Buyers and Builders
00:44:23 · Mikk, Mark Sinatra
[00:44:23] S0: Today, it's 2026. What have you done so far? Can you maybe share the investments, acquisitions? Because going through your website, there's... I can keep scrolling for a long, long time. There are a lot of different companies. Maybe you can share an overview of what you've done so far. [00:44:40] S1: Yeah. About 80, you know, we've supported and invested about 80 searchers through ETA. It's actually been more, about 35, companies. And and for, you know, the the companies that's really been, like, the vast majority of those have been in the last, like, I would say two to four years. So, you know, when initially investing, you know, invested in in cohorts or groups of of searchers really for the first year or year and a half, and then ultimately, the transactions that resulted from some of those searchers. [00:45:20] S0: Your partnership with Matthew, him being the investor, you being more the operator based on the previous experience. How are your conversations when it comes to what type of people are you looking for to pack? I'm asking this because you have this experience of, let's put it in this way, having a lot of scars on your back. You mentioned losing your hair. So, who are those young people who you're willing to, you bet your hard earned money?
00:45:52 · Mark Sinatra
[00:45:52] S1: Yeah, yeah, it's really interesting. So, the... I I would say the answer maybe is a lot of it stayed the same, but it's kind of shifted a bit as well recently. You know, as I mentioned, like, you know, searching in this market, it's never been easy, but it's a competitive credit market now. So there's such a premium and importance on breaking through the noise, standing out. I talk a lot about, like, what's your right to acquire, and having that be super, super tight, and having the skills to appropriately and effectively communicate that to your ideal sellers. So it's, you know, having a clear investment thesis, you know, I think the days of, and I would put myself in this bucket, like, the days of the opportunisticgeneralist searcher, you know, are numbered. Right? It's it's really hard to to have, like, more of an opportunistic generalist, you know, kind of playbook nowadays. I think the searchers that, we have seen, you know, been successful in in, you know, acquiring and getting significant traction in their search are the ones who are able to, you know, they have that clear conviction on an investment thesis, and it's more than likely, you know, an industry thesis, and they're going deep into that industry. So we, you know, we look for things and and it is tough, right? I mean, you you try to kind of assess, like, you know, the the kind of the the quality of that investment industry thesis, and is that something that, you know, we would get excited about to subjectively on paper, but then you also try to get a sense of, well, you know, does the searcher, you know, have the grit and tenacity for what I would call, like, I always like to call it, like, the Friday 5PM test. Right? So, you know, if if, you know, they... It's Friday 5PM, they haven't hit what they deem to be their weekly goal, are they gonna make five more cold calls? Are they gonna send out, you know, 10 more customized emails? Are they gonna do what it takes, right, to climb up the mountain knowing they haven't reached the peak yet, but they have the confidence to continue climbing because they know what they need to do day in and day out to ultimately reach the peak. So those are the the types of things. I mean, I think, you know, it's it's been, the whole journey is a sales process from the very beginning. You're selling yourself to investors.
00:48:58 · Mark Sinatra, Mikk
You're selling yourself to business owners, to brokers, lenders. You're selling yourself once you buy the business. You're selling yourself to your employees, to clients, to customers, then you're selling the business. So, you know, it's these things that, you know, you'd probably don't learn in, the classroom of, like, you know, business school, but, you know, really the ability to effectively communicate, sell yourself, market yourself, you know, is extremely important in this market. [00:49:38] S0: When it comes to underwriting those people, the companies they would like to acquire, if I say the word references, what comes to mind? What comes to mind? How much do you call to their previous partners? Do you call to their previous employers, colleagues? What is your thought process when I say the word references when it comes to the people you back, the companies they're trying to acquire, when it comes to underlying this this person you're going to back? [00:50:10] S1: Yeah. I mean, it's certainly important to to check references, and and that's something that, you know, we we do on on, you know, searchers that that we invest in. You know, absolutely, folks, ideally, it's, you know, the the last, you know, two, managers that they reported to, or people that they've they've worked with, But, yeah, I mean, it's very important to do that as part of this overall diligence process.
