Inspired with Alexa von Tobel
00:27:52 · Michael Brown
[00:27:52] S0: Yeah, Yeah. So it does a couple of things. I mean, the... A couple of concrete examples that come to mind. So one is that, you know, whatever we're weighing in as a as a group, so we meet daily to look at the acquisition funnel. And one of the questions I always ask myself is, do I think this business will be around in fifty years? Right? And that has to be yes. It's it's one of a number of sort of necessary but not sufficient questions that... You know, but I'm one of four voters, you know, to to to take on a new company. That's that's a question I ask myself. And so it means that we turn down companies where we're not highly confident. It... We don't have a crystal ball, but I I think, hopefully, you can use your intuition to figure out, like, odds are people will be eating hamburgers in fifty years. And maybe the mix of meat and non meat changes, but people will be eating. So I think that that's one thing is that we turn away opportunities where we don't know that there is an ultimate evergreen nature to the business. I think it's part of how we approach the first year of the transition. A lot of investors, whether public or private, understandably, they sort of say, well, how quickly can you grow the company in the first year? And it was like, well... And a lot of people don't really know the SME space very well. If you try and at least I came into that in 2013 and bought a business said, let's grow, grow, grow right away. And what happens is when you do that, you can really you can really kinda disrupt the existing customer base if you come in and make a lot of changes right away. And you kinda wanna build the support naturally and organically. And the support is there because in Teamshares' model, we bring in employees as equity partners in the company. So that that builds naturally. But first, you have to build trust. And oftentimes, we have to upgrade the systems, right, and and take these companies. So I'd say it... It's it's embedded in our ability to go slowly to build growth over time but not rush into it because you need to, again, take care of the business. And I think it's even at a company level, it... It's... We've done some, know, like, unintuitive things over time. So we set this headcount cap years ago following the Dunbar principle. Said, we're never gonna have more than a 150 people, right, at the parent company.
00:30:13 · Michael Brown
We're 90 today. We we were bigger at one point, and and that just came from... For for a whole bunch of sort of strategic and business and innovation reasons. We didn't wanna have a huge, huge headcount at the parent. It seems really big to to the outside world today, but, you know, it's like we have two investment associates processing 1,500 companies a year. So it's actually each team is very, very nimble. Even actually, I think Alex and I have not had a we've not had many fights, but one of the fights we had early on was about KPIs. And Alex had genuine concerns in the back of a well known bank that led to some really bad decision making based on sort of KPIs and metrics and stuff. And so we had this sort of heated debate about how to OKRs and KPIs the right way that don't lead to downstream decisions, ripple effects, twenty, forty, fifty years from now. And so we think a lot about the culture of Teamshares and making sure that we're trying to build Teamshares at the parent company in a sustainable way that allows the cultures of the companies we take on as our partner companies, right, to to exist in a sustainable way with their own cultures too. So
00:31:23 · Alexa von Tobel
[00:31:23] S1: I love that. And as as we both know, culture certainly eats strategy for breakfast, and so I respect just the the major focus on it. I'm gonna transition to just some questions of of of things that you can pay for to other people. But I want to say one thing as your friend. I'm so proud of the work that you're doing with Teamshares as they're in a world where obviously AI is happening everywhere and AI, of course, impacts your business in really good ways because it can make a lot of things really efficient. You know, our team here at Inspired has always said, you know, you're digitizing the small business economy, which is a third of The US economy, and you're taking really important businesses that we all need, plumbing businesses, electrician businesses, those aren't going anywhere. Right? And you're doing this incredible good, to to basically really digitize a part of the economy that no one else is. That's a pretty great reason for everybody. The, you know, the the Teamshares team is so passionate about, their job, but I feel that as an investor. I feel that as your teammate, that must be pretty great to be able to have a business that's genuinely unlocking such good in the world.
00:32:42 · Michael Brown
[00:32:42] S0: Yeah. It it is. I think because because we're doing it in a way where everyone wins. I think of it as, like, retiring owner who built the business and slept on a couch, right, to sort of get it off the ground. They win first, right, because they built the business. They own the business. They took all the risk. And then Teamshares sort of win second, if you will, because we sort of put up all the capital to buy the business. And we bring in employees as equity partners. And then if the business is able to produce and grow and everything, then the employees really win over time, too. So we think of it as win win win. And then I think then there's the intellectual nature of it. It's really yeah. You know, what we do hasn't really been done before in the exact same way. Right? And so there there are definitely certainly programmatic acquirers. There are many. There are many... So probably 30 programmatic acquirers of sort of slightly larger companies across a range of industries. But taking on companies of this size in a diversified way and in such a tech enabled way, that hadn't been done before. And I think that that is something that I think is really intellectually interesting too. Because even if you look at the people that are we have a team of people that build software at Teamshares. And we don't try and build software that already exists. So we would never try and build something competitive with Toast because Toast exists and it's great. So we'll have the company switch out into Toast. We build the sort of horizontal layer at the parent company that helps us acquire the companies confidently and then run them confidently and see all the numbers of the businesses. And so you've got this intersection where you've got, say, like, an accounting team that's all sort of big x big four and then an engineering team that's come from really great companies. Right? And they say, like, look. I... I've done these sort of large technical at scale, you know, minutiae problems. I wanna take my skill set. I wanna apply it to the real economy. And that's what's really interesting. I think the intellectual component of Teamshares of, like, how do you take these skill sets out of these other great companies and bring them and then apply this into this new way to create, you know, a tech enabled factory?
00:34:43 · Michael Brown, Alexa von Tobel
And it's a factory that has deep relationships, so there are stakeholders too. But we have to be able to move a company through in a cost effective and efficient manner from start to finish. [00:34:53] S1: I love that. And the repeatability that you are maniacally focused on, I feel like, is a real strength. I'm going to transition to our quick fire, but I want to cover one topic, which is, Michael, in just the last, you know, six ish years, you guys had such interesting market environments that have been tumultuous. As I said, we invested right as you were going into COVID, and obviously, that changes a lot for small business, as we know. Then a couple of years later, you were hit with the shock of 2022 and 2023, rising rates, capital tightening very quickly. You've really been through a lot. What have you learned about being a stable set of hands through truly external shock waves?
00:35:40 · Michael Brown
[00:35:40] S0: So what have I learned? Great question. That they're gonna come every year or two. At least that's been the pattern of the... And I started my career in 'six. I think they were a little more spaced out back then. Right? Yes. Sort of I think, from 'eight until late... There was a longer recovery period. But it seems like they have become very frequent, that sort of every two years, we have some sort of great question mark or some sort of disruption. So I think one is to learn to expect it. And then I think actually this is partially the job of leadership, to be steady hands and heavy hangs the head. And I think that's part of our job is to be a buttress and to absorb that stress and that pressure. Right? And be very long term minded so that when something happens, you you need to sort of do these two things that sound like they're in conflict at the same time. You You need to be aware of what's going on and have really good situational awareness. But when something bad happens, you need to, like, not panic. Right? You need to, like, always think about what's happened over the long term, what do we need to do, what's changed, but you need to be really, really steady and stable. And so I just think that that's just part of going through lots of different economic cycles and environments. And it helps. It's a version of compounding. It's sort of like leadership compounding.