In this episode of 'The Next Next,' Jason Jacobs interviews Jordan Fliegel, co-founder and CEO of Shareholder Ventures. Jordan shares his journey from being a college and professional basketball player in Europe to founding sports company Coach Up and fantasy sports startup Draft, which was acquired for $48 million. After spending several years at Techstars, running their sports and New York City accelerators, Jordan transitioned to co-founding Shareholder Ventures. Shareholder Ventures is a holding company that supports acquisition entrepreneurs in acquiring SMBs by providing capital, resources, and community support. Jordan discusses the state of youth sports, his investment strategies in sports tech, and the benefits of acquiring existing small businesses. The conversation also highlights the unique model and future ambitions of Shareholder Ventures.
Exploring Acquisition Entrepreneurship with Jordan Fliegel: From Sports Tech to Shareholder Ventures In this episode of The Next Next, host Jason Jacobs interviews Jordan Fliegel, co-founder and CEO of Shareholder Ventures. The conversation chronicles Jordan's diverse journey from a professional basketball player to a successful entrepreneur and investor in the sports tech industry. Highlights include the founding of Coach Up and successful ventures like Draft, which was acquired for $48 million. The discussion delves into Jordan's recent focus on acquisition entrepreneurship through Shareholder Ventures, a holding company aimed at helping entrepreneurs acquire small- to medium-sized businesses. The episode covers various topics such as the current state of youth sports, the nuances of sports tech investments, and the unique opportunities arising from the impending retirement of baby boomer business owners. Listeners will gain insights into different entrepreneurial models, the strategic building of a HoldCo, and how emerging tools can assist founders in building and sustaining profitable businesses.
00:00 Introduction to Jordan Fliegel
00:09 Jordan's Early Life and Career
00:17 Founding Coach Up and Draft
00:39 Transition to Techstars and Shareholder Ventures
01:13 Discussion on Youth Sports
03:05 Jason and Jordan's Personal Reflections
04:13 Challenges and Realities of Entrepreneurship
16:01 Jordan's Journey with Techstars
31:53 The Concept of Shareholder Ventures
45:46 The Challenges of Running a Business Solo
46:10 Tim and I Bought Businesses
47:53 Joining the Center for American Entrepreneurship
48:55 Structuring Shareholder Ventures
49:28 The HoldCo Model and Its Benefits
51:04 Supporting Acquisition Entrepreneurs
01:02:49 The Role of Search Funds
01:06:53 Financial Structure and Cash Flow Management
01:25:35 Final Thoughts and Encouragement for Entrepreneurs
Jason Jacobs: Today, on The Next Next, our guest is Jordan Fliegel co-founder and CEO of Shareholder Ventures. Now I've known Jordan A. Long time, and I was particularly excited for this one. Jordan grew up as a basketball player. He played in college and then played professional basketball in Europe before his business career.
Then he founded a sports company called Coach Up, one of the leaders in sports coaching with more than 3000 active coaches conducting lessons every month across the country. He. Founded another sports startup, uh, um, fantasy sports company called Draft that was acquired by Paddy Power Betfair for 48 million.
And then he spent the last several years at Techstars where he ran their sports accelerator and ultimately their New York. City Accelerator as well, and he left recently to co-found Shareholder Ventures, which is a holding company backed by 85 experienced founders and operators that helps acquisition entrepreneurs acquire SMBs from retiring owners [00:01:00] by providing capital back office support, resources, and community to enable the successful silver tsunami, if you will, transition of 500 k plus profitable SMBs by 2040. Now, we had a lot to talk about in this one, including what's happening in youth sports and Jordan's perspective on sports in general. Growing up as an athlete and then being a sports tech entrepreneur and investor for so long, we also talk about what categories within sports tech are interesting to him and where he's made bets and.
Uh, where the fruit's been ripe and where maybe not so much. And we talk about Jordan's transition from founder to investor and now to this, uh, new model with shareholder ventures where it's less about venture-backed startups and more about these small profitable businesses in unsexy areas and how those are kind of hidden opportunities for entrepreneurs that want to build.
A different way and shareholder ventures is, is also building a [00:02:00] different way in terms of this HoldCo that's backing these companies and also, uh, putting some of them on the balance sheet directly as well. At any rate, I learned a lot in this one, and I hope you do as well. But before we get started.
I'm Jason Jacobs, and this is the next. Next. It's not really a show, it's more of a learning journey to explore how founders can build ambitious companies while being present for family and not compromising flexibility and control, and also how emerging AI tools can assist with that. Each week we bring on guests who are at the tip of the spear on redefining how ambitious companies get built, and selfishly the goal is for this to help me better understand how to do that myself.
While bringing all of you along for the ride, not sure where this is gonna go, but it's gonna be fun.
All right. Jordan [00:03:00] Fliegel, welcome to the show.
Jordan Fliegel: Jason, good to be here.
Jason Jacobs: Now I remember I started Runkeeper around 2008 and there was this like crazy little rabid chihuahua who was running around town, Jeremy Levine, uh, you know, trying to do whatever, you know. Um, and uh, and, and I used to see him at events and there would be this like really tall sidekick who was always glued to his side, and I never knew.
It took me a little while to figure out that that was you.
Jordan Fliegel: That was me.
Jason Jacobs: yeah. That's how I, I first met you back in the day. And, uh, and look at us now. We're all grown up.
Jordan Fliegel: I'm glad I made such a memorable impression on you.
Jason Jacobs: Well, you were, I mean, I, uh, I
Jordan Fliegel: I'm still called.
Jason Jacobs: I knew you were a basketball player, but in prep for this discussion, I, I, uh, was looking a little bit into your background and you were kind of a division three hero.
Jordan Fliegel: Yeah, like a jumbo shrimp.[00:04:00]
Jason Jacobs: Like you were, you were like captain of the best team in Boden history, MVP, it was like League State, maybe some all American mixed in there like that, you know,
Jordan Fliegel: Yeah. I.
Jason Jacobs: and then you, then you built a sports startup around coaching, you know, different sports, right? And then, um, I, I don't know the exact timing, but I think you might've got outta that around the same time I, I got outta runkeeper and unlike me, I swore off sports deck at that point.
I was like completely done with it. You like went even deeper for the last many years. Right. And then just as I'm now gearing up to go back in, you're running for the hills and now you don't want anything to do with it. 'cause I try, I'm like, how about this idea? You're like, blah. Like you're, you've got so much PTSD, like you're the worst person to talk to about sports tech now even though you
Jordan Fliegel: Right, right.
Jason Jacobs: much.
Yeah. You're
Jordan Fliegel: But isn't that, isn't that true of anything you ask, like a restaurant tour? Like, um, hey, you know, and they're be like, [00:05:00] stay outta restaurant's, food. Never. No. Oh, everything sucks. Staff, food, you know, chefs, landlords. It's all hard. It's all bad, you know?
Jason Jacobs: Well, every, everything looks, everything looks better from a distance, I think.
Jordan Fliegel: Yeah. When you're in it, you know, you see it.
Jason Jacobs: Well, I've, I've
Jordan Fliegel: Everything's hard. What's easy? Nothing's easy. Everything's hard. You know, if you have passion for something, you got good people around you, you know, you're crazy enough to try, go for it. I mean, you know, you're in a different, you've done it before you, and you've done it in sports before, so it's a different thing, but it's a sexy space and people out of, you know, people, everyone plays.
Not everyone, A lot of people play sports as a kid or high school or college or whatever, and, you know, you get ideas often for your first company based on your, your experience that you've had. Right? Like your personal lived experience. That's how I started Coach Up. I don't know, I, I imagine your runkeeper story, I never quite heard, I think the origin, but I imagine it had to do with you running and wanting to run better or something like that.
Right.
Jason Jacobs: Oh, it had to do with, uh, [00:06:00] growing up it was like sports and partying were my passions, not school. Um, and then, um, then I thought business was just where you go to die when you, you know, like you put
Jordan Fliegel: Yeah.
Jason Jacobs: coat and briefcase and
Jordan Fliegel: Yeah,
Jason Jacobs: you know, like, like life will never be in color again.
It'll only be
Jordan Fliegel: yeah,
Jason Jacobs: and white till till you die. Right? Um, and, and I uncovered while I was in school tech and startups and was like, oh, wow, like business can actually be sport. And,
Jordan Fliegel: Right.
Jason Jacobs: and, and like poured myself into a startup, tech startups. But, but then when I was doing that. worked in an area, I cared about the widget and I was like, well, I'm not a technologist, so I, I, like none of these widgets mean anything to me. But, and then I wanna start a company and I thought the widget didn't matter. And then I was driving myself crazy trying to figure out what to build and, uh, 'cause I didn't know what I was passionate about and I didn't think passion mattered. And I was like, I'm driving myself crazy. I need to clear my head, trained for my first marathon.
And, and then during that I was like, oh, wait. Like, well, one, I have an idea, [00:07:00] like at this intersection, but two, like fitness, like I'm so passionate about fitness, I'm gonna build a fitness technology company, right? Which is really similar now to how I'm kind of, how I got into potentially doing something in, in new sports here.
It's like, all right, like I, you know, how to build different, and then how ai, how AI can help. It's like, yeah, but I, I need to know about the category. And it's like, well wait, like youth sports is where I'm spending. Like, it's like the thing that, it's, the reason I need to work different is 'cause of youth sports.
So
Jordan Fliegel: Yeah, we are sports.
Jason Jacobs: do something in U Sports? I know it
Jordan Fliegel: Yes, yes. And you're a sports dad now, so you have, you have the, uh, you know that perspective, which is, which is where, you know, the dollars are being controlled by mom and dad. And so that's a very valuable perspective to have. When I started Coach Trip, I just had the basketball and the coach perspective, not the parent perspective for the sport.
So I think that gives you an edge and use, use sports. Jason, on behalf of youth sports, we welcome you into the industry and no, we, we do, [00:08:00] we do. I am a proud youth sports person and we need more talent, entrepreneurial ambition, drive, know-how, and so on in the space. And so we welcome you.
Jason Jacobs: Well, I wanna get into the professional stuff. Um, but before we do, I'm just curious. I mean, you played very competitive growing up. Um, I, I know you, I mean, you don't have kids yet, correct.
Jordan Fliegel: Not that I know of.
Jason Jacobs: Okay, so no kids yet, but I'm just curious, like sitting where you sit at, uh, and, and observing you, you're working in sports tech since the beginning of time and, and playing sports growing up.
What's your take on the state of youth sports today? I.
Jordan Fliegel: The state of youth sports today is competitive pay to play
lucrative if you're a top athlete, not just that you can get a college scholarship, but of course with NIL and [00:09:00] so on, you know, the path to not just getting a free ride, but actually making money before you even turn pro. That was never a thing. It's now a real, very real thing. Um, you know, you, the whole narrative around, uh, too much specialization in one sport and, you know, kids sports should be fun and kids should just be playing and they shouldn't be like blah, blah, blah.
