00:13:07 · Giuseppe Balzano
[00:13:07] S1: Well, let me say something on the cofounder. As you know, it's super important. You know, as as an investor, the the the first reason why the companies I backed ended up failing or the project were not delivering the best results is because of a fight between cofounders. You know? So having experienced that many times, and honestly, not having someone, you know, close to me ready to to embark in a in a twenty, thirty, fifty years journey, I just said, well, you know, why not? Then a couple of days ago, an investor of mine sent me a guy from Yale, and, apparently, the the solo solo founders, ETA, performed better than than partnerships. I I need to review the the document, but it was surprising. So I think there is an element of being forced in some way because of your biases and experience and the situation. There was no one to do business with. And, clearly, I was not going on the market looking for someone. We're not hiring anyone. You know? I'm not looking for anyone. Here, this is something to be built together. You know? On the on the second part of the question, this is a lonely, difficult job. You know? You have to deal with investors, with partners, you know, like you. We're having a nice, you know, interview. Maybe it can be helpful for other people. And I need to to do seven, eight, nine company visits per week. Italy is very difficult because logistics is not the best, so you just have to drive. I'm not buying software, so I cannot just have a call. And and these people are 80. They don't fully understand, you know, what is Zoom or Google Meet. You know, they just want to visit you and and see you and have a lunch together. Know? So it's very time consuming. Now I'm in a coworking close to a company I visited two hours ago. So I think the kind of materials and and data points I'm looking for are two. One is real experience. So luckily, I have hundreds of people I speak to. Hundreds. These are all coming from my previous, you know, club deals and other, you know, other founders, other LPs, other GPs. So my network, I would say. And I try to ping them every time there is a there is a chance. Maybe there is a deal I like. Maybe there is a question I have on the market. Maybe there is a governance issue, which could be the case, you know, sometimes. And you want to ping the right people. Okay?
00:15:41 · Giuseppe Balzano
So this is a real experience, and, luckily, I'm I'm very full of senior people that can support my journey. On the other side, it's more, as you said, these quick and dirty, you know, data points, and maybe, you know, in a given day, you have 30, 40, 50 ideas, you know, coming from a leading, could be blog... Blogs. I have subscriptions to all the the holding, you know, roll up and and value investors kind of news... Newsletters. And maybe, you know, out of 50, 60 ideas, 59 are not interesting. You know? But there is one or two sometimes that that I like. At that point, what I do is to forward the email or the tweet or, you know, the interview or whatever to another email I have, which is a personal email that has a label with the with the object saying... The the subject saying, you should you should read this or you should listen to this. So I have a warehouse of of interesting material that I can, you know, consult when I have time. It can be, you know, at night or on a train or when I drive, you know, I can listen to podcasts or to interviews. It's very easy that I can just, you know, pull pull and and and and use. On the other side, you know, this is not time efficient. You know? Maybe you you need an information on one specific company, and the only way to form an opinion is to spend five hours straight on that article or on that, you know, numbers. Of course, you do that. I think it's part of of your job. I think as a CEO and founder, but more as a CEO, I think our two responsibilities are to set the direction, like deciding to go north, east, you know, twenty degrees, twenty five, and find people that can do the job better than me. These are the two most important jobs. And on the second, there is an annex. You also should be able to convince these people to stay when when they realize that they are the one leading the boat, you know, that you decided to direct maybe in one direction. You know? So it's a matter of finding the incentives. As someone said, you know, show me the incentive, and I will show you the outcome, and I will tell you the outcome, and and and finding the right direction. I think with this combo of industrial engineering heavy Italy SMEs, I think there is something here. There's a big thesis. I think we can we can make money. We can do a successful business without any issue. So the risk is more on the execution side.
00:18:17 · Giuseppe Balzano, Mikk
So what I'm doing now is to spend a lot of time with people that can join the company for the future and understanding the personality behind the the the business profile. [00:18:29] S0: Can you talk about the two acquisitions you've done? Because you mentioned like you've done... You've seen like 1,300 companies. That's a lot of companies to choose from. So these... And based on your experience and what you want to build and all that, there are some specific criteria. And could you please elaborate of why those companies and what those companies are doing?
