Shaan and Sam discuss the boomer business succession wave — businesses that profitable, have no successors, and are too small for big private equity. Shaan talks about his investment in Enduring Ventures (with Sieve and Xavier), a holding company that rolls up these boring cashflow businesses and has grown from $2M in equity to ~$50M in revenue. He also shares the story of how Xavier honored an advisory share agreement despite the dollar amount being larger than expected.
Speakers: Shaan Puri (co-host), Sam Parr (co-host)
What Enduring Ventures Buys [00:00:00]
Shaan: They’ve been on the pod before and they’re pretty public about their stuff. They’re buying companies like pool construction companies. Pools are this amazing business — they bought one called, I think, Dolphin Pools, in Arizona. It crushes. They hired this one operator who was really good and took it over from the original boomer owner, and it’s grown like crazy. That’s one of their cash cows now.
They also bought a local internet service provider. In some parts of the country they don’t have AT&T or Time Warner — they have local providers. They bought one and it’s doing well.
Sam: And I have family members who are similar. My dad is an entrepreneur — he has five kids, bought five different internet service providers, all doing pretty well.
My dad owns a small business that none of his children are taking over. My father-in-law owns a small business, and it’s a killer business. Our new brother-in-law is now going to take it over, and seeing the turmoil he had to go through — my father-in-law was like, “I spent 40 years building this thing. If no one I love wants it, I guess I’m just going to shut it down.” It was kind of tragic. He was literally willing to give it to a family member for free, and they could make many millions of dollars a year. People didn’t want to do it.
The Boomer Business Succession Wave [00:02:00]
Shaan: This is a very interesting market. Do you know how many boomers are retiring right now? It’s some absurd number — a quarter of the country, maybe a third. The biggest wealth transfer of all time is about to happen. And similarly, there are many many businesses where the owner wants to retire, their kids don’t want to take it over, and those businesses are up for grabs.
They’re too small and too unglamorous to be a startup. Too small for big private equity. When Enduring first pitched to me, they were like: “There are this many boomer businesses where the owner wants to retire. They’re up for grabs. We’re going to be like a permanent equity — we’ll just buy them and hold them, one after another.”
Sieve and Xavier have rolled up almost $100 million of business equity off of a $2 million starting amount.
Shaan’s Investment Story [00:03:30]
Sam: You invested in that?
Shaan: I did. I didn’t have a lot of money when I first invested, but at the time it was maybe $10,000 or $15,000 — and that was a big deal. It’s just been growing and growing.
So they were like, “Shaan, you’ve helped us think through this idea, we’d like to offer you an investment plus an advisory grant that’ll just match your investment.” They thought I was going to put in maybe $20,000 or $25,000. So they were expecting to give me like $20,000 of advisory shares.
But I was a big believer in what they were doing. So I put in $200,000. And then they were like… pause.
I was like, “Look, you don’t have to honor the advisory grant for the full amount. I’m totally okay with it.” But Xavier was like, “No. A deal’s a deal.” We didn’t even have anything signed. He was like, “We’ll honor that. And I know you’ll deliver.”
Since then I’ve had this immense desire to deliver on that promise. It was actually the best thing he ever did — because he got me to basically work for him for free. For that one act of goodwill, I see his goodwill and I raise him ten times goodwill on my own side.
Sam: That’s going to end up being one of your better investments. Depending on when you got in —
Shaan: We both were in early.
Sam: Then that’s going to be great. What’s the return so far?
Shaan: Let’s say conservatively it’s probably up 20x in valuation. If they go raise now, they have somewhere between $25 to $50 million in revenue from these businesses — closer to $50 million. All acquired off of $2 million of starting equity.