It shouldn't be so serious and all that sort of stuff. So, uh, you know, I see there's, there's, uh. I think two sides to that argument, but I certainly understand when parents come out for that. And there's, I think that, that that is only sort of growing in order to really be competitive, you have to be like serious about it now.
'cause it's, it's, uh, the prizes for, you know, being a, a good athlete now in terms of college and financially and otherwise, um, are there, um, there's more knowledge than ever about how to train, how to eat, how to improve, and kids [00:10:00] still suck at sports. So it's, uh, you know, it's one of these things where there's just so much out there, but, um, I think there's a lot of misinformation and, um, I think just what are we trying to do?
And the goal, and, you know, most kids it should, it is just be fun. Just play. As long as you know, they shouldn't be in this sort of a, a u and skill development, all this sort of stuff. Because they, they're never, it's never gonna be a payoff. And it's not even that fun for them if you're not good at it or don't have potential to be.
There's a lot of lies in youth sports, you know, from a business perspective. You're selling the dream that Junior can play in college or play pro or whatever. Junior like can't. Um, very rarely, you know? And so, uh, but if you actually have a kid who has like real, real, real potential and it's usually pretty easy to actually figure that out.
If you're honest with yourself or the kid's honest with themself, then, you know, uh, go for it. I don't know how, what's changed. NIL has changed a lot. If we're gonna label things. NIL is probably the biggest thing. Um, [00:11:00] and, and just so much more knowledge about strength training and explosiveness and nutrition and all that sort of stuff than when I, when I was coming up for sure.
Jason Jacobs: And I'm also curious, I mean, you, uh, you grew up professionally as a founder, um, and then you spent the last years at Techstars. Uh,
Jordan Fliegel: On the dark side.
Jason Jacobs: Yeah, which is, which is hard to put in a box what, you know, what what you do, you know, running, I guess I think you ran two of the accelerators at once, right?
Jordan Fliegel: Yeah.
Jason Jacobs: so I'd imagine it was very busy, but it's hard to put, like, that's not a, that's a, that's not a typical function that you can kind of describe.
Um, and now you're moving towards, I, I think becoming more of a pure investor, but in a different kind of way than, than many of the tech people and Techstars people and, and all that are, to. But, um, What do you think has driven each of these, changes [00:12:00] and, and where do you sit today just in terms of how you wanna work and where work fits into your portfolio of life?
Jordan Fliegel: As an entrepreneur,
Jason Jacobs: I.
Jordan Fliegel: you need really three things. You need an idea, doesn't have to be your own ideas come from anywhere. You need talented people and you need capital. And kind of the way I think about entrepreneurship is sort of you're, you're putting those three things together. An idea with people to pull it off with money to support them.
'cause obviously, you know, it's, it's rare that it's profitable from the jump. And then, you know, the whole spiel about A CEO and your, your job is to maintain the mission and hire and motivate a great team and ensure you never run outta money so you can keep paying that team. And a few sort of game changing things on the side, business development or PR or whatever.
But so that's what it is to be a CEO and to be an entrepreneur. [00:13:00] Um, on the idea part, I know the first couple businesses I did were in sports. Um, the first one was my idea, the second one was not my idea. Um, but you know, I've had ideas outside or
Jason Jacobs: you're talking about draft?
Jordan Fliegel: Yeah, sorry. So, so coach up my idea, right? Personal experience.
I think oftentimes for an entrepreneur in your first business, you are taking, um, market risk, whereas a second or third time founder, once you know, hopefully a little bit more about what you're doing, you're taking more execution risk. And so, you know, for me with Coach, it was like there was no marketplace for kids and coaches.
And there, there was Uber and there was Airbnb, there's other marketplaces, care.com and whatever for nannies and Ubers and places to stay, but there wasn't, uh, I. For Ubers, for, for rides. It's funny. Become a verb. Um, but there wasn't for, how do you find a great, you know, coach to get better at, better at sports?
And so I created that. So I was, I was [00:14:00] taking market risk, like, will this work hasn't been done before? And um, you know, but I think once you sort of know a little bit more, it's easier to go after something where you're like, oh, this is working and it just, you know, we can out execute or compete or there's room in this space for multiple winners and, you know, the lift to Uber or the VRBO to Airbnb.
And I'm not sure quite the, quite the timing on who came first and all that sort of thing, but there's room for multiple players, right? So anyway, um, yeah, what I'm doing, what I moved from coach up to draft, draft was daily fantasy sports. My, my co CEO, uh, and great friend Jeremy Levine, who you mentioned earlier, was the, the founder of the business and.
Jason Jacobs: that was my first angel check. And then, and then they, it exited and returned uh, a good return in like three months or something. And I thought that that's the way it always works
Jordan Fliegel: That's how it works. Yeah, exactly. And by the way, that's a nice thing when you make people money, then it becomes easier to do. You know, people want to give you more money. That's life. [00:15:00] That's life. You do well in high school, you get to go to college, you do well in college. That becomes a trap where if you do well in college and you go to like law school or something, and then you're screwed forever, uh, you know, in debt and whatever.
And then you like get the good job and you work at the good job and then go in handcuffs and you never actually do what you want to do. Not to say maybe you want a lawyer to be a lawyer, but, um, uh, yeah. With, um, but with entrepreneurship, yeah. Like, yeah. Yeah. Like it was so hard for the, uh, for coach trip, I raised $50,000 was my first round $50,000 at a 1 million valuation.
It took me, at least, it took me six months to get a technical co-founder, and it took me another three months to raise 50 grand. Like, it was like nine months to like get someone to, who could like actually code, you know, my buddy Arian like to now to like do it with me and then to raise the, like, that was nine months and now that's like, you know, that's like a thir, you know, 30 minutes or something.
Right. So it's like, it become faster, you know? What were we talking about [00:16:00] though? I I, do you ask me?
Jason Jacobs: about, yeah, so, so you, you were an entrepreneur, um, a couple times and then you made the decision to spend the last many years at Tech Drive. So what drove that decision? And maybe talk a bit about the work that you did there.
Jordan Fliegel: Uh, yeah. Okay. So Coach Up was CEO, you know, we raised $14 million founder, CEO person. And then I moved a, we, we hired a professional, you know, CEO, uh, John John came in, I moved to president, chairman role, whatever. They wanted me to hang around for a bit, but like, welcome John. I don't know that I was great at hanging around.
I hung around. It was a little awkward of a time. I, I, I lived across the street from the office and I was like, still there. And I would like, when the lights went on the office, I would walk into the office and I was like, but I didn't wanna get in the way, but I was there and I wanna do stuff. And I was 28 or whatever.
Did that for a year. And then went to do another startup, which was draft.com with my buddy Jeremy, who was the founder when I joined, we pivoted the business Daily financial sports app. It was a successful out because we raised like $6 [00:17:00] million worth the course of the business. We only raised 1 million more once I joined, and then we sold it pretty shortly thereafter for we say $48 million.
But some of that was earn out, we didn't get, but it was a good outcome for everyone. And, uh, then I had to stay there, but I didn't wanna stay very long. And so the day that I was allowed to leave, I left, stayed, I think a year and a half of my, you know, handcuff phase. Um, would've maybe stayed longer. Uh, the CEO who bought our business, uh, Brion Corcoran Global CO Patty Power Bedford, which is now fluttered, the biggest sports betting operator in the world.
Love the guy. He's been a great, great friend and mentor, and he left. It's just funny how life works. Had he stayed, he had like a midlife crisis or something. I don't know. He, he left and went on to run other massive companies and so on and so forth. And, um, brilliant guy. And had he stayed, I probably would've stayed.
I'd still be there because I felt like I could learn so much from him. And I loved him, you know, and, and, and I, I don't think [00:18:00] I would've like, wanted to leave. Um, regardless of what the business was like. Even if I liked the business by the way, it would've been very lucrative to have stayed as sports betting has rolled off across America.
And, you know, we were, we bought fan bill, we merged the business together. It's now the largest sports betting operator in the world. Like, maybe I should have stayed, but, um, my heart wasn't in it. And, uh, I wanted to, you know, I like to build things and do things and, uh, so whatever. So I left. But it's funny how life works at East State, I probably would've stayed at.
So it was back to back startups. It was like coach up and then draft, like back to back, no break. And, and by the way, draft was super stressful. Like the first, we were like barely making payroll. I think I slept in the office the first six months. I moved from Boston to New York. Didn't even get an apartment, just like slept in the office, you know, which was a little awkward when people showed up to work.
I was like, still on the couch passed out, you know. And um, it's funny, I remember funny anecdotes and memories about that. Like, we were so tight sometimes on cash. I remember we had that kinda meeting with the team. [00:19:00] There's nine of us and we actually weren't sure that we'd be able to make payroll in two weeks.
And so we, uh, went to another startup, but I, I won't wanna say their name. And I said, Hey, we may not be like, not able to pay our people in two weeks. And they're gonna, like, they have apartments and stuff, you know, they pay rent. I'm like, can can you take our team if we don't make the next payroll? Just like, take 'em.
They're great. Great. It was great team. And the CO of that company, I wanna name names, but. He was like, yeah, sure, we'll take all the engineers, but not, we had one person in marketing. He's like, not that person. And so I, I had a, we do a meeting with Jeremy, said, okay, everyone, um, good news, bad news. Like we, we, we think we're gonna be able to raise money.
We're leaving today for California. We're not gonna come back without money. Um, but if we don't raise money, you all have jobs at this other company except for you. We were like, we gotta go. We went to the airport. Uh, it's funny, the stress is crazy. You don't even realize when you're in it. Like, I was like, what are we doing?
Sleeping in the office? We were trying to make payroll. It was so, so hard. But we believed we, we [00:20:00] had a vision for a pivot to a product that would work, and it did. But we had to get there and it was hard. Anyway, back to back startups. And so the plan, after we got out, uh, in January of 2019, me and Jeremy's my best friends when we were little kids, and we finally like, had a successful startup and, you know, made money for the, like first, like real money for the first time.
And so we had a one-way flight to Bali. And the plan was to just go and backpack around Asia and get bored and maybe come up with our next idea for another company. Right. That was the plan. But I got a mortgage and I, I got a girlfriend and then my sister's dog bit, her kid, I think it wasn't really the dog's fault, but whatever, whatever.
And she had to get rid of the dog. She loved the dog. And so I ended up taking the dog. So I had a mortgage girlfriend and a dog, and I said, Jeremy, I can't go to Bali. I can't go. [00:21:00] And so I got outta Bali and, and meanwhile over the previous like year, the folks at Texas Love Texas. Huh? Oh yeah. He went, the funny thing, he went and then the Patriots were from Boston.
