Inspired with Alexa von Tobel
00:02:46 · Alexa von Tobel, Michael Brown
[00:02:46] S1: I really like that. Say more. When you say comfortable as an outsider, give me give me a few more thoughts on what that means. [00:02:53] S0: Yeah. I mean... So, specifically to say, like, kind of my own experience. Right? I think, you know, when I showed up at UCLA, I I didn't know anyone. Right? There were 4,000. I was supposedly... Like, I was, like, theoretically in state because my parents had moved there, but I literally didn't know anyone. Everyone knew dozens of people. I think same thing too. Most of the jobs I was supposed to get out of UCLA were in LA or San Francisco, and I came to New York, and I I knew one person, right, who went went to high school with. And then same thing, I think, when I left to go buy the first business. Right? I didn't know anything about construction or electrical. And then when we first started thinking about employee ownership, you know, Kevin and I and Alex went to this conference. And so I I didn't know anything. Right? So I think it's a it's a thing where if you can balance humility of realizing you don't know anything and be curious, it can be a powerful combination.
00:03:44 · Alexa von Tobel, Michael Brown
[00:03:44] S1: So in many ways, what you're really saying is just, like, comfort with the unknown, comfort being in a place where you don't know anybody, comfort tackling a topic. I do think that that inner confidence in places when, in fact, you don't have clarity is a skill I hope I teach all my children. Okay. I want to go directly into Teamshares. I am so fortunate to have been an early investor. Mark and I both remember really well when we met you. And I'll come back to the famous sentence that you once said to me. But for everyone that's out there listening, can you just... What is Teamshares? What is it, exactly in plain English? [00:04:22] S0: Yeah. So Teamshares buys small businesses from retiring owners. Like, that's sort of the most plain way to describe it. As a company, we're what's called a programmatic acquirer, meaning a company and soon to be a public company that sort of routinely acquires small businesses. We're an acquisitive operating company that keeps buying small businesses and integrates them into our company. And so we've now done this. We have 92 companies since launching in 2020. We've got about, 500,000,000 of of consolidated revenue and 60,000,000 of operating EBITDA. And we focus on a specific niche, and it's companies that are at the point of retirement, traditional, generally non tech businesses, 500,000 to 5,000,000 of EBITDA.
00:05:01 · Alexa von Tobel
[00:05:01] S1: One of the things obviously that, I personally really loved about your business was just, you know, a third of The US economy is the small business economy. Right? It's the electrician businesses, the refrigeration companies. And doing right by that part of the economy is just a, I think, a wonderful thing that I'm thrilled you do. When Mark and I first met you back in 2019 and invested in 2020, what stood out was not that you you know, this was an acquisition strategy. It was an attempt to build something much bigger. I remember you had a multi hundred year plan, a two hundred year plan, if I remember correctly. Like Michael said super directly as a compliment, you have more ambition than most people I've ever met in my entire life. And as someone who looks for founders like you all day long, What part of your brain was like, let's go make a two hundred year plan? Like, where where did that come from for the business?
00:06:01 · Michael Brown
[00:06:01] S0: Totally. I mean, look. I think Alex and Kevin and I and I think for a lot of people, we know people have been with us for five years. Right? I I think a lot of us have found this interesting place of fulfillment that in Japan, people call it ikegai, which is sort of like your life's work. Right? And so it's something that is both ambitious and intellectually interesting, but it is good for the small business economy too, both for these retiring owners that they need to retire, their kids went to college, and, you know, they're sort of not a natural successor. And then it's also great for the employees too because as the business performs, they are in stock in the company too. So it's meant to be a win win win. I mean, specifically where that idea came from was, I think, in the early days of being a pre venture founder, right, just leaving, quitting my job in banking and buying businesses and running them with Alex, I think we always wanted to build something that was, you know, durable and long lasting. And and it was actually... I think it was on my thirtieth birthday. Was in Hong Kong, and I was just impressed by some of the companies. They're like Swire and Jardine Matheson, and they started as little trading companies two hundred years ago. That was actually where that came from. It's just like, oh, wow. Like, that is wild that Swire, which owns Cathay Pacific and Coca Cola Asia and half the real estate in Hong Kong or a lot of it, you know, started as little Scottish traders. Right? Sort of two hundred years ago in Hong Kong. And that was really inspiring to think that something really large and really durable could, start so small. And for us, you know, it was just... Look. At some point along the way, you know, if you start a business, right, any business, you're trying to achieve something financially. And along the way, becomes it has to be, I think, to keep wanting to do it become much more than that. And so it's about wanting to actually contribute and create something that was really productive for the economy and long lasting. That was kind of where that idea came from.
00:07:44 · Alexa von Tobel
[00:07:44] S1: So on that note, let's just take a step back. A lot of people assume when a company is going public, as you will, that most of the value is already being created. Yet you feel vehemently that you're in your early innings. Say more.
00:08:00 · Michael Brown
[00:08:00] S0: Very vehemently. Yeah. No, I think we're going it's such a natural I'm glad you asked the question. It's such a natural assumption. I mean, remember it's funny going back to the first time I think I ever really thought independently about this was I... It was actually around the time Facebook went public. And I remember reading all these Wall Street Journal articles that, like, oh, it's over, and this thing's overvalued. Mean, that that was, like, just the beginning. It's the same for Walmart. It's the same for FedEx. It's the for, like, lots of great companies. Like, going public is a milestone. The reason... And and so if you're building a company that has a huge market opportunity to grow, it's actually just... It's kinda like graduating from universities. It's kinda the next phase. Right? And so that's why I think about the sort of venture phase as a relatively short phase. In our case, six years. And the reason why Teamshares has, I think, a large opportunity is a couple of things. So first of all, our addressable market, right, is really, really, really large. So, you know, just at... You know, the the the maximum size of the small business economy in The US is about 6,000,000 companies have employees. Four and a half million are owned by baby boomers or Gen X, and we're starting to buy from kind of the oldest sort of, you know, vintages, if you will, of Gen X owners who are kind of approaching sort of, you know, early to mid fifties. So that's that's a lot of companies. And it's not a TAM that you just... It's not a theoretical TAM. Right? We've had 475,000 businesses come into our software since launching it in early twenty twenty. So there's 15,000 every year of size qualified. Last year, we bought nine and added $24,000,000 of EBITDA to the company. So I think that we're scratching the surface. And there's this sort of perpetual TAM. And our job is to get to heavy, heavy free cash flow positive over the next couple of years so that we can be self funding and continue to scale what our mission is. And then I think in the meantime, the way that just like if you were buying a property, the way that you finance something, is it partially in debt, partially in equity? The equity has historically come from venture rounds, raising capital into the company that is going to go public. And then the debt has come from lenders. Right?