under under a bigger platform. And it didn't go well. And that really reinforced, hey. It's interesting. Like, when you see one business going super well and another business in the exact same industry going not well, like it it does, you can draw a lot of conclusions from that. I think we did. Thankfully, we we kept buying companies aggressively in the in in the MSP industry. Like, we didn't let the challenges with that one business, you know, keep us from believing in the industry and believing in the in in the thesis, and we could have at the time. So I'm I'm grateful that we didn't. Perhaps that was a benefit of being twenty twenty five or 26 years old is you just kinda stubbornly keep going. But... Yeah.
00:15:12 · Mikk
[00:15:12] S0: So what went wrong if if you compare those? You had this decentralized model working working extremely well, and now you're trying to do a roll up. Like, can you share more details? Because I think that's that's a big one for for folks listening.
00:15:25 · Ramsey Sahyoun
[00:15:25] S1: Let's see. So I I think the the main... Like, the overarching thing that that went wrong is, and this applies generally I think when you roll up companies at least in the MSP industry, is you lose customer intimacy and service quality degrades because you go from if you're a customer of a small business, you go from being serviced in a way that you like with that small business to your relationship changes to someone at corp... The corporate office who doesn't know you, who doesn't know your business, who's less responsive because they've got a lot of things on their plate, and who oftentimes is more is more junior in the in the organization. So you kinda lose that customer intimacy, that high level of service. You know, MSPs are trusted technology advisors for small businesses, so they're helping them with what tools should I be adopting? How do I keep myself secure from cyber threats. When something's broken, I need it fixed quickly. So you just lose a lot of that when you centralize certain functions in a single corporate office that isn't as close to the customer, so that's what happened there. One kind of interesting thing we observed is that all the branch offices thought they were doing great. Like, the numbers were good, like profitability is good, but the corporate office, this one corporate HQ, was doing terribly. Like it was just absorbing all the cost. And so you had this crazy thing where the business wasn't doing well, but all the people at the branch offices thought they were doing well because it was just you know, they they were doing their jobs, but there was a bunch of costs that they couldn't even see, no visibility into that were being absorbed by corporate. So, yeah, I mean, these these are just classic things. We see a lot of roll ups in in our industry, and and by and large, they they struggle to grow organically. And sometimes they shrink organically pretty meaningfully. And it's it's always due to that loss of customer intimacy, which drives up churn. And and then there's there's all these kinda costs that corporate absorbs, and then there's bureaucracy, and you're just less responsive to the customer. And and it doesn't work. So we we learned that lesson in 2018 and have thankfully taken it to heart.
00:18:07 · Mikk, Ramsey Sahyoun
[00:18:07] S0: And how quickly were you able to pivot, change the strategy? [00:18:11] S1: It wasn't really like a pivot. It was more like, Okay, we'll never do that again. For the most part, we were doing what we've always done, which is buy companies, operate them independently in this decentralized strategy. We tried this other thing over here of rolling up these companies, and it didn't go well. So it was more like just don't do the... Don't do, like, the typical roll up and just focus on the the decentralized strategy. So it it was more of, just don't do that again and less of, like, we have to pivot our our whole strategy. So that was good. [00:18:50] S0: Now let's talk about sourcing because I was posting on Twitter that you're coming on, and I I received quite a few direct messages. People wanting to know the sourcing part. Yes, now you have the San Francisco HQ of 40 plus people mostly focused on sourcing and deal execution. But how was it when it was 2018, 'nineteen, 'twenty in early days based on your background?
00:19:16 · Ramsey Sahyoun
[00:19:16] S1: Yeah, yeah. Really was just me until kind of the tail end of 2019, which is when Sidney Hathaway came on board, who's now a VP here. But yeah, it was just me. And yeah, we had some interns that would support in like the research and identification. I think now a lot of this stuff you could automate with AI and, like, web scraping tools and stuff like that. But back then, we did, I think, more old school, like, Googling, like, managed IT services you know, Los Angeles, and you you kinda build your list that way, you try to find who the owner is. And we had goals every week as far as how many companies are we adding to the database, how many qualified companies are we adding to the database? How many outreaches are we doing? How many introductory calls are we having? And I I... It was just all me doing that. And then, yeah, I mean, I would talk to, you know, 10 business owners a day. It's gotten harder to get in touch with business owners now as as as the space has gotten more competitive. But back then, you could kinda send just massive amounts of emails and get pretty good responses and and and talk to people. So that was what we did, and and we've kinda scaled it from there. But I think because that was really the core of my job for the first couple years at Evergreen, and I I still do a lot of sourcing today. Like, I I I think that's that's shaped that's shaped us and that we just value sourcing tremendously because it's the thing that gives us the opportunity set to choose from, which is how we're gonna make good investment decisions. And I think a lot of people just don't do the dirty work to find opportunities. It's hard. You have to, like, know, beg people to talk to you. You have to you know, it's just scrappy. And it's a lot easier. I think a lot of people think it's a lot easier to, like, you know, just get a nice prepared book from an investment banker talking about a company like, that company is ready to sell and like all the numbers are cleaned up for you and everything like that. Well, it's like if that's your sourcing strategy, like, you're gonna pay for that. Like everybody else is looking at the exact same information, so you're not really getting a differentiated opportunity. And we've always believed that you can hustle. And if you roll up your sleeves, you can get opportunities that, yeah, that other people don't see.
00:22:04 · Ramsey Sahyoun, Mikk
And today, I think 80% of our deals are are proprietary. So, you we're we're just getting... Yeah. We're we're we're seeing opportunities that that other people aren't aren't seeing, and we're doing that because, you know, we were... We work to do that, and we we don't just kinda sit and and let deals come to us. [00:22:27] S0: Do you still do some of those calls yourself today just to make sure you're not forgetting the the skills? [00:22:32] S1: Oh, yeah. Definitely. Definitely. Yeah. There there... There's a lot there's a lot of people that I talked to, you know, years ago, 2017, 2018, that, you know, they still haven't sold us our business, but I've developed a relationship with them. So a lot of that... I I I do a lot of that. It's a good chunk good chunk of my time. And, yeah, I I love it. I love talking to business owners even on that first initial call when they might not be ready to sell. So, yeah, it's it's a significant portion of my time today, and I I think it always will be. [00:23:07] S0: What is your take on... You've said something previously when... Like now you have this database of 15,000 MSPs on your like the list of companies. And you've said something like not people are not giving themselves an option, which now you have this huge list. What I'm trying to understand is how has it grown over the years and what you see people why they may be making these mistakes of not giving them enough database to choose from when it comes to great companies, and how has it changed over over the years for you?