The Patriots got on the Super Bowl like three days after he, or like a week after he got the Bali. So he flies from Bali to Atlanta to go to the Super Bowl. And then back to Paul. He's a nut, by the way. He's crushing her as co co-founder and, you know, CEO of underdog, which is very stone draft. They just raised it a $1.25 billion pre-money valuation.
Five years into the business, not even, um, in credible entrepreneur. And a lot of our folks from draft are now, you know, where we sort of team at underdog, and they, they've had great success with it. Um, so that, that's what happened. He got bored in Asia and he came with the idea, you know, and, and it launched.
So maybe I should have done that one, but, um, whatever, uh, unicorns, whatever. And, uh, uh, they great, great business. I mean, they, they're, they're absolutely crushing it. [00:22:00] Um, and so anyway, the people at Techstar, I had put coach up through Techstars Boston as you know, and then, um, a draft back when it was Star Street when Jeremy was first doing it, had gone through Techstars Bosses.
We had this affinity for Techstars. I'd been a mentor at Techstars. And Techstars never had a sports accelerator. They had a music accelerator and so on. And this gets back to my point, and I know we're kind of going a windy way to get there, but. Um, you know, one thing leads to the next and so on Steve Jobs famous speech, which says, you don't really know where your life's going.
You can only connect the dots. Looking back, you know, afterwards, if you haven't seen that, that's good. Good thing to look up his speech. Great speech. And uh, so I had, I was like in the Techstars Power people mind the Davids and, and Brad and so on. I, I guess I Mark Stallone. I was like the sports guy, you know, as were you.
Right? And there was a few of us who've done like sports tech things.
Jason Jacobs: like you wanted to be. I was desperately trying to like shed that. I was
Jordan Fliegel: What do you wanna be now you're trying to, you you wanted to get out, now you're back. Yeah.
Jason Jacobs: we're, we're just on an opposite path. Like it, it'd be, it would've been nice if things lined up to be on the same path at the same time,
Jordan Fliegel: Two ships cross[00:23:00]
Jason Jacobs: anyways.
Jordan Fliegel: anyways. So they were like, oh, you've done, you know, coach up sports, tech, draft sports, tech, you know, youth sports, fantasy, sports, different, but sports. Sports. Uh, we wanna launch a sports accelerator. And I was like, Techstar should totally have a sports excel. That's great. We should have always had one. And uh, where should we do it?
New York or LA or here or there? And. I was like, I wanna help you guys put this together. I had no intention of running it. So I was talking to people who maybe we should bring on to be the managing director and who should fund it and where should it be. And long story short, with this, this group in Indianapolis, um, next Level fund, the state of Indiana's fund to fund the Pacers, the Colts, the NCAA, Indianapolis more Speedway and IndyCar, all the sports properties in Indy.
Plus, the state came and said, we want to be a sports tech town. We wanna plant a flag in the ground of the best sports accelerator in the world here. And Techstar was like, great. And it was a great partnership. And then, uh, uh, the folks at Texas were like, by the way, do you wanna like run it? And I was like, no, I'm gonna start another company with Jeremy.
And I thought, you know, I, I was kind of burned out like back to back startups [00:24:00] and I was like, this would be kind of interesting learning. I'm more on the investor side and I get to have an impact on other founders and do more than just one thing and go a little shallower and broader. And so I was like, yeah, I'll do this for like a year or two.
And then that turned into six years. 'cause I just enjoyed it, you know, and I, and I just stayed.
Jason Jacobs: So, uh, so during that time, I mean, what does the GM of, uh, text Fire Accelerator do?
Jordan Fliegel: Uh, the first thing you should do is get a really great principal slash program manager, whatever the title is, right Hand person who's super strong operationally. My college roommate called my college roommate, Andrew Hipper. We played basketball together and great friends. I knew he'd be perfect, perfect for the role.
And I said he was living in DC at the time, and I remember saying, Hey Andrew, I want you to come do this thing with me, but I'm not gonna tell you what it is or where it is. And he, and he said, whose car are we taking? And, uh, we're both from Massachusetts, so, and, uh, and I was like, yeah, we're going to Indiana.
He, he's like, what? [00:25:00] So yeah, we would go out to, you know, Indianapolis and run. We ran it together for six years. I mean, he was, he made it so fun and so great. And all of our founders, we, you know, have gone through the program like Love Andrew, and he enabled me to be like the sort of philosophical investor type, you know, role where I.
Drop in and give my little spiel and my advice and hover out and try to make decisions on who we invest in and who they should raise money from and how to raise money and, you know, co advice stuff, whatever it was worth. And, um, and he, he was able to sort of really, really run the program. So, um, that's by the way, a good model for life.
Get a great partner and whatever you do, um, and, uh, it makes everything. And we just had so much fun doing it. Um, so, and then, uh, the, uh, Jenny Fielding is the great investor, has her own fund and, and has been running Tech New York for a long time. She, she left to grow her fund. And so there I was in New York City most of the year.
And, uh, you know, Techstars folks said, Hey, do you, you know, you also wanna run Techstars in New York City, which was a category agnostic, not sports, but any other category. And so I ended up kind of running both for a while and, um, but ultimately [00:26:00] got another idea. And that I like when you can't stop thinking about an idea for a long period of time.
Like you, you know, you gotta do something about it. And that's my new business. And so I left to do that. But I, I love my time at Techstars. I love Techstars, all their founders, you know. I'm seeing one today, I'm seeing another one tomorrow. And you know, it expanded my network so much. All the founders, mentors, VCs I met through that.
It was really great. Great experience.
Jason Jacobs: Uh, looking back at, um, if, uh, I'm interested in the sport sports tech one I mean, it seems like, uh, sports tech could be so wide or so. how did you guys define sports tech and with the benefit of hindsight, what were the areas that you think are, um, investible and interesting? And then what are the ones that are like a bad SoCo night where it's like you're, know, you're, you know, it did seem good at the time, but you're never going back.
Jordan Fliegel: Yeah, so, um, the period in which I invested 2019 through 2024, [00:27:00] um, the period matters and, uh, for, for a number of reasons I touch on, it wasn't my first time investing. I had a little angel fund with Jeremy called Founders First and Syndicate. We deployed about $40 million over the last. 12 years into startups, you know, pre-seed, seed a, um, but with Techstars and focusing on sports.
So first we were doing a class, the year would vary. We'd do like 10 to 13 companies per year through sports, and then another 12 to 14 per year through New York. And so, like the most we did one year was 27 company's the least we did. And like the first year was 10. So that would vary a little bit. But as an accelerator, when you're putting together an accelerator class, you're putting together a class.
You have like whatever, 10 to, you know, 12 or even 14 companies. And so you don't kind of want to have all, you know, fan engagement companies because it's a little weird. They're all doing the same thing. And also it can be competitive and so on. And, um, so you try to kind of assemble sort of broad, if you think about sports, like a lot of people think it's small, but if you, uh, [00:28:00] take the lens and approach that we did, it's actually quite large.
If you think about all the subcategories in sports, you've of course youth sports. You have, you know, fantasy sports and sports betting. You have sports media, you have fitness and wellness, nutrition training and so on. You have all these niche vertical things, which we did a lot of investing in, like, you know, fight camp.
I was an investor advisor, um, before Techstars, but, you know, boxing, right? And we did, um, air gata through the accelerator, which is for like fight camp, but for rowing, I'm oversimplifying it. Um, and we did Flexa and Pilates. And so, so it's these like niche, vertical grind, you know, basketball shooting machine, 10 bot robot that goes around, scoops up your tennis balls, brings it to the net shoots, it over tracks life.
So it's like the greatest innovation's ever happens to tennis. So if you look at like individual, you know, verticals, um, ticketing made several ticketing investments, project and mission. Um, was, was an, was an early one in 2019. Um, and, uh, yeah, so, uh, uh, you know, collectibles [00:29:00] got really hot during, you have to think about the period because during c.
20 20, 20 21. Collectibles, NFTs, all that was like super, super hot because people were sitting around at home and interest rates were super low and people were just throwing money at sports cards and NFTs and whatever. And so we had made some investments in that space when it was hot and we were able to get those things funded.
They have since not done as well, obviously as the market has cooled at home. Fitness was super hot during Covid 'cause people couldn't go to gyms. And so we made investments there and that went up, um, with the repeal of PASPA and the proliferation of sports betting, of course sports betting, but also fantasy sports, which is tied to sports betting.
And sports media properties go up in value 'cause they have users become more valuable. Um, anything related to fan engagement, selling it to teams 'cause team monetize their fans better. And so all that sort of rising tide of sports betting unlocked a lot of value. Not just betting, but ancillary categories.
So we invested there. So anyway, a lot, there's a lot of subcategories within wearables. Of course, you know, everyone [00:30:00] knows about like whoop and um. You know, we did like, uh, ance for instance is a wearable company and other, other wearables. And so when you think about it like that, I mean, the only reason people go outside of their house is for fitness, sports events, dating food.
You don't really have to go for food. Like what are the things that people spend money on right outside of their phone and their subscriptions to Netflix and so on, right? And, um, sports is, is a huge sports and fitness and wellness right, is a huge part of that trend. You see all these cold plunge and sauna stuff.
We did an outdoor steam room company called Geyer Steam in the, the wellness. That was a little bit of a stretch when I sort of presented it, but, um, cool product. I actually have one in my house in Florida. It's like great Geyer steam. Um, but you see that here in New York City. We have like other ship and all these places where you can go and bathhouse and all this sort of stuff or you know, wellness.
I would kind of put that in the recovery category with NormaTec [00:31:00] and. You know the, a gun, right? That's a sports category. It is. So if you look at broad like that, it's a massive, massive space with a lot of really big outcomes. Whoop and DraftKings. And, you know, there are a bunch of large companies, uh, in the youth sports space, teamworks and sport engine, and um, there's a bunch there you can look at too, media over time, right?
So you sort of, but within each subcategory is maybe not that many unicorns, but there's, you know, running, you have Nike and you have Under Armour and Adidas and all these sorts of companies, right? And, and, and, and new ones that are Coca right and on that are coming up that are like doing really well in a short amount of time.
So, long answer. There's a lot of subcategories within sports, how we thought about it.
Jason Jacobs: uh, yeah. And I'm tempted to ask you about the that I'm thinking about, but I'm gonna say that for the end. Um,
Jordan Fliegel: Teasing.
Jason Jacobs: uh, so te so tell me about, um, shareholder ventures. And you mentioned that you'd been thinking about the idea [00:32:00] for a long time, so. Like how and when and why did it start seeping into your consciousness?
And then how did it evolve from just being, uh, um, an intruder in your brain to, uh, your full-time pursuit?