00:50:10 · Mark Sinatra, Mikk
[00:50:10] S1: Yeah. I mean, it's certainly important to to check references, and and that's something that, you know, we we do on on, you know, searchers that that we invest in. You know, absolutely, folks, ideally, it's, you know, the the last, you know, two, managers that they reported to, or people that they've they've worked with, But, yeah, I mean, it's very important to do that as part of this overall diligence process. [00:50:45] S0: I'm asking because, yeah, I've heard stories when some people are outsourcing this, and then there are the ones which doing like, taking extremely seriously, as seriously as they just fly on the other side of the country if needed to meet a specific person to have this conversation about the person they're going to pack. That's why I wanted to ask. [00:51:04] S1: Yeah, that's, I mean, it's very important. I don't think it's something that should be outsourced. It should be done ideally by the principles of, you know, the investment decision. [00:51:20] S0: Now, when it comes to, like, you have quite a lot of data. 80 investments, acquired 35 companies. [00:51:28] S1: I would like to ask [00:51:29] S0: a question about the ones which have not gone so well. When we take like three buckets, there is a person you backed, there is a company they acquired, and then there is these companies in a certain market or an industry. When things have gone not so well, what was the mistake from your end? Was it the person? [00:51:48] S1: Was it [00:51:48] S0: the company? Was it the market or industry?
00:51:51 · Mark Sinatra
[00:51:51] S1: Yeah. It's... We... You know, thankfully, we... We've had, you know, very few of those. But if I look at the ones that that have not gone well, couple reoccurring themes. One is the business faced just significant headwinds post close, within the first year, and for the most part, those challenges were ultimately driven, and were, from from people, and and, that it that it somehow impacted revenue, whether it was, you know, losing a top salesperson, which, you know, we we we saw in one case. Top salesperson left shortly after close, and, you know, the business wasn't able to effectively, you know, replace that that salesperson and that business that was lost. Another example would be if, you know, there's, some attrition, this is more of a health care related business, but, you know, some attrition post close that caused, you know, some loss of of customers. And, again, you know, the the business had a hard time, you know, kind of recovering from that. So then the question is, like, well, these things that that happened post close, what could we have done differently in due diligence to really identify that? And sometimes you just can't, right? At the end of the day, you know, there's a certain level of of some of these cases where it's really unfortunate, bad luck, bad timing, and and it's... At the end of the day, it it's kinda out of your control. But but that's where, you know, really kind of encourage searchers to... And it's tough. Right? Because when you're in due diligence, you've got your searcher hat on, set it around the company, get to the other side. Some folks will say, you know, they love searching and and, it's great if you do, but, you know, operating is really... Obviously, that's where everybody wants to get to. But you've gotta have to have your investor hat on too, and that's really one of the hardest things, I think, about the search, is when those points in time when you've got to make decisions, and maybe your searcher hat and your operator hat have... Oh, I'm sorry, your searcher hat and your investor hat may be telling you different things. And that's where leaning on and having conversations with, you know, your board, investors that you've built a great rapport with can be very, very helpful.
00:54:59 · Mark Sinatra, Mikk
So if there are things in due diligence that you pick up on, you know, keep in mind, like, you know, this is a business that, you know, you're gonna be running and and you have to to really kinda like just think as objectively as possible, because, you know, the toughest situation can be, I mean, it's one thing, like, if you search for a couple years and you don't buy a business, I mean, that, you know, you're gonna have a great network, you're gonna learn a lot, and you're gonna, you know, set yourself up for success in whatever you do next. And then, you know, if you're a searcher that buys a business that really struggles, again, you're gonna learn a ton through that, but you know, it's gonna be a tough experience, right? So, so anyway, those are a couple couple like the lessons learned, would say, you know, from those experiences. [00:56:10] S0: And now across all the companies, all the searches you've seen, there must be some age coming through that repetition. So what tends to matter more than people initially think when it comes to making those good investment decisions in those searchers? [00:56:33] S1: In the searchers? [00:56:36] S0: Yes, because you've done like 80 of those investments. Yeah. Is there anything maybe which which which comes to mind? Could be can... Could be general, could be something more... Much more specific. I leave it to you. Yeah. Yeah.