00:18:50 · Giuseppe Balzano
[00:18:50] S1: Yeah, absolutely. So these are two engineering companies. So they do little components in two different fields. One field is the pharmaceutical and food. I don't know if listeners are aware, but Italy, of course, as food suppliers, you know, I think it's it's easy to to to to assume. But from a pharmaceutical point of view, Italy, Germany, and Switzerland are very important exporters. So we have big supply chains of of suppliers in in the same field. You know? So this specific company is a company doing one component that goes in the machines, in the machines with which the pharma and food companies make stuff. Could be a drag. Could be some pasta. Could be something else. But in these big, you know, lines of machines, there there are some components. I'm not gonna deep dive on on which com... Which component, but there is one component that is critical for checking the quality of of the products. And the company we found is the only one active in Italy doing one specific niche of a niche in in both supply chains. So they are solving an issue for both kind of companies. It's interesting because it used to be different. You know? Fifteen, twenty years ago, maybe there were 20 companies like that. But little by little, they became maybe distributors or commercial branch of big companies, or maybe they just went out of business, which is something that in in Italy happens very frequently. I I don't have the stats, but, you know, in in the order of hundreds of thousands of companies shutting down every year, you know, and sometimes it's because of, you know, a second generation transition happening. So now this is the only one doing what what what we want... What we wanted to do, so we are gonna buy it. The second company is in a completely different space. It's in the agospace, avionics, agospace, to not say anything more. And and they do a little component as well. So imagine helicopters or airplanes. You have a lot of commands. Maybe there there are buttons. There are levers. There are valve bolts or little pumps or, you know, indicators or lines. You know? There are many stuff. One little component, these guys have the monopoly. They have the monopoly in in the European market, and it's big enough and niche enough to be interesting. Because when you put together avionics, helicopters, and planes, you want to have some sort of sovereignty.
00:21:42 · Giuseppe Balzano
So, you know, the Italian companies hopefully will not buy some other contents, especially in this decade, I would say, unfortunately. So it's important to have someone in your continent that you trust, you know, to do this component. Without the components, there is no flight. So they're not gonna... They're they're gonna leave land, and they're not gonna work. So it's either you buy from me, us, or you decide to put something which is critical for the success of your flight, as you... And you and you can imagine, you know, what kind of flights, you know, could be civil or not, in the hands of someone else. And and the question then is, who is the other person? Who is the other company? What kind of interest that the company has? Who's behind? You know? So it's it's a sort of regulatory macro kind of defensibility. On the engineering side, it's not... They don't have they don't have an IP. They have 700 IPs, so they have a class of IPs for different applications. But it's important to notice that there are two, three other companies in the world that can do the same stuff. So the same application with different IP. So it's... Technically, we have competitors. But that kind of component with that design, with that use case is not gonna be the same in another company. So then the question is, if you wanna change your supplier, are you ready to change 20,000 helicopters? And maybe you you have to to to buy the component from another, you know, country. So this kind of stickiness, you know, is what I'm looking I'm looking for in the in the companies we buy. Third acquisition is a... And first strategy for me in another sector is in the water management. And the water management is another industrial company. They do a system, okay, that can be used for, you know, managing to to create some pressures in the in the water system... In the... In water systems in a way. It's like a mix of a of a pump and a filter that can do that can do two kind of jobs depending on on the application... The final application. Hopefully, we have this company. Maybe for for the next interview in in in some years, I will tell you if we ended up buying it. But for now, there is an exclusivity, and we are trying to win the deal.
00:24:24 · Mikk
[00:24:24] S0: What is your approach when it comes to post acquisition, having been working the VC firms? VC firm, you have to grow those companies reasonably aggressively. So what is your approach now when it comes to improving and growing those companies organically?