Jordan Fliegel: Fall in love with a problem, not with the solution. I stole that from someone. I forget who, but I think it's good advice. And so
Jason Jacobs: that way for what it's worth. I can't, it's not this like I, you, it's, it's like you can, you
Jordan Fliegel: you, yeah.
Jason Jacobs: number of ways, but like, I need to anchor on the problem first. For sure.
Jordan Fliegel: You exemplify all of our conversations as you've gotten back into, into youth sports, and it's, yeah, I, I feel that from you and that's, I think that's a hundred percent the right way to be, um, you know, humble, open-minded, willing to explore. You know, it's like a class research project or something. When you go in, if you, if you know the conclusion from the start, it's, that's gonna not lead to a great, a great paper.
Um, [00:33:00] anyway, um, problem. There were a lot of problems in the world. We're solving, I think entrepreneurship's the best way to do it. Uh, one problem that I got really excited about was, uh, you have all these baby boomers who are that, who are retiring, that, uh, my parents are the very older end of the baby boomer generation, but about a, a lot of folks who are in their sixties and seventies now, and they're retiring and they own a very disproportionate amount of the wealth in the country.
Um, not just cash and stocks, but assets and businesses and real estate and all that sort of stuff. There's a lot of opportunity, I think, around baby boomers retiring and transitioning assets to a younger generation or selling, selling their business, selling their homes and all sort of stuff. I think there's a lot of opportunity around that.
But what I got excited by, I started seeing stats, like 45% of Americans work in small businesses. And the majority of owners of these businesses like baby boomers and they don't have transition plans, or their kids don't wanna take these businesses over or, or can't take it over. Think about all the, it's boring service, business, [00:34:00] roofing, hvac, landscaping, plumbing, pool servicing, whatever, right?
And, um, and some, maybe some sexier non-boarding ones, but there's car washes and there's all these things. These are not convenience stores or little restaurants or, you know, nail salons where you're buying a job, not really a business. There's all these business that are like once 2 million in ebitda, realize is sort the sweet spot where they're too small for private equity, too small for traditional search funds.
Definitely not something VCs do or angel investors do. Um, but it's a real business with real enduring value that spits out a lot of cash flow and the owner and is gonna retire over the next 5, 10, 15, 20 years. And their kids like grew up rich and like want to be in. Wanna be a tech founder or want to be a, you know, a VC or wanna be an artist or whatever in some other city.
And they don't want to take over the HVAC business in Omaha. And so what happens to these businesses? What happens to all these jobs? And by the way, this is a problem that it's one of the few things that Republicans and Democrats agree on, like small business [00:35:00] jobs, main Street America, really, really important for our country to solve this.
And to the government's credit, 'cause I think the government generally gets most things wrong. Um, the small business association has been like at the SBA has been really, uh, successful in playing a role here historically, um, in providing guarantees on debt that banks issue to people who are buying small businesses.
So you, as an American or green card holder, every American green card holder can go, I think you have to be over 18. Can't do it if you're six years old. But every. Every American citizen and green card holder can borrow up to $5 million, $5 million. This doesn't exist in other countries to buy a business, a profitable existing business at up to 90% leverage.
But it's usually more like 75 to 80%. Meaning you buy a business doing a million and a half in cash flow for like 5 million [00:36:00] bucks, you'll get a a loan from a bank for $4 million and the government through the SBA a seven a loan program will guarantee 75% $3 million in this example of that bank's loan.
So the banks love doing it because they're like, wait, I get to make a $4 million loan. It's over a 10 year term, sometimes longer with the good interest rate and origination fees, and 75% of the loan is off my books. I didn't have to worry about it. I'll do that deal all day long. Every deal that meets that criteria I'll do, and the seller's like, great, I want to retire and go buy a boat in Florida and like sell this business.
And as an acquisition entrepreneur, it's the name that is most commonly used for people who are. They are an entrepreneur, but they're doing it through buying a business, not starting a business. Very hard to start a business, by the way. Easier to buy one. Not that it's easy, but it's easier. Um, the acquisition entrepreneur or the self-funded searcher, it's different names for it.
They get to buy, be the CEO and own a majority of an existing profitable business, oftentimes with very little to none of their own money. [00:37:00] And so, so it's this beautiful like win win, win thing. But there was a lot of friction in the process. And so the first thing I did in my discovery journey is I, I, I read this book called Buy Then Build by Walker Diebel, who's now become a friend and we're doing more together, which I can't announce yet, but hopefully soon.
Um, it's like the industry bible I recommend to everyone. If you're interested in buying a small business, you have to read buy Them. Build.
Jason Jacobs: Jordan are a published author.
Jordan Fliegel: I am
Jason Jacobs: What book did
Jordan Fliegel: coaching up. Thank you. What a plug. It's called Coaching Up My Philosophy for Leadership Through Relationships, building Relationships.
Jason Jacobs: Okay, so anyways, so,
Jordan Fliegel: I can talk more about that. But
Jason Jacobs: so you discovered this book, uh, by then build,
Jordan Fliegel: buy, then build, read, buy, then build. Here's the homework. If you're interested, read, buy, then build, uh, and then listen to a couple episodes on Acquiring Minds. My partner, co-founder, and COO, Tim Erickson, uh, is interviewed one of the episodes on [00:38:00] Acquiring Mines, but Acquiring Mines a podcast and, and they just interview people who bought small business with SBA seven A loans.
But if you do those two things and you catch the bug, it's, you're, it's too late for you. You're gonna end up buying a business. Uh, then you have to go through the rest of, you know, find a business, learn, get the loan, raise money, blah, blah, blah, do the thing. But those would be the first two steps. I won't give more than that because I think it's enough, and I just want people, if they're interested, like do those things and then you'll, you'll be on your way.
Jason Jacobs: So, so, um, so you that there was this trend and that the acquiring entrepreneur could get access to bank loans because the SBA is guaranteeing 75% of the loan for the bank. Um,
Jordan Fliegel: Yeah,
Jason Jacobs: what gap did you see and what did Shareholder ventures step in to do?
Jordan Fliegel: if Jason wants to go and buy a profitable roofing business instead of starting the next great youth sports [00:39:00] tech company. Um,
Jason Jacobs: I might go by a chain of skills facilities. There you go. So,
Jordan Fliegel: there you go. Um, it has to have cash flow 'cause the banks write the cash flow, so it's an existing profitable business. They're usually bought. So again, sort of once 2 million ebitda. You could buy something a little smaller. We don't recommend it, but you could buy something 500 K cents. K and. EBITDA or what's called seller discretionary earnings, SDE, which is EBITDA plus any add-backs, whatever the owner expense to the business, they probably shouldn't have.
And these things trade for like three to five x multiples with 12 month training in cash flow. So like very cheap. Compare that to the s and p 500, which is like 22 x multiple. This is three to five. So you can buy a thing that's doing a million in free cash flow for approximately $4 million. Now it may not be growing very fast.
Um, there may be some ways you can improve it or maybe it's running very efficiently. But you can go buy one of these and, and again, the government through the SBA 70 loan through a bank will, you know, you have 80% there. You can usually have maybe five to 10% in seller [00:40:00] financing or seller equity role, but you were required to bring 10% equity, 10% in cash.
I think of it like a down payment on a house you have to bring 10% cash, but herein lies opportunity doesn't have to come from you. It can come from a third party. We are gonna be the leading investor, putting in the 10% cash. That's, you know, cutting to the. Yeah,
Jason Jacobs: is invested as equity.
Jordan Fliegel: yeah. We're gonna be your partner. We're gonna put in the cash for you.
So now you don't even need your own cash. You get debt from a bank, cash from us, maybe a little bit of seller financing or, or seller equity rolling forward from the seller. And you put in like none or very little of your own money. We ask this search, the acquisition entrepreneur, put in a little bit of cash and it's personally meaningful for them.
They have a lot of cash. Maybe we want them to put in 50 K or a hundred k. If they have 50 grand, maybe we want them to put in 10 k. Just something they have a little skin in the game, but like it's not about their cash. That's a really great opportunity for a whole lot of folks. Like a lot of people don't like working for someone else and [00:41:00] being in a, you know, the corporate rat race is not for everybody.
It wasn't for me. Um, and okay, you could start a company, great, but it's like so, so, so hard to do from scratch and everyone thinks that that's what entrepreneurship is. 'cause they watch the social network and they heard about, they read about, you know, Steve Jobs and Elon Musk and Zuckerberg are like.
That's not what entrepreneurship is, that's the the 0.0001%. And by the way, for every one of those, there's a million gummies that you and I have seen and invested in or heard about who raised $40 million and then die, and it's wipe out for everyone. The entrepreneur spent 10 years of their life on and made no money, right?
Even after having success publicly with it. So anyway, it's a lot easier to buy a thing that's already working. And in the, in that example, you're gonna own 80% or more of the business. You're gonna be the CEO of it. You get a salary on day one, and as long as you don't mess it up, you're gonna become a millionaire pretty quickly and be able to start generating really good passive cash flow as you pay down the loan, even if you don't grow the business.
And if you can grow it like all the much better, this is a much safer, easier, [00:42:00] highly likely to succeed path, not without risk versus the corporate rat race or starting something, trying to go from zero to one yourself. For most people who are interested or capable of running a business. So, but there's friction.
So I uncovered this. So Tim, my partner, Tim and I, I was a techstar. We were like, okay, cool. Like let's go and like, let's navigate this and let's go and what do you do? How do I learn about Swiss? Let's go look and try to find a business to buy and go buy a business. And so it's really hard. I'll kind of boil it down in the essence, you have to find a business to buy first.
You gotta get educated. Read the book, listen to podcast, talk to people. There's 10,000 business brokers in the United States. There's a bunch of these listing sites like Biz Buy Sell, or micro Acquire, whatever, where you can go and look for businesses. Most of 'em are junk or have already sold, or not even available, but are on the site.
And so there's this whole search process that's education. And then search. That's hard. But then let's even say you find a business, then you gotta negotiate a deal and it's maybe your first time ever buying a business. So you have to, you don't know [00:43:00] what you don't know, and you gotta like do diligence.
You gotta get under LOI, letter of intent, right? You have agreement with the seller and then you gotta do diligence on it. And then you gotta get a bank to give you the loan. You gotta package it up for a bank. And banks are very peculiar and they're not very innovative. And they like what they like and they wanna see what they wanna see exactly how they wanna see it.
And there's forms and things you have to do. And you need to, you need to get the tax returns, you need to do a quality earnings report. You need to do proof of cash and you need to, right. You need to background check on yourself.
Jason Jacobs: 'cause we're doing a heloc, um, for a
Jordan Fliegel: Yeah.
Jason Jacobs: So it's like a mini version of what you're describing. It's
Jordan Fliegel: it. A root canal, it's worse than a root can.
Jason Jacobs: a tiny piece of what, what this entails.
Jordan Fliegel: Yeah. By the way, you need to get life insurance in place. Uh, you have to sign personal guarantee for the debt. If you own a property and you have more than 20% equity in your property, the bank is gonna collateralize your property as part of the loan.
That scares off a lot of people. You do have to sign personally for the debt. Um, you're all in. You're buying this business and you're all in for the business. But again, you're getting up 80% or more of [00:44:00] a business for like free, that's working except profitable business.
Jason Jacobs: so that's the landscape. So
Jordan Fliegel: Then you gotta wait, wait, wait, Jason, wait.
Then you buy it. Whoa, sorry. You can't buy it. You need 10% cash. So what do people do? Mm. If you have, remember these business being bought for 3, 4, 5, 6 million bucks, usually maybe seven, maybe up to 10 at most. We see a deal at 10, 11, 12 million, sort of that. That's the upper end. But the range is smaller. End would be like 3 million bucks, maybe two and a half.
Uh, you need 10% or more cash on working capital. So like maybe you have 400, 500 K in your 401k, or your Roth IRA or something. Maybe you have it in savings or your partner does. Uh, but even if you do, like you're already taking a lot of risk. You're quitting your job, you're buying this business, you're signing for the debt, you're also gonna drain all your life savings or pull out a HELOC outta your house and like to put the cash in.
Like it's even more risk. So most people don't do that. They raise the capital. But again, VCs and hedge funds and private equity doesn't. Angel investors, they don't provide capital for this space because these businesses are small. It's the niche area. So people will syndicate it out [00:45:00] and they'll go to their buddies, right?
And they'll say, Hey Jason, how you doing? Man, remember me from, you know, business school or whatever. Like, you know, you throw in 20 5K in his deal buying his landscaping company for three x multiple of cash in like Houston. And you'll be like, uh, I don't invest in landscaping businesses in Houston, right?
Uh, so they go like, they're rich uncle, you know, if they happen to have one anyway, it's hard. You gotta pull the money together. And then you have this group of maybe 8, 10, 15 people of each throwing a small check to get you your 4K. And they're not value add, right? They're like, friends fools, whatever. And they might even be annoying, Hey Jason, three years in, like, how's my landscaping business doing?
And what am I gonna get my money back and whatever? So there's no value add. It's not like you're taking a check from Benchmark or Entries Horowitz or Techstars or Y Combinator or something. Um, so anyway, and then, and then you find the deal. You get educated, you find the deal, you get the debt. You, you negotiate everything.
You get the equity, you buy it. Now you gotta run a business and you're on your own. Running a business. You don't have a board, you're not part of an accelerator [00:46:00] class, you're not part of a portfolio, a bunch of other funds. They have, you know, best practices and advice and stuff and conferences and whatever.
You're on your own running this business for a deal and you signed personally for the debt. It's a little scary. So cutting to the chase, Tim went and fought a bus, found a business, did this whole thing, bought it. I went and found a business, bought it, and we were like, oh my God, that's hard. And there's not the support stuff that exists in that space.
I bought a nice business. I haven't announced it yet. We'll announced it soon. And, uh, so, uh, we were like, this could be approved.
Jason Jacobs: Sports Tech.
Jordan Fliegel: No, it's, uh, it's B2B I would say it's, it's a marketing events. Marketing B2B business.
Jason Jacobs: Uh huh.
Jordan Fliegel: Yeah. A category I know very little about, by the way, mind you. Uh, but like the business.
Jason Jacobs: Mitzvah DJ business, isn't it?
Jordan Fliegel: That's, that would be a sexy one that you might have to [00:47:00] pay more than a four or five x model for that. Um, and my partner, Tim, I can tell you 'cause it public, uh, and his episode on acquiring Mines talks about it.
He bought, we rent copiers, super sexy business ready for this, for M roll. We rent copiers. If you need a copier or fax or printer machine, we rent it to you. We have warehouses across the country and we rent it to you. The Super Bowl is, uh, one of our clients. And so when they spin up the tents to print out a bunch of tickets and whatever, like we, they don't want to like, you know, buy all the printers and then get rid of them afterwards.
So they read them from us, for instance. Um, but yeah, nice little business niche, profitable, bought it good. Multiple, it's working nice. Um, so anyway, so, so we just thought there was an opportunity there, but, but we, to your point, we like uncovered it by going through it ourselves. Um, the next thing I did, I joined, and I'm gonna stop after this because we can move on.
I joined the Center for American Entrepreneurship on their entrepreneur council. 'cause I wanted to get [00:48:00] close. I don't like DC and politics and blah blah, but I wanted to get close to the SBA. So through that I met the administrator. The person who runs the SBA under President Biden is Bell Guzman. And a lot of people involved with the SBA and I learned, and I love these people who care about small business and how do we do better for America and how do we stimulate innovation and jobs and growth and business transitions enable people to retire.
And everyone's like all excited about it and try and do stuff in it. And I looked around the room and I was like, where's the entrepreneurs and the, you know, the VC people who have raised and deployed hundreds of billions of dollars and why is no one investing in this asset class and uh, at a time when the country needs it?
And I was like, I'm gonna go do that. And then, you know, the rest was with Tim and trying to figure out, you know, our approach and all that sort of stuff. But that's where the idea came from and our initial steps.
Jason Jacobs: Uh, so I mean, would you consider shareholder ventures a venture capital firm? What do you call it, asset class?
Jordan Fliegel: It's a HoldCo holding company. Structurally, [00:49:00] uh, we have 85 investors in the holding company who are high net worth individuals, family office people, founders, or just friends? Mine. Um, and I, I knew all of them before, uh, or Tim, or I, Tim and I knew all of them before. And so we just invited people to invest and we said no one can invest more than a hundred thousand dollars.
'cause we wanna have a big group of a lot of small checks and we wanna have value add from the community. And, um, and we, so we have 85 investors and, um, that's I structure as a hold co because a few reasons. One, we could have done it as a fund and, um. Could honest, had fun, but I went through as a hoko first.
'cause I'm a huge Buffet Munger fan and I wanted to try my hand at, you know, being a very poor man's version of, of that. [00:50:00] I like playing long-term games with long-term oriented people who I like and admire. And the hol coast structure enables you to do that. And I was very explicitly told as investors, I say, uh, I intend to do this for like the rest of my life.
That's my intent. Maybe it won't happen, but it's my intent going in. And it's a very different approach and coach up and draft where like, I don't wanna build this tech thing. I need to raise money to hire engineers. And as passionate as I was about the thing in particular Coach Up, it was always, once you take other people's money, in particular VCs and you're on the VC speed train, like you gotta, you gonna sell the business when you take it public and you're do it within five, 10 years, 12 years or whatever, right?
Like you, that's, you know what you're doing. This is not, don't get emotional about how you're. Changing the world forever. Like no, it's a, it's a, it's a project with, with, you know, amplified by venture dollars and your goal is to move super, super fast and burn a lot of money and grow, grow, grow and then sell it and take it public, right?
Like quickly. 'cause they need to return their funds and their funds are 10 years [00:51:00] cycles and maybe an obstacle extend for two years. And that's how it's structured. And you gotta know what game you're playing. I don't wanna do that with this. I'm gonna build a profitable business to be the leading investor in the space that's gonna do a lot of good for America jobs, cash flow.
We're backing people who intend to buy it. If you are gonna go buy that roofing business, Jason, you're not doing, you're not quitting your job and going buy it 'cause you wanna like flip it in three years. You like, you wanna like own a business and be an important person. You're a small town and employee people and do it for maybe a long time, maybe hand it off to your kids.
You might be in that thing for 30, 40, 50 years. And, and so we need to structurally and emotionally be aligned with you as your investor and minority partner to be a long term partner. And funds are not set up for that. There's also specific tax and, you know, capital allocation and recycling advantages to being a HoldCo.
Um, and I also wanted to do more than just be an investor, because I want you to take my check instead of all the other competitors that are gonna pop up around us and some already have. Um, because we're gonna [00:52:00] provide more than just a check. We're gonna have the industry leading summit and we're gonna have pure CO groups and we're gonna do your accounting and finance back office for you.
And we're gonna help you with your website, your SEO and your SEM, and we're gonna help you hire outsource talent in Latin America to save costs, uh, you know, cut, operate, uh, operating budget, and you know, all that stuff. And
Jason Jacobs: telescopes for that?
Jordan Fliegel: I have an investor in telescope, fan of telescope. Usually these companies are not hiring engineers.
Jason Jacobs: just came on the pod Telescoped,
Jordan Fliegel: Huh?
Jason Jacobs: published yet, but I'm an, I'm a small investor too,
Jordan Fliegel: Very cool. Uh, yeah, it's not engineers, but it, it is more like, you know, um, data marketing folks, customer support. Yeah. Stuff like that. Which Latin America is very well suited for anyway, so I wanted to do these things and like funds aren't well set up to have portfolio services that are like real and, and profitable, uh, and, and that sort of thing.
So for all those reasons, we decided to do as a whole come
Jason Jacobs: Now is this, um, uh, [00:53:00] is it an evergreen structure of sorts? I mean, can investors invest in the whole co over time? And also, can they liquidate their position in the whole co over time or how does that work since it's not a closed end fund?
Jordan Fliegel: what I told. Here's my pitch to investors. Um, you can invest, but not more than a hundred thousand dollars. Um, I promise to never send you a dividend. The pitch gets better, um, because it causes double taxation. Famously, Berkshire sent one dividend in 1967 and Buffett said he must have been on the toilet when they did it.
And they never send another dividend. They have like 350 billion in cash right now and he won't send a dividend, right? Because the corporation pays tax and then if they send it to you as an an investor, then you have to pay personal tax. And so, hey, we'll just keep it at the corporate level and recycle it.
And you know, hopefully you're investing in a whole code. You trust that the team can do better with the money than you can, or at [00:54:00] least as well without the negative tax implications of sending you the money. So, but I did say every five years we'll open up a window, we'll have the business appraised and we, if you want to get out, um, we'll offer to buy you out off the balance sheet at a fair market value price of the, your position.
But every five years, I don't wanna, like, don't bother me every one or two years, you know, I'm busy trying to make you money, so just leave me alone every five years. You can, I'll do it. Um, and so that's what I told 'em. And also, you're not allowed to put in a big check. 'cause I don't want you to be like, like, Hey man, where's my million dollars?
I kind of need to get it out.
Jason Jacobs: you, when you back a company, what, um, or back up an acquisition, uh, I guess, um, technically what, um, what percentage of, of that cash is coming from the whole CO versus an SPV or another
Jordan Fliegel: Ah, so initially, 'cause I didn't wanna raise so much money in the whole code to take a lot of dilution and a low valuation early on. Um, initially I said, okay, every time we do one of these [00:55:00] minority investments, uh, we're gonna do it as an SPV special purpose vehicle. And every time we do that, you as an investor, one of our 85 investors will have first priority access to participate in that deal.
And those will be very cash flowy, all dividends. And we think you're, we think these returns are like
Jason Jacobs: money and, and you, and they
Jordan Fliegel: you put you Yeah. You'll, you'll be able, by being a whole co-investor, you're in the club and um, I'm not gonna charge you money.
Jason Jacobs: to get access to the.
Jordan Fliegel: Yeah. But it's like.
Jason Jacobs: to the individual
Jordan Fliegel: Exactly, but I didn't like the idea, like I could have structure.
I said, okay, you gotta pay. Everyone pays 10 grand a fee a year, 15 grand a year to have access to this thing and to provide, you know, uh, cash for our overhead so we can hire analysts and so on. So we can source deals and, and, and, and present them and manage them and send you the, do the tax and send you the K ones and all that sort of stuff.
Mean everyone pays an annual fee for that, and you have the right to participate in the deals. Um, I have a friend who's running a business that's structured under that model for private credit, and he is done very well with it. But I didn't love that model. I don't like charging people [00:56:00] for access, like, like a social club or something.
Like I, uh, no, you, you, I will allow you to invest, but you're gonna have a piece of the machine. You're gonna have a piece of the next Y Combinator, you're gonna have a piece of the next BlackRock. Um, and you could participate in the deals that we do. But even if you don't participate in the deals that do, your investment in the machine itself is gonna be a very good long-term compounded investment for you.
I felt better philosophically and about aligning what people versus charging 'em, especially since I know all these people and I care about them. And it's their personal money and all that stuff. So, um, I decided to do it that way.
Jason Jacobs: So since you're such a marketplace guy at the core, I don't know if you identify that way, but you know, you, you must be the market, a marketplace guy after Coach up. But, um,
Jordan Fliegel: I have a tattoo here. You can't see it. It's a marketplace guy.
Jason Jacobs: but ha have you thought about uh, the, this, the potential acquire, uh, what do you call 'em, acquiring entrepreneurs? Is that what you call
Jordan Fliegel: acquisition [00:57:00] entrepreneurs.
Jason Jacobs: So acquisition entrepreneurs and then the boomers looking to sell, like,
Jordan Fliegel: Hmm.
Jason Jacobs: marketplace opportunity there? And, and could you pretend, like, do you tend to find the acquisition entrepreneur that already knows what kind of business they wanna buy?
Or do you find one that then runs a process and, and do you, where do you invest more in building relationships on one side or the other? Or is it both equally?
Jordan Fliegel: I love the question. I don't know what the future will hold for us, but I will say. When you're starting something new, you wanna specialize and focus and be really, really good at the thing. And so, you know, there's 10,000 business brokers in the us like could we have a business brokerage business for star one?
Yeah. Um, there are a bunch of marketplaces for listing your company you wanna sell and other people to find it. Like biz buy sells the, the most common example, but there are many, uh, there are communities like search funder for this, communities for people who are searching this community and chat. There are loan brokers who [00:58:00] exist just to connect, you know, people who are buying a business with SPA seven, A loan with banks that will give them the loan and they take their fee like a 1% fee on that.
That's a nice little loan brokerage business. There's some people making a million dollars plus per year just off loan brokerage, often with misaligned incentives. IE whoever will give them the biggest fee, not the best loan, uh, right. Anyway. Uh. What we found was the biggest, biggest pain point that we were most uniquely with our background and skillset to solve is when you have a business under LOI or you're about to have a business, you found it, you're talking to banks, maybe you have a loan, maybe you don't have a loan lined up, but like you're close, you're at the goal line.
Like that's when we can help you the most. And in particular, what people need is cash. They need
Jason Jacobs: where they're at the point where they're like, uh, trying to find the hat that they're gonna go pass around.
Jordan Fliegel: give it like that.
Jason Jacobs: say, and say,
Jordan Fliegel: Yeah.
Jason Jacobs: We can save you that whole headache. Just push this button. And you not only get the capital, but you [00:59:00] get this rich layer of services, expertise, network, et cetera.
Jordan Fliegel: Yeah. Not just a headache. 'cause when you're going to buy that HVAC business, you're not the only person trying to buy it. If it's a decent business worth buying and you're competing with other people that maybe already have the money. Personally, or they've already raised it. And if you don't, like, you're not getting the deal and now you gotta spend another year finding another deal.
Right? So, so not having the cash, not being able to show that you have the cash ability to raise the cash. So when shareholder ventures commits to you, we always close. We always close. Our word is our bond. We're like, you know, building the Berkshire Hathaway brand, right? We say we can do something, we always do it, take it to the grave.
And so, you know, you'll be able to close and we hope to build a brand that the sellers know you're gonna close. And that the business that, remember sellers have put their life into this business. They may be done it for 30 years or 10 years or whatever, right? And they care about the people or working in small businesses.
They know everyone's name, they know everyone's kids' names. And so they care about what happens afterwards. Oftentimes, they even keep a little equity in the business roll afford a [01:00:00] small piece. They don't just want to get the top price. They wanna, they wanna sell to an individual, not private equity, which we are enabling and unlocking.
Like someone, a local entrepreneurs gonna step in and run the business. Sellers like that a lot more than science. Private equity that's gonna load it with debt and flip it. It or ruin it. So that's a big part of it, but it's the best of both worlds because you're selling it to an individual, but you have the backing of an institutional capital that has experience, knowledge, resources, support.
We're gonna do the back office, the accounting, the finance and so on to ensure that it's not messed up or it's not easy as easy to mess it up. But we're a minority owner, not majority. You're still selling to an individual just backed by us. So it's sort of a great merit from a seller perspective. Um, so we think we can help you get a deal.
You, otherwise it wouldn't because we give you one stop shop for the cash, we help you get a better deal on your interest rate. 'cause we have relationships with all the banks. 'cause we do a volume of deals. We help you negotiate the l Lois, see around the corners, figure out how much working capital you need, financial protections, the whole thing.
We make you a better buyer in the eyes of the seller. We give you a better chance of [01:01:00] succeeding, even if it's the same amount of money that your friends would've given you or the back office support, networking, all that sort of stuff. So, yeah. But, but like the, the core need is the cash. Like if you compare it to buying a house.
There's so many things you, you could build the next Zillow, a Redfin or whatever, right, as a marketplace, or you could be a lender or a broker or whatever. But what stops most people from buying a house is like the down payment. They don't have a down payment. And uh, so there's, there's an element of that here too.
Like it's the 10% cash requirement that is often the hardest part in everything else we do around that is to, you know, help and enable access and all this sort of stuff. But it's, it's being the best investor of the 10% cash is what we're, we're trying to do out the, out the gates.
Jason Jacobs: so where do the search funds or the search fund of funds fit relative to shareholder ventures?
Jordan Fliegel: Jason, your questions, I mean, for you sports guy outta your element, oh, you're not missing.
Jason Jacobs: back, uh, back when I was in, uh, getting my MBA from 2003 to 2005. I love the idea [01:02:00] of it. I think what scared me away was. The skillset that you actually needed to run one of these businesses. Like even back then, I knew that I was not operational.
Jordan Fliegel: By the way, I don't think I'd be good at it either. My partner, Tim, is amazing at it. He's like operational machine. Um, I call him form daddy because like anytime we need a, like, he, like he just creates these forms and Airtable and different like spreadsheets and forms and things and models stuff out. I'm like, I dunno.
Jason Jacobs: to help me get my prototype going for my youth
Jordan Fliegel: Uh, Tim, Tim can do anything. Uh, you great partner. Oh my God. And we like, we, we work so well together. It's, I'm blessed, you know, he enables me to schmooze with you and he's like probably doing like real work right now, you know, it's great. And he's like, happy with that. And I'm happy with like, we're both happy.
Um, search funds. Okay. Traditional search funds or search funds, um, have been very successful [01:03:00] over the last, when they get popular, like 25 years ago, started to get really popular. They've been driving like 25, 30 Rick Rick's dad at HBS, and then he moved to Stanford and he took the model from HBS to Stanford.
He invented Irv Irv Beck. And that's the money where the money came from for the Celtics, um, or part of the Celtics. 'cause there's an ownership group there. And I know W and, uh, I don't know Irv. Um, but yes, traditional,
Jason Jacobs: either one, but I know of Irv from reading about search
Jordan Fliegel: yeah.
Jason Jacobs: to 2005.
Jordan Fliegel: WIC wants, I won't share here, but WIC told me a story about how he bought the Celtics.
Like, oh my god, you know, from being a Boston sports fan growing up and like, uh, it was such a cool story and what a great outcome selling it. Really sad about Tatum's Achilles injury yesterday. That would be a tangent if we talked about it though. Um. So as a pros and cons, if you wanna do a search fund, first of all, you have to be probably an elite MBA type, Harvard, Stanford, Wharton booth, whatever Kellogg, uh, to even [01:04:00] have the opportunity to do it.
Um, you then go to one of these traditional search funds and you say, I'm gonna go spend once to two years of my life looking for a business to buy. And they say, great, here's our model, and blah, blah, blah. And they're gonna give you a salary, like, I don't know, 150, 200 k salary, maybe a little more, probably not, uh, enough that you can live on.
Well, you go and you search. And that's nice. I mean, the pro, one of the, we don't do that. So one pro is you get paid a salary to go and look for business by which you may or may not buy.
Jason Jacobs: I mean, you guys probably aren't even in the picture yet at that point, right? Because
Jordan Fliegel: Well, different categories, first of all, categories. This is for businesses, traditional search funds complete directly with private equity, and increasingly with like later stage VC funds that are starting to do some of these deals and moving down a little bit.
Um, so 3 million, call it plus and ebitda. We don't even play there. We're once 2 million ebitda. We don't compete with traditional search funds at all, ever. It's, it's so, so one of the pros you get as a searcher, it's traditional searcher. You get a salary for a year to two, whether it's us, you keep your job and you're doing this on the side.[01:05:00]
Two is you're able to buy a bigger business. You're buying a 3 million to seven, eight, maybe even 10 million EBIT of business instead of a one to 2 million EBIT of business. So you're buying a bigger business. There's benefits there. Um, downside, you're gonna own 15 to 25% of it, whereas in our model, you're gonna own 80 to 85% of it.
So you're not really the owner. You're a minority partner and you have a vesting schedule. And whether you own 10 or 15, or 20 or 25%, depends on your performance, the performance of the business, and how much the board feels about you. You have a board, you report to the board, it's a job. You're getting paid by a group of investors to go and look for a business to buy for them.
And you're gonna be the operating manager for them and they're gonna set your salary and they're gonna set your equity and they're gonna fire you if you don't do a good job. And like, yeah, it's a job. Like, yeah, cool. If you wanna have a job, it's a good job. Um, if you can get it, it's hard to get, but it's just a totally different thing.
Like here you're buying a business, you're running the business, you own the business, you business, and we're giving you a little bit of cash and support to enable your success, but you're buying a smaller business and it's [01:06:00] your business. It's just night and day. Totally different thing. But we get the question a lot 'cause we're it's self-funded search versus traditional search and it's just different, you know?
But yeah. By the way that thing's competitive, you're competing with all the other traditional search funds and private equity funds and everyone who's buying these larger businesses, uh, businesses that maybe often could go public. Or whatever
Jason Jacobs: So it, it sounds like the operating budget will largely come from the hold co investment. Um, uh, how long does that give you? And, and then, uh, is the hope that that's the last capital you would take? And if so, how do you replenish the coffers? And if not, what happens when you need to go and fundraise again?
Jordan Fliegel: your questions. I mean, these is like the best questions I've ever had.
Jason Jacobs: I, that's why I do this show.
Jordan Fliegel: You're good? Yeah.
Jason Jacobs: listens to it. I just like to learn. Yeah. And this is an area I wanted to understand better. So here we are and I
Jordan Fliegel: Let's talk about cash. Let's talk about cash. Let's get to it. Okay, [01:07:00] so first of all, mind shift. You, you, whoever's listening or you Jason, are buying existing profitable business. Profitable business. It's a foreign cons. You're an entrepreneur who's buying a profitable business. Not starting something that's unprofitable.
So the bank won't give you a loan unless there's at least 1.3 x debt service coverage ratio. DSCR debt service coverage ratio. Meaning if the business is producing a million dollars a year in cash flow, not on a forward looking five year fancy projection where you add some zeros like in venture, but like what it's done over and they won't even take last year.
They'll average over the last three years. Tax returns. They'll take the average cash flow. That's your cash flow, okay? It's not a bullshit cash flow. So let's say it's done average a million dollars in free cash flow, like actual owner earnings, like what you could pull out of the business and put in your bank [01:08:00] account, okay?
Over the last three years. Real earnings, not ebitda. 'cause that can be fib, okay? That's the number the bank's using. If that business makes a million a year, the bank wants to. Or, or, um, let's say the business makes 1.3 million a year. Simple example. The the bank will not give you a loan where the principle and interest payments on annual basis are not more than a million dollars, right?
1.3 to a million. They want a 30% buffer margin of safety to use aism, right? Between the cash to the business is producing versus the debt service payments on the loan. They want to ensure, with all the business expenses included, they want to ensure that there's a buffer. So from a cash perspective, the cash we're putting in, like that's going to the seller, right?
So the seller at close, let's say it's a 5 million purchase price, 4 million of that 5 million is coming from the bank debt. You know, half a million is coming from us. We're putting 10% of the purchase price. Okay. And then maybe the rest is some seller [01:09:00] financing or seller equity role where they're basically like, that's cool Jason, you can gimme 90%, 95% today.
You gimme the rest over time. Maybe I'll keep 5% ownership. Whatever I'm getting my 90%, I'm gonna go to Florida and buy my boat. You can gimme the rest later over time and it aligns us. And so there's some of that. Okay. So, but now you own the business in, in the bank and us and you will wanna ensure there's enough working capital cash in your bank account after you close.
You don't wanna have just a dollar in there. After you close that, you can meet your obligations first couple months with some buffer. And so we'll often encourage, even though you only need 10%, take 12 or 15% cash. Take a little more than you need. So you have, you have a little bit of cash to you close, but again, the business is profitable.
The first month you should be making money. Maybe there's some seasonal element to it. If so, we wanna make sure you have enough working capital to get through. But the bid, the cash flow from the business should pay off the loan all of your expenses, including the new loan on the business, and produce enough margin, including your CO salary that you take on day one.
You get a salary on day one. Once you close and with a margin of safety built in the salary, we will [01:10:00] fix it in our term sheet. The salary is usually around 10% of the 12 month trailing cash flow. So the business was doing a a million and a half for free cash flow last. We'll be like, okay Jason, your salary's me 150,000 bucks negotiation variation.
But it's like, call it a hundred to 200 K salaries. Like not a a, it's nothing to sneeze at. It's a real salary. But you know, it's not like a huge salary. It's not like a tiny salary. It's like you should be able to live off that. And we tell the acquisition entrepreneur, we want to, we're, we're all about is alignment.
We're putting in all the cash, we're risking our cash, we're putting a little bit of time and support and resources. You are bringing the deal 'cause you found it, you're bringing the uh, debt 'cause you're signing for it. Even if we help you get a better interest rate and you're bringing the sweat 'cause you're gonna run it.
So you bring the deal, the debt and the sweat we're put in the cash and the support. We're partners you're gonna own like. 81 plus we're gonna own never more than 19%. We don't wanna own more than 20% of the business. We have to sign for the loan if we do. So, we owe stay under 19%, [01:11:00] under 20%. Um, but that's how it works.
And we tell the searcher, and I'll stop here. If you want to make more than your salary, which we strongly encourage and we'd love for you to do, um, unlike a venture model or a CEO hired CE thing where you ask for a raise and we have an executive committee and we're like, does Jason deserve a raise or not?
And whatever politics goes into that, we're like, no, there's never gonna be a raise. It's your business. You own 81% of it or 85% of it. Uh, just send a dividend. The business makes money mind shift. You now own a profitable business. So just send a dividend. So if the business can support a dividend, great.
Send a dividend. You're gonna get 80%, we're gonna get 20% great. We want you to make a million dollars a year, send a dividend. Um, usually they can't do that the first couple years and a hundred percent of the cash comes back to us until we pulled our cash out. Because we risk our cash, we get our cash out.
It's one act. You know, participating, we get it out, but as soon as we get out, then yeah. Uh, you, it's 80 20 split or [01:12:00] whatever the split is, 85, 15, um, your way. So we expect our searchers, you know, a couple years in to be getting into the dividend and, you know, making a lot more than their salary. And once they pay off that loan, now they're gonna start pulling off, you know, seven 50 KA million, million and a half in dividends per year off a business that they put no money into buying, like plus their salary.
That's a nice,
Jason Jacobs: seeing its way back into the HoCo?
Jordan Fliegel: uh, yeah. So, so, um, in every SPV we do, and again, sort of the big vision, like we're, we're doing SPVs to get going because that way we don't have to over raise on the HoldCo and we wanna provide access to our investors who put money into the HoldCo for these deals. And so in every deal we do, there's a mix between HoldCo cash and SPV cash.
We charge 20% carry as a HoldCo for our investors. And so, um, yeah, but that, that's sort of the, the breakdown. But from a searcher perspective, the cash is coming from us, whether it's from our HoldCo or our investors, and maybe the mix is slightly different. Every deal we do or via debt off our balance sheet, however we're putting the [01:13:00] cash in, it's one entry for them.
They're just dealing with us. They never have deal with our investors.
Jason Jacobs: But with a close end fund, it's like, you know, you, you get a, you know, three, four years in and then you're raising the next fund and then that way you get like the trailing fees from the current fund as the new fees from the next fund kick in. And then that's what gives you the budget to run the firm.
Right. Um, what
Jordan Fliegel: Hmm.
Jason Jacobs: to run the firm in
Jordan Fliegel: Ah,
Jason Jacobs: with the whole co model? That was, that was the root. You answered a different que I'm
Jordan Fliegel: Jason, great questions.
Jason Jacobs: I asked initially.
Jordan Fliegel: I tend to do that. You're, and I apologize to you and to America and whoever's listening. Great question. I don't like fees. I don't like this two and 20 fun thing. I don't like the misaligned incentives of fund managers versus LPs. It gives me the ick to use a Gen Z term. It is not aligned.
You see GPS of funds getting very rich at the expense of their investors, and I don't like it. So, uh, I don't wanna do that. So, uh, mind shift. Our holdcos profitable, we [01:14:00] have bought, and we're buying more profitable businesses at the HoldCo. So my overhead at the HoldCo, like, we're profitable. And so I don't need fees for my funds to cover my salary.
Tim's salary. Andrew's salary, like
Jason Jacobs: Because the whole fo, the whole code is essentially operating like an acquiring entrepreneur.
Jordan Fliegel: we have bought businesses, Tim and I, we've assigned them to the HoldCo before we went and raised money. And we're buying more businesses at the HoldCo and we're buying profitable business at the HoldCo. And so we're profitable at the HoldCo and we'll continue to build or buy more businesses. I don't wanna buy at our HoldCo, um, roofing, HVAC businesses.
We're investing these deals. What I wanna own, whether we build it or buy it. And we're doing both. Like we're building our own in-house accounting and finance business, um, called SMB Edge. And we're buying businesses that do like website and SEO optimization and you know, [01:15:00] things like that. Um, we want to be able to say, Jason, here's your check for 10% for the business, and look at all the suite of services that we have that we're gonna offer you to make you more successful.
Like, we can do your website and your SEO and your accounting and your finance, blah, blah, blah. And we charge a small fee for that market or even below market fee. But we do a really good job and it's all that we do and focus on delivering that value. And so, you know, that's important to us that we do that and we offer those services to external customers too, that we're not investors in.
Um, but that's how I wanted to cover my overhead. I.
Jason Jacobs: businesses, so the businesses you buy though, to be clear, are businesses you think will have built in, um, client bases in the portfolio.
Jordan Fliegel: Yeah. Strategic. We're trying to be, we're trying to be strategic. Yeah.
Jason Jacobs: the portfolio's choice if they use these services or
Jordan Fliegel: In our term sheet, we do not give you a choice. You are going to use SMB Edge, our in-house team for your accounting and finance. You're gonna do it. And that's so [01:16:00] that we ensure it's done correctly. That's so that we can promise our investors that their, uh, taxes and K ones is gonna be handled correctly.
That's so that we can look you in the eye and tell you that we're gonna help you see working capital issues before they happen because we don't want you to lose your house and go bankrupt in this deal. And we don't wanna lose our cash. We're partners and we're aligned. So we do that and we charge you a monthly fee for that.
Um, which is gonna be less than you would pay to some other accounting and finance firm for the same service, but enables a small, like, I think we make like a thousand dollars, $1,500 a month profit on it. It's something. We do that in-house and we're fully staffing that in-house. Um, but it's a profit center for us, but it's really so that we can ensure it's done correctly and that all of our investments are all sort of speaking the same language and we're able to look at all of their numbers on a monthly basis and do the closes and jump in and help if needed.
We're gonna give you the option if you'd like to use us for your website and your SEO and your SEM needs. We're not gonna force you to do it, but we have a nice service to offer, um, for your hosting. We're [01:17:00] not gonna buy and compete with AWS or Google, but we're gonna get a discount that we're gonna offer from AWS for you because of our scale that you couldn't get on your own.
Same thing that Techstars does. You know,
Jason Jacobs: how many businesses do you expect are gonna be owned by the Whole CO in five years?
Jordan Fliegel: 1 million? Uh, no. Um, our North Star is by 20, 40, 15 years. I think we could do over a thousand deals.
Jason Jacobs: So do you distinguish between the deals that you're doing and the businesses that, that HoCo owns?
Jordan Fliegel: Yes. Oh, the whole co what we're gonna buy now, uh, we will own
Jason Jacobs: I'm
Jordan Fliegel: between the ones that we bought and built
Jason Jacobs: gonna become relative to the, like,
Jordan Fliegel: the whole co
Jason Jacobs: the priority or is the whole code the priority, or is it 50 50?
Jordan Fliegel: I don't like to talk about forward looking [01:18:00] financials and don't stick me, you know, don't, don't stick it to me if I, if I exceed or under underperform. But we have a pretty good view into what this year will sort of shaping up to look like. And I think at our HoCo, we'll at least two and a half and maybe 3 million in EBITDA this year from a standing start, by the end of the year at a run rate.
And that will be across five to six businesses that we've either bought or started in-house at our whole company.
Jason Jacobs: and the ones that are assigned to the HoCo, do you, do they get run similarly to the ones that you invest in or, um, or do, or are they treated differently?
Jordan Fliegel: Well, um, we don't wanna treat them differently. Um, Tim and I are not running them. So each business has to have its own GM or co. It either comes with,
Jason Jacobs: it a CEO?
Jordan Fliegel: ah, great question. We have one who calls himself a gm. If you, if you wanted to call himself CEO, he could. Uh, we have another one who's a CEO. We have two under [01:19:00] LOI right now, so I can't talk about it.
But, um, they,
Jason Jacobs: have separate books or are they shareholder ventures? Employees.
Jordan Fliegel: um, they, uh, they're an employee of the company. And the company. I want to visualize it for you, but HoldCo, SHV up here, like my head, and then we have. 1, 2, 3, 4, 5, 6 going across that report up and in. So all the cash, the nice thing about hold code is you can pull cash out of, up and over and you can mix the cash in.
Um, so if one is creating a loss, none of them better create a loss. But if they did, that loss would offset a gain for another one. We can pull cash out of one and move it to the other one. So HoldCo allows the fungibility of cash among the portfolios. But yeah, so like if you work at, we rent copiers for instance, which is in the hold cone.
We own, um, you know, you're an employee. I think we have 19 employees that we rent copiers right now. Um, you're an employee, we rent copiers. You get a W2 or a 10 99 or whatever it is from we rent copiers. Um, but it's a hundred percent owned by, you know, shareholder ventures.
Jason Jacobs: I, I mean, I [01:20:00] have a call in another call in four minutes, so, so I gotta move to wrap this, but I, I mean, gosh, I could have kept going, but, um, uh, one, one question. I just had a question. I don't wanna lose it. Um, uh, oh, uh, do, do you care more about the founder or about the, the, um, the business slash Oh, the founder, the business or the market?
Jordan Fliegel: Um, we underwrite the, the business and the acquisition entrepreneur who's coming in together. Like maybe Jason would be really good buying this plumbing business, but he'd be really bad buying whatever roofing business because the roofing business is far away and he doesn't live there and he wants to be absentee or because he knew he grew up in a plumbing business.
He knows everything about plumbing, but he doesn't know anything about roofing. Maybe we could get around it. Maybe we couldn't. So we want to, we're backing both and we're backing them together, right? Because it's [01:21:00] this existing business. But the owner who's often the CEO usually, not always, but often is leaving.
So this new person's coming in and so you're looking at the new person coming in with the history of the existing business. The market we care less about of the three, we care about it. But if I had to choose, I'd go less because, um, we are not underwriting future growth. Like we're actually okay. We, we generally assume like 5% annual growth ish, sometimes less.
Um, and we can do really, really well. We can generate a 35, 40% IRR off of business that's effectively flat 'cause we're buying the cash flow so cheap. Um, what we wanna make sure we do, and this comes again from, you know, buffet and Munger, is we wanna ensure that we're not investing in business and go outta business.
We want to like rule number one, they say never lose money. And rule number two through four are also rule number one. Remember rule number one, don't lose money. And so we are scared of industry that has cyclical decline issues. That maybe because of AI or something else is gonna stop being a profitable business.
It was for the last 20 years and all of a sudden it's not, [01:22:00] um, businesses like
Jason Jacobs: like a YC call for startups except for these kinds of businesses.
Jordan Fliegel: Yeah, like, like, like, yeah, no, we put out like we, we, we put out, I'm launching the website soon. We get it out publicly. Like we're, like CBG restaurants, uh, retail, construction, uh, anything with heavy manufacturing, inventory risk. Um, we're scared of that. Stuff like that, that is easier to mess up. It's harder to do well.
Like we'll generally not do that. We never wanna say never, but we're pretty much not gonna invest in those businesses. Service businesses, business with recurring revenue, um, like boring service businesses. Those are more straight down the narrow, easier to underwrite, um, easier, you know, harder to mess up for the acquisition entrepreneur coming in.
Jason Jacobs: Uh huh. Well, we didn't. There's a lot we didn't talk about, but this is awesome. There's a lot here. Uh, I'm definitely inspired by what you're working on. It's almost a blessing that we didn't have time to talk about my idea. 'cause I know that you have so much PTSD about youth sports that you're just gonna
Jordan Fliegel: We didn't have time to, we didn't have [01:23:00] time to get into it. Oh, man. Well, I'm sorry.
Jason Jacobs: No, I dodge a bullet. I don't want
Jordan Fliegel: Well, I was, I was rambling.
Jason Jacobs: I'm doing it. I don't care what you,
Jordan Fliegel: Can I get, can I get 30 seconds? Come on. Gimme the 32nd spiel, high level elevator pitch.
Jason Jacobs: yeah. Well, uh, well I don't mean I don't really have an, well basically, um, that sweet spot of athletes who, um, you know, it's not sport as daycare, but they're not yet, you know. They don't have yet have a bunch of handlers around, you know, um, but they're, they're serious. Aspiring young athletes call it 12 to 15, right?
Their parents are dragging 'em all over the universe. Um, paying a lot of money, burning a
Jordan Fliegel: Yep.
Jason Jacobs: miles on their cars, making a bunch of sacrifice, you know, more or less unemployable. 'cause it gets in the way of their work, everything,
Jordan Fliegel: I am with you.
Jason Jacobs: yeah. And there's so much that can be done at home, right? And like, you don't even need that much gear.
You can do so much at home. And like small habits compound over time, right? Um, and if you have a kid that's anything like mine, you take 'em out to all these different things and they're [01:24:00] tails wagging. They love it. They're dialed in. Like the feedback you get is like, your kid is dialed in. Your kid is dialed in, he loves it.
He's so passionate about the sport. And then at home, what's he passionate about? He's passionate about video games. He's passionate about fantasy sports, right? Um, uh, and so it's like, even if he's doing the same stuff that you drag him out to do at home, it's like, you know, the spark is gone. Right? And so it's like. How do you make it fun, right? Um, and so, so part of it is like, how do you make it fun and tap into that fantasy sports or video game mindset at home? Part of it is like teeing up, like, what should you do over time and what are your goals and how can we help you get there? Part of it is like, how are you doing?
Like, how are you doing against yourself? How are you doing against other kids? Your age, your ability level? Um, maybe there's some accountability wrapped in if it's like, you know, you posting and your teammates all posting and your coach, you know, commenting or giving you crap if it, if, if you don't stay on top of it.
Um, and then if you're submitting with video to, um, uh, to, um, authentic, uh, not authenticate, but to, [01:25:00] um, uh, you know, to like get credit or whatever, right? Then it trains the model so that you can use computer vision to actually help you make improvements over time. So there you go. That's the pitch.
Jordan Fliegel: I gotta hear more about this. You gonna alleviate,
Jason Jacobs: one minute late. I'm one minute late. Uh, I
Jordan Fliegel: you just
Jason Jacobs: Yeah,
Jordan Fliegel: drop that and the mic drop.
Jason Jacobs: you can't even crap on it. I gotta
Jordan Fliegel: Oh.
Jason Jacobs: Um, but no. But Jordan, uh, last, last words, parting words for guests or listeners. Anything I didn't ask that you wish I did? Or any, uh, any parting words? Any homework for, um, for listeners, whatever, however you wanna bring it home.
Jordan Fliegel: If you're an entrepreneur. Or you think of yourself as an entrepreneur but haven't yet had the opportunity to do it, which I say you're an entrepreneur, I hear by declare you're an entrepreneur. Um, I encourage you selfishly motivated slightly, but I encourage you to think about yourself and about entrepreneurship.
Not just in the exercise [01:26:00] of building something from scratch, going zero to one, but in buying something that's already working, it's already profitable, and growing it from there, buying and then building from there. Um, resources again, as a reminder. Read the book, buy then build. Listening to some episodes on acquiring minds.
There's an accelerator called the Acquisition Lab that I think it's like 12 grand to go through it. Uh, you learn so much. Um, so there's resources out there. Go on biz, buy, sell, start looking at businesses, you know, and, um. This is a much easier, much more likely to succeed path for like the vast, vast, like 98% of entrepreneurs.
And gr there's never been a better time because all these boomers are retiring and AI is making things easier and you don't even need to have that much of your own money to do it, and the government wants you to do it and is gonna get back up 75% of a loan for you to do it. [01:27:00] This is like a historical opportunity to go and buy a profitable business and become a co e and an owner and to generate cash flow from your business beyond your salary and have a really nice lifestyle.
And I think more people should think about doing this. And so I encourage you, you don't have to do anything outside of just look. Just look into it, see if it appeals to you. That's my pitch.
Jason Jacobs: Love it. Yeah, this was awesome, Jordan. Sorry to cut this short, but, uh, actually long, but we could have kept going. But yeah, I'm gonna follow up with you offline, uh, to talk more about this and also to talk about the eSports stuff, um, and,
Jordan Fliegel: look forward to hearing more,
Jason Jacobs: Yeah, super nice to catch up with you too. It's been too long.
Jordan Fliegel: Jason. Thanks man. Appreciate it. This was a lot of fun. Great questions.
Jason Jacobs: Thank you for tuning into The Next Next. If you enjoyed it, you can subscribe from your favorite podcast player in addition to the podcast. Which typically publishes weekly. There's also a weekly newsletter on Substack at the next next.substack.com. [01:28:00] That's essentially for weekly accountability of the ground I'm covering, areas I'm tackling next, and where I could use some help as well.
And it's a great area to foster discussion and dialogue around the topics that we cover on the show. Thanks for tuning in. See you next week.